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https://www.courtlistener.com/api/rest/v3/opinions/1142168/ | 669 So. 2d 1293 (1996)
Michael DALY
v.
William P. REED.
No. 95-C-2445.
Court of Appeal of Louisiana, Fourth Circuit.
February 15, 1996.
*1294 Wayne T. McGaw, New Orleans, for Relator.
Arthur J. O'Keefe, O'Keefe, O'Keefe, & Bernstein, New Orleans, and Cerio A. DiMarco, Law Offices of Cerio A. DiMarco, New Orleans, for Respondent.
Before KLEES, BYRNES and LANDRIEU, JJ.
BYRNES, Judge.
We grant defendant William P. Reed's writ application to review the trial court's denial of relator's exception of no cause of action. We affirm.
South Central Bell Telephone Company terminated the employment of at-will employee, Michael S. Daly, who brought an action against William P. Reed, an investigator, and his insurance company, based on the claim that the plaintiff's employment termination was caused by Reed's fault when Reed allegedly invaded plaintiff's privacy and disclosed plaintiff's personal and private information to the phone company.
Defendant Reed argues that the plaintiff failed to state a cause of action based on negligent interference with a contract, invasion of privacy, or the doctrine of an abuse of rights.
The peremptory exception of no cause of action tests the legal sufficiency of the petition, and the court must determine whether the law affords a remedy for the particular harm alleged by the plaintiff. Lewis v. Aluminum Co. of America, 588 So. 2d 167 (La.App. 4 Cir.1991), writ denied, 592 So. 2d 411 (La.1992). For purposes of ruling on the exception of no cause of action, the court must accept all the allegations of the petition as true. Oster v. Oster, 563 So. 2d 490 (La.App. 4 Cir.1990), writ denied 568 So. 2d 1059 (La.1990). Courts look beyond mere headings and terminology used on or in pleadings to determine the circumstances and true nature of the suit. Adams v. First Nat. Bank of Commerce, 93-2346, 94-048 (La.App. 4 Cir. 9/29/94), 644 So. 2d 219, writ denied 94-3053 (La. 2/3/95), 649 So. 2d 411. Any doubt as to the sufficiency of the petition must be resolved in favor of the plaintiff. Ricard v. State, 544 So. 2d 1310 (La.App. 4 Cir.1989).
Invasion of Privacy
A cause of action for invasion of privacy lies under La.C.C. art. 2315 for among other acts, unreasonable disclosure of embarrassing private facts. Jaubert v. Crowley Post-Signal, Inc., 375 So. 2d 1386 (La.1979); Sharrif v. American Broadcasting Co., 613 So. 2d 768 (La.App. 4 Cir.1993). An actionable invasion of privacy occurs only when the defendant's conduct is unreasonable and seriously interferes with the plaintiff's privacy interest. In re Viviano, 93-1368 (La.App. 4 Cir. 11/17/94), 645 So. 2d 1301, writ denied 94-3095 (La. 2/17/95), 650 So. 2d 254. To be actionable, it is not necessary that there be malicious intent on the part of the defendant; rather, the reasonableness of the defendant's conduct in a breach of privacy action is determined by balancing the plaintiff's interest in protecting his privacy from serious invasions with the defendant's interest in pursuing his course of conduct. Smith v. Arkansas Louisiana Gas Co., 26,180 (La.App. 2 Cir. 10/22/94), 645 So. 2d 785, writ denied, 95-0035 (La. 3/10/95), 650 So. 2d 1179.
In the present case the plaintiff's petition in pertinent part states:
V.
Petitioner's firing from the Telephone Company was caused by the fault of Defendant, William P. Read, who invaded Petitioner's privacy and interested himself in and snooped into Petitioner's personal and private affairs and thereafter made disclosures [to] petitioner's employer, South Central Bell Telephone Company of such a significance and magnitude so as to result in Petitioner being fired from his job with the Telephone Company in New Orleans, La.
*1295 The defendant argues that the phone company has a property interest in plaintiff's telephone records so that plaintiff had no expectation of privacy in those phone records. However, the plaintiff states his cause of action not against the phone company but against the investigator. The plaintiff's petition states that Reed snooped into the petitioner's personal and private affairs and made disclosures to the petitioner's employer, the phone company. The petition's language encompasses the invasion of plaintiff's phone records as well as other private matters which resulted in unauthorized communications.
Accepting the allegations of the petition as true, we are unable to conclude that the plaintiff failed to state a cause of action for invasion of privacy. A qualified privilege to communicate events is a defense under certain circumstances. Klump v. Schwegmann Bros. Giant Supermarkets, Inc., 376 So. 2d 514 (La.App. 4 Cir.1979), writ denied, 378 So. 2d 1391 (La.1980). In his brief the plaintiff did not state that the defendant was employed by the phone company but that Reed, the investigator, represented to the plaintiff that Reed was employed by the phone company. The status of the defendant's employment is not reflected in the petition. The question of the defendant's employment, the extent of the investigator's apparent authority to review and disclose the plaintiff's affairs, the question of what private matters were disclosed by the defendant, and the question of whether the defendant's interest in revealing the disclosures was greater than the petitioner's privacy interest are issues that should be determined on the merits. Those determinations cannot be made on an exception of no cause of action.
When the petition states a cause of action as to any ground or portion of a demand, the exception must be overruled. Pitre v. Opeloussas General Hosp., 530 So. 2d 1151 (La.App. 4 Cir.1989). Because plaintiff states a cause of action based on invasion of privacy, it is unnecessary to review causes of action based on the doctrine of abuse of rights or negligent interference with a contract.
Accordingly, we find no error in the ruling of the trial court denying the exception of no cause of action.
WRIT GRANTED; RELIEF DENIED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1385728/ | 178 Ga. App. 810 (1986)
344 S.E.2d 699
ASKIN
v.
THE STATE.
72170.
Court of Appeals of Georgia.
Decided April 9, 1986.
Rehearing Denied April 23, 1986.
James D. Dunham, for appellant.
Johnnie L. Caldwell, Jr., District Attorney, Paschal A. English, Jr., David A. Fowler, Assistant District Attorneys, for appellee.
BANKE, Chief Judge.
On appeal from her conviction of aggravated assault, the defendant contends that she received ineffective assistance of counsel and that the trial court erred in allowing an investigator from the sheriff's department to offer an opinion as to the believability of her account of the events leading up to the assault.
The defendant had been the victim's girl friend for several years, but the two were in the process of breaking up. The victim testified that he was shot twice by the defendant as he was in the process of leaving her bedroom. He maintained that he was not armed at the time, that he had not touched the defendant, and that immediately prior to shooting him, "[s]he just told me she was tired of me walking out of her life." The victim has evidently been confined to a wheel-chair since the shooting.
An investigator from the sheriff's department testified that he examined the defendant's residence shortly after the shooting and found no indications that a struggle had taken place. He further testified that he questioned the defendant immediately after conducting this examination, as she was seated outside in a patrol car, and that, after being informed of her Miranda rights, she told him she shot the victim as he started to leave the room.
The defendant maintained that the victim had beaten her about the head with his fists immediately prior to the shooting and that, at the moment she fired at him, he was again approaching her in a threatening manner, causing her to be in fear for her life. She testified that the victim had also beaten her on previous occasions, stating that a year prior to the shooting he had "beat a baby out of me."
In rebuttal, the state recalled the investigator and elicited from *811 him the testimony that the defendant did not appear to have been in a fight when he questioned her and that the bullets appeared to have entered the victim through the right side of his body and exited through the left. Over objection, the witness was further allowed to testify that these bullet wounds were not consistent with the defendant's version of events. Held:
1. "A convicted defendant's claim that counsel's assistance was so defective as to require reversal of a conviction . . . has two components. First, the defendant must show that counsel's performance was deficient. This requires showing that counsel made errors so serious that counsel was not functioning as the `counsel' guaranteed the defendant by the Sixth Amendment. Second, the defendant must show that the deficient performance prejudiced the defense. This requires showing that counsel's errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable. Unless a defendant makes both showings, it cannot be said that the conviction . . . resulted from a breakdown in the adversary process that renders the result unreliable." Strickland v. Washington, 466 U.S. 668, 687 (104 SC 2052, 80 LE2d 674) (1984).
While the defendant in this case argues persuasively that a large portion of her trial counsel's cross-examination of the victim was both repetitious and pointless, perhaps even to the point of antagonizing the jury, she has not demonstrated that this 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. The defendant did not, after all, deny that she had shot the victim but claimed that she had done so in self-defense, as he was approaching her in the aftermath of a violent struggle in which she had been severely beaten. This account was shown to be totally inconsistent both with her appearance after the shooting and with the nature of the victim's bullet wounds. It also conflicted with the investigator's testimony that, shortly after the shooting, the defendant had told him she shot the victim as he was attempting to leave the room an account which was materially consistent with the victim's version of the shooting. Under such circumstances, we do not believe there is any reasonable possibility that the jury's verdict was based on defense counsel's cross-examination technique rather than on the evidence of the defendant's guilt.
It is further contended by the defendant that there were several occurrences during the trial which indicated that counsel had neglected to investigate the facts of the case sufficiently or to research the law adequately. However, the defendant's counsel on appeal has failed to suggest what additional facts might have been revealed by further investigation or what additional defenses might have become apparent as the result of further research and preparation. Thus, *812 there has been no showing whatever that any additional avenues of defense were available which were not used. Consequently, this enumeration of error is without merit.
2. On rebuttal, the investigator from the sheriff's department was asked whether there was "any way in the world if [the defendant's version of events] was true, that this man would have had gunshot wounds to the part of his body that he [did]." Over objection, the witness was allowed to respond, "I don't know of any possible way." We agree with the defendant's contention that this question was phrased in such a manner as to call for an expert opinion from the witness, as an experienced law enforcement officer, on the ultimate issue in the case i.e., whether the defendant had acted in self-defense. This was clearly a matter within the ken of the average juror, and it follows that the question and the response were improper. Accord Williams v. State, 254 Ga. 508 (2) (330 SE2d 353) (1985). However, given the obvious and inescapable nature of the conclusion i.e., that the bullets could not have entered the victim's body through the right side and exited the left had he been shot while approaching the appellant head on, we find it highly probable that the error did not contribute to the jury's verdict; and we consequently hold that it was harmless. See Johnson v. State, 238 Ga. 59 (230 SE2d 869) (1976).
Judgment affirmed. Birdsong, P. J., and Sognier, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1634326/ | 680 So. 2d 839 (1996)
Jeanette WILKS, Daughter of Anderson Smith, Deceased, Individually, and on Behalf of All Wrongful Death Beneficiaries and the Estate of Anderson Smith, Deceased, and Jessie Willie Bell
v.
The AMERICAN TOBACCO COMPANY and New Deal Tobacco and Candy, Inc.
No. 93-CA-01337-SCT.
Supreme Court of Mississippi.
September 12, 1996.
*840 Don Barrett, Barrett Law Office, Lexington; Frederick B. Clark, Greenwood, Cynthia Langston Miller, Jackson; Charles Victor, McTeer, McTeer & Associates, Greenville; Richard F. Scruggs, Scruggs Millette Lawson Bozeman & Dent, Pascagoula, for appellants.
James E. Upshaw, Lonnie D. Bailey, Upshaw Williams Biggers Page & Kruger, Greenwood; Thomas E. Bezanson, Mary T. Yelenick, Chadbourne & Parke, New York City; J. Murray Akers, Greenville, for appellees.
Before SULLIVAN, P.J., and McRAE and MILLS, JJ.
McRAE, Justice, for the Court:
This is an appeal from a judgment in favor of the American Tobacco Company in the Circuit Court of Washington County on a claim for wrongful death after the jury determined that cigarette smoking was not the proximate cause of the decedent's death. The heirs of Anderson Smith maintained on appeal that they were at least entitled to Smith's lifetime damages which were overwhelmingly proven to be caused by smoking defendant's Pall Mall brand of cigarettes. Because the heirs brought this cause of action solely under Miss. Code Ann. § 11-7-13, Mississippi's wrongful death statute, we must affirm the jury verdict and judgment below finding no damages where the jury concluded defendant's product was not the proximate cause of death. We also affirm the court's grant of partial summary judgment striking assumption of the risk as a viable defense.
I.
On May 5, 1988, the heirs of Anderson Smith filed a complaint, pursuant to Miss. Code Ann. § 11-7-13, asserting that Pall Mall cigarettes, manufactured and distributed by the American Tobacco Company [hereinafter "ATC"], New Deal Tobacco and Candy Company, Inc., were unreasonably dangerous, resulting in the wrongful death of Smith, who smoked Pall Malls for approximately forty-five years. The Circuit Court of Washington County granted partial summary judgment, declaring cigarettes unreasonably dangerous as a matter of law and striking assumption of the risk as an affirmative defense.[1] However, on June 17, 1993, following a two week trial, the jury found that Smith's death was not proximately caused by his lung cancer or chronic obstructive pulmonary disease, conditions which had been attributed to cigarette smoking. Judgment was therefore entered for ATC. Plaintiffs filed their notice of appeal on November 17, 1993, and the defense cross-appealed the court's grant of partial summary judgment.
II.
Anderson Smith smoked about one and one half packs of Pall Mall cigarettes per day for approximately forty-five years. Pall Mall cigarettes had been discovered in tests to contain more tar or harmful compounds than most cigarettes manufactured in the United States. Dr. David M. Burns, M.D., testified that Smith died on February 7, 1986 of squamous cell carcinoma on the upper right lobe of the lung, and chronic obstructive lung disease caused by smoking Pall Mall cigarettes.
*841 Burns admitted that the death certificate failed to list lung cancer as the cause of death, but he maintained that medical records revealed no hope for Smith's recovery from lung cancer. The death certificate stated the immediate cause of death as a "rupture of the myocardium as a consequence of a myocardial infarction"; his heart ruptured and filled the myocardium with blood causing the heart to eventually quit beating. This was caused by a pulmonary embolism, or blood clot, which traveled through the veins to the vena cava and into the pulmonary artery where it lodged. Without an autopsy, however, there was no evidence completely resolving all doubt as to cause of death.
Smith's lung cancer was actually discovered in a routine chest x-ray after he was admitted to the hospital with urinary tract complaints. Smith was scheduled for a cystoscopic examination due to complaints of burning during urination, but local anesthesia was not sufficient to numb the pain during the first attempt as Smith thrashed about on the operating table, and forcefully removed the cystoscope from his urethra. As a result, Smith was placed under general anesthesia for a second cystoscopic examination on February 4, 1986. During this surgery, there was a large amount of trauma to his urinary tract which caused bleeding, a drop in blood pressure and cardiac arrhythmia. Due to these complications, the doctors ended the second cystoscopy prematurely and performed three transfusions upon Smith's recovery from the anaesthesia.
The problems which led to the cystoscopy were related to improperly treated gonorrhea suffered by Smith in 1938 and 1944. Because penicillin was not widely available until the late 1940's, sulphur drugs and strong caustic acid were often used in an attempt to kill the gonorrhea, but this often led to scarring of the urinary tract. The scarring destroyed the stretching ability of the bladder and caused dilation and obstructions which led to infection of the bladder, prostate and kidneys. The numerous procedures Smith underwent during his life to alleviate these problems caused additional scarring of the urinary tract.
Defense experts maintained that the pulmonary embolism which killed Smith was the result of his urinary tract problems, the urinary tract surgery and complications during the surgery three days before his death. It was also suggested that the blood clot could have formed and broken free when Smith fell in his bathtub and fractured the shaft of his right femur. It was recognized, however, that Smith was suffering lung problems too, and that the length of his stay at the hospital and prolonged bed rest, was due to the discovery of cancer. Bed rest and surgery were major risk factors for pulmonary embolism. Smith's medical records indicated his cancer had reduced his lung capacity to 30 percent of its normal capacity. His cancer was inoperable, and he had been scheduled for curative radiation treatment. He was in a great deal of pain and suffering over his last several years due to lung problems. His medical bill for his final stay in the VA hospital, forty-six days at $418 per day, totaled $19,378.
Based on early scientific studies, Dr. Burns testified that ATC should have known of the ill effects of cigarette smoking by the early 1950s. ATC made no attempts to warn consumers, and it even formed the Tobacco Research Council, according to Burns, to conduct its own research and make the issue appear unresolved. In 1964, the Surgeon General finally released a report based on statistical correlations, as opposed to laboratory tests, concluding that cigarette smoking caused lung cancer. Burns testified that statistics demonstrate today that cigarette smoking is the single most hazardous product currently available in the United States, killing approximately 435,000 people per year. Still, Robert K. Heimann, former President and Chief Executive Officer of ATC, maintained the company's historical position that the Surgeon General was dead wrong in concluding that cigarettes were harmful to health, and that warning labels were not justified.
Dr. Richard Pollay, a Ph.D in consumer behavior, testified that Pall Mall's 1950's advertising campaign, "Guard against throat scratch," which increased sales by three hundred percent, was a deliberate attempt to *842 assure people that Pall Mall cigarettes actually protected against the possibility of cancer. Pollay also researched the minutes from the Tobacco Industry Research Committee which, in his opinion, revealed that its sole purpose was to create a campaign to communicate to the public there was insufficient evidence to conclude that cigarette smoking was dangerous to one's health.
III.
This trial boiled down to a dispute over the decedent's cause of death. Plaintiffs claimed that Smith died from smoking related illnesses. The American Tobacco Company maintained that Smith died as the result of a pulmonary embolism caused by a lifetime of complications suffered during treatment for gonorrhea. On June 17, 1993, the twelve member jury returned a verdict finding that the death of Anderson Smith was not proximately caused or contributed to by his lung cancer or chronic obstructive pulmonary disease. Based on this verdict, the trial court entered judgment for ATC on June 23, 1993. On appeal, the plaintiffs contend that even though the jury may have found Smith's death unrelated to smoking, the heirs were entitled to recover damages associated with Smith's lung cancer and other smoking related illnesses suffered during his lifetime.
The Plaintiffs pursued their cause of action exclusively under Mississippi's wrongful death statute which provides as follows:
Whenever the death of any person shall be caused by any real, wrongful or negligent act or omission, or by such unsafe machinery, way or appliances as would, if death had not ensued, have entitled the party injured or damaged thereby to maintain an action and recover damages in respect thereof, or whenever the death of any person shall be caused by the breach of any warranty, express or implied, of the purity or fitness of any foods, drugs, medicines, beverages, tobacco or any and all other articles or commodities intended for human consumption, as would, had the death not ensued, have entitled the person injured or made ill or damaged thereby, to maintain an action and recover damages in respect thereof ...
Miss. Code Ann. § 11-7-13 (1972)(emphasis added).
Based on the language of our wrongful death statute, in order to recover any damages for wrongful death, the heirs were required to prove that the negligence or wrongful acts of ATC caused the death of Smith. The jury returned a verdict and special interrogatory clearly indicating they found Smith's death to have been unrelated to his lung cancer or chronic obstructive pulmonary disease. Consequently, the jury verdict prohibits any recovery of wrongful death damages under the statute. Had the jury found the cause of death attributable to the pulmonary disease or lung cancer, then the plaintiffs would naturally have been entitled to redress for damages associated with these smoking related illnesses suffered during his lifetime.
Given the overwhelming proof that Smith's lung cancer was the result of smoking cigarettes manufactured by ATC, the heirs maintain on appeal that they are at least entitled to recover damages for injuries suffered by Smith during his lifetime which were related to smoking ATC's cigarettes such as medical bills and the pain and suffering associated with his lung cancer. Although the wrongful death statute provides for recovery of "all the damages of every kind," which would certainly include lifetime damages, the entire claim under this statute must fail where the heirs failed to prove by a preponderance of the evidence that Smith's death was caused by ATC's product.
The heirs suggest that the following portion of the wrongful death statute suggests they are entitled to recover lifetime damages:
In an action brought pursuant to the provisions of this section by the widow, husband, child, father, mother, sister or brother of the deceased, or by all interested parties, such party or parties may recover as damages property damages and funeral, medical or other related expenses incurred by or for the deceased as a result of such wrongful or negligent act or omission or *843 breach of warranty, whether an estate has been opened or not.
§ 11-7-13 (1972)(emphasis added).
This language allows the heirs to bring a wrongful death suit without regard to administration of the estate. However, this excerpt is irrelevant to the issue of the elements which must be proven in order to recover for wrongful death. Certainly the closing of the estate did not preclude the heirs from this action; however, it does not alter the fact that the heirs' cause of action was based on Smith's "wrongful death."
In Berryhill v. Nichols, 171 Miss. 769, 158 So. 470, 471 (1935), this Court stated, "[i]t is essential as an element of liability under our wrongful death statute ... that the negligence complained of shall be the proximate cause, or at least a directly contributing cause, of the death which is the subject of the suit." In the wrongful death action brought in Berryhill, this Court did not allow the plaintiffs to recover for the decedent's pain and suffering because they were not successful in proving that the defendant's negligence was the proximate cause of death. 158 So. at 471. Recovery for those damages had to be brought in a suit by the personal representative. Id; see Munn v. Southern Health Plan, Inc., 719 F. Supp. 525, 530 (N.D.Miss. 1989) (concluding cause of action for damages must be brought under survival statute where defendant found not liable for decedent's death), aff'd, 924 F.2d 568 (5th Cir.), cert. denied, 502 U.S. 900, 112 S. Ct. 277, 116 L. Ed. 2d 229 (1991).
Mississippi's survival statute, Miss. Code Ann. § 91-7-233 (1972), allows personal actions of a decedent to be pursued after his death. It provides as follows:
Executors, administrators, and temporary administrators may commence and prosecute any personal action whatever, at law or in equity, which the testator or intestate might have commenced and prosecuted... .
§ 91-7-233. The survival statute permitted a cause of action for personal injury suffered by Smith during his lifetime. Again, the jury found in this case that the decedent's death was not related to the cause of action as presented by the plaintiff. As contended by ATC, the heirs failed to alternatively base their cause of action on the survival statute at any point in time during this litigation. The complaint and trial proceeded exclusively under the wrongful death statute. ATC cannot be blamed for the heirs' failure to alternatively pursue a cause of action for personal injury under Mississippi's survival statute.
As to ATC's cross-appeal, we find that the trial court properly struck the defense of assumption of the risk based on our recent pronouncements in Horton v. American Tobacco Co., 667 So. 2d 1289 (Miss. 1995). Even if it was a viable defense, it may not be employed unless the defendant admits the existence of a risk. ATC firmly denied that smoking was hazardous to one's health. It follows that there was no evidentiary support for ATC's use of this defense. All other arguments of ATC's cross-appeal are rendered moot by the jury verdict and judgment in the court below.
Therefore, in light of the verdict at trial and the heirs' failure pursue their cause of action under the survival statute, the heirs were not entitled to recover Smith's lifetime damages. The judgment below for the American Tobacco Company is hereby affirmed. ATC's cross-appeal is denied.
ON DIRECT APPEAL: AFFIRMED. ON CROSS APPEAL: DENIED.
SULLIVAN, P.J., and PITTMAN, JAMES L. ROBERTS, Jr. and SMITH, JJ., concur.
MILLS, J., concurs in result only.
BANKS, J., concurs with separate written opinion joined by DAN LEE, C.J., and PRATHER, P.J.
BANKS, Justice, concurring:
I concur in the result reached by the majority and its reasoning with respect to the direct appeal. I also concur in the result reached by the majority with respect to the cross-appeal and agree that a majority of the Court voting in Horton v. American Tobacco Co., that assumption of the risk is subsumed in comparative fault doctrine. I write separately *844 to note that I do not join the pronouncements immediately following the majority's reference to Horton.
DAN LEE, C.J., and PRATHER, P.J., join this opinion.
NOTES
[1] The court also denied the request to strike the defense of comparative fault, declaring that it might still be a viable defense. Defendants unsuccessfully sought to have this ruling set aside by interlocutory appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1119287/ | 660 P.2d 581 (1983)
James REYNOLDS, Randy Dix, Jerome Cate and Donald A. Douglas, Petitioners,
v.
STATE BAR OF MONTANA, Ward A. Shanahan, President; Sandy McCracken, President-Elect; Lawrence D. Huss, Secretary-Treasurer; George C. Dalthorp, James W. Johnson, Donovan Worden, Douglas J. Wold, Max A. Hansen, Robert D. Corette, James R. Johnson, Raymond F. Koby, Jr., John A. Warner, Gregory O. Morgan, Thomas F. Dowling, Patrick E. Melby, K. Robert Foster, Damon L. Gannett, Christopher J. Nelson, George W. Huss, Members of the Board of Trustees of the State Bar of Montana, and Kent M. Parcell, Executive Director of the State Bar of Montana, Respondents.
No. 83-09.
Supreme Court of Montana.
March 25, 1983.
ORDER
The petition of petitioners for declaratory judgment and injunctive relief having been fully briefed by the parties, and oral argument had thereon, the matter being now deemed submitted, and the Court advised,
IT IS ORDERED:
1. The Court declares and adjudges that the State Bar of Montana may not use funds derived from compulsory dues for lobbying purposes unless the State Bar makes provision to refund to members dissenting to such lobbying an aliquot portion of compulsory dues paid by said members, said refund to be based on the proportion of the lobbying expenses incurred by the State Bar to the number of dues-paying members as of the previous July 1.
2. The State Bar shall amend its Constitution and Bylaws to comply with this order, and submit proposals for the same for approval by this Court in the manner required.
3. The State Bar shall make such refunds for the current fiscal year to the petitioners herein when its lobbying expenses for the current year are determined, but not later than July 30, 1983.
4. All further declaratory or injunctive relief is denied. The court retains jurisdiction only for the purpose of the amendments here required. This cause is otherwise dismissed.
SHEA, Justice, concurring:
I join in the order of the Court because I think it is the fastest way to afford the relief requested and, of course, because I think the relief requested should be granted. What has happened here is illustrative of the heavy powers which are assumed by organizations without involving all of its members in the democratic decision making process. It would be repugnant to me to have my compelled membership dues used in lobbying activities for which I may be strongly opposed. And that is precisely why the lawsuit was filed, the Montana Bar Association simply undertook lobbying activities with the use of compulsory membership *582 dues, without ever thinking that they should consider the rights of those members who may disagree with those lobbying activities.
Although lobbying activities are a valuable and perhaps even laudable activity of the bar, the officers should not have undertaken lobbying activities without first considering the rights of those members who either disagreed in principle to any lobbying activity, or who disagreed with certain lobbying activities of the bar. The officers should first have set up some formula for remitting fees to lawyers who did not approve of the lobbying activities.
Another sad factor is that the lawsuit probably has had the result of further depleting the financial resources of the Montana Bar Association. The Bar Association hired counsel to defend the lawsuit, and although it may be that this counsel donated his services to defend the bar's position, it may also be that the Bar Association has paid for his services. If the Bar has paid for legal counsel, an added insult has been imposed on the minority members (and certainly the plaintiffs here) they have been compelled to pay in part for the defense of the lawsuit in which they seek to establish the very opposite point that compulsory fees cannot be used for lobbying activities without their consent.
Perhaps a serious and good faith effort by the plaintiffs, combined with a serious and good faith effort on the part of the officers of the Montana Bar Association, could have avoided what I consider to be unnecessary litigation.
WEBER, Justice, dissenting from the foregoing Order.
I agree with the conclusion stated in the foregoing Order that declaratory and injunctive relief should be denied.
I dissent from the declaration that the State Bar of Montana may not use funds derived from compulsory dues for lobbying unless each dissenter receives a portion of his dues. The Order is not based on legal or constitutional principles but rather upon the power of this Court to control the organization of the State Bar. Apparently the Court has concluded that it is inappropriate to use the funds in the absence of consent by a dissenting member. I do not choose to join in the adoption of a rationale granting this type of veto power to dissenters. That rationale suggests each dissenter from a State Bar activity is entitled to an appropriate return of dues. That could hamstring the State Bar.
I would therefore return the matter to the District Court for its determination of the petition on the merits. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2225722/ | 587 N.E.2d 182 (1992)
Darlus JOHNSON, Appellant-Claimant below,
v.
The ESTATE OF Jean RAYBURN, Appellee.
No. 33A04-9104-CV-92[1].
Court of Appeals of Indiana, Third District.
March 5, 1992.
*183 Michael J. Tosick, Greenfield, for appellant.
Kevin W. Ault, Rushville, for appellee.
STATON, Judge.
Darlus Johnson appeals the denial of her claim against the Estate of Jean Rayburn (Estate). Johnson alleged that Edward Rayburn fraudulently conveyed real estate to Jean Rayburn prior to her death in order to avoid paying an $80,000 award levied by the Industrial Board (now Worker's Compensation Board) in 1985. The Board entered the award following a hearing into the death of Johnson's husband, who was killed in a logging accident while working *184 for Edward Rayburn. Rayburn was not carrying worker's compensation insurance at the time.
Alleging that she had a lien on the property conveyed to Jean Rayburn, Johnson filed a claim against the Estate. The trial court denied her claim, and Johnson appeals, presenting this court with the following issues for review:
I. Whether the trial court erroneously excluded Johnson's testimony pursuant to the "dead man's statute."[2]
II. Whether the trial court erroneously disregarded the testimony of Edward Rayburn pursuant to the same statute.
III. Whether the trial court's failure to find a fraudulent transfer was contrary to law.
We reverse and remand.
In a case tried to the court, Darlus Johnson sought to introduce her own testimony and that of Edward Rayburn, and counsel for the Estate objected on the basis of the dead man's statute. Edward Rayburn, the surviving spouse of Jean Rayburn, was the executor of his wife's Estate. The trial court took the objection under advisement and allowed the testimony, subject to his later ruling on the competency of the witnesses. In the order denying Johnson's claim, the trial court held that the witnesses were not competent to testify, and that even considering Rayburn's testimony, Johnson had not adduced sufficient evidence to succeed on her claim.
Indiana's dead man's statute, unaltered since its passage in 1881, provides in relevant part:
In suits or proceedings in which an executor or administrator is a party, involving matters which occurred during the lifetime of the decedent, where a judgment or allowance may be made or rendered for or against the estate represented by such executor or administrator; any person who is a necessary party to the issue or record, whose interest is adverse to such estate, shall not be a competent witness as to such matters against such estate[.]
IC XX-X-XX-X.
The general purpose of this statute is to protect decedent's estates from spurious claims. State Farm Life Insurance Co. v. Fort Wayne National Bank (1985), Ind. App., 474 N.E.2d 524, 526. Dead man acts are rules of fairness and mutuality that require, when the lips of one party to a transaction are closed by death, the lips of the surviving party are closed by law. Id.; Satterthwaite v. Estate of Satterthwaite (1981), Ind. App., 420 N.E.2d 287, 289, reh'g denied.[3]
A witness is rendered incompetent under the dead man's statute when the following requirements are met:
a. The action must be one in which an administrator or executor is a party, or one of the parties is acting in the capacity of an administrator or executor;
b. It must involve matters which occurred within and during the lifetime of the decedent;
c. It must be a case in which a judgment or allowance may be made or rendered for or against the estate represented by such executor or administrator;
d. The witness must be a necessary party to the issue and not merely a party to the record;
e. The witness must be adverse to the estate and must testify against the estate.
Satterthwaite, supra, at 289-90. Where the trial court rules on witness competency the ruling will not be reversed absent a clear abuse of the trial court's discretion. Myers v. Manlove (1913), 53 Ind. App. 327, 101 N.E. 661. An abuse of discretion will be found when the ruling is against the logic and effect of the facts and circumstances before the trial court. Porter v. *185 Porter (1988), Ind. App., 526 N.E.2d 219, 222, trans. denied.
Johnson contends that the trial court erred in finding her incompetent to testify because her testimony did not concern any transactions between her and the decedent, Jean Rayburn. The Estate suggests that the Indiana General Assembly intended to cover this area of witness competency with a blanket prohibition. We are not persuaded, however, that the legislature meant to paint the judicial landscape with so broad a brush.
As stated above, the purpose of the dead man's statute is to put the surviving party on equal footing with the decedent with respect to a matters that occurred during the decedent's lifetime. However, we do not agree this statute renders the witness incompetent for all purposes. The application of the statute is limited to circumstances in which the decedent, if alive, could have refuted the testimony of the surviving party. Otherwise, there would be no inequity to be rectified.
In this case, Johnson did not take the witness stand to offer any testimony as to any transaction she had with Jean Rayburn during Rayburn's lifetime. Her testimony consisted solely of evidence pertaining to Edward Rayburn's attempt to secure a full release of liability from Johnson approximately two weeks after her husband was killed in the logging accident. Although Jean Rayburn was alive during this period, she was not a party to this incident. Thus, there was absolutely no testimony from Johnson that Jean Rayburn could have refuted, had she been alive. Under these circumstances, Johnson was not incompetent to testify. See Denny v. Denny (1890), 123 Ind. 240, 23 N.E. 519, reh'g denied (conversation between claimant and an heir to the estate, even though it might have occurred in the decedent's presence, was not a "matter" which occurred with the decedent during his lifetime); Matter of Estate of Niemiec (1982), Ind. App., 435 N.E.2d 570, trans. denied; Citizens State Bank v. Kelley (1959), 130 Ind. App. 376, 378-79, 162 N.E.2d 322, 323, trans. denied ("An objection to the competency of a witness to testify at all as to any matter that occurred during the lifetime of decedent is properly overruled where the witness is competent to testify as to some matters."); Baker v. State Bank of Akron (1942), 112 Ind. App. 612, 44 N.E.2d 257, trans. denied.
Our conclusion that the dead man's statute applies only where the claimant is prepared to testify as to matters or transactions concerning the decedent, and not merely as to matters that occurred while the decedent was alive, is in accord with the Indiana cases interpreting the provision. See, e.g., Satterthwaite, supra, at 291 (witness held incompetent to testify as to promises made by decedent during decedent's life to devise real estate to witness); State Farm Life Insurance, supra, at 527 (agent negotiating insurance agreement on behalf of principal ruled incompetent to testify concerning statements made by decedent when he applied for insurance); Matter of Estate of Palamara (1987), Ind. App., 513 N.E.2d 1223, 1232, reh'g denied (although challenge to competency was waived on cross-examination, witness would have otherwise been incompetent to testify that decedent earlier promised to provide witness with financial security for the rest of her life); United Theological Seminary v. Burkhart (1986), Ind. App., 494 N.E.2d 361, 366, trans. denied (agent of not-for-profit organization held incompetent to testify as to contribution pledge made by decedent in his lifetime). Because Johnson was not called to testify as to any matter or transaction relating to the decedent, it was an abuse of discretion for the trial court to disregard her testimony.
Johnson next contends that the trial court erred by also disregarding the testimony of Edward Rayburn, the personal representative of his late wife's estate.[4] The Estate contends that the dead man's statute clearly provides that a personal representative *186 is not a competent witness. The latter contention has no foundation in the statute or in case law. For a witness to be rendered incompetent to testify as to a "matter" under the statute, the witness must have an interest adverse to the estate. IC XX-X-XX-X. The undisputed fact is that Edward Rayburn has no interest adverse to the Estate. Moreover, IC XX-X-XX-XX gives any party to a suit under the dead man's statute the right to call and examine any adverse party as a witness. As this case involves a suit against an estate under IC XX-X-XX-X, and as Edward Rayburn is an adverse party, Johnson was entitled to call him as a witness just as Rayburn could have called Johnson to the stand to testify even though she would have otherwise been incompetent as a witness. Palamara, supra, at 1232. See also Julian v. Bliss (1924), 82 Ind. App. 597, 145 N.E. 442; Reed v. Farmers Bank of Frankfort (1918), 67 Ind. App. 425, 119 N.E. 261. Therefore, the trial court erred in disregarding Edward Rayburn's testimony.
This brings us to Johnson's final contention: that the court erred by denying her claim against the Estate.[5] Johnson appeals from a negative judgment. As such, we must determine whether the judgment is contrary to law. McClure Oil Corp. v. Murray Equipment, Inc. (1987), Ind. App., 515 N.E.2d 546, reh'g denied. A judgment is contrary to law when the evidence is without conflict and leads to but one conclusion which is contrary to that reached by the trial court. Ashland Pipeline Co. v. Indiana Bell Telephone Co., Inc. (1987), Ind. App., 505 N.E.2d 483, trans. denied. Johnson argues that the undisputed evidence reveals indicia of a fraudulent conveyance from Edward Rayburn to Jean Rayburn. The Estate asserts that the trial court correctly found that Johnson failed to support her claim with sufficient evidence.
Under Indiana law, a conveyance of real estate, "made or suffered with the intent to hinder, delay or defraud creditors or other persons of their lawful damages," shall be void as to the person sought to be defrauded. IC XX-X-X-XX. This section must be read together with the following provision:
The question of fraudulent intent, in all cases arising under the provisions of this chapter, shall be deemed a question of fact; nor shall any conveyance or charge be adjudged fraudulent as against creditors or purchasers solely on the ground that it was not founded on a valuable consideration.
IC XX-X-X-XX; LaPorte Production Credit Association v. Kalwitz (1991), Ind. App., 567 N.E.2d 1202, 1205, reh'g denied.
Fraudulent intent may be inferred from the following indicia, or "badges of fraud" present in a given transaction:
the transfer of property by a debtor during the pendency of a suit; a transfer of property that renders the debtor insolvent or greatly reduces his estate; a series of contemporaneous transactions which strip a debtor of all property available for execution; secret or hurried transactions not in the usual mode of doing business; any transaction conducted in a manner differing from customary methods; a transaction whereby the debtor retains benefits over the transferred property; little or no consideration in return for the transfer; a transfer of property between family members.
Jones v. Central National Bank of St. Johns (1989), Ind. App., 547 N.E.2d 887, 889-90; U.S. Marketing Concepts v. Don Jacobs Buick-Subaru, Inc. (1989), Ind. App., 547 N.E.2d 892, 894, reh'g denied. As no single indicium constitutes a showing of fraudulent intent per se, the facts must be taken together to determine how many badges of fraud exist and if together they amount to a pattern of fraudulent *187 intent. Jones, supra, at 890. This determination rests, in the first instance, with the trier of fact. Id.
Reviewing the circumstances of this case, we find the following uncontroverted evidence: Johnson's husband was killed in a logging accident while in Rayburn's employ on February 6, 1984. Approximately two weeks later, Rayburn attempted to secure a release from all claims that Johnson may have against him, but Johnson refused. On February 21, 1984, Rayburn conveyed the real estate in question to Jean Rayburn. The timing of this transaction raises an inference of fraudulent intent.
Moreover, the evidence is not disputed that Rayburn lived with Jean Rayburn in a home situated on one of the lots conveyed to her in February of 1984. In fact, Rayburn remained in the home until after his wife's death in 1987, when the home was destroyed by fire. Thus, he did retain benefits of the property transferred. Additionally, despite the trial court's finding that the Rayburns were divorced at the time of the conveyance, the fact that they were married previously and lived together in the year of the transfer and every year thereafter, plus the fact that the Rayburns remarried prior to Jean Rayburn's death, leads us to conclude that the transfer was effectively between family members.
The parties disagree on the element of consideration. While Johnson asserts that Jean Rayburn gave nothing in return for the land, the Estate claims that Edward Rayburn conveyed the property as partial settlement in a 1984 divorce proceeding, where Jean Rayburn released her interest in pieces of heavy equipment and trucks used in Edward Rayburn's logging operation. Appellee's Brief, p. 2. However, the undisputed evidence, through the testimony of Edward Rayburn, reveals that the parties were divorced from 1971 until 1987, at which time they remarried. There was no 1984 divorce proceeding. Given this uncontradicted evidence, we are also persuaded that the transaction was conducted in a manner different from customary methods. The evidence further reveals that the only piece of equipment in the logging business titled in Jean Rayburn's name was a semi-tractor truck. In sum, the heretofore disregarded testimony of Johnson and Rayburn supports a finding of nearly every badge of fraud, as those indicia are articulated in Jones, supra, at 889-90.
The Estate contends that, regardless of the indicia of fraud present in this case, the trial court should be affirmed because Johnson failed to prove that Jean Rayburn had notice of the purported fraud in the conveyance of the property. The Estate relies on the following statute:
The provisions of this chapter shall not be construed to affect the title of a purchaser for a valuable consideration, unless it shall appear that such purchaser had previous notice of the fraudulent intent of his immediate grantor or assignor, or of the fraud rendering void the title of such grantor or assignor.
IC XX-X-X-XX. Because we have determined that the evidence leads solely to the conclusion that no valuable consideration was given for the real estate, this statute is not applicable. See First National Bank of Frankfort v. Smith (1898), 149 Ind. 443, 49 N.E. 376.
As the trial court found that both Johnson and Rayburn were not competent to testify, the court was unable to consider evidence supporting the following undisputed facts: Edward Rayburn transferred thirty one parcels of valuable real estate, for little or no consideration, to his ex-wife, mere days after Darlus Johnson refused to release him from liability for worker's compensation benefits. The transfer greatly reduced Rayburn's assets. Rayburn lived with his ex-wife on one of the lots, and continued to live there after her death. Considering all of the testimony elicited at the hearing, we find that the evidence is without conflict and leads to a result opposite that reached by the trial court. Therefore, the decision is contrary to law. Ashland Pipeline Co., supra, at 489.
This case is remanded to the trial court with the instruction to enter judgment *188 in favor of appellant, Darlus Johnson. Costs assessed against the appellee.
GARRARD and BARTEAU, JJ., concur.
NOTES
[1] This case was diverted to this office by order of the Chief Judge.
[2] IND. CODE 34-1-14-6 (1988).
[3] But see 2 J. Wigmore, Evidence § 578 (Chadbourn rev. 1979) (commenting that the rule is an "anomaly" that bars from proof far more honest claims than spurious ones); 3 B. Jones, Evidence § 20:20 et seq. (6th ed. 1972); C. McCormick, Evidence § 65 (3rd ed. 1984).
[4] The trial court actually concluded that Edward Rayburn was not competent to testify, but that even if he was competent, his testimony failed to support Johnson's fraudulent conveyance claim. Record, pp. 5-6.
[5] Rather than remand for a new trial in light of our resolution of the first two issues, we reach the merits of Johnson's third issue on the record presented to this court because the trial court received the disputed testimony into evidence, subject to its later ruling on the competency of the witnesses. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1119283/ | 34 Wash. App. 199 (1983)
660 P.2d 320
WILLIAM P. BRUST, ET AL, Respondents,
v.
McDONALD'S CORPORATION, ET AL, Appellants.
No. 9599-4-I.
The Court of Appeals of Washington, Division One.
March 7, 1983.
*201 Williams, Novack & Hansen, Ronald Castleberry, Jeffrey Pratt, Carney, Stephenson, Badley, Smith & Mueller, and Edward Mueller, for appellants.
Bell & Ingram, P.S., Douglas L. Bell, and James H. Jones, Jr., for respondents.
CALLOW, J.
The defendants, McDonald's Corporation and James Watters, appeal a judgment, rendered after a nonjury trial, which granted two easements across certain property leased by the McDonald's Corporation from the plaintiffs, William P. Brust and E.A. Thacker. Two issues are presented:
1. Whether the trial court erred by admitting and considering parol evidence to construe the written lease and amendment to lease.
2. Whether the trial court erred in refusing to grant equitable relief on the basis of equitable estoppel or laches.
Brust and Thacker (hereinafter collectively referred to as Brust) are the owners of certain parcels of real property on the northeast corner of the intersection of 41st Street and Colby Avenue in Everett, Washington. These parcels will be designated as Parcel 1, Parcel 2, the eastern parcel and the western parcel.
Westbound traffic has direct access to Parcel 1 from 41st. Eastbound traffic on 41st Street, however, does not have direct access to Parcel 1 due to traffic control devices. No other public street provides access to Parcel 1. Parcel 2 lies immediately to the north of and adjacent to Parcel 1. There is no direct access to Parcel 2 from a public street.
The eastern parcel adjoins Parcels 1 and 2 on the east. There is no direct access to the eastern parcel via a public street except for westbound automobile traffic on 41st Street. The western parcel adjoins Parcels 1 and 2 on the west and is located at the northeast corner of the intersection of 41st Street and Colby Avenue. Westbound automobile traffic from 41st Street may directly access the western parcel. Eastbound traffic on 41st Street cannot directly
*202 *203 access the western parcel. Northbound and southbound traffic on Colby Avenue can directly access the western parcel.
On July 31, 1969, Brust leased Parcel 1 to the McDonald's Corporation (McDonald's), a Delaware corporation, pursuant to a lease (1969 lease) prepared by McDonald's. The lease expressly reserved a 20-foot-wide easement over Parcel 1. This reservation granted Brust and his assigns access for automobile traffic from Colby Avenue to Brust's eastern parcel over Parcel 1 (Parcel 1 easement). It also reserved a nonexclusive easement in favor of McDonald's to provide access from Colby Avenue over Brust's western parcel to Parcel 1 (Colby easement). The legal description of the Colby easement was subsequently prepared. However, the Parcel 1 easement, to date, has not yet been identified and located.
After the execution of the 1969 lease, McDonald's constructed a fast food restaurant on Parcel 1. McDonald's then entered into a contractual and sublease arrangement with James Watters, whereby Watters operated the restaurant. On September 21, 1973, Parcel 2 was leased to McDonald's pursuant to a written agreement prepared by McDonald's entitled "Amendment to Lease." McDonald's needed the additional property to expand its parking lot. The amendment also contained language which reserved a 20-foot easement over the leased property (Parcel 2 easement) and granted a reciprocal nonexclusive easement to McDonald's over Brust's adjacent property. The location of this easement has been set by survey to run across Parcel 2.
In the spring of 1978, Watters added a drive-in window served by drive-in lanes. This drive-through improvement included directional curbing upon the pavement, certain landscaping consisting of large planters, and construction of an outside callbox, all of which are located on the northern end of Parcel 1. This improvement has caused rush-hour traffic waiting to use the drive-in window to back up over the alleged Parcel 1 easement so as to block access over that route both to the eastern parcel and to the businesses *204 of Brust's other lessees located on Brust's western parcel. It also blocks utilization of the Parcel 2 easement at times.
On January 12, 1979, Brust complained to McDonald's about the obstruction to the alleged Parcel 1 easement. McDonald's response was to deny the existence of the Parcel 1 easement. Due to the obstruction and because Brust needed the Parcel 1 easement to further develop his eastern parcel, Brust filed suit on October 29, 1979, against McDonald's and Watters for declaratory relief. At trial on September 18, 1980, the trial court granted Brust's request for relief and declared a 20-foot-wide easement for automobile purposes across both Parcels 1 and 2; determined that the Parcel 1 easement is to be located on the northerly 40 feet of Parcel 1; required McDonald's and Watters to remove all obstructions within the Parcel 1 easement area; and enjoined them from operating or conducting their business in a manner so as to unreasonably obstruct or hinder the free flow of traffic upon the easements over Parcels 1 and 2. Brust was awarded judgment against McDonald's and Watters for attorney's fees and costs.
McDonald's and Watters appeal the judgment of the trial court.
The first issue is whether the trial court erred by admitting and considering parol evidence to construe the written lease and amendment to lease.
The parol evidence rule provides that
prior conversations and negotiations, in the absence of ambiguity, merge into the final integrated writing. Parol evidence is not then admissible to contradict the terms of the instrument.
Heath Northwest, Inc. v. Peterson, 67 Wash. 2d 582, 584, 408 P.2d 896 (1965); see Fleetham v. Schneekloth, 52 Wash. 2d 176, 324 P.2d 429 (1958). Hence, parol or other extrinsic evidence is generally not admissible to add to, subtract from, vary or contradict written instruments which are contractual in nature and which are valid, complete, unambiguous, and are not affected by accident, fraud, or mistake. Pederson v. Peters, 6 Wash. App. 908, 910, 496 P.2d 970 *205 (1972); Bond v. Wiegardt, 36 Wash. 2d 41, 216 P.2d 196 (1950). However, the parol evidence rule should not be applied until the court has first determined as a matter of fact that the parties intended the written agreement to be a complete integration of the parties' agreement. Diel v. Beekman, 1 Wash. App. 874, 465 P.2d 212 (1970).
As noted in previous cases, confusion has resulted as to the proper application of the parol evidence rule in ascertaining the parties' intent in an agreement. Weyerhaeuser Co. v. Burlington N., Inc., 15 Wash. App. 314, 317, 549 P.2d 54 (1976); Lynch v. Higley, 8 Wash. App. 903, 510 P.2d 663 (1973); Eagle Ins. Co. v. Albright, 3 Wash. App. 256, 474 P.2d 920 (1970). Consequently, two lines of cases have developed regarding the admissibility of parol evidence to clarify a written agreement. See Shattuck, Contracts in Washington, 1937-1957: Part II, 34 Wash. L. Rev. 345, 374-77 (1959).
Some cases have held that a court may look beyond the four corners of a written instrument only if the instrument, on its face, is ambiguous. This is sometimes referred to as the "mechanical rule." Jacoby v. Grays Harbor Chair & Mfg. Co., 77 Wash. 2d 911, 917, 468 P.2d 666 (1970); Poggi v. Tool Research & Eng'g Corp., 75 Wash. 2d 356, 451 P.2d 296 (1969); Boeing Airplane Co. v. Firemen's Fund Indem. Co., 44 Wash. 2d 488, 268 P.2d 654, 45 A.L.R. 2d 984 (1954); North Am. Non Metallics, Ltd. v. Erickson, 24 Wash. App. 892, 896, 604 P.2d 999 (1979). Other cases have applied the "intent" test. Under the "intent" test, a court may examine parol evidence regarding circumstances surrounding the execution of a writing as an aid to its interpretation despite a lack of ambiguity on the face of the instrument. Tube-Art Display, Inc. v. Berg, 37 Wash. 2d 1, 4, 221 P.2d 510 (1950); J.W. Seavey Hop Corp. v. Pollock, 20 Wash. 2d 337, 349, 147 P.2d 310 (1944); Vance v. Ingram, 16 Wash. 2d 399, 410-11, 133 P.2d 938 (1943); Spokane Helicopter Serv., Inc. v. Malone, 28 Wash. App. 377, 382, 623 P.2d 727 (1981).
[1] In this case, we need not decide which test to apply. Washington case law indicates that the two tests have been *206 applied in order to determine, "whether the parties intended the written document to be an integration of their mutual agreement." Weyerhaeuser Co. v. Burlington N., Inc., supra at 318; see Lynch v. Higley, supra. Here, there is no dispute that the 1969 lease and its amendment were fully integrated. The issue of integration was not before the trial court and is not before us on appeal. The sole question is whether the two instruments were ambiguous as to the number of easements that were reserved. If so, the trial court could properly have considered parol evidence to explain the ambiguity and to ascertain the intent of the parties. Levy v. North Am. Co. for Life & Health Ins., 90 Wash. 2d 846, 852, 586 P.2d 845 (1978); Corinthian Corp. v. White & Bollard, Inc., 74 Wash. 2d 50, 442 P.2d 950 (1968); Brower Co. v. Baker & Ford Co., 71 Wash. 2d 860, 431 P.2d 595 (1967); Ladum v. Utility Cartage, Inc., 68 Wash. 2d 109, 411 P.2d 868 (1966).
The 1969 lease, in an addendum, contained the following language:
Lessor reserves unto themselves or their assigns, for automobiles only, a twenty (20) foot wide exit and entrance for egress, ingress and access to and from Lessor's adjacent properties on the west and east boundaries of the leased premises and Lessee agrees that any barriers or obstructions to be placed on said exits or entrances shall not interfere with the free flow of traffic to and from said adjacent properties; and as the Lessor develops said adjacent properties there shall be reserved unto Lessee a common driveway over said properties of the Lessor to give to Lessee egress, ingress and access to Colby Avenue in the City of Everett, State of Washington.
The 1973 amendment to lease states, in pertinent part:
The legal description of the demised premises contained in the Ground Lease dated July 31, 1969, is hereby amended to include the additional property in the City of Everett, County of Snohomish and State of Washington and commonly described as follows, to wit:
[legal description of Parcel 2 omitted]
Lessor reserves for themselves or their assigns, an easement for vehicular purposes over a 20 foot portion of the *207 demised premises and Lessor agrees to grant a reciprocal non-exclusive easement to Lessee over Lessor's adjacent property. Such mutual non exclusive easement shall be more particularly described upon receipt of an approved survey by a licensed surveyor of the State of Washington as aforementioned.
[2, 3] Since the 1973 amendment to lease refers to the 1969 lease, they should be read in conjunction with each other. Turner v. Wexler, 14 Wash. App. 143, 149, 538 P.2d 877 (1975); see Spokane Helicopter Serv., Inc. v. Malone, 28 Wash. App. 377, 382, 623 P.2d 727 (1981). When reading the two instruments together, an ambiguity arises, to wit: whether the parties intended the easement reserved in the 1969 lease to merge with that reserved in the amendment, or whether they intended the amendment to reserve a new easement separate and independent from that reserved in the 1969 lease. "`A written instrument is ambiguous when its terms are uncertain or capable of being understood as having more than one meaning.'" Rydman v. Martinolich Shipbuilding Corp., 13 Wash. App. 150, 153, 534 P.2d 62 (1975) (quoting Murray v. Western Pac. Ins. Co., 2 Wash. App. 985, 989, 472 P.2d 611 (1970)). Hence, the trial court properly admitted and considered parol evidence to resolve such ambiguity.
After consideration of the parol evidence, the trial court found:
As a condition of leasing Parcel 2 to McDonald's Corporation, Plaintiffs required an additional easement across Parcel 2 (hereinafter referred to as the Parcel 2 easement), to provide additional access across Parcel 2 from the Colby easement to Plaintiff's still-undeveloped eastern parcel. During the negotiations, representatives of Defendant McDonald's Corporation requested that the Parcel 1 easement be relocated onto Parcel 2 rather than establishing two separate easements. Plaintiffs refused, and insisted that the Parcel 2 easement be in addition to the Parcel 1 easement. Since additional parking adjacent to Parcel 1 was not available elsewhere, the representatives of Defendant McDonald's Corporation agreed.
[4] This finding is supported by substantial evidence *208 and will not be disturbed on appeal. Seattle-First Nat'l Bank v. Brommers, 89 Wash. 2d 190, 199, 570 P.2d 1035 (1977); Thorndike v. Hesperian Orchards, Inc., 54 Wash. 2d 570, 343 P.2d 183 (1959). The trial court correctly construed the 1969 lease and its amendment to have created two separate and independent easements.
The second issue is whether the trial court erred in refusing to grant equitable relief to McDonald's and Watters based on equitable estoppel and laches.
McDonald's and Watters contend that the failure of Brust to assert the Parcel 1 easement until after the drive in window had been constructed with his full knowledge and acquiescence precludes him from now asserting such claim based on equitable estoppel and/or laches.
[5-7] "Equitable estoppel arises when one wrongfully or negligently, by acts or representations, causes another who has a right to rely on such acts or representations to change position to its detriment." Alaska Marine Trucking v. Carnation Co., 30 Wash. App. 144, 149, 633 P.2d 105 (1981). It has been otherwise stated to require:
(1) an admission, statement, or act inconsistent with the claim afterwards asserted, (2) action by the other party on the faith of such admission, statement, or act, and (3) injury to such other party resulting from allowing the first party to contradict or repudiate such admission, statement or act.
Wagner v. Wagner, 95 Wash. 2d 94, 102, 621 P.2d 1279 (1980). The defense of laches is based upon equitable estoppel. It forbids the assertion of a right where others will be injured because of the claimant's delay. Thorsteinson v. Waters, 65 Wash. 2d 739, 747, 399 P.2d 510 (1965). Laches will bar a claim when a claimant has unreasonably delayed where he could have proceeded and a change of conditions makes it inequitable to enforce the claim. Panorama Residential Protective Ass'n v. Panorama Corp., 28 Wash. App. 923, 932, 627 P.2d 121 (1981).
In the instant case, McDonald's and Watters have not met their burden of proof. The equitable doctrines of *209 estoppel and laches are affirmative defenses upon which McDonald's and Watters have the burden of proof. Fulle v. Boulevard Excavating, Inc., 20 Wash. App. 741, 744, 582 P.2d 566 (1978). "The burden of proving estoppel and the material facts to support estoppel is on the party claiming estoppel." Alaska Marine Trucking v. Carnation Co., supra at 149; see State v. Charlton, 71 Wash. 2d 748, 751, 430 P.2d 977 (1967). Since the trial court made no findings upon the material facts relating to estoppel or laches, this court must imply a finding against the party having the burden of proof. Fulle v. Boulevard Excavating, Inc., supra at 744; Rhodes v. Gould, 19 Wash. App. 437, 576 P.2d 914 (1978).
[8] Brust and Thacker have moved, with supporting argument, for an award of attorney's fees incurred in their defense of this appeal. Pursuant to RAP 18.1, they have filed an affidavit and time sheets detailing the necessity of requested fees of $11,375.32. The trial court awarded reasonable attorney's fees to Brust and Thacker in the amount of $3,500 based on a provision in the 1969 lease which provided that the lessee was to pay lessor's costs and expenses, including reasonable attorney's fees, in legal proceedings. Such a contractual provision encompasses fees necessary for appeal as well as for trial. Schmitt v. Matthews, 12 Wash. App. 654, 665, 531 P.2d 309 (1975). The respondents, Brust and Thacker, are entitled to a reasonable attorney's fee in the amount of $2,800 for this appeal.
The judgment is affirmed.
DURHAM, A.C.J., and RINGOLD, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1133631/ | 754 So. 2d 1136 (1999)
L.W., Individually and as Next Friend of Her Son, J.A.
v.
The McCOMB SEPARATE MUNICIPAL SCHOOL DISTRICT and Unknown John Does 1-5.
No. 97-CA-01465-SCT.
Supreme Court of Mississippi.
September 2, 1999.
*1137 Rodney G. Tidwell, Alfred Lee Felder, McComb, Attorneys for Appellants.
Alben N. Hopkins, Thomas A. Waller, Gulfport, Attorneys for Appellees.
EN BANC.
ON MOTION FOR REHEARING
SMITH, Justice, for the Court:
STATEMENT OF THE CASE
¶ 1. Motion for rehearing denied. The original opinion is withdrawn and this opinion is substituted therefor.
¶ 2. On October 9, 1995, the minor plaintiff/appellant J.A. turned fourteen years old. J.A. is a student at Denman Middle School in the McComb School District. On that morning, J.A. was threatened by a fellow student, Matthew Garner, while in music class. J.A. told Mr. Dykes, a nearby teacher, of the threats. The teacher did nothing in response.
¶ 3. That afternoon, both J.A. and Matthew were in after-school detention. During this time, Matthew again threatened J.A. in front of the detention teacher, Mrs. Paul. As they left detention, Matthew followed J.A. across the school's baseball field. At this point, words were exchanged, and Matthew attacked J.A. Matthew struck him in the face and ordered him to perform oral sex. When J.A. resisted, Matthew continued to beat him and forced him to perform the act. The incident was witnessed by one student and later reported to a coach. Upon knowledge of the incident, J.A. was taken by his mother, L.W., to the hospital.
¶ 4. On January 9, 1997, L.W., individually and as next friend of her son J.A., brought suit in Pike County Circuit Court against the McComb Separate Municipal School District (the "School") and unknown John Does 1-5. L.W. alleges that the School was negligent in failing to maintain a safe environment; in failing to properly monitor its grounds; in failing to properly supervise its students; in failing to have a route of safe departure for detention students; and for other acts of negligence.
¶ 5. On March 21, 1997, the School filed a Motion to Dismiss on grounds that the Mississippi Sovereign Immunity Act, §§ 11-46-1 et seq. (Supp.1998), immunized them from the suit. On June 24, 1997, L.W. responded to the motion to dismiss by denying the absolute immunity of the School, and alternatively, by claiming the School's purchase of liability insurance waived any immunity.
¶ 6. On October 13, 1997, Pike County Circuit Judge Keith Starrett granted the School's Motion to Dismiss pursuant to Miss.R.Civ.Proc. 12(b)(6). He stated that the statute immunizes the School for administrative action or inaction and/or failure to perform a discretionary duty. Furthermore, he held that T.M. v. Noblitt, 650 So. 2d 1340 (Miss.1995), cited by L.W., does *1138 not apply, because the cause of action in that case occurred prior to the enactment of the statute.
¶ 7. Aggrieved, L.W. now appeals to this Court and raises the following issues:
I. WHETHER THE TRIAL COURT ERRED WHEN IT DISMISSED L.W.'S LAWSUIT BECAUSE DISCRETIONARY ACTS OF NEGLIGENCE WERE ALLEGED TOGETHER WITH A GENERAL ALLEGATION OF NEGLIGENCE.
II. WHETHER THE TRIAL COURT ERRED WHEN IT DISMISSED L.W.'S LAWSUIT BECAUSE SEVERAL OF THE ACTS OF NEGLIGENCE ALLEGED IN THE COMPLAINT WERE DISCRETIONARY.
III. WHETHER THE SOVEREIGN IMMUNITY PROTECTIONS OF SECTION 11-46-9 OF THE MISSISSIPPI CODE ANNOTATED ARE WAIVED WHEN A GOVERNMENTAL ENTITY PURCHASES LIABILITY INSURANCE IN EXCESS OF THE LIMITS IN SECTION 11-46-15.
STANDARD OF REVIEW
¶ 8. A motion to dismiss under Miss.R.Civ.P. 12(b)(6) raises an issue of law. Tucker v. Hinds County, 558 So. 2d 869, 872 (Miss.1990); Lester Engineering Co. v. Richland Water and Sewer Dist., 504 So. 2d 1185, 1187 (Miss.1987). This Court conducts de novo review on questions of law. UHS-Qualicare, Inc. v. Gulf Coast Community Hosp., Inc., 525 So. 2d 746, 754 (Miss.1987).
¶ 9. When considering a motion to dismiss, the allegations in the complaint must be taken as true and the motion should not be granted unless it appears beyond doubt that the plaintiff will be unable to prove any set of facts in support of his claim. Butler v. Bd. of Supervisors for Hinds County, 659 So. 2d 578, 581 (Miss.1995); Overstreet v. Merlos, 570 So. 2d 1196, 1197 (Miss.1990).
LEGAL ANALYSIS
I. WHETHER THE TRIAL COURT ERRED WHEN IT DISMISSED L.W.'S LAWSUIT BECAUSE DISCRETIONARY ACTS OF NEGLIGENCE WERE ALLEGED TOGETHER WITH A GENERAL ALLEGATION OF NEGLIGENCE.
¶ 10. L.W. contends that her complaint was sufficient under notice pleadings, because she alleged negligence and demanded relief both generally and specifically. Therefore, she continues, if the trial court found some of those acts barred as discretionary duties under sovereign immunity, there still should remain sufficient allegations under notice pleadings to allow the lawsuit to proceed. This is not true.
¶ 11. The Mississippi Tort Claims Act ("MTCA") provides the exclusive civil remedy against a governmental entity or its employee for acts or omissions which give rise to a suit. Miss.Code Ann. § 11-46-7(1) (Supp.1998)[1]; Moore v. Carroll County, Mississippi, 960 F. Supp. 1084, 1088 (N.D.Miss.1997)("The remedy provided pursuant to the MTCA is exclusive of any other state law remedy sought against a governmental entity or its employee."). Any tort claim filed against a governmental entity or its employee shall be brought only under the MTCA. Id.
¶ 12. The MTCA waives sovereign immunity from claims for money damages arising out of the torts of governmental entities and their employees from and after October 1, 1993, for political subdivisions. Miss.Code Ann. § 11-46-5(1) (Supp.1998); Chamberlin v. City of Hernando, *1139 716 So. 2d 596, 600 (Miss.1998). The MTCA defines a "school district" as a "political subdivision" and a "governmental entity." Miss.Code Ann. § 11-46-1(g), (i) (Supp.1998); see also Gressett v. Newton Separate Mun. Sch. Dist., 697 So. 2d 444, 446(¶ 4) (Miss.1997). However, certain circumstances are exempted from this waiver of immunity. Miss.Code Ann. § 11-46-9 (Supp.1998).
¶ 13. In Stanton & Associates v. Bryant Const. Co., this Court stated:
Rule 8(a), Miss.R.Civ.P., requires only that in its complaint a plaintiff provide (1) a short and plain statement of the claim showing that the pleader is entitled to relief, and, (2) a demand for judgment for the relief to which he deems himself entitled. Relief in the alternative or of several different types may be demanded. Rule 8(e), Miss. R.Civ.P., then provides (1) Each averment of a pleading shall be simple, concise, and direct. No technical forms of pleading or motions are required. When a complaint is tested via a motion under Rule 12(b)(6) for failure to state a claim upon which relief may be granted, the sufficiency of the complaint is in substantial part determined by reference to Rule 8(a) and (e). The leading federal case, Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80, 84 (1957), construing an identically worded provision of the Federal Rules of Civil Procedure, states that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitled him to relief."
464 So. 2d 499, 505 (Miss.1985)(emphasis added & footnotes omitted). If the exemptions to waiver of sovereign immunity under the MTCA apply as the trial court concluded, then it is "beyond doubt" that L.W. can prove no set of facts to support his claim and entitle him to relief. The MTCA is the exclusive remedy for L.W.'s claims.
II. WHETHER THE TRIAL COURT ERRED WHEN IT DISMISSED L.W.'S LAWSUIT BECAUSE SEVERAL OF THE ACTS OF NEGLIGENCE ALLEGED IN THE COMPLAINT WERE DISCRETIONARY.
A. The Trial Court Erred in Dismissing L.W.'s Lawsuit Since the Acts of Negligence Alleged in the Complaint Are Not Governmental Policy Decisions.
1. Section 11-46-9(1)(d) Is In Derogation of the Common Law Right and Should Be Read Narrowly.
¶ 14. The trial court's order stated, in part:
... That the allegations as set forth in the complaint, except for the one stating "other acts of negligence," allege something that would be provided for by administrative action or inaction of a legislative nature and/or failure to perform a discretionary function or a duty; and
That the exercise of discretion was called for in the acts of negligence alleged and therefore, the McComb School District is absolutely immune from suit;
* * * *
... That the allegations as set forth in the complaint require use of discretion and therefore the school district is immune pursuant to Section 11-46-9(d) [sic] ...
Subsection (d) states:
(1) A governmental entity and its employees acting within the course and scope of their employment or duties shall not be liable for any claim:
* * * *
(d) Based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a governmental entity or employee thereof, whether or not the discretion be abused;
*1140 Miss.Code Ann. § 11-46-9(1)(d) (Supp. 1998).
¶ 15. One of this Court's maxims of statutory construction is that the legislative intent must be determined from the total language of the act and not from one section considered apart from the remainder. Lee v. Alexander, 607 So. 2d 30, 36 (Miss.1992); Pearl River Valley Water Supply Dist. v. Hinds County, 445 So. 2d 1330 (Miss.1984). Therefore, in this analysis, it will be necessary to determine the application of subsections in their relation to the whole.
¶ 16. L.W. argues that subsection (d) is a continuation of the common law public officials' sovereign immunity, but with the additional constraint to the plaintiff of allowing the defendant to abuse his discretion. Evans v. Trader, 614 So. 2d 955, 957 (Miss.1993). However, Evans does not cite the subsection, section, or the statute at issue, because it predates the effective date of implementation of the MTCA. Id. Despite Evans, L.W.'s assertion does appear correct when one reads the plain language of the legislative intent, as follows:
Declaration of legislative intent.
(2) The immunity of the state and its political subdivisions recognized and reenacted herein is and always has been the law in this state, before and after November 10, 1982, and before and after July 1, 1984, and is and has been in full force and effect in this state except only in the case of rights which, prior to the date of final passage hereof, have become vested by final judgment of a court of competent jurisdiction or by the express terms of any written contract or other instrument in writing.
Miss.Code Ann. § 11-46-3(2) (Supp.1998); Fortune v. Lee County Bd. of Supervisors, 725 So. 2d 747, 750 (¶ 5)(Miss.1998).[2]
¶ 17. Next, L.W. argues that the addition of the abuse of discretion phrase into subsection (d) is in derogation of the common law right; therefore, the subsection should then be construed against any such limitation under the rules of statutory construction. Mississippi Milk Comm'n v. Winn-Dixie Louisiana, Inc., 235 So. 2d 684, 688 (Miss.1970). However, this rule of statutory construction has been expressly abolished by this Court. McCluskey v. Thompson, 363 So. 2d 256, 261-64 (Miss.1978)(citing Vol. 3, R. Pound, Jurisprudence, § 111, at 663-665 (1959)); see also Southern Natural Gas Co. v. Pursue Energy, 781 F.2d 1079, 1088 (5th Cir.1986). Rather, this Court has determined that the common law must give way to statutes. McCluskey at 264. This analysis will move to the next sub-issue, because the rest of the L.W.'s argument on this sub-issue is premised on a rule of statutory construction that has been abolished.
2. Section 11-46-9(1)(d) Should Be Read Narrowly Because The Broad Reading Employed by the Trial Court Would Nullify Most of the Other Subsections of Section 11-46-9(1).
¶ 18. The School successfully argued to the trial court that subsection (d) of § 11-46-9(1) is a catchall exemption for all discretionary functions or duties. Since discretion was involved in the School's negligence, the trial court found the lawsuit was totally barred by the statute. L.W. argues that this ruling applied an overly broad interpretation to the statute.
¶ 19. L.W. contends that if this interpretation is accepted by this Court, then subsection (d) would obviate the purpose and need for the majority of other subsections under section 11-46-9(1). Plaintiff argues that twelve other subsections necessarily require some element of discretion, e.g. subsection "(a) Arising out of a legislative or judicial action or inaction, or administrative action or inaction of a legislative or judicial nature." Miss.Code Ann. § 11-46-9(1)(a) (Supp.1998). In other words, if the broad interpretation employed by the *1141 trial court is allowed, then the exemption will swallow the waiver of immunity.
¶ 20. The School counters that L.W. confuses statutory sovereign immunity with common law qualified immunity. Defendant School contends that subsection (d) and common law qualified immunity are alike in that the court must determine whether or not the function of the governmental actor was discretionary. But they differ in that statutory sovereign immunity requires only the simple, straightforward determination of discretion; whereas, with common law qualified immunity, discretion is not the sole determining factor. T.M. ex rel. E.N.M. v. Noblitt, 650 So. 2d 1340, 1346 (Miss.1995)(Banks, J. concurring). The Legislature specifically chose not to put any additional requirements on statutory sovereign immunity. For example, the Legislature expressly stated that it does not matter "whether or not the discretion be abused" in order to be exempt from liability. Miss.Code Ann. § 11-46-9(1)(d) (Supp.1998).
¶ 21. Since both statutory and common law immunity require a determination of discretion, prior case law can be used to define discretionary conduct. In Noblitt, this Court accepted the trial court's definition which stated that "[a] duty is discretionary if it requires the official to use her own judgment and discretion in the performance thereof." 650 So.2d at 1343 (citing Poyner v. Gilmore, 171 Miss. 859, 158 So. 922, 923 (1935)); see also Dalehite v. United States, 346 U.S. 15, 35-36, 73 S. Ct. 956, 968, 97 L. Ed. 1427 (1953) (interpreting "discretionary function" under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2680 (1982), the United States Supreme Court stated that discretion means "more than the initiation of programs and activities.... Where there is room for policy judgment and decision there is discretion.")
¶ 22. In contrast, an act is ministerial "(if) the duty is one which has been positively imposed by law and its performance required at a time and in a manner or upon conditions which are specifically designated, the duty to perform under the conditions specified not being dependent upon the officer's judgment or discretion." Id. at 1344 (quoting Davis v. Little, 362 So. 2d 642, 644 (Miss.1978) and Poyner at 922). Additionally, this Court said that the duty to hire and supervise employees is necessarily and logically dependent on discretion. Id.
¶ 23. The School argues that L.W.'s allegations involve discretionary conduct rather than ministerial, because providing supervision, monitoring, and a safe environment satisfy Noblitt. See also Mohundro v. Alcorn County, 675 So. 2d 848, 854 (Miss.1996)("road maintenance and repair are discretionary rather than ministerial..."); Glover ex rel. Glover v. Donnell, 878 F. Supp. 898, 901 (S.D.Miss.1995)(defendant's conduct was discretionary and therefore immune where plaintiff alleged a failure to properly supervise and protect her from other participants in a governmental program). This Court finds that the L.W.'s allegations do in fact involve discretionary conduct rather than ministerial.
¶ 24. However, merely finding that the conduct at issue in the instant case was discretionary does not fully resolve the matter as the School suggests. As will be shown below, both state and federal law support our conclusion that public schools have the responsibility to use ordinary care and take reasonable steps to minimize risks to students thereby providing a safe school environment.
¶ 25. Miss.Code Ann. § 11-46-9 requires a minimum standard of ordinary care be exercised by the government actor in order to raise the statutory shield:
(1) A governmental entity and its employees acting within the course and scope of their employment or duties shall not be liable for any claim:
. . . .
(b) Arising out of any act or omission of an employee of a governmental *1142 entity exercising ordinary care in reliance upon, or in the execution or performance of, or in the failure to execute or perform, a statute, ordinance or regulation, whether or not the statute, ordinance or regulation be valid;
Miss.Code Ann. § 11-46-9(1)(b) (emphasis added). Under this statute, as long as ordinary care is used while performing a statutory duty, immunity exists. But when the state actor fails to use ordinary care in executing or performing or failing to execute or perform an act mandated by statute, there is no shield of immunity. One such statutory duty applicable to public schools is the following:
It shall be the duty of each superintendent, principal and teacher in the public schools of this state to enforce in the schools the courses of study prescribed by law or by the state board of education, to comply with the law in distribution and use of free textbooks, and to observe and enforce the statutes, rules and regulations prescribed for the operation of schools. Such superintendents, principals and teachers shall hold the pupils to strict account for disorderly conduct at school, on the way to and from school, on the playgrounds, and during recess.
Miss.Code Ann. § 37-9-69 (emphasis added). This statute mandates that school personnel maintain appropriate control and discipline of students while the children are in their care. Furthermore, the State of Mississippi mandates compulsory school attendance for all children upon penalty of law. Miss.Code Ann. § 37-13-91 (Supp.1998).[3] Since the state requires all children to be enrolled in school, it only seems logical that the state should then require school personnel to use ordinary care in administering our public schools.[4]
¶ 26. The teachers and administrators here are then protected by sovereign immunity if and only if they used ordinary care in controlling and disciplining their students. The issue of ordinary care is a fact question. The trial court, confronted with all the relevant facts, should then under our law, decide whether or not those responsible used ordinary care as required by the statute. If the trial judge concludes that they failed, neither they nor the school are immune from liability.
¶ 27. In Mosby v. Moore, 716 So. 2d 551, 557-558 (Miss.1998), this Court stated as follows:
While there is no flexible rule to distinguish whether an act is ministerial or discretionary, the most important criteria is if the duty is one which has been positively imposed by law and in a manner or upon conditions which are specifically designated, the duty to perform under the condition specified, not being dependent upon the officer's judgment or discretion, the act and discharge thereof is ministerial.
Id. at 557-558 (quoting Barrett v. Miller, 599 So. 2d 559, 567 (Miss.1992)). Therefore, the statutorily imposed obligation to "hold the pupils to strict account", a ministerial dictate, trumps the discretionary exception, regardless of the amount of discretion school personnel may exercise in carrying out this statutory obligation.
*1143 ¶ 28. Federal law also supports our conclusion. Applying a similarly worded exception to the FTCA, a federal district court has held:
The discretionary function exemption is intended to protect public policy objectives. (citations omitted.) It would run counter to the discretionary function exemption to second-guess or micromanage the kinds of steps appropriate to maximize safety in government facilities, even where the decisions are made below the policy level. United States v. Gaubert, 499 U.S. 315, 111 S. Ct. 1267, 113 L. Ed. 2d 335 (1991). Within that broad discretion, reasonable steps of a type determined by management to minimize risks of personal injury are necessary. Failure to take any such steps where feasible is negligent and not within the discretionary function exemption, even though the particular nature of the appropriate steps is discretionary. Andrulonis v. United States, 952 F.2d 652 (2d Cir.1991); see also Indian Towing v. United States, 350 U.S. 61, 76 S. Ct. 122, 100 L. Ed. 48 (1955).
Wright v. United States, 866 F. Supp. 804, 806 (S.D.N.Y.1994)[5] (emphasis added). In this case, a guest was injured in a fall in a wedding chapel owned by the federal government. Id.
¶ 29. Here, L.W. claimed negligence in maintenance and supervision of the premises. The government claimed exemption under this discretionary function exception. The district court denied both parties' motions for summary judgment stating that the discretionary function exception did apply, but reasonable steps to minimize risks are still necessary. Id. Schools have the responsibility to use ordinary care to provide a safe school environment. Bd. of Trustees of the Pascagoula Municipal Separate Sch. Dist. v. Doe, 508 So. 2d 1081, 1085 (Miss.1987); see also S-1 v. Turlington, 635 F.2d 342, 348 n. 9 (5th Cir.1981). Taking reasonable steps to minimize risks is one way to provide a safe school environment. Therefore, both Mississippi and federal law support our holding that sovereign immunity is inapplicable as an absolute bar to L.W.'s case. The lower court's dismissal is thus reversed and remanded.
B. Even If the Discretionary/Ministerial Dichotomy Is Applicable To This Case, This Case Should Not Have Been Dismissed Because The Plaintiff Has Not Had An Opportunity to Discover Whether The Defendant Violated Any Ministerial Duties.
C. This Court Envisioned the Mississippi Tort Claims Act As Providing Relief In A Case Such As the Present Case.
¶ 30. Discussion of sub-issues B. and C. is rendered moot by our reversal in A.
III. WHETHER THE SOVEREIGN IMMUNITY PROTECTIONS OF SECTION 11-46-9 OF THE MISSISSIPPI CODE ANNOTATED ARE WAIVED WHEN A GOVERNMENTAL ENTITY PURCHASES LIABILITY INSURANCE IN EXCESS OF THE LIMITS IN SECTION 11-46-15.
¶ 31. L.W. believes that Defendant School has a $500,000 liability insurance policy that would cover the type of injury in this case. However, without discovery, L.W. cannot confirm the existence of any liability insurance. L.W. asserts that if such a policy exists, she should be able to sue the sovereign up to the policy limits *1144 under Miss.Code Ann. § 11-46-17(4). The statute states in pertinent part:
Any governmental entity of the state may purchase liability insurance to cover claims in excess of the amounts provided for in Section 11-46-15 and may be sued by anyone in excess of the amounts provided for in Section 11-46-15 to the extent of such excess insurance carried; provided, however, that the immunity from suit above the amounts provided for in Section 11-46-15 shall be waived only to the extent of such excess liability insurance carried.
Miss.Code Ann. § 11-46-17(4) (Supp. 1998).[6]
¶ 32. Prior to the enactment of the MTCA, this Court held that the defendant sovereign was estopped from asserting sovereign immunity if it had purchased a public liability policy. Churchill v. Pearl River Basin Dev. Dist., 619 So. 2d 900, 906 (Miss.1993). There, the plaintiff's tort claims were allowed to the extent of the policy in Churchill. Id. In accord with the statute and Churchill, L.W. argues that her suit should be allowed.
¶ 33. The School argues instead that the MTCA has "laid to rest" Churchill, because under the statute, a sovereign must first be found liable before damages should be considered. The School points to Section 11-46-17(3) which states in pertinent part:
All political subdivisions shall, from and after October 1, 1993, obtain such policy or policies of insurance, establish such self-insurance reserves, or provide a combination of such insurance and reserves as necessary to cover all risks of claims and suits for which political sub-divisions may be liable under this chapter;....
Miss.Code Ann. § 11-46-17(3) (Supp.1998)(emphasis added). Since "may" is discretionary, the School argues that a determination of liability is a condition precedent to examining damages and insurance.
¶ 34. This Court has recently upheld the Churchill rationale with regards to a pre-MTCA cause of action stating:
... regardless of whether or not the City of Yazoo City was cloaked with sovereign immunity in the instant case, the liability insurance procured by it to cover instances such as Jerome Hord's injury necessitates reversal in this case. A plaintiff may be entitled to recover if the governmental entity has purchased liability insurance which covers the type of injury the plaintiff suffered. Churchill v. Pearl River Basin Dev. Dist., 619 So. 2d 900, 905-06 (Miss.1993).
Hord v. City of Yazoo City, 702 So. 2d 121, 124 (¶ 13) (Miss.1997) (C.J. Lee, concurring; joined by JJ. Pittman, Banks, McRae, and Roberts). However, Hord and Churchill both involved pre-MTCA tort claims. Here, the MTCA is in full force and effect. Thus, the School is correct in asserting that Churchill has been laid to rest by the MTCA. The purchase of insurance does not affect potential defenses under Miss.Code Ann. § 11-46-9. Otherwise, sovereigns would be unlikely to continue to purchase insurance if it had the effect of waiving all of their defenses under the MTCA-an undesirable and unintended result in this Court's view.
¶ 35. Accordingly, this Court holds that Miss.Code Ann. § 11-46-17(4)(Supp.1998) allows for the purchase of *1145 insurance by a sovereign which then covers claims in excess of the amounts set by Miss.Code Ann. § 11-46-15 (Supp.1998) to the extent of the policy. This provision does not limit the exclusions or exemptions enumerated in Section 11-46-9.
CONCLUSION
¶ 36. The Mississippi Tort Claims Act provides the exclusive civil remedy for the Plaintiff's claims of negligence against a school district. The common law must give way to statutes.
¶ 37. The Defendant School's conduct at issue is best described as discretionary. However, there is a ministerial aspect, because both state and federal law place a duty of ordinary care on school personnel to minimize risks of personal injury to provide a safe school environment. Therefore, the case is reversed and remanded.
¶ 38. This case is also reversed and remanded to determine whether the Defendant School has a liability insurance policy in effect that covers the type of injury in this case. If there is such a policy, the immunity limitations found in Miss.Code Ann. § 11-46-15 (Supp.1998) would be waived to the extent discussed above.
¶ 39. REVERSED AND REMANDED FOR PROCEEDINGS CONSISTENT WITH THIS OPINION.
PRATHER, C.J., MILLS, WALLER AND COBB, JJ., CONCUR. BANKS, J., CONCURS IN PART WITH SEPARATE WRITTEN OPINION JOINED BY PRATHER, C.J., SMITH, WALLER AND COBB, JJ. McRAE, J., CONCURS IN PART AND DISSENTS IN PART WITH SEPARATE WRITTEN OPINION JOINED BY SULLIVAN AND PITTMAN, P.JJ.
BANKS, Justice, concurring in part:
¶ 40. I agree with the majority insofar as it reverses and remands this case. I write separately because I disagree with the emphasis of its resolution of the insurance issue.
¶ 41. The question whether the purchase of insurance waives the immunity exemptions up to the insurance amount is a matter of statutory construction. While the possible result of a particular construction with respect to the motivation and incentives of legislative bodies may have some effect on that process, it is hardly controlling. Thus, the suggestion that an interpretation that excess coverage waives immunities, including those established by way of specific exemption from the statutorily limited waiver, would be a disincentive for the purchase of insurance should not dictate the result here. I say that even if the statement were not open to debate, which it is.
¶ 42. We must first look to the language of the statute. "Whatever the legislature says in the text of the statute is considered the best evidence of the legislative intent." Pegram v. Bailey, 708 So. 2d 1307, 1314 (Miss.1997) (quoting McMillan v. Puckett, 678 So. 2d 652, 657 (Miss.1996) (Banks, J., dissenting)). The subsection in question are Miss.Code Ann. § 11-46-17(3) and (4) (Supp.1999). Section 11-46-17 provides generally for funding the tort claims fund through self-insurance or commercial policies. Subsection (3) prescribes the purchase of insurance to cover claims for which the governmental entity "may be liable under this chapter...." The next subsection, 11-46-17(4), provides that a governmental entity "may purchase liability insurance to cover claims in excess of the amounts provided for in Section 11-46-15 and may be sued by anyone in excess of the amounts provided for in Section 11-46-15 to the extent of such insurance carried...." These subsections must be read in the context of the entire statutory scheme. On its face, however, section 11-46-17(4) speaks only of excess, that is amount, rather than substantive waiver. It refers back to, and only to, Section 11-46-15 which provides the monetary limitation of waiver, not the waiver itself.
*1146 ¶ 43. Section 11-46-15 prescribes limitations in the amount of damages allowed for claims "brought under this chapter." Section 11-46-3 provides a blanket immunity from suit to governmental entities and their employees. Section 11-46-5 provides for a waiver of that immunity to the extent of the maximum liability established in Section 11-46-15. Section 11-46-7(1) provides that the remedy provided in this chapter is exclusive "notwithstanding the provisions of any other law to the contrary." Section 11-46-9 provides for exemptions from the waiver of immunity for specific governmental activities. It states explicitly that the entity "shall not be held liable" for claims arising out of the activities there mentioned. Formerly, Section 11-46-16, which stood repealed coterminously with the effective date of Section 11-46-17, provided a blanket waiver of immunity arising out of the purchase of insurance. No similar statute now exists in the chapter.
¶ 44. The conclusion is inescapable, then, that the provision for excess coverage in Section 11-46-17(4) speaks to the limitation on damages rather than whether the entity may be held liable for the substantive claim.
PRATHER, C.J., SMITH, WALLER AND COBB, JJ., JOIN THIS OPINION.
McRAE, Justice, concurring in part and dissenting in part:
¶ 45. I dissent from the majority's conclusion that the purchase of insurance by a governmental entity does not affect potential defenses under Miss.Code Ann. § 11-46-9 (Supp.1999). Where the entity purchases insurance, the majority writes, it does so only to cover claims in excess of the limits set by the Tort Claims Act. The majority reads the Tort Claims Act to say that a sovereign may never waive immunity under the Tort Claims Act. Under this scenario a political entity, even if it desired to do so, cannot provide greater protections for its citizens than those afforded by the Act. I find this conclusion entirely without merit.
¶ 46. When a city or county is benevolent enough to purchase insurance for the protection of itself and potential claimants, the governmental entity should be taken out of the Act altogether, up to the amount of that policy. If an entity chooses to come out from under the protection of the legislatively created umbrella for a "bigger" one provided by an insurance company, the entity and its insurance company should be estopped from claiming any privileges or defenses under the Act, up to the amount of coverage. Consequently, an insurance provider has no right to gain shelter under the very umbrella created by the Act. That right was created for governmental entities and may not be delegated.
¶ 47. Prior to the enactment of the Tort Claims Act, we had no problem finding that a political subdivision, when it purchased liability insurance, waived its immunity up to the amount of insurance. Churchill v. Pearl River Basin Dev. Dist., 619 So. 2d 900, 906 (Miss.1993). Once the entity was protected by insurance, it was treated like any other defendant. The insurance company could not claim immunity which is a defense personal to its insured.
¶ 48. When the Legislature, at our insistence,[7] finally addressed sovereign immunity, it merely incorporated our cases holding that the purchase of insurance by a governmental entity waived immunity up to the amount of the policy. There is no reason to think that the Legislature intended to do anything different. It simply took our previous language and said that immunity was waived up to the amount of the insurance. See Miss.Code Ann. § 11-46-17(4) (Supp.1999).
¶ 49. Nor is there any reason to believe that a different decision by us concerning *1147 the purchase of insurance by political subdivisions is likely to open a flood of litigation. The instant case concerns an injury suffered at a public school. Private schools, of which there are many in this state, do not enjoy sovereign immunity for torts occurring on their premises. Yet we do not see a host of lawsuits against the private schools in this state.
¶ 50. In this case, L.W. believes that the McComb Separate School District has an insurance policy with coverage in excess of $500,000. If true, the real party in interest in this case is the insurance company and not the defendant school. The entity's sovereign immunity is waived and cannot be transferred to the insurance carrier. Once the public entity contracts and turns over the responsibility to the insurance company to handle the claims against it, it has waived its immunity up to the policy limits, and the scope and procedure of the act do not apply.
¶ 51. Today's majority opinion misinterprets the waiver statute, and its holding will only serve as a back-page exclusion to the McComb school's insurance policy and any other policy a governmental entity may choose to obtain, essentially telling the entity that, despite the insurance, nothing is waived. In effect, the purpose of purchasing insurance to protect against suit under the Tort Claims Act will now be frustrated.
¶ 52. When a governmental entity contracts and pays an insurance company to provide coverage in the event of a claim, it pays for complete coverage. However, it is not to be considered "extended coverage." The defenses the entity would normally enjoy under the sovereign immunity statute are not placed into the policy. Governmental entities may purchase liability insurance over the limits in the statute and as a result waive their sovereign immunity up to the amount of the policy. Accordingly, when an entity chooses to purchase insurance, the Tort Claims Act is completely inapplicable up to the limits of the policy, and all immunity is waived.
¶ 53. There exists no legitimate explanation for the majority's conclusion that the purchase of insurance by a political subdivision does not waive immunity. Indeed, public policy would appear to demand the opposite result.
¶ 54. Indeed, the majority's opinion is lagniappe for the insurance companies. It provides them with exclusions far better than the ones they have already written into their policies. At the same time, the majority deprives political subdivisions and their citizens of that for which they have already paid. Because I am unable to condone such a great disservice to the people of this state, I dissent from that part of the majority opinion which holds that the purchase of insurance by a governmental subdivision does not waive immunity.
¶ 55. The language and intent of the legislation is clear, concise, and simple. If a political subdivision purchases insurance, sovereign immunity is waived up to the amount of the insurance. Accordingly, I dissent as to this issue, but I join the majority on Issues I and II and in its judgment to reverse and remand.
SULLIVAN AND PITTMAN, P.JJ., JOIN THIS OPINION.
NOTES
[1] Title 11, Chapter 46, Section 1 et seq. is also commonly referred to as the Mississippi Sovereign Immunity Act.
[2] There is no case authority on the subsection (d)'s proper application.
[3] Miss.Code Ann. § 37-13-91 states in pertinent part:
(3) A parent, guardian or custodian of a compulsory-school-age child in this state shall cause the child to enroll in and attend a public school or legitimate nonpublic school for the period of time that the child is of compulsory school age, ....
(5) Any parent, guardian or custodian of a compulsory-school-age child subject to this section who refuses or willfully fails to perform any of the duties imposed upon him or her under this section or who intentionally falsifies any information required to be contained in a certificate of enrollment, shall be guilty of contributing to the neglect of a child and, upon conviction, shall be punished in accordance with Section 97-5-39.
[4] The duty to provide a safe environment is one of ordinary care.
[5] 28 U.S.C. § 2680(a) is the exceptions to waiver of tort immunity under the FTCA, which states:
Any claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused. (emphasis added).
[6] Miss.Code Ann. § 11-46-15 (Supp.1998) states in pertinent part:
(1) In any claim or suit for damages against a governmental entity or its employee brought under the provisions of this chapter, the liability shall not exceed the following for all claims arising out of a single occurrence for all damages permitted under this chapter:
(a) For claims or causes of action arising from acts or omissions occurring on or after July 1, 1993, but before July 1, 1997, the sum of Fifty Thousand Dollars ($50,000.00).
. . . .
[7] See Pruett v. City of Rosedale, 421 So. 2d 1046 (Miss.1982) (abrogating judicially created sovereign immunity). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1385726/ | 514 F.3d 251 (2008)
RI KAI LIN, Petitioner,
v.
BUREAU OF CITIZENSHIP AND IMMIGRATION SERVICES, Respondent.
Docket No. 06-3905-ag.
United States Court of Appeals, Second Circuit.
Argued: December 7, 2007.
Decided: January 28, 2008.
*252 Theodore N. Cox, New York, NY, for Petitioner.
Thankful T. Vanderstar, Trial Attorney (Peter D. Keisler, Assistant Attorney General, and James E. Grimes, Senior Litigation Counsel, on the brief), U.S. Department of Justice, Civil Division, Office of Immigration Litigation, Washington, D.C., for Respondent.
Before: McLAUGHLIN, STRAUB, and HALL, Circuit Judges.
PER CURIAM:
FACTS AND PROCEDURAL HISTORY
Ri Kai Lin, a citizen of the People's Republic of China, entered the United States without inspection in September 1986. In September 1993, he filed an application to adjust his status to that of a legal permanent resident pursuant to the Chinese Student Protection Act of 1992, Pub.L. No. 102-404, 106 Stat.1969 ("CSPA"), with the former Immigration and Naturalization Service ("INS"). In October 1993, the INS denied his application, finding that he was not eligible to adjust status under 8 U.S.C. § 1255(a) because he had entered without inspection.[1] In April 1994, Lin filed an application for asylum and withholding of deportation, claiming that he and his wife had been punished under China's family planning policy because they had four children. In December 1995, he was placed in deportation proceedings.
During a preliminary hearing before IJ Sandy K. Horn, Lin indicated that he wished to renew his application for adjustment of status and to pursue his application for asylum and withholding of deportation. The IJ initially questioned whether he had the authority to adjudicate the adjustment of status application; however, in August 1996, he issued a written decision concluding that Lin could, in fact, renew that application before the Immigration Court. After several hearings at which Lin testified in support of his CSPA adjustment application, but gave no testimony regarding his asylum application, the IJ issued an oral decision granting the CSPA application. Noting that the only potential obstacle to Lin's eligibility was his entry without inspection, the IJ stated that the INA had recently been amended to allow certain *253 individuals who had entered without inspection to apply for adjustment of status upon payment of a "superfee." 8 U.S.C. § 1255(i) ("INA § 245(i)"). Because. Lin had submitted proof that he paid this fee and was otherwise eligible for adjustment of status under, the CSPA, the IJ granted that application. Regarding the asylum application, the IJ noted that Lin had not presented any supporting evidence, and accordingly denied the asylum and withholding of deportation claims.
The government appealed the IJ's decision to the BIA, arguing that Lin could not use INA § 245(i) to remedy his entry without inspection for the purpose of adjusting under the CSPA because the deadline for CSPA applications ended prior to the effective date of INA § 245(i). Lin filed a brief in opposition, but did not cross-appeal the IJ's denial of his asylum application. In November 1998, the BIA sustained the government's appeal, concluding that Lin was ineligible to adjust status notwithstanding § 245(i). Lin did not file a petition for review of that decision.
Later in November 1998, Lin moved the BIA to reconsider its decision in light of a recent amendment to § 245(i). Specifically, he argued that under the amended version of § 245(i), he was required only to have filed an application for adjustment of status before January 14, 1998. In June 1999, while that motion was still pending, he filed a motion to remand for consideration of his eligibility for CAT relief. Along with the motion, he submitted a new Form I-589, in which he alleged that if he were deported to China, he would be detained and tortured, and either he or his wife would be "force[d][to] undergo sterilization and other severe penalties." He also submitted background materials regarding country conditions in China.
In a March 2003 order, the BIA denied both motions. The BIA rejected Lin's argument that the CSPA could be read in tandem with § 245(1), notwithstanding the recent amendment. The BIA also denied Lin's motion to reopen, finding that he had not established a prima facie case for CAT relief. Lin filed a petition for review of that decision with this Court. In October 2005, we dismissed his petition and remanded the case to the BIA pursuant to a stipulation by the parties, directing the BIA to "provide further explanation of the reasons for its decision, including a ruling as to Lin's eligibility to utilize INA § 245(i) in conjunction with his application to adjust his status under the CSPA under current law."
On remand, both parties submitted further briefing to the BIA. Meanwhile, in May 2006, the BIA issued a published decision in a case with a similar factual and procedural history, concluding: "An alien whose CSPA application for adjustment of status was denied as a result of the alien's entry without inspection may not amend or renew the application in immigration proceedings in conjunction with section 245(i)." Matter of Wang, 23 I. & N. Dec. 924, 924 (B.I.A.2006). In August 2006, the BIA again denied Lin's motion to reconsider, relying primarily on its reasoning in Wang. The BIA also restated its reasons for denying Lin's motion to reopen to pursue a CAT claim. Lin filed a timely petition for review.[2]
DISCUSSION
We review the BIA's denial of a motion to reopen or reconsider for an abuse of *254 discretion. See Kaur v. BIA, 413 F.3d 232, 233 (2d Cir.2005) (per curiam); Jin Ming Liu v. Gonzales, 439 F.3d 109, 111 (2d Cir.2006) (per curiam). An abuse of discretion may be found where the BIA's decision "provides no rational explanation, inexplicably departs from established policies, is devoid of any reasoning, or contains only summary or conclusory statements; that is to say, where the Board has acted in an arbitrary or capricious manner." Ke Zhen Zhao v. U.S. Dep't of Justice, 265 F.3d 83, 93 (2d Cir.2001) (internal citations omitted). Underlying questions of law are reviewed de novo. See Khouzam v. Ashcroft, 361 F.3d 161, 165 (2d Cir.2004). Where, as here, a question of statutory interpretation is involved, we must first determine whether the language of the statute is ambiguous, and if so, must defer to the BIA's interpretation, as long as that construction is reasonable. See id. at 164 (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-44, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984)).
A. The Motion to Reconsider
In Wang, 23 I. & N. Dec. at 924, the BIA concluded that an alien who applied for adjustment of status under the CSPA, and had that application denied because he entered the United States without inspection, may not renew that application in immigration proceedings in order to pursue an application for adjustment under section 245(i) of the INA.[3] We conclude that the BIA's interpretation of these provisions in Wang was reasonable, to the extent they are ambiguous, and that therefore, the BIA did not abuse its discretion in relying on Wang to deny Lin's motion to reconsider. See Ruiz-Almanzar v. Ridge, 485 F.3d 193, 198 (2d Cir.2007).
The CSPA provided a limited opportunity for Chinese nationals to adjust to permanent resident status, provided that they had remained in the United States continuously since April 11, 1990, other than "brief, casual, and innocent absences," and had not been physically present in China for more than 90 days between April 11, 1990 and the date of enactment. See §§ 102-404, 106 Stat. at 1969-70. The implementing regulations further required that the alien file an application for adjustment of status under INA § 245, and "[e]stablish[] eligibility for adjustment of status under all provisions of section 245." 8 C.F.R. § 1245.9(b) (emphasis added). Lin does not dispute that his application was not approvable when he filed it in September 1993, because he entered without inspection. See 8 U.S.C. § 1255(a); Wang, 23 I. & N. Dec. at 928-29.
Instead, Lin argues that he is now eligible to adjust under a newer provision of the INA, § 245(i). This provision, first enacted in August 1994, allows certain aliens who entered without inspection to adjust status upon payment of an additional fee. See 8 U.S.C. § 1255(i). In Wang, the BIA noted that, although the statute has undergone several amendments since that time, the corresponding regulation, enacted in 2001, continues to provide that INA § 245(i) applies only to adjustment applications filed after October 1, 1994. 23 I. & N. Dec. at 933-34 (citing 8 C.F.R. § 1245.10(e)). Because the window for filing an adjustment application under the CSPA closed on June 30, 1994, see CSPA § 2(e), the BIA found that individuals who had applied for adjustment under the CSPA prior to the June 30, 1994 deadline could not later renew their applications under INA § 245(i). Wang; 23 I. & N. Dec. at 930-31.
Nevertheless, Lin argues that he was not required to "renew" his application, *255 because a 2000 amendment to INA § 245(i) provides that an alien who is the "beneficiary . . . of . . . a petition for classification under [INA § 204] that was filed with the Attorney General on or before April 30, 2001" is eligible to adjust status, 8 U.S.C. § 1255(i)(1)(B)(i), and that as an alien who met all the requirements to adjust under the CSPA, he was "deemed to have had a petition approved under [INA § 204(a)] for classification under [INA §] 203(b)(3)(A)(i),"[4]see CSPA § 2(a)(1), 106 Stat. at 1969. These provisions are, arguably, ambiguous. In Wang, however, the BIA concluded that the two statutory provisions could not be read together in the manner Lin suggests. 23 I. & N. Dec. at 930-32. The BIA reasoned:
The language chosen by Congress in the current version of section 245(i) clearly refers to the act of filing an immigrant visa petition. The filing of an immigrant visa petition is an act preliminary to, and is distinctly different from, the filing of an application for adjustment of status.
Id. at 932. Accordingly, the BIA found that a CSPA applicant was "not the beneficiary of a visa petition," but was rather the "beneficiary of a limited opportunity to adjust status afforded by Congress under the CSPA." Id. We find reasonable the BIA's conclusion that even if Lin was considered "deemed" to have had a visa petition approved for purposes of adjustment, see CSPA § 2(a)(1), he did not, in fact, "file" an approvable visa petition under § 204(a) as required by INA § 245(i), and was therefore not eligible to adjust under that provision. Cf. Shi Liang Lin v. U.S. Dep't of Justice, 494 F.3d 296, 307 & n. 9 (2d Cir.2007) (en banc) (explaining that the word "deem" is used to establish a "legal fiction").
The CSPA and INA § 245(1) each provided a unique opportunity for certain individuals to adjust status notwithstanding their ineligibility under INA § 245(a), and the BIA reasonably concluded in Wang that the two provisions could not be read together to allow an individual who was neither inspected and admitted or paroled, nor had filed an approvable visa petition or labor certification, to adjust status. See Wang, 23 I. & N. Dec. at 932-33; see also Gee-Kwong Chan v. Reno, 113 F.3d 1068, 1071-73 (9th Cir.1997).
B. The Motion to Reopen
Likewise, the BIA did not abuse its discretion in denying Lin's motion to reopen. In his most recent brief to the BIA, following this Court's remand, Lin argued that if the BIA were to find him ineligible for adjustment of status, it should "remand the matter for consideration of his asylum and CAT claims," because he had not had the opportunity to present those claims. In his brief to this Court, he argues that the BIA abused its discretion by ignoring this argument and instead addressing the merits of his underlying claims. This argument is unavailing for several reasons. First, Lin had an opportunity to present testimony and evidence in support of his asylum application during his proceedings before the IJ, yet failed to do so, and accordingly, the IJ found that he had not demonstrated eligibility. When the government appealed the IJ's grant of adjustment of status, Lin did not cross-appeal the IJ's ruling on the asylum claim. Lin also did not mention his asylum claim in his initial motion to reconsider or reopen, nor did he submit any supporting evidence with his brief on remand, and therefore it was not an abuse *256 of discretion for the BIA not to address the claim at that stage. Moreover, to the extent Lin sought reopening with respect to his CAT claim, the BIA's ruling was consistent with the applicable regulations. CAT relief was not available at the time of Lin's hearing before the IJ; however, the regulations allow for aliens who were ordered removed prior to March 22, 1999 to file motions to reopen to pursue CAT relief. 8 C.F.R. § 1208.18(b)(2). The regulations provide that such a motion "shall not be granted unless . . . [t]he evidence sought to be offered establishes a prima fade case" for withholding or deferral of removal under the CAT. Id. § 1208.18(b)(2)(ii). The BIA found that Lin failed to establish a prima facie claim for CAT relief.[5] We find that the BIA acted within its allowable discretion when it denied Lin's motion to reopen based on a straightforward application of the regulations.
CONCLUSION
For the foregoing reasons, the petition for review is DENIED, and the pending motion for a stay of removal in this petition is DENIED as moot.
NOTES
[1] Under 8 U.S.C. § 1255(a), the Attorney General may adjust the status to permanent residence of "an alien who was inspected and admitted or paroled into the United States," if: (1) he or she makes an application for adjustment; (2) he or she is eligible to receive an immigrant visa and is admissible to the United States for permanent residence; and (3) an immigrant visa is immediately available to him or her (emphasis added).
[2] The BIA's decision in Wang provides an extensive factual background with respect to the CSPA and INA provisions at issue.
[3] No petition for review of the Wang decision has been filed in this Court.
[4] Section 204(a) of the INA establishes the procedure by which an alien petitions for an immigrant visa. Section 203(b)(3)(A)(i) provides for the allocation of employment-based visa petitions to skilled workers.
[5] Lin does not challenge the merits of the BIA's determination that he failed to establish a prima facie case for CAT relief, and therefore such challenge is deemed waived. See Yueqing Zhang v. Gonzales, 426 F.3d 540, 541 n. 1 (2d Cir.2005). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2587258/ | 17 N.Y.2d 195 (1966)
In the Matter of the Arbitration between Wilaka Construction Co., Inc., Respondent, and New York City Housing Authority, Appellant.
Court of Appeals of the State of New York.
Argued February 15, 1966.
Decided March 31, 1966.
Paul W. Hessel, Harry Levy, Michael M. Cohen and I. Stanley Stein for appellant.
Joseph Feldman and Irwin H. Rosenberg for respondent.
Chief Judge DESMOND and Judges FULD, VAN VOORHIS, BURKE, SCILEPPI and BERGAN concur.
*198KEATING, J.
By permission of this court, the New York City Housing Authority appeals from an order of the Appellate Division, First Department, unanimously affirming, without opinion, an order of the Supreme Court, New York County (LYMAN, J.), which, on motion of the respondent, Wilaka Construction Co., directed the parties to arbitrate a dispute for extra compensation arising out of a construction contract between them.
The contract contains certain conditions precedent to invoking arbitration, and it is the alleged failure of Wilaka to abide by them which gives rise to the present controversy.
On this appeal, both parties agree that Special Term erred in holding that the fulfillment of conditions precedent to arbitration is a question for the arbitrator. That question is for the court. (Matter of Exercycle Corp. [Maratta], 9 N Y 2d 329; Matter of Rosenbaum [American Sur. Co.], 11 N Y 2d 310; *199 Matter of Lipman [Haeuser Shellac Co.], 289 N.Y. 76; Matter of Board of Educ. [Heckler Elec. Co.], 7 N Y 2d 476.)
The facts are undisputed, and the primary questions of law presented are whether the contractor, Wilaka, failed to comply with time requirements of the contract for invoking arbitration of a claim and, if it did, whether the claim may nonetheless be arbitrated because the Housing Authority waived compliance.
Before turning to the facts, we briefly outline the pertinent provisions of the contract.
Wilaka undertook to serve as general contractor for the construction of a housing project known as West Brighton Houses.
Article 15 of the contract deals with disputes. Section a makes time of the essence, and it accordingly provides, in substance, that all work directed by the Authority shall be performed by Wilaka without delay "reserving to the parties the right to have determined by the method in this Contract provided all questions relating to compensation, damages, or other payments of money."
Subdivision (1) of section b deals with "Disputes as to Money Payment or for Damages * * * Conditions Precedent To Recovery." If the contractor claims that any direction involves "Extra Work entailing extra cost," he must, within five days after receipt of such instructions and before executing the work, "file with the Authority written notice of his intention to make a claim for extra compensation".
"The filing by the Contractor of a notice of claim * * * within the time limited herein, shall be a condition precedent to the settlement of any claim or to the right of appeal to arbitration as hereinafter provided".
Subdivision (2) of section b gives the Authority power to determine whether work required is extra work or whether the contractor is entitled to compensation for damages and such determination shall be final, subject to the provisions of the paragraphs entitled "Appeal from Decision" and "Arbitration." Until a determination is made following a claim by the contractor "as above provided" for extra work, the contractor shall not proceed with the work.
Section c is entitled "Appeal from Decision." It provides that the decision of the Authority "made upon the notice of claim" "shall be conclusive and binding upon the Contractor *200 unless within ten (10) days from the service upon the Contractor of written notification of such decision, the Contractor files with the Authority * * * a notice of intention to arbitrate". The failure of the Authority to make a decision within 30 days shall be deemed a denial of the claim, and the contractor has 10 days thereafter to demand arbitration. "In default of such notice of intention to arbitrate within the time limited herein, the Contractor shall be deemed to have ratified such decision and to have waived any and all rights and remedies which he might otherwise have had, and the service of such notice of intention to arbitrate within the time limited, shall be a condition precedent to the right to appeal to arbitration".
Section d deals with the arbitration procedure itself but, for our purposes, it need not be considered.
We turn now to the facts.
The contract was made on September 29, 1960 and, among other things, it required Wilaka to construct the framework "true and plumb" within certain tolerances. Wilaka engaged Lafayette Ironworks, Inc., to perform this work.
On May 16, 1961 the Authority informed Wilaka that columns in certain buildings were out of plumb. It asked what corrective measurements would be taken and stated, "Any remedial work which may be necessary is to be done by you without added cost to the Authority."
Wilaka answered on July 6, 1961 that it was enclosing a technical report from a consulting firm employed by Lafayette along with three letters from Lafayette, all dated June 8, 1961. The letter from Wilaka to the Authority asks the Authority to consider the technical report and the letters, and to inform Wilaka so that it may proceed with corrective measures. The letters from Lafayette to Wilaka and the technical report make it clear that Lafayette attributed the problem to faulty construction plans.
The Authority wrote back on July 14, 1961, acknowledging receipt of Wilaka's letter and the technical report, but indicating that Wilaka had forgotten to enclose the letters from Lafayette to Wilaka. "In any event", wrote the Authority, "it should be emphasized that no contractual relationship exists between [Lafayette] and the Authority." "We wish to remind you, in this connection, that any corrective work that is needed * * * *201 must be done at your cost and expense", notwithstanding the technical report which attributed fault to the Authority's plans.
The extra expenses allegedly incurred by Lafayette form the basis of Wilaka's claim here.
Wilaka responded on July 24, 1961 and requested a meeting "for the purpose of resolving, if possible, the question of responsibility for the existing condition and a determination as to the nature and extent of the corrective work required."
The Authority answered on August 8, 1961. They acknowledged the conflict on the question of responsibility, reiterated their position that corrective work must be done at "your [Wilaka's] cost and expense", refused to consider the claim by Lafayette "with whom we have no contractual relationship", and stated, "Such claims, if made, should be made by you in writing in accordance with the provisions of the contract."
Ten days later, on August 18, 1961, Wilaka again wrote to the Authority. To avoid further misunderstanding, Wilaka made it clear that, in forwarding the technical report and letters from Lafayette, it was acting on behalf of itself as well as Lafayette, and it would "in due course, submit [a] claim for all of the increased costs incurred", but in the meantime "to resolve the existing impasse, we are prepared to proceed with the suggested remedial measures". Such work, however, would be done "without prejudice and subject to later determination as to responsibility for the increased costs".
The final letter of significance here was sent by the Authority to Wilaka, dated August 22, 1961. The crucial portions state:
"We have received your letter of August 18, 1961 * * *
"We note your statement * * * that you will submit your claim of increased costs incurred by your structural steel contractor [and that] you were acting on behalf of your subcontractor as well as yourselves.
"We herewith direct you to proceed in accordance with your proposed corrective measures * * *
"In accordance with our interpretation of the Contract you are responsible for all increased costs due to lack of plumbness * * * However, we will give your claim consideration in accordance with the terms of the Contract, when received." (Emphasis added.)
*202The letters which follow deal primarily with the technical aspects of the corrective work.
The steel work was completed by the end of January, 1962. The buildings were completed and occupied between August and December, 1962. Lafayette submitted its claim to Wilaka the following month (January 22, 1963). Wilaka forwarded the claim to the Authority on February 5, 1963. The Authority rejected the claim on March 15, 1963; and Wilaka, seven days later, on March 22, 1963, gave the Authority formal written notice of intention to arbitrate the dispute in accordance with section (article) 15 of the contract. This letter went unanswered, as did subsequent letters of June 7, 1963 and July 18, 1963, requesting the Authority to comply with the arbitration provisions. On August 5, 1963 Wilaka commenced this proceeding to compel arbitration.
The claim is for $291,786.04 for the extra work performed by Lafayette, and $37,500 representing a claim by Wilaka for additional compensation.
Upon these facts, the question of law is on what date did petitioner first claim that a direction from the Authority involved "Extra Work entailing extra cost." Subdivision (1) of section b dealing with disputes allows but five days thereafter in which to serve notice of intention to make a claim for extra compensation.
Ordinarily, the question of whether the contractor has complied with the condition precedent to arbitration, namely, the filing requirement imposed upon it by the agreement, is for Special Term. Here, however, there is no need to remit to that court since examination of the documents establishes, as a matter of law, that the condition precedent was satisfied.
The Authority's letter of May 16, 1961 created neither a dispute nor an extra claim. Indeed, Wilaka had no first-hand information on the alleged matter, and first had to contact its subcontractor, Lafayette.
Wilaka's answer of July 6, 1961 merely supplied the requested information and asked for further instructions. The tenor of the letter itself refutes any indication of a dispute. To the extent that Lafayette's letters, included thereafter, suggested a claim, the Authority was already, in fact, being given notice of a possible claim.
*203The Authority's letter of July 14, 1961 reiterated the need for corrective work at Wilaka's expense, and Wilaka, 10 days later, requested a meeting to resolve the question of responsibility and determine the extent of extra work required.
When this meeting was refused by the Authority's letter of August 8, Wilaka wrote to the Authority on August 18, made it clear beyond question that they intended "to make a claim for extra compensation" and would proceed with the work, without prejudice, as soon as the Authority approved the remedies suggested by the subcontractor.
The only conclusion possible, therefore, is that Wilaka's letter of August 18 was a timely assertion of its intention to make a claim for extra compensation. All of the letters which preceded it failed, in one way or another, to satisfy the circumstances under which Wilaka was required to file and not until this date was there a dispute in which Wilaka knew that there would be an extra work claim. In fact, it could be argued that the five-day period did not start to run until the Authority's letter followed on August 22, 1961, since only that letter constitutes a direction to do work and gives the necessary approval of the proposed corrective measures to be taken.
After giving notice of intention to make a claim, Wilaka was required by the contract to give further notice of intention to arbitrate if the claim was rejected by the Authority within a specified period. Those provisions, however, were clearly waived by the Authority in its letter of August 22, 1961 when it stated "However, we will give your claim consideration in accordance with the terms of the Contract, when received." Read in the context of the letters preceding and following it, both parties intended that the work be proceeded with, and that the Authority would consider the claim "when received." The phrase, "in accordance with the Contract", does not bar a waiver. In context, it relates to the merits only.
The Authority's rejection of the claim, dated March 15, 1963, followed by Wilaka's notice of intention to arbitrate, dated March 22, complied, as indicated above, with the time provisions of the agreement, and, therefore, this court is warranted in concluding that Wilaka is entitled to have the claim heard on its merits at arbitration.
*204The Authority raises two other objections to arbitration.
It claims first that the dispute sought to be arbitrated does not come within the class of those things which it agreed to arbitrate. The argument is based on the assertion that, while Wilaka alleges a claim for extra work, it is really seeking to recover only for corrective work. The answer to this depends on whether fault is ultimately placed with the Authority for faulty plans or with Lafayette for faulty work, and that issue is for the arbitrators, not for the courts. Moreover, the arbitration provision, authorizing as it does submission of "all questions relating to compensation, damages, or other payments of money", is quite broad.
The Authority also contends that the alleged disagreement is not bona fide within the meaning of the Cutler-Hammer doctrine (Matter of International Assn. of Machinists [Cutler-Hammer, Inc.], 271 A.D. 917, affd. 297 N.Y. 519) and that it is, therefore, not an arbitrable dispute.
Without passing on this assertion of non bona fide, it is sufficient to point out that the so-called Cutler-Hammer doctrine has been overruled by CPLR 7501 (formerly Civ. Prac. Act, § 1448-a). Under this provision, the court may not consider "whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute."
The contention that CPLR 7501 does not apply to arbitration agreements entered into before its effective date seems equally lacking in merit. This statutory section affords no new rights it merely affects the jurisdiction of the court to consider a particular question, and it speaks in the mandatory present tense, without any indication that it is not to be applied to arbitration agreements entered into before its effective date. (See Matter of Berkovitz v. Arbib & Houlberg, 230 N.Y. 261 [1921].)
As noted above, we granted leave in this case and it is appropriate to note that, despite a possible argument to the contrary (see 8 Weinstein-Korn-Miller, New York Civil Practice, par. 7502.08, pp. 75-50, 75-51), an order of the Appellate Division directing arbitration or denying a stay of arbitration is deemed final and appealable as such to this court (see Matter of De Luca [MVAIC], 17 N Y 2d 76; Matter of Wilson [MVAIC], 16 N Y 2d 482; Matter of C. W. Regan, Inc. v. Compudyne Corp., 16 N Y 2d 481; *205 Cohen and Karger, Powers of the New York Court of Appeals, § 31).
The order appealed from should be affirmed, without costs.
Order affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2632461/ | 150 P.3d 439 (2006)
210 Or. App. 237
In the Matter of Devon Edward Byrd, a Minor Child.
STATE ex rel DEPARTMENT OF HUMAN SERVICES, Respondent,
v.
Holly Rheanan CAIN and Gary Byrd, Appellants.
0100727; A131436.
Court of Appeals of Oregon.
Argued and Submitted August 7, 2006.
Decided December 27, 2006.
*440 James A. Palmer, Eugene, argued the cause and filed the brief for appellant Holly R. Cain.
Inge D. Wells, Eugene, filed the brief for appellant Gary Byrd.
Christina M. Hutchins, Assistant Attorney General, filed the brief for respondent. With her on the brief were Hardy Myers, Attorney General, and Mary H. Williams, Solicitor General.
Before EDMONDS, Presiding Judge, and ORTEGA, Judge, and BREITHAUPT, Judge pro tempore.
ORTEGA, J.
Mother and father appeal from a juvenile court judgment terminating their parental rights to their child, D. The trial court determined that mother was presently unfit, ORS 419B.504,[1] primarily because of her mental illness, her drug use, and her failure to effect a lasting adjustment to those circumstances. The trial court also terminated father's parental rights based on unfitness, ORS 419B.504, and neglect, ORS 419B.506.[2] We conclude that the record establishes beyond a reasonable doubt that, for a period of nine months before the filing of the petition and for more than two years before the trial, father elected not to participate in visitation and did not have any contact with D. Therefore, on de novo review, we affirm the termination of father's parental rights based on neglect. See State ex rel Dept. of Human Services v. Squiers, 203 Or.App. 774, 789, 126 P.3d 758 (2006) ("[A] finding of neglect [may] be based on * * * a parent's failure to maintain contact[.]"). We write only to address mother's challenge to the termination of her rights based on unfitness.
We begin by identifying the applicable law. Father is a member of the Upper Skagit Tribe, and the parties agree that child is an Indian child to whom the Indian Child Welfare Act (ICWA) applies. 25 U.S.C. § 1903(4) (defining Indian child); OAR XXX-XXX-XXXX(8) (same). The ICWA's requirements supplement and, where in conflict, displace state law governing the termination of parental rights to Indian children. State ex rel SOSCF v. Amador, 176 Or.App. 237, 243, 30 P.3d 1223, rev. den., 333 Or. 73, 36 P.3d 974 (2001); see also State ex rel Juv. Dept. v. Tucker, 76 Or.App. 673, 677, 710 P.2d 793 (1985), rev den., 300 Or. 605, 717 P.2d 1182 (1986) (noting that the ICWA applies when the court "knows or has reason to know that an Indian child is involved") (citing 25 U.S.C. § 1912(a); further citation omitted). Accordingly, termination of mother's parental rights must be supported by evidence beyond a reasonable doubt, the standard applicable under the ICWA. ORS 419B.521(4); *441 25 U.S.C. § 1912(f). See generally State ex rel. Juv. Dept. v. Charles, 106 Or.App. 637, 639, 810 P.2d 393, rev. den., 312 Or. 150, 817 P.2d 757 (1991) (applying the ICWA to proceedings involving an Indian child and a non-Indian parent). We review the juvenile court's judgment de novo, ORS 419A.200(6)(b), giving considerable weight to its findings regarding credibility, and affirm.
We turn to the factual record, beginning with an overview before delving into mother's complicated history. The record contains a number of psychological evaluations of mother and, although the diagnoses vary slightly, they all identify her as suffering from a personality disorder characterized by extreme emotional instability and impulsivity and by frequent and inappropriate expressions of anger and conflicts with others, particularly with authority figures. Additionally, mother's history includes periodic methamphetamine use, addiction to marijuana, and domestic violence.
Mother's involvement with the Department of Human Services (DHS) spans an eight-year period beginning with the birth of her first child, J, in 1997.[3] We divide the relevant history into three time periods: (1) the four-year period beginning in 1997, when DHS first began working with mother, until early 2002, shortly after D's birth and his removal from mother's home; (2) the following two years, ending in 2004, which were characterized by DHS's insistence on, and mother's resistance to, mental health and drug treatment; and (3) the final period leading up to the termination trial in late 2005, which includes mother's mixed successes in mental health and drug treatment. Within each time period, we focus on three topics: (a) mother's involvement and interaction with DHS; (b) mother's mental health issues and therapy; and (c) mother's drug use and attempts at recovery.
We begin with the first time period, spanning from 1997 to D's birth in early 2002. DHS first became involved with mother and her first child, J, because he was hospitalized for failure to thrive two weeks after he was born. In the ensuing two years, DHS received approximately 11 referrals, or reports of concern, about mother's care of J, although two were deemed unfounded. The referrals consistently involved reports of physical abuse and neglect of J. The first referral, when J was six weeks old, consisted of a report that J was not being fed enough. Mother explained that she had not fed J any formula for a period of more than 24 hours because her father (whom she had not asked) would not take her to get any formula and that, in any event, the baby was fine because he was sleeping. When J was 15 months old, a referral occurred after mother slapped J, leaving a hand print on his face. At the time, mother admitted to the slap and explained that she had "just lost it"; at trial, mother denied the incident but did admit to another slapping incident that occurred when J was 3 or 4 years old. Another referral consisted of a report that mother was not bathing or feeding J and that she had spanked him for waking up too early. The referrals reflected a continuing pattern of, as one DHS worker described it, "over and over and over again [mother] losing her temper and slapping [J]."
A twelfth referral in late 2000 consisted of a report that J was found wandering the neighborhood early in the morning, alone, dressed only in a diaper. J was removed from mother's care, a petition was filed, and mother was convicted of criminal neglect for the incident. Mother's interactions with DHS following that incident were particularly volatile; she threatened a caseworker who was trying to schedule a family decision meeting with the comment, "You have no fucking idea how bad[ly] I want to beat the shit out of you right now." Mother asserted, "I don't need [a] fucking meeting. I need my fucking kid."
Indeed, mother's interactions with DHS workers, family members, and others were consistently volatile, aggressive, and even violent. DHS employees reported on various *442 occasions that mother was "furious," "very hostile," "combative," and "aggressive" during their interactions with her. One caseworker explained that mother "[did not want] anybody to tell her how to do anything, how to raise her son." Another DHS worker said that mother's attitude would frequently shift from cooperative to belligerent. During this first time period, mother's father and an ex-boyfriend filed restraining orders against her. Mother's father stated in support of his restraining order that mother had threatened him and that she "follow[ed] through [with] threats." The ex-boyfriend stated in support of his order that mother is an "unstable person and [there is] no telling what she would do." Mother also was arrested for assault when she threw a soda can at her mother, causing a skull fracture. Mother boasted about the incident to a caseworker, who testified that mother laughed about the fact that she "had just gotten into a fist fight with her mother [and] had been charged with cracking * * * her skull open."[4] In another incident involving police, mother tried to punch J's babysitter and chased her out the door after the babysitter suggested that mother clean up J and change his clothes.
Eventually, mother signed a service agreement with DHS, and complied with the agreement by engaging in supervised visits with J and completing a parenting class. She also participated in a comprehensive psychological evaluation, performed by Dr. James Ewell in December 2000. Ewell diagnosed mother with attention deficit/hyperactivity disorder (ADHD); post-traumatic stress disorder (PTSD); and borderline, antisocial, and narcissistic personality disorders.
According to Ewell, mother's most salient features were affective instability, a history of inappropriate and intense anger, stress-related paranoid ideation, unstable relationships, and impulsivity. Because she suffered from multiple forms of psychopathology, Ewell considered her situation to be "quite complex and disabling" and indicated that she would need intensive, long-term intervention, including psychotherapy, parenting classes, anger management, and support group work. Her prognosis for change was poor, not only because mother's personality disorders would be highly resistant to intervention, but because mother considered herself to be a "great mother" with no need for services. Ewell referred mother to Douglas County Mental Health (DCMH) for mental health treatment.
Dr. Randy Olander, a psychologist for DCMH, evaluated and began individual therapy with mother several months after Ewell's evaluation. Similarly to Ewell, Olander diagnosed mother with a personality disorder not otherwise specified, with borderline and narcissistic traits. Additionally, he diagnosed her with an adjustment disorder with depressed mood and polysubstance abuse in early remission. Olander testified that mother's life seemed to be in ongoing "chaos" and that she appeared to consider treatment to be "an inconvenience to her." She was "verbally combative" at times and once called him a liar. Eventually he referred mother to another therapist at DCMH because he and mother were "not a good personality fit."
Around the same time that J was removed from mother's care in late 2000, mother began an intimate relationship with father and eventually became pregnant with D. The relationship between mother and father involved both domestic violence and drug use. For example, a few months before D was born, mother filed for a restraining order against father, claiming that he had "beat on [her] causing bruises, maced [her] in the face, [and] hit [her] in [the] stomach."[5] Mother submitted a 43-page document to the court detailing physical abuse and drug use, but withdrew the application for a restraining order two days later, telling the court that she had lied.
Mother admits significant drug use. She began smoking marijuana at age 16 and began using methamphetamine at the start of her relationship with father. Mother admitted smoking marijuana during her pregnancy *443 with D and using methamphetamine at one point "before [she] found out [she] was pregnant." When D was born in November 2001, his toxicology screen was negative meaning that there were no drugs in D's systembut mother tested positive for tetrahydrocannabinol (THC) and pseudoephedrine, indicating recent use of marijuana and methamphetamine. As a result, DHS filed a petition regarding D within days of his birth. Rather than remove D from the home, however, DHS attempted to engage mother in services. Because DHS was having difficulty finding a stable foster care placement for J (who was in his seventh or eighth placement), DHS also returned J to mother at that time.
This brings us to the second time period, from early 2002 to early 2004. As of January 2002, mother and father were living together, J had been returned to the home, and D was two months old. This arrangement lasted only a few months and dramatically changed one day when mother came to the DHS office in a panicked and "visibly shaken" state. She told her DHS caseworker that she believed that the police were about to raid her and father's home because father had been dealing marijuana and methamphetamine. She worried that the children would go to foster care as a result of the raid. Additionally, mother admitted that she had been using marijuana and methamphetamine on a regular basis. Mother's caseworker arranged for J to be placed back in foster care and referred mother, along with D, to Crossroads, an inpatient drug treatment program.
Mother was assessed as needing "Level 3" care (with "Level 4" being the most intensive care level), and, at intake, a substance abuse counselor recorded that mother reported "extensive [use of] drugs and alcohol" recently and throughout her pregnancy with D. Mother's primary counselor at Crosswords stated that mother was emotionally distraught and unstable, frequently becoming upset, crying, and shouting, and was unwilling to cooperate with putting together a treatment plan. Even though mother understood that D, too, would be placed in foster care if she left Crossroads prematurely, she left Crossroads after five days.
At trial, mother explained that she had left Crossroads because she "sat in a room * * * in a rocking chair with [D] with nothing but a TV in front of me all day long for five days." She continued, "I had not had any groups[;] I had no classes[;] I had no books or paperwork given to me and I think five days is more than a sufficient amount of time to start treating somebody[.]" However, mother's primary counselor contradicted that testimony, explaining that activities had in fact been scheduled for mother. Mother's record at Crossroads contains a note that mother was "emotionally agitatedshouting, crying, demanding and refusing to comply."
Mother's caseworker and her attorney tried for two hours to dissuade mother from leaving the program, reminding her that D would be placed in foster care. According to the caseworker, mother "did [not] care," insisting that she "couldn't handle it * * * anymore" at Crossroads. So, mother placed D in a car seat, kissed him good-bye, and left, and D was placed with his current foster care providers, who are father's niece and her husband.
Shortly after mother left Crossroads, she began participating in a treatment group for people with "dual diagnoses" (that is, people suffering from two or more diagnoses, usually including addiction and mental illness) at ADAPT, an outpatient treatment facility. Sasha Maddox, a counselor specializing in "dual diagnosis" treatment, worked with mother for several months. She testified that mother denied using methamphetamine (despite having recently admitted regular use to DHS) and generally had "a lot of difficulty accepting responsibility for the circumstances she was in * * * due to drug and alcohol use." She also had difficulty managing her emotions in group sessions and was frequently very argumentative. Maddox wrote in her notes that mother was continually "defocusing, blaming, rationalizing and minimizing" and that mother's "issues around victimization and learned helplessness * * * seem impenetrable."
Maddox ended her counseling relationship with mother after an explosive incident in which mother came to Maddox's office yelling and demanding a urinalysis test (UA). *444 Mother was so aggressive that two other counselors responded with concern. After about 15 minutes, when mother had apparently calmed down, Maddox agreed to administer a UA. However, in the bathroom, mother began yelling obscenities within an inch of Maddox's face. Maddox testified that she had never, before or since, dealt with a client so aggressive and abusive.
By all indications, mother did not meaningfully engage in treatment at ADAPT. During her time there, five or six out of 35 UAs tested positive for THC. Maddox's case file ended with the observation that mother "is not in recovery. She is not working on her * * * violent aggressive behavior, making amends[, or] working a program of honesty and humility, but [is] stuck in a rapid cycle of blaming, excuse making, minimizing, * * * and not taking responsibility for her behavior." At trial, mother explained that her failure to complete the ADAPT program was because she "didn't click" with her counselor and that she had issues with being told she was "a junkie": "[I]t didn't really make sense * * * for her to tell me that smoking pot was like a crime[.]"
Throughout this second time period, mother was also receiving mental health treatment at DCMH, where she had been referred in 2000. After receiving treatment from Olander, mother had been transferred to a new therapist, Sandy Willette, who specializes in treating patients with borderline personality disorder (BPD). Willette reevaluated mother and changed her diagnosis to BPD, PTSD, and polysubstance dependence. Willette testified that BPD is diagnosed when a patient exhibits five of nine criteria, and that mother displayed eight of the nine. She referred mother to a dialectic behavior therapy (DBT) group, a form of treatment that is used to reduce BPD symptoms by training the client to become more aware of her emotions. It is considered the most effective mental health treatment for persons with BPD. The program lasts a year and most of Willette's clients take it twice.
Mother participated in DBT for seven months before being removed because she was volatile, explosive, and "out of control." She behaved in a threatening manner toward other group members, had angry outbursts, cursed, and engaged in verbal attacks. Group leaders tried to explain to mother that throwing pens across the table at other group members and continually interrupting and talking over others was disruptive. Because mother was repeatedly unreceptive to those interventions, she was finally asked to leave. According to Willette, mother learned nothing from the group, gained no insight, and made no progress whatsoever.[6]
Ewell performed another evaluation of mother at the same time that mother began her DBT group with Willette, in May 2002. He did not alter his prior diagnoses of ADHD, PTSD, and borderline, antisocial, and narcissistic personality disorders, but added a diagnosis of cannabis abuse. Ewell noted that mother continued to exhibit significant mood volatility, impulsivity, and exaggerated responses to stress. He concluded that she remained a "significantly maladjusted individual" who lacked insight into her children's needs. He expressed "grave doubts" regarding her ability to provide the boundaries and structure needed to protect the children from harm. Moreover, he doubted that mother would be able to accomplish the changes necessary for her to become a minimally adequate parent within the limited time typically imposed in termination cases, because she needed several years of ongoing services.
This brings us to the end of 2002. It appears that mother did not engage in any form of drug or mental health treatment for most of 2003. By November 2002, mother was no longer receiving services at ADAPT, and by February 2003 mother was no longer receiving services at DCMH. Additionally, mother's caseworker was unable to track her progress because mother had revoked her treatment releases.
*445 A representative of the Upper Skagit Tribe was working closely with DHS, and was involved with D's foster placement with the Bruces. However, by late 2002, the tribe recommended that D be placed with father, as long as father and mother had no contact and father engaged in services. A no-contact order was put in place by the court, and father understood that a violation would result in D being returned to his placement with the Bruces. D was returned to father's custody in November 2002.[7]
Immediately after D's return, however, mother moved into the household. The DHS caseworker suspected that mother and father were having contact but could not confirm that suspicion for nearly six months, at which point D was removed and returned to the Bruces' home. From that point forward, father has had very little contact with DHS and has not participated in any visits with D. The record reveals little about what happened for the rest of 2003, except that mother admitted to smoking methamphetamine and filed a second restraining order against father. Mother testified that her relationship with father ended at that time.
That brings us to the third identified time period, consisting of the final two years before the termination trial (which began in September 2005 and concluded in November of that year). As we have noted, mother accomplished some changes during that final time period. Most significantly, mother moved to Portland and completed a nine-month residential drug treatment program at Comprehensive Options for Drug Abuse (CODA), which she started in January 2004.
Mother initially had some difficulties at CODA. For example, she changed counselors soon after she arrived due to conflicts with her first counselor. Also, mother was nearly terminated from the program once or twice due to poor "interpersonal relationship skills." Nevertheless, mother's counselor noted that mother made significant progress in managing her emotions and in her interpersonal relationships, and mother's UAs at CODA were clean. Mother's discharge record, assessing her emotional behavior, indicates that she entered the program at a rating of "5," that is, "[v]ery serious adverse impact on recovery," but left at a "2," meaning "[l]ow adverse impact on recovery." It also indicates that mother had "developed relapse prevention skills and [had] made great progress with emotional management skills."
Because the CODA program did not have a mental health component, mother also attended Cascadia Behavior Health Care, a mental health treatment facility. Her counselor, Wendy Bauman, testified that mother completed a two-month coping skills program. Bauman then referred mother to another DBT group, not because Bauman "notice[d] any emotional instability or difficulty [in mother]," but because a previous evaluation had recommended it. Mother attended only two DBT meetings, and then switched to individual sessions with Bauman to "check[ ] in" regarding how her drug treatment was going and talk about her education and employment goals and visitation with D. Mother reported to Bauman that she did not want to return to methamphetamine use, but did plan to resume using marijuana, because it helped her to relax and "she * * * didn't feel there was anything wrong with that." Mother's last session with Bauman was in October 2004, the same month that mother completed the CODA program. At that contact, mother was "pretty stable" on her medications (an antidepressant and a mood stabilizer), and Bauman did not see an "overwhelming need" for her to continue with mental health counseling.
Dr. Robert Basham, a clinical psychologist, evaluated mother twice, at the beginning and at the end of her nine-month residential treatment program at CODA. Mother requested the first evaluation because she felt unfairly labeled by prior evaluations. However, Basham reached a diagnosis that was similar to mother's prior evaluations: polysubstance abuse, PTSD, and a personality disorder not otherwise specified, with borderline, antisocial, and paranoid features.
*446 Basham performed the second evaluation in order to assess whether there had been any change in mother's psychological functioning and to incorporate review of other background reports, including the evaluations conducted by Ewell in 2000 and 2002. Basham did note some changes in mother, including a significant decline in indications of paranoia and a positive response to medication, which seemed to have mitigated symptoms of a mood disorder. The fact that she had completed the CODA program without major incident demonstrated "a genuine effort and commitment to making gains." However, mother continued to exhibit borderline and antisocial personality traits, and she remained prone to overreacting to problems, particularly to difficulties in relationships, and to disliking anyone in the role of authority. She also appeared to be less receptive to drug treatment than in her prior evaluation.
Despite the progress that mother had made since her prior evaluations, Basham remained guarded about mother's prospects for long-term success as a parent. He noted that "[m]uch of the question on her future prospects for parenting depends on the likelihood of remaining clean and sober, particularly when she is living in the community without any immediate supervision or accountability." He concluded that there is a "near certainty" that mother's condition would deteriorate were she to relapse, because drug abuse would exacerbate her tendency toward extreme emotional reactions and her borderline and antisocial personality traits. The emotional instability that would result would decrease her awareness and appreciation of D's needs and would interfere with her ability to maintain a stable job or housing. Accordingly, abstinence from drugs would be crucial to her ability to function as a minimally adequate parent to D.
Because mother's personality disorder created a higher risk of relapse, Basham also considered it "crucial" that she participate in a comprehensive aftercare treatment regime, including community 12-step meetings. He expressed concern regarding her lack of involvement in such meetings and her critical and dismissive comments about her current aftercare group. He also recommended that she continue with mental health treatment, and noted that, because mother was resistant to acknowledging the reality of her borderline personality traits, "it would be an important sign of progress for [mother] to come to terms with that and then work diligently on addressing the specific psychological problems that are part of her personality disorder."
In all events, Basham concluded that, as of the date of the evaluation, December 2004, mother was not ready to parent. The "true test" would be for her to maintain sobriety and stability for about a year on her own, outside the structured setting of a residential program. Because mother's termination trial occurred almost one year after Basham's second evaluation, what mother accomplished during that final year is of critical importance to our review.
DHS was prepared to go to trial at the time of Basham's second evaluation but postponed the trial because of mother's completion of the CODA program. In a letter, DHS outlined the following expectations for mother in order to consider her as a resource for D: that she remain drug free and participate in aftercare as recommended by CODA and Basham; that she submit to random UAs; that she continue in mental health treatment and successfully address the issues outlined in Basham's evaluation; that she complete a parenting class and an anger management class; that she establish and maintain adequate housing; and that she continue therapeutic visitation with D and demonstrate an ability to meet his developmental, emotional, and psychological needs based on his treatment plan. Mother failed to fulfill the majority of those expectations.
To her credit, mother did move into an Oxford House, a self-governing clean-and-sober "halfway" residence where she remained as of the time of trial. Each of the eight residents had her own room, and the rest of the house was shared space. Each resident was assigned chores and responsibilities; mother acted as treasurer, in charge of paying bills for the household. One of the other residents testified that mother is "very emotionally stable," is appropriate in her *447 moods, and has successfully followed through with her job as treasurer.
However, mother did not remain drug free, and her involvement with aftercare was sporadic at best. After completing the CODA program, mother enrolled in an outpatient drug and alcohol group at Cascadia, but missed 10 out of 29 meetings. Her counselor, Don Kangas, classified her attendance as a "failure to attend" and observed that it "certainly [was no] treatment success." Indeed, Kangas had to escort mother out of a couple of the meetings that she did attend because of her emotional volatility. He expressed concern about her ability to maintain control over her emotions, describing her as overreacting to things and as angrier than the average person.
Moreover, three out of her 11 UAs while at Cascadia were positive for marijuana. Whenever Kangas confronted mother about her drug use, she excused it with the explanation that she was "under so much stress." During those discussions, Kangas reminded mother that custody of D was in jeopardy and that, to ensure his return, she needed to remain clean and sober. However, mother was not able to maintain sobriety during the period that Kangas was working with her. Eventually mother dropped out of the program, claiming inability to pay. Her discharge record, dated June 2005, stated that mother "ha[d] not yet established adequate abstinence," that her "[e]motional stability" was "questionable," that she demonstrated "great ambivalence about treatment involvement," and that mother eventually "disappeared from [the] outpatient treatment program." At trial, Kangas testified that he did not believe that mother had maintained abstinence and that she fit the profile of a person in "chronic relapse."
The record likewise contains no evidence that mother participated in anger management or parenting classes or mental health treatment. Mother did submit to random UAs, but only after nearly being suspended from the UA program for not calling in. In addition to the three positive UAs from Cascadia, mother had positive UAs for marijuana and alcohol in April and August of 2005. The April UA prompted DHS to again proceed to trial to terminate mother's parental rights.
Mother did visit with D, and the visit supervisors reported that mother was always very affectionate and loving with D, giving him hugs and kisses and holding him on her lap. D generally responded well to visits and was eager and happy to interact with mother. D would reciprocate affection when asked. Visit supervisors commented that mother genuinely cares for D, demonstrated concern about his well-being, and tried very hard to make visits positive.
At the same time, visit supervisors expressed concern about mother's lack of insight into D's needs and her resistance to support services. As discussed in detail below, D has a number of mental health challenges, but mother "minimize[d]" and "overlook[ed]" the mental health difficulties reported to her by other treatment providers. She told one supervisor that D was a "normal kid" with no real problems other than being separated from her. Mother likewise failed to appreciate D's difficulties connecting with her during visits. For example, mother would continually redirect D to other activities prematurely. As one supervisor observed, mother would want D "to play with everything and be around everything. She wants hugs and kisses when he's not ready to give them. She * * * does not read his signs that he gives back to her." She also frequently reacted defensively to feedback or offers of assistance (which were made before or after visits), becoming "highly upset or emotional to the point of yelling or swearing." Mother's attitude varied from "friendly" to "belligerent [and] demanding."[8]
One supervisor reported that mother became very upset during one visit after learning that D had been put on medication, complaining that he was "on F'ing drugs and [wouldn't] even look at her." Mother insisted, "He can't sit still. He's wired." Mother then snapped her fingers several times in a row demanding that D look at her, and demanded *448 to know why D could be placed on drugs and she could not smoke marijuana.
Mother's employment history during the final year before trial was mixed. She did succeed in maintaining a job at Pizza Hut for 10 months and received some positive reports on her performancebut she also received some criticism and had conflicts with her supervisor. She failed to show up for work during the last few weeks of her employment and then quit, claiming that the work environment was abusive. She then worked at a gas station for three months, where she was disciplined for lashing out at customers when she was busy and under stress. Mother quit that job after being suspended from work due to a cash shortfall that the employer eventually determined was not her fault.
Having addressed the relevant facts with respect to mother, we turn the focus to D, who was four years old at the time of trial. Along with ADHD and a communication disorder, D has been diagnosed with a pervasive developmental disorder, not otherwise specified. Pervasive developmental disorder is an umbrella term for a spectrum of neuropsychiatric disorders (including, most familiarly, autism and Asperger's Syndrome) involving atypical communicating, relating, and information processing. Dr. Dane Borg, the psychologist who evaluated D, indicated that, although there are certain characteristics of both autism and Asperger's Syndrome in D's behavioral patterns and cognitive profile, "his symptoms do not fully cluster in either [category]."
Pervasive developmental disorders involve problems in the organization of a child's nervous system that cause atypical patterns of social development and relatedness, language development, sensory processing, mood regulation, and cognitive flexibility. In Borg's words, a child with a pervasive developmental disorder is "hard wired" differently than his typically developing peers. D has difficulty communicating and relating to his peers and tends to isolate himself. He also demonstrates rigid thinking, an extreme intolerance for change, an unbending need for predictability and routine, and intense and excessively emotional tantrums and defiant protests.
D's rigid thinking and difficulty tolerating change are very apparent in his responses to transitions, the unexpected, or even having something "out of place" in a familiar room. When something "new" is coming up, such as a visit to a relative or a doctor's appointment, D needs intensive verbal coaching in order to prevent an "emotional meltdown." As a two-year-old, he escalated into extended tantrums several times a day that lasted up to 45 minutes at a time and involved screaming, object-throwing, and, eventually, bodily rocking and head-banging. As of Borg's evaluation shortly before trial, medication (including Ritalin), combined with "very intensive and attentive environmental prevention of frustration," had resulted in a reduction in the frequency and severity of such incidents, but oppositionality and tantrums were still part of D's day-to-day functioning.
D's foster mother, Bruce, described the importance of D's daily routine:
"We wake up at six-thirty. He has to eat by seven and have his medication. He has to stay on the same routine, have the same place to eat, the same spoon, the same cereal. It takes a half an hour to forty-five minutes to have breakfast. Then we get ready for school and we have about twenty-five minutes to brush our teeth, get dressed and try to get a little movie time in, and then he goes to school until 1:00 o'clock. [He c]omes home at 1:00 o'clock, [and] he needs the same snack, his gold fish, cheese and crackers and raisins and toasted peanut butter. It has to be the same way, laid out the same way every time. Then he takes a nap for up to [an] hour. And then we have afternoon play time * * * until dinner time. And then dinner time [is] another hour ordeal with the same meal. He'll only eat chicken, hamburger, rice and just very few things. And they can't be touching. And there cannot be any outside stimulation. No TV. We draw the blinds even so he can't see outside to get through the meal easier."
According to Bruce, D fights every step of the routine, saying "no" to every bite, for example. It can take 45 minutes not just to feed D but to coax him to eat. Something like having a substitute school bus driver, *449 going to a different store, or the graduation of one of the children in D's class "totally throws him off." He also becomes fixated on things; for example, where another child may ask for an object several times in a row, D "will ask for it three hundred times."
Borg explained that D responds differently than do other children to multiple types of sensory information. He might simultaneously seek out high levels of certain types of information, "be disinterested or under-responsive to others, and be easily pushed into uncomfortable levels of overstimulation," which leads to "more disorganized emotional and behavioral responses." Age-appropriate experiences may be overstimulating for him, and may arouse his nervous system into an "unbearable state of overload." His environment must be strictly structured to meet the needs of his nervous system, a very challenging task.
According to Borg, D's developmental potential will be determined in large part by his environment from this point on. He will need intensive services and a "sophisticated parenting strategy"that is, caregivers who are able to understand and appreciate that D responds to the world differently than other children do. His caregivers must be aware that the approaches that one might take instinctively with other children may be counter to D's needs and will need a capacity for ongoing focus on D's behaviors and responses to sensory experiences in his environment. According to Borg, because of their problems relating and communicating, children suffering from pervasive developmental disorders can become more disorganized, confused, and overwhelmed by other people's unregulated, emotionally driven behaviors. He concluded that D needs "to experience placement in a stable home with caregivers who are really committed to him and who are able to provide the kind of structure, emotional nurturing and interaction that he really needs."
At the time of trial, D was receiving services and treatment through a special day treatment preschool. A psychiatrist and a social worker at the program testified to D's behavior and communication difficulties. The medication prescribed by the psychiatrist, Dr. William Sack, appears, by all accounts, to be helping; D is more stable and "seems more relaxed and comfortable." Bruce commented that D's quality of life has improved since being placed on medication and, although she was resistant to the idea at first, she now realizes that he needs it. Sack testified that if D were taken off the medication, his condition would soon deteriorate.
Both Sack and the social worker, Amanda Barnum, concurred with Borg's assessment of D's needs. Barnum testified that he needs a "very mentally stable" caregiver who is willing to continue to learn how to work with his condition. She opined that D's caregivers would need to consistently participate in training and support groups, and would need to constantly work on their own issues arising from a caregiver's own anger and frustration that will inevitably surface as a result of working with a child with such special needs. Barnum expressed the view that, in order to provide adequate care to D, his caregivers would need to be "very strong in their listening abilities and very skilled in their therapeutic parenting." In the future, when D is in public school, his caregivers will need to work extensively with the school, with special education providers, and with a treatment team. When asked how D would respond to an emotionally unstable parent, Barnum replied:
"That would be * * * very alarming to think about. But if [D] were with someone that was not mentally stable it really would not foster his growth socially, emotionally or cognitively in any way. He needs a solid grounding, [a] trusted caretaker that can be consistent in every way or * * * he would become increasingly more severe in his mental health [problems and] would regress."
For her part, mother is skeptical about those assessments of D's special needs. At trial, she acknowledged that "there's a possibility that he has special needs," but she has not observed them firsthand. She asserted that she is "not comfortable with the idea of him being placed on medication when there's no proper diagnosis for it"; she has seen D's psychological assessments and believes that they do not establish a "need for [him to be *450 on] a Ritalin-based drug." Mother is particularly concerned about Ritalin because "it's amphetamines like I was using[.]" Despite those comments, mother allowed that if she were to regain custody of D, she would keep him on medication if a doctor of her choosing thought it was necessary and "had proof to back it up."
When asked what D needs, mother replied that he needs "attention" and "recognition." She recalled that when she and D were living together, she talked to him and gave him one-on-one time, except when she was on drugs. Mother opined that D's negative behaviors were learned from his foster home and, if he were placed back with her, his behavior would improve or, at least "would [not] get any worse." Mother indicated that she has "no problem" with D receiving therapy and thought it "[m]ore than likely" that she would be able to work with D's treatment providers.
Mother was adamant that she would not use marijuana if D were returned to her. When asked about her recent positive UAs, mother acknowledged that her "drug of choice" was marijuana and that she has a "huge void without [D] in [her] life and probably * * * used pot to try to fill that void." When asked by the judge what would happen if she were to experience that "void" after D was returned to her care, she replied:
"It is impossible. * * * I have done everything in my power at this point since I've been up in Portland * * * on what I need to do so I can be a good [mother] to [D]. * * * I'm not going to have that problem."[9]
Mother reported that her primary relapse prevention plan is to call her grandmother or her lawyer when she is about to use drugs. She no longer attends any outpatient program because she reportedly cannot afford it, and she does not attend any 12-step meetings. She commented that she "tend[s] to frown about [12-step] meetings because * * * they have no directive" and they tend to "trigger" her; she claims it is "actually safer for [her] recovery for [her] not to go to them."
Mother also denied any current anger issues; although she acknowledged that she "used to" have problems with anger, she claims now that she is "not even the same person" and is "the complete opposite" from before. She reports that she has learned how to control and deal with her anger and that she still gets emotional, but not like she would in the past. Mother believes that she has characteristics of BPD, but does not have it "full-blown."
The juvenile court found that mother's mental illness, coupled with her drug addiction, has resulted in a condition that is seriously detrimental to D and that integration into mother's home is improbable within a reasonable time due to conduct or conditions not likely to change. The court found that mother is an aggressive, assaultive type of borderline personality who continues to use drugs and alcohol and has discontinued services for both conditions. It found that the state had proved beyond a reasonable doubt that mother's mental illness presents a "severely negative impact" on her ability to parent D because it makes her emotionally unstable and unable to develop insight into his needs. The court likewise found that mother's continued use of controlled substances and her attitude establish that she is unable to remain clean and that the state had proved beyond a reasonable doubt that mother's drug use renders her unfit because it impairs her ability to be aware of and appropriately respond to D's needs. Finally, the court found beyond a reasonable doubt that mother had failed make a sufficient lasting adjustment to enable D's integration into mother's home within a reasonable time, noting that D requires extremely skilled care and that mother cannot provide him with the stable, nonchanging environment and routine that he needs. Additionally, the juvenile court found that mother is unable to effectively follow the advice of D's treatment providers, *451 placing D at further risk. The court summarized:
"Mother has failed to make the necessary adjustments to allow for the return of [D]. She has completed the [CODA] substance abuse treatment program, but failed to engage in aftercare. She has failed to engage in [12-step meetings.] She failed to complete parenting classes. She failed to complete anger management * * * classes. She failed to complete [DBT] or individual mental health counseling. She has visited with [D] and she has continued living in the Oxford House, but she has not maintained abstinence from alcohol or marijuana."
On de novo review, we affirm those findings.
ORS 419B.504 provides, in part:
"The rights of the parent or parents may be terminated * * * if the court finds that the parent or parents are unfit by reason of conduct or condition seriously detrimental to the child * * * and integration of the child * * * into the home of the parent or parents is improbable within a reasonable time due to conduct or conditions not likely to change. In determining such conduct and conditions, the court shall consider but is not limited to the following:
"(1) Emotional illness, mental illness or mental deficiency of the parent of such nature and duration as to render the parent incapable of providing proper care for the child * * * for extended periods of time.
"* * * * *
"(3) Addictive or habitual use of * * * controlled substances to the extent that parental ability has been substantially impaired.
"* * * * *
"(5) Lack of effort of the parent to adjust the circumstances of the parent, conduct, or conditions to make it possible for the child * * * to safely return home within a reasonable time or failure of the parent to effect a lasting adjustment after [active efforts[10]] by available social agencies for such extended duration of time that it appears reasonable that no lasting adjustment can be effected."
In seeking the termination of a parent's rights to an Indian child under ORS 419B.504, the state has the burden of showing beyond a reasonable doubt, ORS 419B.521(4), that the parent is presently unfit to care for the child. The Supreme Court has observed that both parts of the two-part test contained in ORS 419B.504 must be met before the court orders termination:
"First, the court must address a parent's fitness: The court must find that the parent is `unfit by reason of conduct or condition seriously detrimental to the child.' That, in turn, requires a two-part inquiry: The court must find that: (1) the parent has engaged in some conduct or is characterized by some condition; and (2) the conduct or condition is `seriously detrimental' to the child. Secondand only if the parent has met the foregoing criteriathe court also must find that the `integration of the child into the home of the parent * * * is improbable within a reasonable time due to conduct or conditions not likely to change.'"
State ex rel. SOSCF v. Stillman, 333 Or. 135, 145, 36 P.3d 490 (2001); see also State ex rel Dept. of Human Services v. Smith, 338 Or. 58, 80-81, 106 P.3d 627 (2005). Additionally, the court must also find that termination of parental rights is in the best interests of the child. ORS 419B.500.
We first address mother's fitness and find that mother's mental illness, coupled with her addiction to controlled substances, constitutes a condition that, beyond a reasonable doubt, is seriously detrimental to D. We are mindful that the "conduct or conditions" at issue must have rendered mother unfit at the time of the termination hearing. Stillman, 333 Or. at 148-49, 36 P.3d 490. Even though mother's mental health issues and her drug addiction are intertwined, we begin by addressing her mental illness.
Over the last eight years of involvement with DHS, mother has had a number of psychological evaluations, and each one included *452 a diagnosis of either BPD or characteristics of BPD attached to a personality disorder not otherwise specified. Although there is no cure for BPD, therapy can help a person learn to cope with and manage the symptoms. However, we are convinced that mother has not achieved the ability to manage her illness and that her illness is seriously detrimental to D.
For the last eight years, mother's life has been in almost constant chaos. Her emotional instability is frequently extreme, and she is regularly in conflict with others. She is prone to angry outbursts and violent behavior. People have consistently described mother as threatening, combative, aggressive, and even violent. The record also establishes that she has assaulted a number of people, including her first child, J, and has threatened to assault others. Closer to trial, mother was not engaging in any sort of mental health treatment, and her aggressive outbursts continued. DHS employees testified to a number of outbursts of intense and extreme anger in the six months before trial. Additionally, mother's volatility apparently interfered with her ability to maintain employment.
Also characteristic of BPD, mother currently displays a lack of insight into her participation in the problems she has encountered. For example, when asked at trial why she left her first inpatient treatment facility after five days, mother insisted that the facility offered her no treatment and let her sit idly for five daysyet the testimony of her primary counselor and her discharge record indicate that it was mother who refused to engage in her recovery. Additionally, at trial, mother implied that the violent interaction with her own mother (resulting in the fracture of her mother's skull) occurred because if she had not responded violently, she would have been injured. Mother reported that she was unsuccessful in a DBT treatment group, not because she was unwilling to learn, but because the other members of the group were too difficult to interact with. Perhaps the most telling example of mother's lack of insight was mother's response when asked whether she felt accountable for D being placed in foster care. Mother had difficulty understanding, and answering, that question: "There [are] things that I don't maybe have provoked [that caused] him to go into foster care in the first place * * *. * * * I placed him in care * * * when I left Crossroads [but] I was not emotionally stable. I cracked. I mean I sat in [Crossroads] for five days and * * * did nothing. And I justI just don't know."
Under ORS 419B.504, a diagnosis of mental illness is not enough; there must also be evidence that the parent's condition is so seriously detrimental to the child as to warrant a finding of unfitness. State ex rel Dept. of Human Services v. Huston, 203 Or.App. 640, 646, 126 P.3d 710 (2006). That statutory requirement is meant to be "child-specific" and calls for "testimony in psychological and developmental terms regarding the particular child's requirements." Id. at 657, 126 P.3d 710 (citing Stillman, 333 Or. at 146, 36 P.3d 490). For example, "minimally adequate parenting skills may be different for a severely disabled child from those for a child that has no disabilities." State ex rel. SOSCF v. Wilcox, 162 Or.App. 567, 575-76, 986 P.2d 1172 (1999).
In State ex rel Dept. of Human Services v. Radiske, 208 Or.App. 25, 55-57, 144 P.3d 943 (2006), we considered the mother's conditions in light of the child's particular needs.[11] There, the child had been diagnosed with chronic post-traumatic stress disorder, major depressive disorder, a learning disorder and, in general, was a "very fragile" and "unusually troubled" child. Id. at 42, 55, 144 P.3d 943. Therapists testified that the child "absolutely" needed a calm, predictable, highly supportive home environment with a caregiver who had good emotional control in order for the child to be able to overcome her emotional problems. Id. at 42, 144 P.3d 943. We concluded that the mother's serious mental illnesses, which were exacerbated by continued *453 marijuana use, made her unable to understand and appreciate the child's fragile emotional state. Id. at 50-51, 56-57, 144 P.3d 943. We noted that the mother had demonstrated that inability by pressuring the child to testify a certain way at trial, causing the child significant emotional distress, and by being unable to articulate an understanding of the child's specific needs, beyond agreeing to take her to therapy. Id. at 56-57, 144 P.3d 943. We ultimately agreed with one therapist that the mother's psychological problems and drug use caused her to have an inadequate appreciation and sensitivity to the child's complex special needs. Id.
On the other hand, in Squiers, 203 Or.App. at 793-94, 126 P.3d 758, we concluded that the mother's borderline personality traits did not interfere with her ability to recognize and meet her children's special needs. There, the two children both had learning difficulties, ADHD, and other special needs. Id. at 784-86, 126 P.3d 758. The children needed a consistent home environment where they would receive attention and stimulation, and they needed a caregiver who would be a strong advocate for them in the school system and expose them to educational materials at home. Id. at 784-86, 126 P.3d 758. At trial, the mother was able to persuasively articulate how she would address her children's learning delays and other special needs. Id. at 794, 126 P.3d 758. For example, she demonstrated an awareness of their need for repetition to assist in the learning process. Id. She testified that she would help them learn to communicate better by offering them choices and then teaching them about the consequences of those choices. Id. She stated an intention to work closely with everyone who worked with the children and to implement their suggestions. Id. Moreover, she had participated in a number of parenting classes that had helped her understand appropriate levels of supervision for the children. Id. at 795, 126 P.3d 758. In sum, the evidence showed that, despite a personality disorder, the mother displayed insight and understanding regarding her children's special needs.
The record before us is more like Radiske than Squiers, because the manifestations of mother's personality disorder are directly harmful to D and render her unable to understand, appreciate, and accommodate D's special needs. We agree with the juvenile court's conclusion that D's needs far exceed any parenting skills of which mother is capable.
As noted, D suffers from a pervasive developmental disorder. As a result, D has problems with social development, communication, sensory processing, and mood regulation. The most prominent manifestation of his disorder is his unbending need for stability and predictability. It is clear from the testimony that D is easily overwhelmed by the slightest alteration in his environment.
Accordingly, the record establishes that minimally adequate parenting for D will involve a "very intensive and * * * sophisticated parenting strategy." It will include the ability both to recognize and accommodate D's needs for stability and patience. Additionally, D's caregivers must be able to advocate for him and work proactively with his service providers; such treatment will include medication management and regular contacts with special education and mental health services. All told, D requires an emotionally stable caregiver with highly developed observation skills, insight, and self-awareness who is able to negotiate the system of service providers.
If D's special needs are not met, his development is at risk. One expert opined that if D were placed with an emotionally unstable caregiver, he would "regress severely in all developmental areas." Another stated that D is more vulnerable to being confused and overwhelmed by other people's emotional displays or emotionally driven behavior, and that such confusion would interfere with his development. In essence, his disorder would become increasingly symptomatic.
Mother's mental illness is seriously detrimental to D. First, the emotional instability that accompanies her mental illness is directly harmful to D. As the experts explained, D is easily overwhelmed and confused by erratic emotional displays. And although all children are affected by their caregivers' reactions to life experiences, those effects may be particularly pronounced for a child like D *454 because he will deteriorate psychologically if his caregiver's behavior is inconsistent or inappropriate. Mother has consistently demonstrated that she is unable to control her emotional volatility, which would place D at serious risk.
Second, like the mother in Radiske, mother's interactions with D and her attitude regarding his illness demonstrate that she is unable to perceive his needs. During visits, the supervisors frequently expressed concern about mother's lack of insight, reporting that she "minimize[d]" and "overlook[ed]" the difficulties that D was having during visitation and that she would overstimulate him by redirecting him too often and too quickly. The record demonstrates that mother interacts with D without regard for his unique sensory experience.
Third, mother's illness makes her unable to accommodate D's needs because she is resistant and unresponsive to D's support services and treatment providers. As she often did in her own treatment, she frequently responds to visitation feedback by yelling and swearing. She testified that she would keep D on medication only if a doctor of her choosing had the "proof to back it up." Indeed, mother herself expressed some uncertainty about whether she would be able to work with D's treatment providers, indicating only that it was "[m]ore than likely" that she could.
Finally, unlike the mother in Squiers, mother did not provide any persuasive evidence that she is capable of addressing, or even understanding, D's condition. When asked about D's needs, mother was able to articulate only that he needs "attention" and "recognition." She expressed uncertainty regarding whether D even has special needs at all, despite the fact that she has been repeatedly informed of those needs by professionals, and suggested that D learned his behaviors from his foster family and would improve once he is returned to her.
Mother's drug use is an additional condition seriously detrimental to D because it worsens her personality disorder and makes it more difficult for her to manage her symptoms. Even though mother attended a nine-month inpatient drug treatment program and apparently was sober the entire time, she subsequently has had a total of five positive UAs. She no longer attends outpatient aftercare and her relapse prevention plan is essentially nonexistent. The discharge summary for her last aftercare programwhich ended about four months before trialstated that she had not established abstinence, her emotional stability was questionable, and she was ambivalent about continuing with treatment.
We agree with the juvenile court's findings that mother has not maintained sobriety and that her drug use seriously complicates her mental health issues. We also concur with the juvenile court's finding that mother's drug use impairs her ability to be aware of and appropriately respond to D's needs and renders her more unstable in her emotions, her employment, her housing, and her relationships. As of the time of trial, mother apparently did not yet realize the importance that her sobriety plays in her ability to manage her mental illness.
Mother contends that the state failed to prove beyond a reasonable doubt that her present condition is seriously detrimental to D. She points to her recent successes over the two years leading to trialthat she completed a nine-month residential drug rehabilitation program, was stable in her employment for 10 months and then for three months, and maintained stable housing in a structured clean-and-sober environmentto show that she has made significant progress. She points to State ex rel. DHS v. Lee, 194 Or.App. 633, 96 P.3d 823 (2004), and State ex rel. SOSCF v. Armijo, 151 Or.App. 666, 950 P.2d 357 (1997), for the proposition that, when a parent has made significant progress, termination is improper.
We do not see the same amount of progress here as we did in Lee and Armijo. In Lee, the mother had significantly adjusted her circumstances by obtaining adequate housing, improving her parenting and housekeeping skills, demonstrating improvement in her mental health, and engaging in mental health treatment. 194 Or.App. at 645-46, 96 P.3d 823. Moreover, in Lee, there were no drug and alcohol issues, and the mental *455 health issues were less severe than in this case. Id. at 639, 643-44, 96 P.3d 823. Finally, there was no evidence in Lee that the mother's deficits were seriously detrimental to the children. Id. at 646, 96 P.3d 823.
Armijo is more similar to this case in that it involved both substance abuse and mental health issues. Armijo, 151 Or.App. at 668-71, 950 P.2d 357. Again, however, the progress achieved by the mother in Armijo was more substantial than mother's progress here. In Armijo, the mother's mental health improved; she completed a drug treatment program, participated in intensive aftercare treatment, did not relapse, and was on a course of "discipline, stability, and sobriety that was unprecedented in her life." Id. at 682-83, 950 P.2d 357.
Here, by contrast, mother's successes are more limited. Even after mother completed a nine-month residential treatment program, she relapsed a number of times and has all but abandoned aftercare treatment. Mother is not participating in any sort of mental health treatment, and her BPD symptoms continue to be apparent. We also agree with the juvenile court's findings that mother's recent history with employment and housing indicate instability, rather than stability. In just the year before trial, mother had quit two jobs and was apparently starting a third; she has not yet been able to maintain long-term employment. Additionally, we agree with the juvenile court that mother's housing situation was in jeopardy at the time of trial because of her inability to conform to the rules of the Oxford House and remain drug free. Moreover, the children in Lee and Armijo did not have special needs like those D has demonstrated. Here, mother's emotional instability and her inability to perceive D's significant special needs are an important reason why her condition is seriously detrimental to him.
We next consider whether D's integration into mother's home is improbable within a reasonable time due to conditions not likely to change. Stillman, 333 Or. at 145-46, 36 P.3d 490. After considering mother's history, her pattern of treatment and relapse, and the length of time that mother has been given to stabilize her life, we agree with the juvenile court that the state proved beyond a reasonable doubt that it is improbable that mother's condition will sufficiently change within a reasonable time.
First, mother's involvement with DHS has spanned nearly a decade, and she has thus far been unable to establish significant long-term positive changes. Further, we agree with Basham's assessment that, because mother's problems are so pervasive, debilitating, and prone to relapse, she would need to demonstrate a minimum of a year of substantial and sustained improvements to demonstrate that she has gained control over her problems. Mother was given that year after she completed her nine-month treatment program at CODAbut in that year, she was unable to maintain her sobriety, her BPD symptoms were still in evidence, and she abandoned any form of drug or mental health treatment. At the time of trial, there was no evidence that mother was headed toward sustained improvement; rather, she appears to be at significant risk of more drug use and psychological deterioration. As we said in State ex rel. SOSCF v. Lehtonen, 172 Or. App. 584, 594, 20 P.3d 210, rev. den., 333 Or. 73, 36 P.3d 974 (2001), "[t]he opportunities for a parent to adjust conduct and conditions so as to be a minimally adequate parent simply cannot be unlimited. At some point, the child's needs for permanence and stability in life must prevail." For D, that time has come.
The final issue is whether termination is in D's best interests. As noted, D's needs far exceed what mother is able to provide for him. Given D's own mental health problems, his need for stability, consistency, and permanence is particularly pressing. As the juvenile court found, D's present foster home is a stable and caring placement; from all indications, D's foster parents have demonstrated a high commitment to and capacity for addressing his complex needs, and they plan to adopt him. If D were returned to mother, her instability and drug addiction would seriously jeopardize D's development. We are convinced that it is in D's best interests that mother's parental rights be terminated *456 so that D's need for stability can be addressed.
Affirmed.
NOTES
[1] For the provisions of ORS 419B.504, see 210 Or.App. at 259, 150 P.3d at 451.
[2] ORS 419B.506 provides:
"The rights of the parent or parents may be terminated * * * if the court finds that the parent or parents have failed or neglected without reasonable and lawful cause to provide for the basic physical and psychological needs of the child or ward for six months prior to the filing of a petition. In determining such failure or neglect, the court * * * shall consider * * *:
"* * * * *
"(2) Failure to maintain regular visitation or other contact with the child * * *.
"(3) Failure to contact or communicate with the child * * *."
[3] Mother has voluntarily relinquished her parental rights to J; nonetheless, as will become apparent, evidence of her relationship with J is relevant to this case. See generally State ex rel. SOSCF v. Farish, 182 Or.App. 322, 334-35, 49 P.3d 811, rev. den., 334 Or. 693, 56 P.3d 405 (2002) (stating that evidence of abuse of a child's sibling directly bears on fitness).
[4] At trial, mother explained that she threw the soda can at her mother, who was very drunk, "before she had a chance to hit me."
[5] When asked about the incident at trial, mother stated that she "never told anybody that he maced me in the face."
[6] Mother testified that she was unsuccessful with the DBT group "not because [she] was [un]willing to learn" but because "being in the same room with [13] people who have [BPD] drove [her] up the wall."
[7] Although it is not entirely clear from the record, it appears that mother voluntarily relinquished her parental rights to J at about that time.
[8] During this time period, mother had other emotionally charged interactions with DHS employees. The receptionist at DHS reported two incidents when mother was "very upset," "yelling," and "using profanities." The latest of those incidents occurred one month before trial.
[9] Mother apparently believes that if D were returned, the "void" would disappear. However, according to Willette, mother's chronic feelings of emptiness are a typical symptom of BPD that would not disappear if D were returned. Willette suggested that, although the feelings may subside for a short time, they are certain to return, at which point mother will again be faced with an impulsive desire to use drugs.
[10] ORS 419B.500; 25 U.S.C. § 1912(d).
[11] Even though in Radiske we considered the child's specific needs during the second step of the unfitness analysisthat is, whether integration into the parent's home was improbable within a reasonable timethe "child-specific" inquiry applies to all levels of the analysis. Huston, 203 Or.App. at 657, 126 P.3d 710. | 01-03-2023 | 11-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2013105/ | 133 B.R. 547 (1991)
In re William David MILLSAPS et ux., Debtors.
William David MILLSAPS et ux., Plaintiffs,
v.
UNITED STATES of America, Defendant.
Bankruptcy No. 86-00487-BKC-6C7, Adv. No. 86-0154.
United States Bankruptcy Court, M.D. Florida, Orlando Division.
November 4, 1991.
*548 William D. Millsaps and Anna Jean Millsaps, debtors pro se.
Hildy S. Stern, Trial Atty. Tax Div., U.S. Dept. of Justice, Washington, D.C.
Steven R. Bechtel, Mateer, Harbert & Bates, P.A., Orlando, Fla., for Earl K. Wood and Ford S. Hausman.
*549 Eugene S. Legette, Orlando, Fla., for Paul Roper and Martha O. Haynie.
Andrea A. Ruff, Trustee, Orlando, Fla.
DECISION ON CROSS MOTIONS FOR SUMMARY JUDGMENT AND ON MOTION FOR ABSTENTION
C. TIMOTHY CORCORAN, III, Bankruptcy Judge.
This adversary proceeding came on for consideration of the motion for partial summary judgment filed by plaintiffs, William and Anna Jean Millsaps ("Millsaps") (Document No. 81); the cross motion for summary judgment filed by the defendant, United States of America ("Internal Revenue Service" or "Service") (Document No. 97); the motion for abstention filed by the Service (Document No. 95); and the Millsaps' response (Document No. 105).
In this proceeding, the Millsaps make:
1. A request for a declaratory judgment that their federal income tax liabilities for the years 1979 through 1984 have been discharged.
2. A request for a declaratory judgment that the action taken by the Internal Revenue Service to enforce the liens securing tax obligations for the years 1979 through 1984 violated the automatic stay or Section 524(a)(2) of the Bankruptcy Code.
3. A request for a declaratory judgment that the levy, seizure, and sale of the debtors' home located at 528 Morocco Avenue, Orlando, Florida, was illegal and invalid.
4. A request that the court determine the amount owed for the tax year 1982.
In its cross motion for summary judgment, the Service requests that the court declare the dischargeability issues relating to the tax liabilities for the years 1979 through 1984; declare that the tax liabilities for the years 1979 through 1984 were validly assessed; declare that notice and demand were properly effectuated; and declare that the sale of the plaintiffs' residence did not violate the automatic stay or Section 524(a)(2) of the Bankruptcy Code. Alternatively, the Service asserts that, under the facts of this proceeding, this court does not have subject matter jurisdiction to review the levy, seizure, and sale of the plaintiffs' residence.
In addition, in its separate motion for abstention, the Service requests that the court abstain from determining all issues raised by the plaintiffs' fourth amended complaint except the dischargeability of the income tax liabilities for the years 1979 through 1984.
UNDISPUTED MATERIAL FACTS
The undisputed facts of this proceeding set forth by the parties in the record on the pending motions are as follows:
By early 1986, the Millsaps and the Service for some considerable time had been engaged in a dispute over the Millsaps' federal income tax liabilities for 1979 through 1984. With enforcement action by the Service then imminent, on March 5, 1986, the Millsaps filed suit in the United States District Court for the Middle District of Florida (Case No. 86-227-CIV-ORL) seeking injunctive relief to prevent the Service from selling their residence located at 528 Morocco Avenue, Orlando, Florida. (On April 2, 1987, the district court dismissed that action for lack of subject matter jurisdiction.)
A week later, on March 12, 1986, the Millsaps then filed in this court their joint petition under Chapter 7 of the Bankruptcy Code. The clerk notified creditors that there appeared to be no assets in the estate for distribution and that no claims bar date had been set. The docket reflects that, to this date, there has been no claims bar date established. The Service has never filed a proof of claim. In this bankruptcy case, the debtors claimed their home at 528 Morocco Avenue, Orlando, Florida, as exempt from administration under the Florida constitutional homestead exemption. There were no objections to this claim of exemption. The court entered the debtors' discharge on September 15, 1986.
On July 22, 1986, the Millsaps filed the original complaint initiating this adversary proceeding. The only relief requested in the first complaint was a determination of the dischargeability of the Millsaps' tax *550 obligations for the years 1979 through 1984. Later the Millsaps filed the first amendment to the complaint to identify correctly the United States of America as the defendant.
On January 21, 1987, the Service sold the plaintiffs' Morocco Avenue home to enforce claimed perfected tax liens securing the debtors' personal income tax liabilities for 1979, 1980, and 1981. Although the Service had filed notices of liens relating to the tax years 1979 through 1984, the Service applied the proceeds from the sale of the home only to the unpaid federal income tax liabilities for the years 1979 through 1981 because there were not sufficient funds to cover the later years.
Also on January 21, 1987, the Millsaps filed a civil action in the Circuit Court for Orange County, Florida (Case No. C.I. 87-413), in connection with the Service's collection efforts. The Service removed that case to the United States District Court for the Middle District of Florida (Case No. 87-104-CIV-ORL-18). On March 16, 1987, the district court dismissed this case with prejudice for failure to allege facts upon which relief could be granted or upon which the court could take jurisdiction.
On September 1, 1987, the Millsaps filed their second amended complaint in this adversary proceeding. In addition to requesting a declaration of the dischargeability of their personal income tax liabilities for the years 1979 through 1984, the Millsaps requested that the court determine the amount of their tax liability for the 1982 tax year.
On November 13, 1987, the Millsaps filed a third amended complaint in this adversary proceeding. In addition to the relief requested previously, the Millsaps requested a declaration that the alleged claim of the Service was unenforceable by virtue of the automatic stay of Section 362 or the permanent injunction of Section 524(a)(2) of the Bankruptcy Code.
On December 30, 1988, almost two years after the sale of the Millsaps' Morocco Avenue home by the Service and well after the dismissal of both civil actions by the district court, the Millsaps filed a fourth amended complaint in this adversary proceeding. In addition to the relief previously requested, the Millsaps requested for the first time that this court declare invalid and improper the assessment, lien, levy, seizure, and sale procedure followed by the Service with regard to the taxes for the years 1979 through 1984 and the sale of the home.
DISCUSSION
The court makes these conclusions of law based upon the undisputed facts.
1. Dischargeability of Tax Liabilities for the Tax Years 1979 through 1984.
The debtors' discharge, entered on September 15, 1986, operates to discharge the Millsaps from all debts that arose before the date of the petition except those debts identified in Section 523 of the Bankruptcy Code. See 11 U.S.C. § 727(b).
Section 523(a)(1)(A) of the Bankruptcy Code provides that a discharge under Section 727 does not discharge individual debtors from taxes of the kind and for the periods specified in Section 507(a)(7). Conversely, unless the tax obligations fall into one of the Section 507(a) categories, they are discharged as personal obligations. Whether or not the personal prepetition tax obligations are discharged, however, exempt real property remains subject to any properly filed tax liens. 11 U.S.C. § 522(c)(2)(B).
(a) Tax years 1979-1981.
The certified certificates of assessments and payments filed by the Service in support of its cross motion for summary judgment reveal that the Millsaps' tax obligations for the years 1979, 1980, and 1981 were personal income tax obligations the returns for which were last due well before three years before the filing of the petition in this case on March 12, 1986.[1] Section *551 507(a)(7)(A)(i) would provide no priority to taxes of such an old age. For each of those years, however, the obligations arose as the result of audit deficiencies. Section 507(a)(7)(A)(ii) of the Bankruptcy Code assigns a priority status to unsecured obligations arising from audit deficiencies that are assessed within 240 days before the filing of the petition. The certificates for the years 1979 through 1981 further reveal that the most recent assessment occurred on May 8, 1984, a date more than 240 days before the filing date.
Consequently, those obligations do not constitute a priority and are therefore not excepted from the discharge. Indeed, the Service concedes the Millsaps had no personal liability after the discharge for the 1979 through 1981 tax years. The Millsaps are therefore entitled to a judgment declaring that their personal liability for the 1979 through 1981 tax years has been discharged. The issues relating to the tax liens on the real property for these years, however, are discussed in Section 2 below.
(b) Tax years 1982-1984.
Section 507(a)(7)(A)(i) of the Bankruptcy Code assigns a priority for income tax obligations for which the return was last due within the three year period before the filing of the petition. The certified certificates of assessment show that the obligations for the years 1982, 1983, and 1984 arose from income taxes for which a return was due within the three year period before the filing of the petition on March 12, 1986. The return for the 1982 tax year was due April 15, 1983; the return for the year 1983 was due April 15, 1984; and the return for 1984 was due April 15, 1985.
As a result, the tax obligations for those years, including interest, are Section 507(a)(7) priority taxes and, as such, are excluded from the discharge by virtue of Section 523(a)(1)(A). United States v. H.G.D. & J. Mining Company, Inc. (In re H.G.D. & J. Mining Co., Inc.), 74 B.R. 122, 124 (S.D.W.Va.1986), aff'd, 836 F.2d 546 (4th Cir.1987); In re Standard Johnson Co., 90 B.R. 41, 42 (Bankr.E.D.N.Y.1988). The Millsaps remain personally liable for the taxes, including interest, for the years 1982, 1983, and 1984. As to this, the Service is entitled to summary judgment in its favor as a matter of law.
(c) Tax penalties for years 1982-1984.
The certificates of assessment reflect that the Millsaps were assessed penalties for filing frivolous returns for the years 1982 through 1984. There is no evidence in this record that any of the penalties assessed compensated the Service for actual pecuniary loss such that these penalties would be excepted from the discharge pursuant to Section 507(a)(7)(G) and Section 523(a)(1)(A). Standard Johnson Co., supra at 44; In re Jackson, 80 B.R. 213, 215 (Bankr.D.Colo.1987); In re New England Carpet Co., Inc., 26 B.R. 934, 936 (Bankr. D.Vt.1983). In fact, the Service has conceded that the penalties assessed against the Millsaps for the years 1983 and 1984 have been discharged. The same is true of any penalties assessed for 1982. As to this, therefore, the Millsaps are entitled to a judgment declaring that the penalties assessed for the years 1982 through 1984 have been discharged.
2. Did the actions taken by the Service in selling the debtors' home violate Section 524(a)(2) or the automatic stay?
In November of 1987, almost ten months after the Service sold the Millsaps' home and applied the proceeds in payment of their 1979 through 1981 taxes, the Millsaps filed a third amended complaint requesting a declaration that the alleged claim of the Service was unenforceable under Section 524(a)(2) or that the sale process violated the automatic stay.
The Millsaps' contention that any action taken by the Service violated the *552 automatic stay can be rejected summarily. The Millsaps claimed the subject real property as exempt, and there were no objections to the exemption claimed. Thus, in 1987 the property had long since ceased to be property of the estate, and the automatic stay no longer precluded any action against the property. 11 U.S.C. §§ 541(a), 522(b), 522(l), 362(c)(1); Samore v. Graham (In re Graham), 726 F.2d 1268, 1271 (8th Cir.1984); Christy v. Heights Finance Corp., 101 B.R. 542, 544 (C.D.Ill.1987); Crow v. Long, 107 B.R. 184, 188 (E.D.Mo. 1989).
The only protection afforded the debtors at the time of the sale was that provided by the permanent injunction imposed by Section 524(a)(2) of the Bankruptcy Code. It is clear, however, that this provision is not applicable to the action taken by the Service to enforce its liens. Section 524(a)(2) relates only to the collection of a prepetition obligation "as a personal liability of the debtor." The Service has conceded that any deficiencies for the years 1979 through 1981 have been discharged, and the Service has not asserted any claim for those years against the Millsaps personally.
The Service does contend, however, that it had valid, enforceable tax liens on the Millsaps' real property that partially secured the obligations for the tax years 1979, 1980, and 1981. It is well settled, of course, that the validity and enforceability of a lien securing an obligation is not affected by the discharge of the debtors' personal liability for the obligation; the lien is preserved after the discharge is entered. Isom v. United States (In re Isom), 901 F.2d 744, 746 (9th Cir.1990); Lindsey v. Federal Land Bank of St. Louis (In re Lindsey), 823 F.2d 189, 190 (7th Cir.1987). Because the Millsaps had taken no action in the bankruptcy case to contest or invalidate the liens, there was nothing to prevent their enforcement by the Service. Lindsey, supra at 190; Crow, supra at 187. Nor will the bankruptcy discharge prevent enforcement of a valid lien on exempt property. 11 U.S.C. § 522(c)(2)(B); Louisville Joint Stockland Bank v. Radford, 295 U.S. 555, 583, 55 S. Ct. 854, 860, 79 L. Ed. 1593 (1935). The Service is therefore entitled to summary judgment against the Millsaps on this issue.
3. The validity of the levy, seizure, and sale of the debtors' homestead.
In December of 1988, almost two years after the sale of the Morocco Avenue home, the Millsaps filed their fourth amended complaint attacking the validity of the tax liens and the sale. The certificates of assessments and payments filed by the Service reflect that the Service mailed in April and May of 1984 the notices of assessments for the tax years 1979 through 1981. There is no evidence in this record, other than prosecuting the two civil actions that the district court dismissed in March and April, 1987, that the Millsaps took any administrative or legal action to contest the amount of the taxes due for the years 1979 through 1981 or to contest the procedure relating to the assessment, the giving of the notice, or the filing of the liens until they filed that fourth amended complaint.
The Millsaps filed the complaint initiating this adversary proceeding on July 22, 1986. The original complaint involved merely a request for a determination of the dischargeability of their personal liability for tax obligations for the years 1979 through 1984. It did not raise any issues relating to the validity of the Service's liens on the Millsaps' home.
When the discharge was entered by this court on September 15, 1986, the liens were not at issue. As discussed in Section 2 above, after the discharge was entered the Service was free to continue to enforce its liens on the Millsaps' residence. The Service recommenced its enforcement efforts, culminating in the sale of the residence on January 21, 1987. The proceeds of the sale were applied to the tax obligations for the years 1979 through 1981.
On December 30, 1988, almost two years after the sale of the home and the dismissal of both district court actions, the Millsaps filed a fourth amended complaint in this adversary proceeding. The amendment *553 was the first request that this court declare the assessment, liens, levies, seizure, and sale of the property to be invalid and improper. It is, then, not the validity of the liens that is subject to contest here. By then, the liens had already been enforced, and the proceeds had already been applied to pay the tax obligations for years 1979 through 1981. In other words, by the time the Millsaps first attacked the liens, the liens no longer existed; they had long since been satisfied through enforcement (or, in laymen's terms, foreclosure).
Despite the request by the Millsaps that the court declare the sale to have been invalid and improper, the only relief available to the Millsaps at this late date after the sale of their property and satisfaction of the liens is a refund of the taxes paid through the sale and satisfaction process.
As to an action for such a refund, Section 7422(a) of Title 26, United States Code, provides that:
No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.
Section 505 of the Bankruptcy Code grants specific authority for the bankruptcy court to determine the right of the estate to a tax refund. Section 505(a)(2)(B) provides, however, that:
(2) The court may not so determine
* * * * * *
(B) Any right of the estate to a tax refund, before the earlier of
(i) 120 days after the trustee properly requests such refund from the governmental unit from which such refund is claimed; or
(ii) a determination by such governmental unit of such request.
Although Section 505 of the Bankruptcy Code grants limited jurisdiction to the bankruptcy court to consider a civil refund action, it nevertheless reiterates the condition precedent to suit similar to that set forth in 26 U.S.C. § 7422(a), that is, the trustee must first properly request a refund from the Service.
There is no evidence on this record that the Millsaps have ever filed a request for a refund with the Secretary of the Treasury. Absent the satisfaction of that condition, this court, as well as any other court, is precluded from entertaining a refund action. 26 U.S.C. § 7422(a); 11 U.S.C. § 505(a)(2)(B); Thomas v. United States, 755 F.2d 728 (9th Cir.1985); Lipsett v. United States, 37 F.R.D. 549 (S.D.N.Y.1965); In re Qual Krom South, Inc., 119 B.R. 327 (Bankr.S.D.Fla.1990).
Moreover, that defect cannot be cured by filing a claim for refund now. Section 6511(a) of Title 26, United States Code, requires taxpayers to file any administrative claims for refund with the Secretary within three years from the time the return was filed or two years from the time the tax was paid, whichever is later. Since the sale of the Millsaps home and the application of credit to the payment of taxes took place on January 21, 1987, the Millsaps were required to file a claim with the Secretary on or before January 20, 1989. Instead, the Millsaps filed their fourth amended complaint in this proceeding on December 30, 1988, just 21 days before that administrative limitations period expired. Because they did not then, and cannot now, file a claim for refund with the Secretary, the Millsaps are precluded by Section 7422(a) of Title 26 and by Section 505(a)(2)(B) of the Bankruptcy Code from prosecuting a civil action for a refund in any court, much less this court.
Because this court is precluded from entertaining this claim for a refund by virtue of the Millsaps' failure to satisfy the condition precedent, it is unnecessary to determine whether the bankruptcy court has subject matter jurisdiction to consider a suit for refund filed by the debtor, as distinguished from the trustee on behalf of *554 the estate. It is likewise unnecessary to consider, if the court had jurisdiction, whether it should exercise that jurisdiction to consider a refund for a payment to the Service made by virtue of the post-petition sale of the debtors' exempt property.
For the foregoing reasons, the Millsaps are not entitled to a judgment determining that the assessment, lien, levy, seizure, and sale on and of the debtors' home was illegal and invalid. Instead, the Service is entitled to judgment on this issue.
4. Determination of 1982 Tax Obligation.
The Millsaps' second amended complaint requested that the court determine the correct amount of the tax liability for 1982. By virtue of Section 505(a)(1) of the Bankruptcy Code, this court has subject matter jurisdiction to determine the amount or legality of any tax. The Service acknowledges the court's jurisdiction to determine the amount of the 1982 taxes, but it requests that the court abstain from hearing the matter pursuant to 28 U.S.C. § 1334(c)(1). Section 1334(c)(1) permits the court to exercise its discretion to abstain from determining a proceeding within its jurisdiction "in the interest of justice." In this context, therefore, the court should consider the purpose to be served by exercising its jurisdiction.
Under the old Bankruptcy Act of 1898, the court had broad jurisdiction to consider the validity of a previous tax assessment if a final determination had not been made by another court; this jurisdiction existed regardless of whether the time had expired for the debtor to contest the assessment in a non-bankruptcy forum. See In re E.C. Fisher Corp., 229 F. 316 (D.Mass.1915). Further, the trustee was not ordinarily bound or estopped by the acts or omissions of the debtor as to any question the trustee could raise concerning the amount or validity of a tax claim. 3 King, Bobitt, Herzog & Levin, Collier on Bankruptcy ¶ 505.01 (15th ed. 1991); Boyle v. Well (In re Gustav Schaefer Co.), 103 F.2d 237 (6th Cir.), cert. denied, 308 U.S. 579, 60 S. Ct. 96, 84 L. Ed. 485 (1939); Henderson County v. Wilkins (In re Fleetwood of Hendersonville Hotel Corp.), 43 F.2d 670 (4th Cir. 1930); In re Raflowitz, 37 F. Supp. 202 (D.Conn.1941). These cases, decided under the Bankruptcy Act of 1898, reflect the Congressional intent to provide an opportunity for the trustee, on behalf of the creditors, to contest the validity and amount of tax claims when the debtor had been unwilling or unable to do so.
The legislative history leading to the enactment in 1978 of Section 505 of the Bankruptcy Code clearly indicates that Congress intended to continue the bankruptcy court's jurisdiction to determine certain tax issues for the benefit of the estate. 124 Cong. Rec. H11095 (1978). In addition, Congress refined the statute for the express purpose of providing a forum for the rapid determination of claims so that disputed tax claims would not delay the conclusion of the administration of a bankruptcy estate. Id. See also In re Diez, 45 B.R. 137, 139 (Bankr.S.D.Fla.1984) (citing Cohen v. United States, 115 F.2d 505 (1st Cir.1940)).
Here the trustee is not seeking a determination of the amount of these taxes in the process of administering the estate. Instead, it is the debtors who are contesting the amount of a non-dischargeable debt. Although Congress extended jurisdiction to the bankruptcy court to determine the debtors' personal tax liability under Section 505(a)(1), the debate in the House of Representatives leading to the passage of this section clearly shows that, when there is no need for a determination of the amount of the tax for estate administration purposes, Congress did not intend or foresee that the bankruptcy court would be the forum for this litigation. The drafters explained the section this way:
If a tax authority decides not to file a claim for taxes which would typically occur when there are few, if any, assets in the estate, normally the tax authority would also not request the bankruptcy court to rule on the debtor's personal liability for a non-dischargeable tax. Under the House amendment, the tax authority would then have to follow the normal procedures in order to collect a *555 nondischargeable tax. For example, in the case of nondischargeable Federal income taxes, the Internal Revenue Service would be required to issue a deficiency notice to an individual debtor, and the debtor could then file a petition in the Tax Courtor a refund suit in a district courtas the forum in which to litigate his personal liability for a nondischargeable tax. (Emphasis added).
124 Cong.Rec. H11095, H11110-H11111 (1978).
This portion of the House debate anticipates precisely the situation presented here. The Service did not file a claim; there were no assets administered in this Chapter 7 case; and there will be no distribution from the estate to the Service or to any other creditor. As a result, this controversy as to the amount of 1982 taxes has no effect on creditors generally; it involves only the debtors and the Internal Revenue Service. For these obvious reasons, the trustee has no interest in the matter and has not sought any relief. The principal policy reasons for giving this court the authority to determine this dispute are not present in this case.
The Millsaps amended their complaint on September 1, 1987, to litigate the amount of the 1982 taxes that were assessed almost four and one-half years earlier. There is no evidence on this record that the debtors made any effort earlier to contest the tax liability in the appropriate forum in a timely fashion. Given this, it appears that the Millsaps are merely taking advantage of what may look to them to be a renewed opportunity to contest the 1982 tax obligations.
The court is persuaded that these facts justify this court's discretionary abstention under the interest of justice standard of 28 U.S.C. § 1334(c)(1). The Millsaps have had ample opportunity to contest the amount of the 1982 taxes through the Service's administrative procedures and in their choice of three courtsthe United States tax court, the United States court of claims, and the United States district court. This record fails to reflect that they took any of these steps within the time periods prescribed by law for them to have done so. After thereby sitting on their rights, the Millsaps find themselves precluded by general law from disputing the amount of taxes the Service contends they owe for 1982. To remedy this situation, they invoke this court's Section 505(a)(1) jurisdiction to determine the amount of the tax.
Were this court to respond to the Millsaps' tardy call by exercising its jurisdiction, no bankruptcy interest would be furthered. As the court has already pointed out, the estate and creditors are not affected by this matter. Although it is true that an exercise of this jurisdiction would benefit the debtors and further the "fresh start" policy of the Bankruptcy Code, that interest would only be served at the expense of the orderly enforcement of the internal revenue laws. Unless this court abstains in these unusual circumstances, every taxpayer would know that he or she could ignore all of the tax protest and determination procedures and opportunities provided by the Internal Revenue Code and regulations, allow all time periods they provide to expire, watch the Service finally determine a tax, and then years later come into this court and obtain the judicial determination the taxpayer chose not to seek before. The interest of justice cannot be furthered by that result.
In addition to this sound policy reason for abstaining from determining the 1982 tax liability, there is another reason for abstaining here, as well. The docket of this court can only be fairly described as in crisis. The number of cases filed, the complexity of the cases, the larger-than-average percentage of Chapter 11 cases, and the lack of new judgeships to keep up with the load, have all operated to prevent this court from hearing and determining cases, contested matters, and adversary proceedings promptly as contemplated by the drafters of the Bankruptcy Code and as the parties litigant have every right to expect and demand. Although this court regularly holds hearings well into the evenings and on Saturdays, Sundays, and holidays, and despite the welcomed assistance of visiting judges from both within and outside *556 our circuit, there is simply much more to do than this court can complete with dispatch. Since the court first wrote about these conditions in March, 1991, in Shop & Go, Inc. v. D.K. Patterson Construction Co. (In re Shop & Go, Inc.), 124 B.R. 915, 918-19 (Bankr.M.D.Fla.1991), the situation has deteriorated even further. This proceeding is a case in point: the court took under advisement the pending motions decided in this order in January, 1990some 22 months ago. No one can argue that this delay is satisfactory in any respect, yet the docket permitted no earlier determination of the issues as framed by the parties.
Although the court's docket conditions standing alone would probably not justify an order of abstention, they surely may constitute an additional consideration weighing in favor of abstention. Eastport Associates v. City of Los Angeles (In re Eastport Associates), 935 F.2d 1071, 1075 (9th Cir.1991). It is especially appropriate to consider this factor in this case because there is little bankruptcy interest present here. As indicated above, the Millsaps' bankruptcy case is a no asset case. The Service had no obligation to file a proof of claim in such a case and did not do so. A determination of the 1982 tax would have no conceivable effect on the administration of the bankruptcy estate. Based on these facts, the claim for a determination of the 1982 tax is not a core proceeding within the meaning of 28 U.S.C. § 157(b) and (c). It is doubtful that the matter is even "related to" this bankruptcy case within the meaning of 28 U.S.C. § 1334(b). See Security Commission v. Wolverine Radio Co. (In re Wolverine Radio Co.), 930 F.2d 1132, 1141 (6th Cir.1991). Our docket conditions might not justify abstaining from a core proceeding within this court's original and exclusive jurisdiction under 28 U.S.C. § 1334(a). It is entirely appropriate, however, for the court to consider its docket conditions in deciding whether to abstain from hearing this non-core proceeding that falls at best within the court's original but not exclusive jurisdiction under 28 U.S.C. § 1334(b).
On these facts, therefore, it is clear that there is no bankruptcy purpose to be served by a determination by this court of the amount of the debtors' tax liability for 1982. Unfortunately, time on this court's calendar is a scarce resource. The fact that the Millsaps passed up numerous opportunities to have their 1982 tax dispute resolved in other forums weighs in favor of this court's abstention from determining that dispute at this late date. Accordingly, in the interest of justice, the court should and will abstain from the consideration of the amount owed by the debtors for the 1982 tax year. 28 U.S.C. § 1334(c)(1); In re Diez, supra at 139; Kaufman v. United States (In re Kaufman), 115 B.R. 378, 379 (Bankr.S.D.Fla.1990).[2]
JURISDICTION, DISPOSITION, AND CONCLUSION
This court has jurisdiction of the parties and the subject matter pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a), and the standing order of reference entered by the district court.
The claims determined in Sections 1 and 2 of the Discussion above are core proceedings within the meaning of 28 U.S.C. § 157(b). Although the claim discussed in Section 4 of the Discussion above is a non-core proceeding within the meaning of 28 U.S.C. § 157(c), this court may nevertheless enter a final order of abstention as to that claim, subject to appellate review in the district court under F.R.B.P. Part VIII, as has been made clear by Section 309(b) of the Judicial Improvements Act of 1990, which amended 28 U.S.C. § 1334(c)(2), and F.R.B.P. 5011(b), effective August 1, 1991. Nationwide Roofing & Sheet Metal, Inc. v. Cincinnati Insurance Co. (In re Nationwide Roofing & Sheet Metal, Inc.), 130 B.R. 768, 777 (Bankr.S.D.Ohio 1991); see also Local Rule 108(c). Accordingly, the court is contemporaneously entering a separate judgment on the claims determined in Sections 1 and 2 above and abstaining from *557 determining the claim discussed in Section 4 above.
The claim discussed in Section 3 of the Discussion above is a non-core proceeding within the meaning of 28 U.S.C. § 157(c). The Undisputed Material Facts and Section 3 of the Discussion above shall therefore constitute this court's proposed findings of fact and conclusions of law to the district court pursuant to F.R.B.P. 9033.
DONE and ORDERED.
NOTES
[1] The debtors moved to strike the certified certificates of assessments and payments ("Exhibit A") filed by the Service in support of its motion. The grounds for the motion to strike encompass 12 pages of their memorandum. None are meritorious. Exhibit A is a domestic official record within the meaning of F.R.Civ.P. 44 and is authenticated as required by Rule 44(a)(1). It also satisfies the requirements of F.R.Evid. 902(1) and (4). The motion to strike is therefore denied.
[2] The court is mindful of In re Witte, 92 B.R. 218 (Bankr.M.D.Mich.1988), cited by the debtors, but finds the facts of that case readily distinguishable from those at issue here. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2051161/ | 171 A.2d 381 (1961)
Nettle M. LUTZ and Managed Funds, Inc., Plaintiffs,
v.
Lloyd E. BOAS, J. John Brouk, Robert A. Hicks, James J. Mullen, Jr., Jefferson J. Rebstock, Dr. Earl Rice, W. Munro Roberts, Jr., Hilton H. Slayton and Hovey E. Slayton, Leo Model, Rolf R. Roland, Frits Markus, Robert R. Rosenberg, Walter H. Berton, Walter S. Morris, Erwin Wolff, Herman H. Stone, Stephen M. Jaquith, Elliot D. Fox, Jr., and Frank L. Thompson, Individually and as partners doing business under the firm, name and style of Model, Roland & Stone, James S. Stubbs and Harold W. Smith, and Slayton Associates, Inc. Defendants.
Court of Chancery of Delaware, New Castle.
May 25, 1961.
*383 Richard L. McMahon, of Berl, Potter & Anderson, Wilmington, and R. Walston Chubb, Robert S. Allen, Dominic Troiani, of Lewis, Rice, Tucker, Allen & Chubb, St. Louis, Mo., for plaintiff, Managed Funds, Inc.
William E. Taylor, Jr., Wilmington, and Abraham L. Pomerantz and Jerome T. Orans, of Pomerantz, Levy & Haudek, New York City, for plaintiff, Nettie M. Lutz.
Hilton Slayton, Hovey Slayton and Slayton Associates, St. Louis, Mo., pro se.
Robert H. Richards, Jr., of Richards, Layton & Finger, Wilmington, and Arthur H. Dean and Marvin Schwartz, of Sullivan & Cromwell, New York City, for defendants, Model, Roland & Stone, Leo Model, Rolf R. Roland, Frits Markus, Robert Rosenberg, Walter H. Berton, Walter S. Morris, Erwin Wolff and Herman H. Stone.
John VanBrunt, Jr., and E. Dickinson Griffenberg, Jr., of Killoran & VanBrunt, Wilmington, for defendant, Dr. Earl Rice.
Defendant Jefferson J. Rebstock did not appear; jurisdiction limited to stock seized.
The other defendants were not subject to this court's jurisdiction.
SEITZ, Chancellor.
Originally, this was a stockholder's derivative action for the benefit of Managed Funds, Inc. ("Funds"), a mutual fund. Subsequently, Funds was realigned as plaintiff and given primary control of the case. The defendants who are before the court fall into three groups:
*384 1. Hilton Slayton ("Hilton") and his cousin Hovey Slayton ("Hovey"), who were the founders of Funds in 1946; their wholly-owned investment advisory company, Slayton Associates, Inc. ("Associates").
2. The partnership and eight of the individual partners of the New York brokerage firm of Model, Roland & Stone ("Model").
3. Dr. Rice, a former director of Funds. The defendant, Rebstock, also a former director of Funds, had his shares in Funds seized but did not appear. These were so-called non-affiliated directors. The other non-affiliated directors were not subject to this court's jurisdiction.
Neither of the Slaytons' sales companies, Slayton and Company, Inc. ("Slayton Inc.") and Mutual Fund Distributors, Inc., is a party defendant here. Each was at all times owned 51% by Hilton and 49% by Hovey and both were the principal officers and directors of Slayton, Inc.
Before launching into a narration of the actions of the various defendants of which plaintiffs complain, it is pertinent to describe Funds. It was organized in 1946 as a Delaware corporation. It is an openend investment company registered under the Investment Company Act of 1940 (15 U.S.C.A. § 80a-1 et seq.) ("Act"). It operated out of St. Louis, Missouri, around the idea that the new fund would realize capital gains and distribute them and the income quarterly to their shareholders in relatively level amounts. Funds offered several classes of shares which concentrated their investments in different industry groups. Its shares were widely distributed and its assets were valued at close to $80,000,000 when, in 1959, the S. E. C. held public hearings to determine whether a registration filed by Funds was false and misleading. This action followed and is based to a large extent on the disclosures there adduced.
Hilton, the president and dominant figure of both Funds and Associates, had a great deal of experience with mutual funds when he formed Funds. Hovey is involved, but his conduct was largely that of a Hilton follower. While not technically a securities analyst, Hilton was quite conversant with the important aspects of securities management. Throughout the period here involved, the Board of Directors of Funds consisted of nine persons. The non-affiliated directors were nominated by Hilton or his friends.
In 1945, Hovey, who was also experienced in selling mutual fund shares, joined Slayton Inc. After Hilton and Hovey organized Funds, Slayton Inc. became the exclusive sales organization or "underwriter" and investment adviser for Funds. Associates succeeded Slayton Inc. as investment adviser on August 15, 1952, when a "Funds Management Agreement" ("Agreement") was executed by Funds and Associates and was approved by the stockholders of Funds. Like the earlier management agreement between Funds and Slayton Inc., it was for a period of two years, and was also subject to annual renewal by the directors. While it contained a termination provision, it was in fact renewed from year to year. Under the Agreement, which remained in effect throughout the period here pertinent, Associates agreed to furnish Funds, "* * * advisory, research and statistical services as required in accordance with the provisions of the Certificate of Incorporation and the investment policies adopted and declared by its Board of Directors". Associates was to be paid for its services one-half of one per cent per annum on the average of the daily net asset value of Funds.
At the time Funds and Associates executed the Agreement, Associates had one employee, Boll, who was a full-time security analyst. It also had a contract with one Jacob Baker of the Econometric Institute. Both of these men plus Hilton and Hovey received salaries from Associates, although *385 Hovey's contribution was apparently minimal.
It is necessary next to turn from St. Louis to New York to pick up another important actor in this drama. In April 1952, one Stephen Jaquith ("Jaquith") was employed by Model, a New York brokerage partnership, to manage an investment advisory department just being created. At that time Model had several partners and associates but Jaquith was not made a partner. Model specialized in European securities and had a limited contact with so-called American securities. It did, however, advise several substantial American accounts.
Jaquith had a fine academic record and a reputation as a brilliant securities analyst. He had been in business for himself as an investment counselor and had rendered advice, inter alia, to an investment adviser to a mutual fund. Because of a change of management he lost that position. When he joined Model he registered with the New York Stock Exchange as a salesman and representative. He was to be paid a salary and bonus by Model, plus a commission of 40% of each brokerage fee he produced.
In the fall of 1953, Hilton approached Jaquith about rendering certain services to Associates. After some conferences, Hilton and Jaquith reached an understanding. One James Stubbs, a Dayton attorney, who was a director of Funds and who represented the Slayton companies, drew the contract. Associates entered into the contract with Jaquith, in his individual capacity. Hovey came to know of the agreement in 1954.
The contract, dated December 1, 1953, was to have considerable future significance. Under it Associates employed Jaquith "as an Investment Counselor and Manager of the Securities Portfolios" of Funds, for which Associates then acted as investment manager. Under its provisions, Jaquith, "under the general direction and approval of the Company [Associates], [was to] use his best judgment in the selection, purchase, and sale of said securities, under the general policy of the Company [Associates], as it may be determined from time to time". The agreement provided further that "In payment of the services so rendered, Company [Associates] will direct brokerage commission business to Stephen M. Jaquith, or to such person, persons or firms, as he may designate in writing * * *" for a five year period in a total minimum amount of $250,000 at a $50,000 per year minimum. There was also a provision for an additional five year period. It was provided that should conditions not reasonably warrant the payments in the first five year period, they would be in effect added to the second five year commitment.
I find as a fact that Jaquith did not disclose the existence of the December 1, agreement to any of the Model partners. He did tell them that he was about to obtain, as a new customer, a St. Louis mutual fund with a $20 million dollar portfolio. He stated further that he hoped to receive substantial amounts of brokerage business.
Nor did Jaquith advise the Model partners of what I shall euphemistically call a "loan" which, I find, he caused his wife, to make to Hilton about that time, at Hilton's instance. He also failed to advise them that in 1955, at Hilton's "suggestion", he caused his wife to make a $42,500 investment in a company organized by Hilton to purchase a parcel of real estate to be used for the erection of a building to be leased to Funds and the Slayton companies. I further find that the Jaquith contract was not disclosed to the non-affiliated directors of Funds.
At first, Jaquith's function was largely confined to making general recommendations of securities he considered attractive. In February 1954, Hilton asked Jacquith to make some specific recommendations concerning stocks, the amounts thereof, purchase prices and the portfolios for which they should be purchased. The board of *386 Funds expressed its appreciation for Jaquith's services in April 1954.
On June 12, 1954, Mr. Boll terminated his connection with Associates. The contact with the Econometric Institute also was terminated. Thus, Associates had no employees except the Slaytons. Up to that date I am satisfied that Jaquith was not buying or selling for Funds or rendering to Funds any substantial amount of the services for which Associates was being paid by Funds.
After June 12, 1954, there occurred a substantial change in the relationship between Associates and Jaquith. Hilton gave Jaquith specific instructions as to the allocation of Funds' brokerage business among several brokerage houses. Under Hilton's instructions, 30% to Spencer Trask, 30% to Model, 15% to Bacon Stevenson & Co., 10% to Seligman, Lubetkin, and 15% to miscellaneous firms. The business directed to Spencer Trask was, pursuant to Hilton's instructions to Jaquith, credited to Harold W. Smith, who maintained a small office for Spencer Trask in Manchester, N. H. Smith was a brother-in-law of Hovey Slayton. Pursuant to Hilton's request, Jaquith placed orders with the other brokers by phone but apparently the Model partners were not aware of this practice.
At about this same time Jaquith acquired a direct line from his room at Model to its order room. Model began rendering daily telegraph confirmations of purchases and sales of securities on orders placed by Jaquith with Model for Funds. Funds' custodian authorized its New York correspondent to accept delivery and pay Model direct in New York City.
After June 1954, Jaquith and Hilton had innumerable phone conversations with respect to all facets of the investment world, but particularly concerning stock in different businesses and those which might be bought or sold by Funds. The parties are in dispute as to whether, during the period from June 1954 to 1959, Jaquith only recommended purchases and sales or whether he actually bought and sold without prior approval to any substantial degree. Preliminarily, it seems clear that Hilton as the president of Funds obviously had a continuing responsibility with respect to the purchase and sale of stock for it. He will not be permitted to deny that such discussions were in connection with the discharge of his responsibilities as president of Funds. Model also knew he was president of Funds.
The bulk of the investment transactions over these years (1954-1959) arose from selling programs designed to realize capital gains and from reinvesting programs. Jaquith was told by Hilton how much money was needed to meet the required distribution of capital gains in each class of shares. Jaquith then, I find, selected a list of securities for possible sale and, sometimes at least, discussed them with Hilton. The same procedure was followed in connection with reinvestments. However, I find that Jaquith bought and sold for Funds generally without specific prior approval from Hilton as to particular securities. Jaquith testified that he could not recall that he had not discussed such securities at some previous time with Hilton. This may have been so but it does not alter the fact that the buying and selling was done without specific prior approval, and was done pursuant to a grant of such power in fact from Hilton after June 12, 1954, although Associates itself did not have such power under its management Agreement with Funds.
In July 1954, Slayton asked Jaquith whether Model would be interested in hiring Harold W. Smith, Hovey's brother-in-law, as a registered representative. Jaquith understood that Model would get the Funds' business then going to Spencer Trask if satisfactory arrangements could be made. Model employed Smith to get the additional business and not because of any particular concern about Smith's attainments or abilities. When Smith was hired it was also agreed between Jaquith and Model that Jaquith would receive a 10% *387 override on the commissions credited to Smith, provided Smith produced commissions of $50,000 a year. This was justified on the basis that Jaquith was servicing the work which created the Smith commissions.
Also, in the latter half of 1954, Jaquith reviewed with a Model partner his relationship with the firm. Even at this early date the Funds' work had become more than Jaquith could handle. Model agreed to hire and pay for a full-time research assistant, provided Jaquith obtained from Funds gross commissions of at least $100,000 a year. Jaquith's commissions were raised from 40% to 50% of the Funds' business provided it reached $100,000 a year.
In the spring of 1955, Hilton asked Jaquith whether Model would consider hiring attorney Stubbs, heretofore mentioned, as a registered representative. Because of his physical condition Stubbs had gone to Florida to live. It was made clear by Hilton that $50,000 to $60,000 of additional Funds' brokerage business would go to Model if it hired Stubbs. Stubbs was employed by Model on an agreed commission in order that Model could get the additional business. Jaquith also got a 10% override on this business.
As the business grew Model increased its staff assigned to Funds' work until in 1958 it had five other analyists and four secretaries working full time on Funds' portfolio. Some of the expense was shared by Jaquith. Brokerage commissions for the period 1953-1959 were over $2,300,000 of which Model received $1,940,806.72.
Most of the important facts here stated were developed in the S. E. C. investigation of 1959, which was concerned with the issue as to whether the effectiveness of a Funds' registration statement should be suspended[1]. Model was not a party to that proceeding.
Jurisdiction, which is unchallenged, is based on general equitable principles and the Investment Company Act.
Preliminarily, while Hilton, Hovey and Associates (collectively called "Slayton defendants") appeared in this action and denied liability, they did not participate in the trial either personally or through counsel. It would appear that the Slayton defendants are largely if not wholly without assets. However, I must resolve the various issues involving their liability because they are urged by plaintiffs and also because they involve, in part, some of the same issues raised in connection with the claimed liability of Model and the non-affiliated directors.
Parenthetically, Jaquith's legal liability is not being determined because he was not subject to this court's jurisdiction.
Liability of Slayton Defendants for Management Fees
Plaintiffs first claim that the Slayton defendants are liable for $1,218,926 in management fees which they collected from Funds from December 1, 1953 until termination. They contend that the Slaytons breached the fiduciary duty owed Funds in many ways. While the Slayton defendants offered no evidence, Model attempted to show that it did not do Associates' work.
The Jaquith-Associates' contract gave Jaquith the power to purchase and sell securities held in the Funds' portfolio under the general direction and with the approval of Associates. This was an unauthorized grant of power, regardless of its scope, because Associates itself did not have the power to make this agreement under the terms of its own Agreement with Funds. Hilton signed the Agreement in his capacity as president of both entities.
*388 Jaquith's contract purported to pay Jaquith by the use of Funds' brokerage business. Under its Agreement with Funds, Associates did not have the power to so commit Funds' brokerage business. Moreover, the Slayton defendants had no right to use Funds' brokerage business to pay for services for which Associates was already being paid. At least it was a situation which cried out for full prior disclosure to the Funds' stockholders. No such disclosure was made.
Under the Jaquith contract, Associates purported to commit Funds' brokerage business to Jaquith for a period beyond that provided in its Agreement with Funds. This was an unauthorized attempt to exercise a power which Associates itself did not possess.
I find as a fact that after June 12, 1954, Jaquith performed substantially all of the services for which Associates was being paid under its management Agreement with Funds. This was clearly a breach of duty in that Associates and the Slaytons took Funds' money for services they did not render.
By breaching their fiduciary duty and exceeding their authorized powers in the ways just described in connection with the payment of management fees, the Slayton defendants are jointly and severally liable to Funds apart from any responsibility created by a breach of the Investment Company Act of 1940.
What is the measure of recovery against the Slayton defendants on this phase of the case? The Slaytons, through Associates, caused Funds to pay money for services which it might well have received solely for brokerage commissions. At least, that possibility should have been submitted to the stockholders or the non-affiliated directors. Instead, Associates received the payments after June 12, 1954 without, in my view, rendering for Funds the services for which it was being paid. This practice was not only a breach of fiduciary duty but also made the prospectus misleading. The conscious nature of the acts does not call for any amelioration of the remedy. The Slayton defendants will be held jointly and severally liable for all management fees received after June 12, 1954. It, of course, follows that the counterclaim of Associates is denied.
Liability of Slayton Defendants for Brokerage Commissions Received by Model
I come now to the liability of the Slayton defendants in connection with the commission payments received by Model on Funds' business. I shall not dwell too long here because I am satisfied that the Jaquith contract rendered Jaquith an "investment adviser" within the meaning of Clause B of definition (19) of the Act. I so conclude because I believe the parties operated under it in such a way as to justify the interpretation that Jaquith was empowered to determine what securities should be purchased or sold by Funds. Moreover, after June 14, 1954, the Jaquith staff regularly furnished advice to Associates, and indeed, to Funds, with respect to the desirability of investing in securities. The factual basis for this conclusion is found in this opinion.
Having failed to obtain proper approval of the Jaquith contract, it was void. The Slayton defendants thus lost their rights thereunder. What should Funds recover? Plaintiffs say it is the full amount of the commissions paid by Funds to Model. It seems to the court that when a flagrant breach of the Act is found, a drastic remedy is in order. Taking the word "void" as used in the Act to have some added weight, I conclude that the Slayton defendants are liable for the full commissions paid Model after the execution of the Jaquith contract in December 1953. However, it does not seem equitable to require the Slayton defendants to repay both the management fees and the brokerage fees. I decide therefore that the corporate plaintiff must *389 elect one or the other as the basis of liability.
Liability of Model for Brokerage Commissions Paid by Funds
I turn now to the charge that Model must also be held jointly and severally liable with the Slayton defendants for the brokerage commissions received from Funds. Plaintiffs charge that Model acted as an "investment adviser" under the Act without procuring the requisite approval. The result is that their agreement was void and their liability complete.
The Act defines an investment adviser as follows (15 U.S.C.A. § 80a-2(a) (19):
"(19) `Investment adviser' of an investment company means (A) any person (other than a bona fide officer, director, trustee, member of an advisory board, or employee of such company, as such) who pursuant to contract with such company regularly furnishes advice to such company with respect to the desirability of investing in, purchasing or selling securities or other property, or is empowered to determine what securities or other property shall be purchased or sold by such company, and (B) any other person who pursuant to contract with a person described in Clause (A) of this paragraph regularly performs substantially all of the duties undertaken by such person described in said clause (A); but does not include (i) a person whose advice is furnished solely through uniform publications distributed to subscribers thereto, (ii) a person who furnishes only statistical and other factual information, advice regarding economic factors and trends, or advice as to occasional transactions in specific securities, but without generally furnishing advice or making recommendations regarding the purchase or sale of securities, (iii) * * *".
I agree that the Model partners did not have actual knowledge of the Jaquith contract and I also agree that as time went by the Jaquith contract became unimportant to the thinking of the parties thereto because the growth of the business far outstripped the situation visualized in the Agreement. But this does not dispose of the matter for reasons I shall now discuss.
Model argues that it was not an "investment adviser" because it had no contract with either Funds or Associates, as the Act requires. Model concedes that such a contract need not be in writing but argues that there must be a contract. Was there a contract between Funds and Model?
I am satisfied from the evidence that after June 12, 1954, a contract implied in fact existed between Model and Funds by which Model, in return for commissions on brokerage business, regularly furnished advice to Funds with respect to the desirability of investing in, purchasing or selling securities. Model says either Model or Funds was free to terminate their relationship at will and thus there could be no contract. The arrangement does not preclude the finding of a contract of the type mentioned based on a well established course of conduct. Compare Trincia v. Testardi, 30 Del.Ch. 182, 57 A.2d 638; 1 Williston on Contracts (3rd ed., Jaeger), § 3. Certainly, the provisions of the Act requiring approval of the investment adviser's contract cannot be frustrated by the mere absence of a formal written contract if the evidence shows a contract implied in fact between the pertinent parties. To adopt Model's approach would be to permit the parties to determine "by form" whether or not they desired to be covered by this phase of the Act. To state this possibility is to reject it in view of the purposes of the Act.
My conclusion that a contract was made by the parties is based on the following findings of fact: Model was told initially that Funds was Jaquith's new customer; Hilton was, to Model's knowledge, the chief executive officer of Funds; after June of 1954, Model knew that Associates was paid *390 a large fee as investment adviser and also knew that its own substantial Managed Funds' department was providing most of such advice to Funds; a Model partner checked the order room and was aware of the volume of business; Funds' chief executive officer had caused substantial brokerage business to be diverted to Model in return for the "nominal" employment of persons in whom he had a personal interest, all to Model's knowledge; Model had paid Jaquith an "override" on such business because Jaquith was "processing" such accounts, Model made such arrangements directly with Hilton. Jaquith acted only as an intermediary.
The foregoing facts, in the setting, compel the conclusion that Model had a "contract" with Funds within the statutory use of that term. In reaching this conclusion, I do not rely on the facts adduced at the S. E. C. hearings, to which Model was not a party. The contract which I find existed in fact between Funds and Model was not approved as required by the Act under § 80a-15(c). In consequence, it was unlawful under § 80a-15(a) and was void under § 80a-46(b) thereof. It also violated § 80a-15(a) because it was not in writing. Finally, it was contrary to Section 3(D) of Funds' Certificate of Incorporation, requiring that such contracts be in writing and approved by the stockholders. My conclusion makes it unnecessary to consider whether Model was an "investment adviser" because of the Jaquith contract.
Plaintiffs claim that the only way to implement such a decision under the Act is to require Model to repay Funds all the commissions received on the various purchases and sales. Model argues that plaintiffs can show no damage.
I am satisfied that, by analogy, Goldstein v. Groesbeck, 2 Cir., 142 F.2d 422, 154 A.L.R. 1285, calls for a recovery from Model. I say this because any other approach would frustrate the implementation of the policy behind the Investment Company Act of 1940, insofar as it is made clear therein that the public interest and the interest of the investor are adversely affected when investment companies are operated in the interest of brokers, etc. Model, in my view does not successfully distinguish the Goldstein case. Nor does Section 17(e) of the Act preclude recovery. It merely limits, inter alia, commissions to the usual amounts. It does not automatically permit a broker to keep the "usual" commissions if he has violated other portions of the Act.
Model argues that the Act does not forbid fair compensation to an investment adviser who violates the Act, citing In the Matter of Investors Diversified Services, Inc. (September 22, 1949), C.C.H.Fed.Sec. Rep. § 76,022. That decision by the Commission constituted nothing more than the removal of a statutory bar to the completion of a settlement involving such an established claim. It was not a decision as to the extent of relief in an adjudicated case. Indeed, the opinion says that it was adjusted on a "cost" basis. It might mean that it was the broker's actual costs and not the amount of the usual brokerage fees.
Model says that there is no proximate cause between its violation of the Act and plaintiffs' claimed damage to Funds, citing Downing v. Howard, 3 Cir., 162 F.2d 654. That case involved an attempt to hold the Company liable for decreases in the value of its assets during the period when it failed to register as required by the Public Utility Holding Company Act, 15 U.S.C.A. § 79a et seq. The court could find no connection between the two situations. I agree. But here Model profited from its illegal actions. One can only speculate as to what the stockholders might have decided had the investment advisory arrangement been submitted for approval, particularly in view of the contemporaneous payments being made to Associates for the same service. Restatement of Torts, § 286, cited by Model, under the facts as I find them, supports rather than negates the granting of a recovery here.
*391 The parties have cited numerous authorities in various fields of law dealing with the measure of damages but I do not find anything precisely in point. The case of Goldstein v. Groesbeck, above, came up to the issue but did not resolve it under a similar provision in the Public Utility Holding Company Act of 1935. The issue was there formulated in terms of whether the damages were to be the return of the full consideration paid or the difference between the consideration paid and the value of the services received. Since Model only charged such brokerage commissions as would have been charged by any other broker, it seems obvious that there can be no recovery if the court is to adopt the view that the damages are the difference between the consideration paid and the value of the services received.
In my view the traditional "damage" approach is not permissible here in implementing the policy incorporated in the Act. I conclude that an offending party of the type here involved may not profit from this type of violation of the Act. The issue then, as I view it, is whether Model should be required to return all of the commissions received on Funds' business after June 12, 1954, or only the difference between the commissions received and the proper costs of operation. Absent any authoritative ruling under the Act or any comparable act, as an equity judge, I am inclined to adopt a measure of recovery here which will deprive the partnership of any benefits but will allow a "credit" for its proper expenses.
I conclude that Model must pay Funds the difference between its expenses (properly allocated) and the commissions received by it after June 12, 1954. I next consider the proper expense items to be considered in arriving at Model's ultimate liability.
The partners' remuneration should be eliminated from expenses because it is in effect a "profit" item. In determining its expenses, should Model be allowed credit for any of the payments made to Jaquith, Smith and Stubbs? I believe the answer is found by determining how far the court should go in implementing the salutary purposes of the Investment Company Act.
As to Jaquith, it must be remembered that Model did not know of his agreement with Associates. In addition to his 50% commission for Funds' business, Jaquith was paid a so-called override on the Smith and Stubbs accounts on the theory that he was servicing them. Stripped of its euphemism, this arrangement was nothing more nor less than a payoff to Jaquith because he brought the additional business to Model. Under the circumstances, I think it is not proper to permit Model to deduct these override payments in computing its net profit. Otherwise, I am satisfied that the Jaquith payments should be deducted.
As to the payment to Smith and Stubbs, I find that, to Model's knowledge, these allowances were not for true brokerage service rendered. Rather, the commissions were paid with the full realization that Smith and Stubbs were in reality not expected to perform any of the services for which the commissions were being paid. Thus, brokerage business of Funds was used, with Model's cooperation and knowledge, for Hilton's purely personal purposes. Considering the purposes of the Investment Company Act, I think it inappropriate to permit Model to deduct the Smith and Stubbs payments in determining its net profit for the purpose of ascertaining the proper recovery here. Unless, plaintiff promptly raises some issue concerning it, I shall accept the other expense items set forth in the pertinent exhibit filed by Model.
Next, a word should be said concerning Model's alleged liability for commissions during the period between December 1, 1953, when the Jaquith-Associates' contract was signed, and June 12, 1954, when Model, in my view, became an "investment adviser" under the Act. During this period neither Jaquith nor Model bought or sold *392 for or rendered substantial investment advice to Funds or Associates. Thus, the violation of the Act during that period consisted of the execution of the Jaquith contract without director or stockholder approval. However, Model had no knowledge of the contract and did not gain an abnormal benefit therefrom. I do not believe the facts render Model liable under the principal-agent theory. Nor can Model be held liable under the doctrine of ratification. I say this because it had no knowledge of the contract. Nor did the facts fairly put it on notice as to its existence. Thus, Model cannot be held to any liability during the period under discussion.
Liability of Model for Management Fees
I next consider the plaintiffs' claim that Model is jointly and severally liable with the Slayton defendants for the sums paid by Funds to Associates for management fees. In resolving this issue I make the following findings of fact:
1. Model knew of the relationship between Funds and Associates and the connection of the Slaytons thereto.
2. Model knew that Jaquith's department in Model was serving only Funds.
3. Model knew that Associates was receiving substantial compensation for rendering management services to Funds.
4. Model knew that after June 1954, its department was doing most of the work, for which Associates was being paid.
Do the foregoing facts, when considered in conjunction with the nature and size of Model's organization, render Model liable for payments made by Funds to Associates after June 1954?
In answering the question posed, I assume that Model's liability is governed by New York law[2] I say this because Model's connection with the transaction stemmed almost entirely from its activities within New York State. Under that law a person who knowingly participates with a fiduciary in a breach of trust is equally liable for the damages caused thereby. Wechsler v. Bowman, 285 N.Y. 284, 34 N.E.2d 322, 134 A.L.R. 1337. I am satisfied that Model, after June 12, 1954, must be held to have known that it was doing the work for which Associates was being compensated. I further find that it remained silent and continued to participate with Associates and its dominant personality, Hilton Slayton, because any other course would have jeopardized the lucrative account. Model argues that it had no duty to take any affirmative action in this situation. Assuming that it had no affirmative duty, it does not necessarily follow that it did not have a responsibility to refrain from conduct which made it a conscious and cooperative party to a breach of fiduciary duty. To this should be added my finding that Model was an investment adviser to Funds after June 1954. These actions by Model rendered it less likely that the stockholder and non-affiliated directors would become aware of this continuing breach of duty by the Slaytons.
What is Model's liability under this head of the case? I have already determined that Model should repay to Funds all profits made on the Funds' brokerage business received after June 12, 1954. This, I believe, is compelled by the policy basis of the Act. In considering Model's liability in connection with Funds' payments to Associates, I believe that Model's liability should be governed solely by general principles of equity. Those principles do not, under the present circumstances, require that Model be held liable for the payments made by Funds to Associates except to the extent, if any, that such payments after June 12, 1954, exceed the amount which under my ruling, Model will be required to repay Funds from commissions received. My approach will, in effect, result in Funds having received back all payments improperly *393 made to Associates and having obtained investment advice and brokerage service for the standard brokerage charges, or less. This would seem to do equity under the facts.
Liability of Slayton Defendants and Model for Excessive Trading and Other Violations of Stated Investment Policy
Plaintiffs next claim that Funds suffered losses due to certain specific sales and repurchases of securities in its portfolio. They also claim that unless the court determines that Funds is entitled to a recovery of all commissions, it is entitled to recover the commissions to the extent the brokerage transactions were excessive. Plaintiffs claim that the Slayton defendants and Model are jointly and severally liable to Funds because (1) the Slaytons and Model participated in the mismanagement of the portfolio for their own benefit; (2) they violated the Act by deviating from Funds stated policy; and (3) damages were the foreseeable consequences of the wrongful acts heretofore found in this opinion.
Model says that there was no "churning" of Funds' portfolio as that term is commonly defined, and that in any event, the turnover was the inevitable consequence of Funds' investment policy which was not illegal. Model says that churning means the inducement of transactions which are excessive in size or frequency in view of the financial resources and character of the customers' account. Taking this definition to be accurate, the court is nevertheless confronted with the clearly established fact that the turnover in Funds' portfolio, at least after December 1956, violated Funds' own investment policy as set forth in its prospectus. The average turnover of various funds generally for the years 1957-1959 was about 25%. Funds' turnover was 44% for 1957, 97% for 1958, and 47.4% for 1959, (adjusted). Model says Funds' turnover must be compared with funds having a similar capital gains distribution policy before the comparison can be fair. I do not agree. I say this because at least after 1956 Funds' stated investment policy was "capital growth" and "normal turnover". The "normal turnover", in its context, fairly implied a comparison with mutual funds generally and not with some isolated Fund also having a high turnover.
The excessive turnover was contrary to Funds' stated investment policy and was a violation of the Act. It also violated general equitable principles because it was contrary to the representations appearing in its prospectus.
Model says the high turnover was an inevitable consequence of Funds' investment policy. Model confuses two factors. The high turnover was not an inevitable consequence of the stated investment policy. It was an inevitable consequence of the actual investment operations of Funds at least after 1956. So the answer is that the investment policy was legal but the operation thereunder was not. I might add that the non-affiliated directors contend that the turnover was the inevitable consequence of Funds' capital gains distribution policy. This was true only because of the manner in which it was implemented. There was nothing in that policy, as stated, which required turnover at a rate which frustrated the overriding policy of "capital growth".
I first consider Model's liability. Should it be required to repay any costs involved in the excessive trading. It is necessary to decide this because Model was only held liable for its profits from the brokerage fees under my earlier ruling herein.
In resolving this issue I make the following findings of fact:
1. Model was an investment adviser to Funds during the period here pertinent.
2. Model was aware that in December 1956 Funds had restated its investment policy to emphasize "capital growth" and that the result of such "restatement of policy could result in but normal turnover in the securities held * * *".
*394 3. Model was aware of the volume of transactions and is chargeable with knowledge that the excessive trading was contrary to the restated policy.
4. Model was receiving commissions on all such transactions.
The foregoing facts, when considered in conjunction with the magnitude of the Managed Funds' department of Model and its awareness of the consequences of the prior policy, compel me to conclude that Model was a knowing and conscious party to the violation of the Funds' policy. Model was not in the position of the ordinary broker executing a customer's order. Rather, it was providing the principal advice concerning the purchase and sale of securities for Funds and was executing such orders. Although the facts are admittedly not the same, the language of the S. E. C. in E. H. Rollins & Sons, Inc., 18 S.E.C. 347, 380, is pertinent:
"Of course a dealer cannot be held guilty of overtrading in an account where transactions are initiated by the customer. In that case the profit drain on the account is the responsibility of the customer and not the dealer. On the other hand, in order to determine a dealer's culpability for overtrading it is not necessary that we find him to have a discretionary power over the account in a formal sense. The heart of the inquiry is not nomenclature or form but fact. Does the dealer occupy such a status with respect to the customer that he may be held responsible for excessive trading in such customer's account? Or, more specifically, did the respondent Rawls or Rollins, or both, occupy such a status with respect to the funds in this case, and make use of it to induce excessive trading in any of their accounts?"
I am satisfied that Model exercised such a position with respect to Funds' brokerage business that it must be held to have been a party to the excessive trading. An additional reason for the same conclusion is found in its "investment adviser" status.
The issue as to the measure of Model's liability in connection with the excessive trading is not easy. It has already been compelled to give up its profit. Should the court make Model repay the balance of the commissions received (representing its costs) on business deemed to be in excess of the industry average? To do so would require this court to assume that the excessive trading automatically damaged Funds. I do not believe that such a result necessarily follows. I therefore believe that plaintiffs' recovery must be limited to losses and costs incurred by Funds which can be specifically identified.
Plaintiffs have introduced into evidence a chart showing sales and purchases of the same securities within a certain short period of time. Many of those sales were clearly, if not admittedly, to obtain capital gains for distribution purposes. I am satisfied that some of these losses were the direct consequence of the violation of Funds' "capital growth" investment policy. It does not necessarily follow that a sale and a repurchase is conclusive proof of a violation of Funds' investment policy. However, an examination of the transactions reveals that many could not have been based on legitimate investment judgment decisions. I shall not detail the several cases involving the sale and repurchase of securities at a loss which took place within a short period of time. The only justification for them is found in the need for realized capital gains for dividend purposes. The transactions were contrary to Funds' overriding investment policy.
It seems to the court that an arbitrary period must be selected beyond which it will be assumed that the repurchases were not solely the result of a violation of Funds' policy. Giving Model the benefit of the doubt, I will limit the sale-reacquisition prima facie liability period to 30 days and also limit it to the years 1957, 1958 and the pertinent part of 1959. The 30 day period *395 is arbitrary and is selected as a period which, in time, probably excludes decisions based on legitimate investment considerations. The years used are those subsequent to the restatement of Funds' policy in December 1956. Also, I accept Model's evidence giving a "new information" explanation for certain of the re-acquisitions (Lorillard, Bristol-Myers). I cannot accept the explanation that A. T. & T. was treated as cash by Funds and should not be considered as an investment.
Nor can Model, under the facts of this case, justify its actions here attacked on the basis that Hilton was aware of them or that they represented a small percentage of the total transactions. These were concrete losses incurred because of a violation of Funds' investment policy at a time when Model was aware thereof and an active party thereto.
I conclude that as to the condemned transactions, Model must repay the costs thereof and the losses incurred. I emphasize that the costs should not include the profit made by Model which has already been covered at an earlier stage of this opinion.
There is no exhibit which shows the sales and repurchases in such a way that the damages can now be computed. Such a chart must be prepared and should embrace those losses resulting from repurchases which can properly be connected with a prior sale. To the extent the parties cannot agree, the court will resolve the matter.
Since I have already held that the Slayton defendants must, if plaintiff elects, repay the entire brokerage commissions covered by the period in question, the only issue is whether they should also be liable for any other costs and the losses incurred in connection with the sales for which I have just held Model responsible. I conclude that the Slayton defendants are also jointly and severally liable for such losses. They are also liable for any costs beyond the commissions paid on such transactions. My conclusion is based upon a finding that the Slaytons were actually aware that these transactions violated their stated investment policy and are charged with knowledge that they were contrary to the Act.
Liability of Non-Affiliated Directors
I come now to the plaintiffs' claim that the so-called non-affiliated directors who are here parties (one by general appearance and one by seizure of property) are jointly and severally liable with the Slayton defendants and Model for the following items:
1. The unearned advisory fees paid to Associates.
2. The losses resulting from the sale and repurchase of the same securities as determined herein.
3. The commissions paid due to excessive turnover generally.
Preliminarily, it can be said that since I have ruled that there can be no liability based on the mere showing of turnover in excess of the average in the field, the non-affiliated directors are not liable under Item 3.
The non-affiliated directors had the same responsibility as that of the ordinary directors of a Delaware corporation. Their non-affiliated status is a creation of the Investment Company Act, but it does not lessen their obligations.
These non-affiliated directors were concerned with the board for varying periods. Dr. Rice had been a director since 1946 and was a substantial investor in Funds. These men are prime examples of what can happen when a man undertakes a substantial responsibility with public overtones without any appreciation of his obligation thereunder. Based upon my view of the evidence I make certain findings of fact: these non-affiliated directors gave almost automatic approval to the management Agreement; they did not examine the registration statements carefully; they did not discuss securities at their meetings or discuss any of the other facts which would have been pertinent to a reasonable discharge of their duties; most of the time at the directors' meeting was spent in determining *396 dividends on the basis of work sheets provided by the Slaytons; the directors did not know who selected securities for purchase or sale; they did not inform themselves about the rate of turnover and how the brokerage business was being distributed.
Indeed, on the record made before me, I can adopt the following statement from the S. E. C. opinion as my own; noting that the directors here involved testified at the S. E. C. hearing:
"The record shows that the board of directors gave scant attention to the management of the registrant; made no efforts to be informed concerning registrant's policies and whether such policies were being followed; made no decisions concerning purchases and sales of portfolio securities; and generally permitted the registrant to be managed by the Slaytons without consultation with or approval by the board as a whole.
"On the basis of the record it is evident that the directors failed to discharge their duties and responsibilities as directors, and failed to perform the functions which the prospectus represented they were performing. The prospectus represented that the operations of the registrant are under the supervision and direction of its board of directors, and failed to point out that the Slaytons were assuming the functions of the board of directors in directing the operations of registrant. * * *"
What is the extent of the liability of these grossly negligent directors? Counsel for one of them says that his client's conduct did not cause damage to Funds. He says the investment advisory fees paid Associates were computed at the rate prevalent in the industry. He argues that Funds did get the advice and concludes by contending that there is no evidence that such advice could have been obtained for less from some other source.
I think the answer is that even an average attention to duty by the directors would have revealed the fact that the Slaytons were being paid for services being rendered by Model. I conclude that because of this negligence these directors must be held jointly and severally liable with Slayton Associates and Model for the payments made to Associates after June 12, 1954. This follows because Funds was paying Associates without receiving from it the requisite consideration. It may well have been that the management fee arrangement could have been adjusted or eliminated in the light of the function performed by Model solely in return for Funds' brokerage business. Hawkins v. Merrill, etc., D.C., 85 F.Supp. 104.
Finally, I come to plaintiffs' claim that the directors are jointly and severally liable for the losses resulting from the sale and repurchase of the same securities as heretofore discussed.
As I have determined in connection with Model's liability, the record demonstrates that the Fund was damaged by losses and costs incurred in connection with the sale and repurchase of stocks in violation of the investment policy of Funds. I will not repeat the basis upon which I reached that conclusion. The sole issue here is whether these directors are jointly and severally liable for the damages which are ultimately determined under this aspect of the case.
I am satisfied that these directors are liable because I think it is clear that had they discharged their responsibilities as to general supervision they would have discovered these violations of Funds' investment policy. It is evident that the negligence of these directors can be considered a proximate cause of this loss to Funds. I therefore conclude that these directors are, to the extent indicated, jointly and severally liable with the Slayton defendants and Model. The amount of their liability under this item will be determined in conjunction with the ascertainment of Model's liability under this aspect of the case.
An order must await the determination of the matters left open herein.
NOTES
[1] The New York Stock Exchange also took certain punitive action against certain members of the Model firm based on the so-called "nominal" employment of Smith and Stubbs.
[2] I do not consider whether Model's conduct also placed it in violation of the Act. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1137437/ | 647 So.2d 1196 (1994)
Bruce T. MASSEY, dba Massey Petroleum, Inc., Plaintiff-Appellee,
v.
DECCA DRILLING COMPANY, INC., et al., Defendants-Appellants.
No. 25,973-CA.
Court of Appeal of Louisiana, Second Circuit.
December 7, 1994.
Rehearing Denied January 19, 1995.
*1198 Mayer, Smith & Roberts by Walter O. Hunter, Jr., Shreveport, Deutsch, Kerrigan & Stiles by Howard L. Murphy, Allen F. Campbell and Victor J. Franckiewicz, New Orleans, for appellant.
Weems, Wright, Schimpf, Hayter & Carmouche by Carey T. Schimpf, Mark W. Odom and Kenneth P. Haines, Robert A. Booth, Jr., Johnson & Thornton by James J. Thornton, Shreveport, for appellee.
Before MARVIN, LINDSAY and HIGHTOWER, JJ.
LINDSAY, Judge.
A jury awarded the plaintiff, Massey Petroleum, Inc., $19 million for breach of a drilling contract and tortious damage to an oil well in southwestern Arkansas.[1] For the reasons assigned below, we affirm in part, reverse in part, and amend in part, the judgment of the trial court on the merits. Additionally, we affirm the trial court judgment dismissing a petition of intervention filed by Massey's investors.
FACTS
The Arkana field is an oil and gas field which lies on the Arkansas/Louisiana state boundary in Lafayette County, Arkansas, and Bossier Parish, Louisiana. In 1982, Lake Ronel Oil Company owned certain leases on the Arkansas side of the border which it "farmed out" to Crystal Oil Company.[2] Crystal, in turn, entered into a "farmout" agreement with Lyle Dews, an oil broker, on May 4, 1982.
The terms of each of these agreements established the time period during which a *1199 test well could be drilled on the property, as well as successive wells which could be drilled if the initial time restrictions were met. (At various points, the agreements were amended to provide time extensions for the drilling of the initial well.) Additionally, the agreements provided the depth to which the well was to be drilled. Both the Lake Ronel and the Crystal farmout agreements required that the test well be drilled at a depth sufficient to test the Cotton Valley formation.[3]
The Crystal/Dews farmout agreement required Dews to drill a test well at his own expense by May 15, 1982; this was later extended to July 15, 1982. If production was obtained, Crystal was required to assign Dews an interest in the leasehold estate; Crystal reserved an overriding royalty interest. If the first well was drilled, Dews had the option to drill additional wells on the acreage.
On June 10, 1982, Dews entered into an agreement with Bruce Massey, d/b/a Massey Petroleum, Inc. In this agreement, Dews agreed to assign to Massey the leasehold estate he acquired under his agreement with Crystal in exchange for $50,000 and an overriding royalty interest. However, Massey's testimony at trial demonstrated that Dews never cashed the checks tendered to him or executed the assignment in Massey's favor.
Massey secured several investors to help pay drilling costs. One of these investors was a company called Lexco, the principal shareholder of which was James Latham, who was also the principal shareholder of Decca Drilling Company. At Latham's request, Massey hired Decca to drill a well in the southern half of the southeast quarter of Tract 10 of the Arkana Field. The well was to be named E.B. Taylor No. 1.
Decca moved its rig on site on July 17, 1982, and drilling commenced thereafter. However, Massey felt that the drilling proceeded at an extremely slow pace. Money disputes arose between Massey and Decca which further retarded the progression of the drilling. On August 27, 1982, Massey and his investors decided to stop drilling at a depth of 9,050 feet instead of proceeding to the initially contemplated depth of 9,500 feet. The depth of 9,050 feet was reached on September 1, 1982. On September 4, 1982, Decca began "rigging down" or dismantling its oil rig.
On September 9, 1982, it was discovered that foreign objects (bolts, tubing and other metal pieces) had been thrown down the well. Investigation revealed that while "rigging down" several disgruntled Decca employees had intentionally dropped these objects down the well. (During the subsequent criminal prosecutions in Arkansas, at least two of the employees pled nolo contendere to criminal charges as a result of the damage.) About 10 feet of debris was removed from the well with a magnet; the remaining 20 feet of junk was pushed down to the bottom of the well. It took four days to remedy the obstruction at a cost of more than $44,000.
The well went into production on November 13, 1982. Shortly thereafter, Decca and others began to file liens against the well. Only 9,514 barrels of oil were produced from the well before it was capped in 1988. The evidence at trial revealed that there has been no additional drilling on the tracts in question since 1982.
Litigation in Arkansas concerning the liens filed against the well was resolved in Dews v. Halliburton Industries, Inc., 288 Ark. 532, 708 S.W.2d 67 (1986). The Supreme Court of Arkansas held Dews responsible for drilling costs because he allowed Massey to incur debt in the hope that Massey would finish the well, even though he knew Massey had breached their agreement by never satisfactorily paying the consideration of $50,000 owed to Dews. The court further found that, due to Massey's failure to pay the $50,000 in a satisfactory manner, Dews never assigned his right to the leasehold estate under the Crystal/Dews agreement to Massey.
The present suit was brought by Massey against Decca for breach of contract and damages resulting from the debris thrown *1200 down the well. He sought to recover the expenses for removal of the obstruction. He also claimed damages for Decca taking twice as long as normal to drill to 9,050 feet and for allegedly denying him the ability to drill further in that well as a result of the debris. He further contended that Decca's actions caused him to lose his option under the farmout agreement to drill successive wells.
Also named as defendants were Decca's insurers, Wausau Insurance Companies and Twin City Fire Insurance Company. (Two other insurers who allegedly covered Decca were also sued but were dismissed before trial.) Decca itself was eventually dissolved in bankruptcy proceedings.
In a supplemental and amended petition, Massey also sought damages for personal injuries he allegedly suffered as a result of the drilling problems, including alcoholism and injuries sustained in a car accident. However, these claims were dismissed pursuant to the defendants' exception of prescription and motion for summary judgment. This court affirmed in an unpublished opinion in No. 24,919 on August 18, 1993. 622 So.2d 869.
Twin City filed a series of motions for summary judgment concerning insurance coverage issues. It claimed that it did not provide coverage to Decca due to the following: (1) a policy exclusion for injury to a well in its oil industry limitation endorsement; (2) a policy exclusion for injury to any real property used by or in the care, custody and control of the insured; and (3) a policy definition of "property damage" as only physical injury to tangible property, not to intangibles like mineral rights. Twin City also sought dismissal of all claims for "consequential damages" which were barred under the drilling contract between Massey and Decca.[4] All of these motions for summary judgment were denied.
An eight-day jury trial was held in April 1993. At the conclusion of the plaintiff's evidence, Twin City and Wausau moved for directed verdicts on eight grounds. The motion was granted as to their claim that the drilling contract (specifically ¶ 14.12) barred recovery of consequential damages in contract; however, the court ruled that such consequential damages might be recoverable under a tort theory. Otherwise, the motion was denied.
On April 28, 1993, the jury found the following: Decca's employees were negligent in damaging the well; Decca was responsible for their tortious conduct; Decca breached its contract with Massey; and the breach caused damages of $19 million ($2.5 million for "physical injury to or destruction of tangible property, including its loss of use," and $16.5 million for "loss of use of tangible property not physically injured or destroyed.") A judgment was signed on May 17, 1993.
Wausau and Twin City filed motions for JNOV, new trial and remittitur. They asserted that the jury awards consisted overwhelmingly of consequential damages barred by the drilling contract. They again asserted that the loss of drilling or mineral rights was not "tangible property" and was thus excluded by their policies. The motions were denied.
Additionally, several of Massey's investors (hereinafter referred to as "the intervenors") filed a petition for intervention on June 25, 1993, more than a month after the signing of the judgment. They asserted that Massey had never informed them of the damage to the well or his lawsuit against Decca. In fact, they contended that they first learned of these matters through a newspaper article reporting the $19 million jury award.
In response to the intervention, the plaintiff filed exceptions of lack of procedural capacity, no right of action, and no cause of action. The trial court denied the exception of lack of procedural capacity; however; the trial court subsequently dismissed the intervention on the peremptory exceptions. Twin City also filed an exception of prescription *1201 against the intervenors' claims, which was denied.
In August of 1993, Twin City and Wausau filed a second motion for new trial on the grounds of newly discovered evidence and an exception of no cause of action after they were contacted by Dews, who they had believed was deceased. They asserted that Dews told them that he had never assigned his rights in the well to Massey because the two checks for $25,000 each, given to him by Massey as consideration, were drawn against non-existent funds. Consequently, the insurers contended that Massey had no right to file suit. This motion for new trial was denied as untimely, and the trial court found that the pending appeal in the case had divested it of jurisdiction to rule on the exception of no cause of action.[5]
Twin City and Wausau filed the present appeal. In Twin City's brief (which Wausau adopted as its own), the following assignments of error are asserted: (1) Decca was not vicariously liable for the criminal acts of Decca's employees in trashing the well; (2) the drilling contract between Massey and Decca, which contained "risk allocation" provisions, barred recovery for direct and consequential damages to the hole; (3) Massey had no right of action to recover for the mineral rights because, by his own admission, he never received an assignment of Dews' interest under the farmout agreement, an issue already resolved in the Arkansas litigation; (4) the trial court improperly inferred coverage under the policies without determining whether the alleged damages legally fit the policy's definition of "property damage"; (5) Twin City's policy barred recovery under its "Oil Industry Limitation Endorsement" and eliminated direct and consequential damages related to and resulting from the insured's improperly performed work; (6) Massey failed to prove that the debris in the well was the legal cause of his loss of mineral rights when the decision not to drill deeper was made before the incident with the debris; (7) the damages awarded by the jury, which were apparently based on the testimony of the plaintiff's expert petroleum engineer, were speculative and grossly excessive; and (8) the trial court erred in refusing to grant a new trial after it erroneously submitted the case to the jury on both the contract and tort theories. Due to our resolution of the case, we find it unnecessary to specifically address the last four assignments of error.
As fully discussed hereafter, we find that Decca is vicariously liable for the intentional acts of its employees. Further, we hold that the provisions of Decca's drilling contract do not absolve it (or its insurers) from liability. However, we sustain the defendants' exception of no right of action as to plaintiff's claim for loss of mineral rights and eliminate those alleged damages from the trial court judgment. We also find that the defendants' policy provisions limit their liability to reimbursement of plaintiff for the damage done to tangible property, which under the facts of this case, is the damage to the well itself, which amounted to approximately $44,000. The other damages assessed by the jury must be set aside.
The intervenors also appealed from the trial court's dismissal of their petition of intervention. We affirm the dismissal.
VICARIOUS LIABILITY OF DECCA DRILLING
Twin City and Wausau contend that Decca should not be held vicariously liable for the intentional acts of its employees in trashing or junking the well. To the contrary, the plaintiff contends that the jury's findings of fact on this issue are not manifestly erroneous and should be affirmed.
Employers are answerable for the damage caused by their employees in the exercise of the functions in which they are employed. LSA-C.C. Art. 2320. Dismuke v. Quaynor, No. 25482 (La.App. 2 Cir. 4/5/94) 637 So.2d 555, writ denied, 94-1183 (La. 7/1/94) 639 So.2d 1164. An employer may have vicarious tort liability for intentional *1202 acts of employees. LeBrane v. Lewis, 292 So.2d 216 (La.1974).
In LeBrane, supra, the Supreme Court considered four factors in determining whether an employer may be liable for the intentional torts of its employees: (1) whether the tortious act was primarily employment-rooted; (2) whether the violence was reasonably incidental to the performance of the employee's duties; (3) whether the act occurred on the employer's premises; and (4) whether it occurred during the hours of employment. In Miller v. Keating, 349 So.2d 265 (La.1977), the Supreme Court explained that it had not intended to suggest that, in all cases of an employer's vicarious liability for the intentional torts of his employee, all four of these factors must be met before liability may be found. The pertinent inquiry is whether the employee's tortious conduct was so closely connected in time, place, and causation to his employment duties as to be regarded as a risk of harm fairly attributable to the employer's business, as compared with conduct motivated by purely personal considerations entirely extraneous to the employer's interest. LeBrane, supra. Each question of an employer's response in damages for the intentional torts of his employee must be considered on its own merits. Miller, supra.
The fact that the predominant motive of the employee is to benefit himself or a third person does not prevent the act from being within the scope of employment. Ermert v. Hartford Insurance Company, 559 So.2d 467 (La.1990). The act may be found to be in the service of the employer if not only the manner of acting but the act itself is done largely for the servant's purposes. Ermert, supra.
The findings that support or refute vicarious liability are factual in nature and, as such, regulated by the manifest error rule. The issue for the reviewing court is not whether the trial court was right or wrong, but whether the factfinder's conclusion was reasonable. Dismuke, supra. Where two permissible views of the evidence exist, the factfinder's choice between them cannot be manifestly erroneous or clearly wrong. Rosell v. ESCO, 549 So.2d 840 (La.1989).
At trial, the plaintiff introduced into evidence the depositions of two Decca employees who pled guilty to criminal charges resulting from the junking of the well, David Joe Burnaman and Steven Charles Johnson. Burnaman admitted his participation and testified that he was mad at Decca as a result of being laid off and hired back several times. He understood that the layoffs were due to financial bickering between Decca and Massey. Consequently, during the process of "rigging down" the Decca drilling rig, he and other employees threw pieces of metal and other debris down the well.
Our examination of the record demonstrates that the LeBrane factors are present. The tortious acts were primarily employment-rooted and reasonably incidental to the performance of the employees' duties in "rigging down." The employees were at the well site as part of Decca's execution of its contract with Massey, and the incident occurred during employment hours. The incident was not a "purely personal matter." Therefore, the jury correctly found that Decca was responsible for the acts of its employees.
This assignment of error is without merit.
THE PROVISIONS OF THE DRILLING CONTRACT
The appellants contend that the provisions of the drilling contract between Massey and Decca, specifically ¶ 14.12, bar the recovery of all consequential damages and that the jury award consists almost entirely of consequential damages. They argue that when the trial court ruled on their motion for directed verdict, it properly held that consequential damages in contract were barred. However, according to the appellants, the trial court erred in then finding that an award of consequential damages might be permissible under "some theory of tort."
The drilling contract entered into by Massey (as Operator) and Decca (as Contractor) was a standard International Association of Drilling Contractors (IADC) "Drilling Bid Proposal and Daywork Drilling Contract." It provided, in part, that "Contractor agrees to perform all work to be conducted by him under the terms of this Contract in accordance *1203 with the orders and directions of Operator, with due diligence and care and in a good and workmanlike manner, and agrees to provide competent supervision of the work performed hereunder."
In other pertinent part, the contract provided:
14. RESPONSIBILITY FOR LOSS OR DAMAGE:
* * * * * *
14.5 The Hole: In the event the hole should be lost or damaged, Operator shall be solely responsible for such damage to or loss of the hole, including the casing therein.
* * * * * *
14.12 Consequential Damages: Neither party shall be liable to the other for special, indirect or consequential damages resulting from or arising out of this Contract, including, without limitation, loss of profit or business interruptions, however same may be caused.
14.13 Indemnity Obligation: Except as otherwise expressly limited herein, it is the intent of parties hereto that all indemnity obligations and/or liabilities assumed by such parties under terms of this Contract, including, without limitation, paragraphs 14.1 through 14.12 hereof, be without limit and without regard to the cause or causes thereof (including pre-existing conditions), the unseaworthiness of any vessel or vessels, strict liability, or the negligence of any party or parties, whether such negligence be sole, joint or concurrent, active or passive. [Emphasis added.]
We are only aware of two cases construing contract provisions virtually identical to those contained in the instant contract, Sevarg Co., Inc. v. Energy Drilling Co., 591 So.2d 1278 (La.App. 3d Cir.1991), writ denied, 595 So.2d 662 (La.1992), and Smith v. L.D. Burns Drilling Company, 852 S.W.2d 40 (Tx.App. Waco 1993).
In Sevarg, supra, the operator filed suit against the contractor claiming breach of contract. In its petition, the operator alleged that the contractor had intentionally failed to comply with the mud control program in their contract in order to save money and that this caused damage to the operator. The contractor filed an exception of no cause of action based on the indemnity provisions in their contract. The trial court partially sustained the exception, and the operator appealed. The appellate court overruled the exception in its entirety. It found that the indemnity provisions, which are almost identical to those contained in the present contract, would constitute a violation of LSA-C.C. Art. 2004 because they, in advance, excluded or limited the liability of the contractor for intentional or gross fault that caused damage to the operator.
LSA-C.C. Art. 2004 provides:
Any clause is null that, in advance, excludes or limits the liability of one party for intentional or gross fault that causes damage to the other party.
Any clause is null that, in advance, excludes or limits the liability of one party for causing physical injury to the other party.
Comment (e) of LSA-C.C. Art. 2004 provides: "This Article does not govern `indemnity' clauses, `hold harmless' agreements, or other agreements where parties allocate between themselves, the risk of potential liability towards third persons." [Emphasis added.] In the instant case, we are not dealing with third persons; rather, we are dealing with the relationship between two contracting parties and an act of sabotage by the employees of one party.
Although LSA-C.C. Art. 2004 was enacted by Acts 1984, No. 331, and did not become effective until January 1, 1985, comment (a) specifies that the article did not change the law and cites Freeman v. Department of Highways, 253 La. 105, 217 So.2d 166 (1968), which held that, as a matter of principle, clauses excluding or limiting liability between the parties for intentional fault are invalid.
In the Smith case, supra, the operator and his investors in a gas well filed suit alleging that an employee of the drilling contractor had dropped the production casing down the hole and that his actions constituted negligence, gross negligence, breach of contract, and breach of warranties. The operator and *1204 his investors also claimed that the cost overruns and delays had occurred as a result of the poor condition of the drilling contractor's rig and equipment. The trial court granted the drilling contractor's motion for summary judgment, ruling that the claims were barred by the daywork contract, including a provision releasing the contractor from liability for consequential damages. The appellate court affirmed, holding that, under ¶ 14.5, the operator had assumed liability for all damage to or loss of the hole. The court specifically declined to determine whether the damages sought were consequential or direct, as the operator contended.
Based on Sevarg, supra, we find that the indemnity provisions are null, as being in violation of the principles embodied in LSA-C.C. Art. 2004. Additionally, our examination of the contract leads us to conclude that the parties did not intend to prohibit an award of consequential damages for an intentional tort.
We further find that Smith, supra, a Texas case which apparently did not involve an intentional act of sabotage, is not applicable to the present circumstances.
Therefore, we find no merit to the appellants' assignments of error pertaining to the provisions of the drilling contract.
NO RIGHT OF ACTION BY MASSEY
Twin City and Wausau filed a peremptory exception of no right of action in this court, which this court referred to the merits. They contend that Massey has no right of action to claim any of the lost production from the well, or the right to drill other wells, because of his failure to obtain an assignment of the leases from Dews. In this same vein, they also contend that the Arkansas litigation concluded in the Dews case, supra, fully resolved any question as to Massey's failure to obtain the assignment from Dews. They contend that the foreign ruling is res judicata and entitled to full faith and credit in Louisiana.
Massey responds by pointing out that the appellants never filed an exception of res judicata. Such a peremptory exception cannot be supplied by the court and must be specifically pleaded. LSA-C.C.P. Art. 927. This point is well taken. Therefore, we will not treat this assignment of error as presenting the issue of res judicata or full faith and credit of a foreign judgment.
However, the issue of whether Massey has a right to assert an interest in the mineral rights is properly before us in the form of a peremptory exception of no right of action. Except as otherwise provided by law, an action can be brought only by a person having a real and actual interest which he asserts. LSA-C.C.P. Art. 681. The peremptory exception of no right of action raises the question of whether the plaintiff has any interest in judicially enforcing the right asserted, or, put another way, whether, as a matter of law, the particular plaintiff falls within the general class in whose favor the law grants the cause of action sought to be asserted by the suit. Lambert v. Donald G. Lambert Construction Company, 370 So.2d 1254 (La.1979); Teachers' Retirement System of Louisiana v. Louisiana State Employees' Retirement System, 456 So.2d 594 (La.1984). Moreover, the exception of no right of action, or no interest in the plaintiff to institute the suit, is a peremptory exception which may be pleaded at any stage of the proceedings in the trial court prior to submission of the case for a decision. It may also be pleaded for the first time in the appellate court if pleaded prior to submission of the case for a decision if proof of the ground of the exception appears of record and even may be noticed by either the trial or appellate court on its own motion. LSA-C.C.P. Arts. 927, 928 and 2163. Lambert, supra. Evidence may be received under the exception of no right of action for the purpose of showing that the plaintiff does not possess the right he claims or that the right does not exist. Teachers' Retirement System of Louisiana, supra.
Although the effect of the Arkansas Supreme Court decision in the Dews case is not properly before us, nonetheless, we must look to Arkansas law to determine whether Massey had an interest in the mineral rights because the agreements pertaining to the immovable property at issue here arose in *1205 that state and under its laws. LSA-C.C. Art. 3535.
The Arkansas Statute of Frauds requires that a contract "for the sale of lands ... or any interest in or concerning them" be in writing. Ark.Stat.Ann. § 4-59-101. The Lake Ronel/Crystal farmout agreement and the Crystal/Dews farmout agreement were both followed up with written assignments of their mineral rights after the completion of the well. By his own admission, Massey never received the assignment of Dews' interest in the well, and Dews never cashed the tendered checks. Additionally, Massey never sued Dews to compel specific performance of the terms of their farmout agreement.
Therefore, we find that Massey did not have the requisite interest in the mineral rights to entitle him to seek recovery for their alleged loss. The appellants' exception of no right of action is sustained to the extent that it prohibits Massey from seeking damages for loss of revenues from the well he drilled or from additional wells he might have drilled in the future.
POLICY PROVISIONS
Having found that Decca was vicariously liable for the torts of its employees and that the drilling contract did not prohibit an award of consequential damages for intentional torts, we must now determine whether the insurance policies at issue provided coverage which would obligate the appellants to pay damages under the circumstances of this case. (Although we have already concluded that Massey had no right of action for the alleged loss of mineral rights, nonetheless, we find that this coverage issue merits consideration.)
Definitions
The insurance policies covering Decca provided coverage for "property damage." Both the Twin City and the Wausau insurance policies define property damage as: "(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."
The appellants asserted that the policy definition of property damage and the use of the term "tangible" in the definition included only damage to tangible property, or the cost of cleaning up the debris in the well. They raised this issue repeatedly, in one of their motions for partial summary judgment, their motion for directed verdict, and their motion for JNOV, new trial or remittitur. The trial court denied all of these motions. However, the trial court incorporated the policy language pertaining to physical damage and tangible property in the verdict form.[6]
First, we must determine what constitutes "tangible property." "Tangible property" has been equated with the civilian concept of "corporeal property" by the Louisiana Supreme Court. City of New Orleans v. Baumer Foods, Inc., 532 So.2d 1381 (La.1988). LSA-C.C. Art. 461 defines corporeals as things that "have a body, whether animate or inanimate, and can be felt or touched," while incorporeals are "things that have no body, but are comprehended by the understanding, such as the rights of inheritance, servitudes, obligations, and right of intellectual property." Under LSA-R.S. 31:18, a mineral right is defined as an incorporeal immovable. Therefore, we find that the mineral rights at issue may be properly categorized as intangible, not tangible. Because they are not tangible, their loss is not included within the policy definition of "property damage," and the policies provide no coverage.[7] The jury *1206 was clearly wrong in awarding damages for intangible property.
Inasmuch as the policies provide coverage only for damage to "tangible property," those damages for loss of mineral rights and future profit must be set aside.
Oil Industry Limitation Endorsement
The Oil Industry Limitation Endorsement to the Twin City policy further provides:
B. Except insofar as coverage is available to the assured in the underlying insurances at the limits specified in the schedule, this policy shall not apply to:
1. injury to or destruction of ... (b) any well, hole, formation, strata or area in or through which exploration for or production of any substance is carried on...
This issue was raised in one of Twin City's motions for summary judgment, which was denied. However, it was not raised again. Therefore, we find that this issue was not properly preserved for appeal, and we will not consider it.
AMOUNT OF DAMAGES
The jury awarded damages of $19 million, or $2.5 million for "physical injury to or destruction of tangible property, including its loss of use," and $16.5 million for "loss of use of tangible property not physically injured or destroyed." Inasmuch as we have found that the insurance policies fail to provide coverage for the claim of loss of mineral rights, which does not constitute "tangible property,"and that Massey had no right of action to seek damages for loss of mineral rightswe must reduce the damage award made against the appellants/insurers.
The award for "loss of use of tangible property not physically injured or destroyed" is deleted in its entirety.
The award for "physical injury to or destruction of tangible property, including its loss of use," must be reduced significantly. The record demonstrates that the plaintiff incurred the following expenses in removing the debris from the well:
Mosely Well Service $22,000.00
Tri-State Oil Tool Industries 6,609.28
KAT Wireless 750.00
Hall Engineering 2,325.00
Equipment rental 625.00
Piping 4,500.00
Private investigator 7,500.00
----------
Total $44,309.28
The plaintiff is entitled to an award to compensate it for these damages. The judgment of the trial court will be amended accordingly.
INTERVENORS' APPEAL
The intervenors also appeal from the trial court's dismissal of their petition of intervention.
LSA-C.C.P. Art. 1091 which provides as follows:
A third person having an interest therein may intervene in a pending action to enforce a right related to or connected with the object of the pending action against one or more of the parties thereto by:
(1) Joining with plaintiff in demanding the same or similar relief against the defendant;
(2) Uniting with defendant in resisting the plaintiff's demand; or
(3) Opposing both plaintiff and defendant.
An intervention is an incidental demand in a principal action wherein a third person having an interest may intervene in the pending principal action to enforce a right *1207 related to or connected with the object of the principal action. LSA-C.C.P. Arts. 1031 and 1091. Lamana v. LeBlanc, 515 So.2d 622 (La.App. 1st Cir.1987), reversed on other grounds, 526 So.2d 1107 (La.1988). Furthermore, an intervention may not be filed after judgment has been rendered in the trial court on the merits of the principal action, except as provided in LSA-C.C.P. Arts. 1066 and 1092. See Lamana, supra; Thibeaux v. State Farm Mutual Automobile Insurance Company, 285 So.2d 363 (La.App. 3d Cir.1973), writ refused, 287 So.2d 191 (La.1974); Pratt v. Livingston Parish Police Jury, 278 So.2d 897 (La.App. 1st Cir.1973); Louisiana Power and Light Company v. Charpentier, 165 So.2d 614 (La.App. 1st Cir. 1964).
In dismissing the intervention, the trial court found that the intervention was filed after the entry of judgment and that the plaintiff's claims were therefore not pending in the trial court at the time of the filing of the petition of intervention. Thibeaux, supra; Pratt, supra. We agree and affirm the judgment of the trial court dismissing the petition of intervention.
CONCLUSION
The exception of no right of action is sustained.
The judgment of the trial court on the merits is affirmed in part, reversed in part, and amended in part. We accordingly recast the relevant portion of the judgment as follows:
IT IS ORDERED, ADJUDGED AND DECREED that there be judgment granted in favor of plaintiff, Massey Company, L.L.C., against defendants, Wausau Insurance Companies and Twin City Fire Insurance Company, in solido to the extent of their respective policy limits, in the sum of FORTY-FOUR THOUSAND THREE HUNDRED NINE AND 28/100 DOLLARS ($44,309.28), plus legal interest from date of judicial demand, until paid in full.
The judgment of the trial court on the intervention is affirmed.
Costs are assessed against the plaintiff/appellee.
JUDGMENT ON THE MERITS AFFIRMED IN PART, REVERSED IN PART, AND AMENDED IN PART. JUDGMENT ON THE INTERVENTION AFFIRMED.
APPLICATION FOR REHEARING
Before MARVIN, SEXTON, LINDSAY and HIGHTOWER, JJ., and PRICE, J. Pro Tem.
Rehearing denied.
NOTES
[1] Suit was originally brought in the name of Bruce T. Massey, d/b/a Massey Petroleum, Inc. In the third supplemental and amended petition, the plaintiffs were named as Bruce T. Massey and Massey Petroleum, Inc. However, when ruling on the defendants' motion for directed verdict, the trial court concluded that the proper party plaintiff was the corporate entity. Thus, judgment was rendered in favor of Massey Petroleum, Inc., only. While this appeal was pending, Massey Petroleum, Inc., was merged into the Massey Company, L.L.C., which was substituted as the proper party appellee.
[2] A farmout agreement is a contract to assign oil and lease rights in acreage upon the completion of a drilling obligation and performance of the other provisions contained therein. Robinson v. North American Royalties, Inc., 509 So.2d 679 (La.App. 3d Cir.1987).
A farmout agreement is understood to be an arrangement under which the lessee in an oil and gas lease agrees to assign his lease, retaining an overriding royalty only, to one who successfully causes a well to be drilled to a desired depth upon the leased lands. Spangler v. Comer Lumber & Supply Company, 246 Ark. 764, 439 S.W.2d 792 (1969).
[3] The Arkana field has several mineral yielding formations. The formation nearest the surface is the Cotton Valley formation, followed by the Haynesville formation. The deepest formation is called the Smackover.
[4] Although the drilling contract itself failed to define the term "consequential damages," in the context of this case, we believe that it would refer to all damages arising from the junk being thrown in the well, including the cost of removing the junk and the alleged resulting loss of mineral rights.
[5] Twin City and Wausau filed a separate appeal of the trial court's denial of their second motion for new trial and its overruling of Twin City's exception of prescription to the petition of intervention (No. 26,425-CA). This appeal of unappealable interlocutory judgments was dismissed on Massey's motion.
[6] Questions have been raised as to whether this issue was properly preserved for appeal. We find that counsel for the insurers adequately preserved their objections when given an opportunity to do so immediately after the jury retired, by reiterating their various grounds for a directed verdict.
[7] See Snug Harbor, Ltd. v. Zurich Insurance, 968 F.2d 538 (5th Cir.1992), in which the court reversed a jury verdict against the insurers; it cited Lay v. Aetna Ins., 599 S.W.2d 684 (Tex.Civ. App.Austin 1980, writ ref'd, n.r.e.), a case brought against an insurer for negligent location of an oil well, where the Texas court held that purchase of an assignment of drilling rights was an economic transaction involving the exchange of money for the privilege of drilling and producing oil and did not constitute injury to, destruction of, or loss of use of tangible property. See also Gulf Insurance Co. v. L.A. Effects Group, Inc., 827 F.2d 574 (9th Cir.1987), which involved the same definition of "property damage" as in the present case and found that strictly economic losses like lost profits, loss of goodwill, loss of the anticipated benefit of a bargain, and loss of an investment did not constitute damage or injury to tangible property covered by a comprehensive general liability policy; Lowenstein Dyes & Cosmetics, Inc. v. Aetna Life and Casualty Company, 524 F.Supp. 574 (E.D.N.Y.1981), also involving the same definition of "property damage," in which the court found that business losses were not covered; Selective Insurance Company of Southeast v. J.B. Mouton & Sons, Inc., 954 F.2d 1075 (5th Cir.1992), where the court, dealing with the same definition, found that injury to a partnership interest, transfer of land and construction of a building upon it did not constitute "physical injury to tangible property," and claims for loss of future rent involved intangible property. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1249568/ | 844 P.2d 1113 (1993)
CHI OF ALASKA, INC., Appellant,
v.
EMPLOYERS REINSURANCE CORPORATION, Appellee.
No. S-4323.
Supreme Court of Alaska.
January 15, 1993.
*1114 Brett von Gemmingen, Anchorage, for appellant.
Michael N. White, Nicole R. Faghin, Preston, Thorgrimson, Shidler, Gates & Ellis, Anchorage, for appellee.
Before RABINOWITZ, C.J., and BURKE, MATTHEWS, COMPTON and MOORE, JJ.
OPINION
MATTHEWS, Justice.
A seaman aboard a vessel owned by Oceanic Research Services, Inc. (Oceanic) accidentally sustained serious injuries. Oceanic believed it was insured against the loss by a $500,000 bodily injury insurance policy it purchased through CHI of Alaska, Inc. (CHI). That policy, however, actually had a bodily injury limit of only $100,000. Oceanic sued CHI, asserting contract and negligent tort claims, as well as a claim that CHI had intentionally misrepresented that the policy coverage was $500,000. Oceanic sought compensatory and punitive damages.
CHI tendered the defense of this suit to its liability insurer, Employers Reinsurance Corporation (Employers). Employers agreed to defend CHI, conditional on reserving its rights to disclaim coverage with respect to Oceanic's claim of intentional misconduct. Employers claimed that intentional misconduct would be excluded under the policy if such misconduct was ratified by CHI.
CHI objected, noting that the reservation of rights created a conflict of interest between Employers and CHI, and demanded independent counsel paid for by Employers and selected by CHI. CHI stated that it wanted its personal attorney Brett von Gemmingen to defend it. Employers expressed reservations about von Gemmingen's experience in handling claims of this nature and suggested that CHI provide the names of other attorneys with more experience who might be retained by Employers to defend CHI. This was not acceptable to CHI. Next Employers offered to pay von Gemmingen to defend that portion of the lawsuit pertaining to the intentional misconduct claim while retaining the law firm of Hughes, Thorsness, Gantz, Powell & Brundin to act as co-counsel for CHI with responsibility for the defense of all claims. CHI declined this offer. CHI then brought the present action for declaratory relief, seeking vindication of its position that it is entitled to select independent counsel. In the meanwhile, the Oceanic case has been jointly defended by Hughes Thorsness and von Gemmingen.
CHI and Employers each moved for summary judgment in the present case. CHI contended that there was necessarily a conflict of interest between CHI and Employers respecting the defense of Oceanic's claim because Employers could win either by defeating all claims of liability or by establishing that CHI is liable for intentional misconduct. Given this conflict of interest, CHI contended that Employers should have no role in the selection of defense counsel because any attorney selected by an insurance company "will attempt to help his real client, the insurance company, at the expense of the insured." CHI argued that the retention of von Gemmingen "to defend claims as they are pushed outside the policy coverage does not resolve the conflict." Instead, dual representation, according to CHI, would still permit the attorney *1115 hired by the insurance company to work against the interests of the insured and in addition would cause confusion concerning who is to control various litigation decisions. In response and in support of its motion for summary judgment, Employers argued that potential conflicts were eliminated by allowing CHI to have its personal attorney handle the non-covered claim at Employers' expense.
The superior court granted Employers' motion for summary judgment. The court ruled that Employers' offer to allow CHI to retain counsel of its choice to defend it on the intentional tort claim adequately resolved potential conflicts of interest. In addition, the court stated that if CHI contends at the conclusion of the Oceanic lawsuit "that a conflict existed despite Employers' action in allowing it to retain its own counsel to defend uncovered claims, then it can raise this issue at the coverage trial." Following the order granting Employers' motion for summary judgment, a final judgment was entered which contained no explicit declaration. CHI has appealed from this judgment.
There are three issues on appeal:
1. Did Employers' reservation of rights to disclaim coverage give CHI a right to retain independent counsel?
2. Does the two-counsel scheme proposed by Employers and approved by the superior court satisfy CHI's right to independent counsel?
3. Does CHI have the unilateral right to select independent counsel?
We turn to a discussion of these issues.
1. Did Employers' reservation of rights to disclaim coverage give CHI a right to retain independent counsel?
We answer this question in the affirmative.
Liability insurers have separate duties to defend and to indemnify their insureds.[1] In order to discharge their duty to defend, insurers hire counsel to conduct the defense of their insureds.[2] Often there is no conflict of interest between the interests of the insurers and the interests of the insureds. Both wish to successfully defend and, if that is not possible, minimize damages.
Sometimes, however, the insurer claims that the policy has been breached by the insured. These are so-called policy defenses[3] of which the insured's failure to give notice or to cooperate are typical examples. The insurer may wish to preserve its policy defenses and still provide a defense to the insured. By doing so it may be able to avoid paying the underlying claim either by succeeding in its defense of the insured or, failing that, by successfully asserting its policy defense. The insurer can preserve these options by defending the insured under a reservation of rights to later disclaim coverage if the reservation of rights is acquiesced in by the insured. Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 288 (Alaska 1980).
Similarly, the insurer may claim that although no condition of the policy has been breached by the insured, a particular claim made by the plaintiff does not come within the coverage of the policy. Such defenses are called coverage defenses. The most typical example is the coverage defense in this case where alternative theories of negligent and intentional tort are plead and negligent acts are covered by the policy but intentional acts are not.[4] In such cases the insurer's duty to defend may require it to defend even if the most likely theory of recovery is one for which there is no insurance coverage.[5] The insurer *1116 can preserve its coverage defense and fulfill its duty to defend by defending under a reservation of rights to later disclaim coverage if liability is attributable to the excluded theory.
In cases where an insurer asserts either policy or coverage defenses, and defends its insured under a reservation of rights, there are various conflicts of interest between the insurer and the insured. We identified three of these in Continental. First, if the insurer knows that it can later assert non-coverage, or if it thinks that the loss which it is defending will not be covered under the policy, it may only go through the motions of defending: "it may offer only a token defense... . [I]t may not be motivated to achieve the lowest possible settlement or in other ways treat the interests of the insured as its own." Id. at 289. Second, if there are several theories of recovery, at least one of which is not covered under the policy, the insurer might conduct the defense in such a manner as to make the likelihood of a plaintiff's verdict greater under the uninsured theory. Id. Third, the insurer might gain access to confidential or privileged information in the process of the defense which it might later use to its advantage in litigation concerning coverage. Id. at 291.
Merely because the insurer and the insured have divergent interests when the insurer seeks to defend under a reservation of rights does not necessarily mean that appointed counsel also has conflicting interests. If appointed counsel makes it clear at the outset of his engagement that he is going to be involved only in the defense of the liability claim, not in coverage issues, and that his client is the insured, not the insurer, conflicts should be rare.[6] A number of authorities hold that this is the appropriate role of appointed counsel. For example, the Arizona Supreme Court held that appointed counsel who in the course of representing the insured gains access to information which may give rise to a policy defense is prohibited from communicating that information to the insurance company. Farmers Ins. Co. of Arizona v. Vagnozzi, 138 Ariz. 443, 448, 675 P.2d 703, 708 (1983): "We emphasize that the attorney who represents the insured owes him an undeviating allegiance whether compensated by the insurer or the insured and cannot act as an agent of the insurance company by supplying information detrimental to the insured." Employers agrees with this view, noting that counsel has "an absolute duty of fidelity to the insured over the interests of the insurer."
Other authorities, however, take the view that appointed counsel represents both the insured and the insurer. A former president of the Defense Research Institute has written that appointed counsel has an obligation to disclose to the insurance company information detrimental to the insured. Thomas A. Ford, The Insurance Contract: The Conflicts of Interest it Breeds, Ins. Couns.J. 610, 620 (Oct. 1969):
In order for the attorney to perform his role properly, he must never lose sight of the fact that he is working for two different and distinct parties the insured and the insurer. He must fully disclose to both parties the information he has obtained as a result of his unique relationship with them.
See also Shafer v. Utica Mutual Ins. Co., 248 A.D. 279, 289 N.Y.S. 577, 587 (1936) (appointed attorney acted properly in disclosing to insurer information which enabled insurer to disclaim liability); Alaska Code of Professional Responsibility EC 517 (stating that one typically recurring situation involving potentially different interests is dual representation of insured and insurer).
Where there is a conflict between insurer and insured, appointed counsel may tend to *1117 favor the interests of the insurer primarily because of the prospect of future employment. United States Fidelity & Guar. Co. v. Lewis A. Roser Co., 585 F.2d 932, 938 n. 5 (8th Cir.1978) ("Even the most optimistic view of human nature requires us to realize that an attorney employed by an insurance company will slant his efforts, perhaps unconsciously, in the interest of his real client the one who is paying his fee and from whom he hopes to receive future business the insurance company."); San Diego Navy Fed. Credit Union v. Cumis Ins. Soc'y, Inc., 162 Cal. App.3d 358, 208 Cal. Rptr. 494, 498 (1984) ("`A lawyer who does not look out for the carrier's best interest may soon find himself out of work.'" (quoting the trial court)); Michael A. Berch and Rebecca W. Berch, Will the Real Counsel for the Insured Please Rise?, 19 Ariz.St.L.J. 27, 29-30 (1987) ("[T]he attorney's economic interests weigh heavily in favor of the insurer, which, after all, may retain his services in other cases; yet the rules of professional responsibility tip the scales toward the insured."); Arthur P. Berg, Losing Control of the Defense The Insured's Right to Select His Own Counsel, 26 For the Defense 10, 15 (July 1984) ("Although [some] courts seem to trust the insurer and attorney to act in the best interests of the insured, the more common view is that the longstanding ties that defense counsel has with the insurer will inevitably influence his conduct of the case."); Sampson A. Brown and John L. Romaker, Cumis, Conflicts and the Civil Code: Section 2860 Changes Little, 25 Cal. W.L.Rev. 45, 54 (1988) ("The attorney, wishing to maintain the insurer's business, does not want to aggravate the company."); Mark A. Saxon, Conflicts of Interest: Insurers' Expanding Duty to Defend and the Impact of "Cumis" Counsel, 23 Idaho L.Rev. 351, 353 (1987) (Insurance counsel's "relationship with the insurer is contractual, usually ongoing, supported by strong financial interests, and often strengthened by sincere friendships.").[7] In recognition of this, most courts hold that in conflict situations the insured has the right to independent counsel to conduct its defense and the insurance company has the obligation to pay the reasonable value of the defense conducted by independent counsel.[8]
In dicta in National Indemnity Co. v. Flesher, 469 P.2d 360, 367 n. 22 (Alaska 1970), we recognized the right of the insured to independent counsel under circumstances involving a coverage defense: "In such circumstances, the insurer must provide the insured with independent counsel." Ten years later in Continental Insurance Co. v. Bayless & Roberts, Inc., 608 P.2d 281 (Alaska 1980), we recognized the right *1118 of the insured to independent counsel in cases involving policy defenses. However, we reserved the question whether the insured had the same right in coverage defense cases. Id. at 289.
In Continental the insurer claimed that the insured had breached the cooperation clause of the policy, but offered to defend the insured under a reservation of rights. Id. at 283. The insured rejected the insurer's offer of a conditional defense and demanded a defense without a reservation of rights. Id. at 286. This the insurer refused to do. Id. Subsequently, the insured's personal counsel took over the defense of the case and entered into a settlement which resulted in a consent judgment against the insured. Id. In the ensuing litigation between the insured and the insurer, the insurer contended that the insured had breached the insurance policy by refusing to accept the insurer's offer to defend under a reservation of rights. Id. at 288. We held that the insured did not breach the policy and that it was within its rights to require the insurer to defend unconditionally or withdraw from the defense. Id. at 291. We also affirmed the jury's award which included $4,000 expended by the insured as its defense costs. Id. at 296 n. 28.
In reaching this result, we expressed and adopted in policy defense cases the general rule that the insurer must surrender its right to control the defense to the insured if the insured refuses to accept a defense under a reservation of rights:
[T]he general rule is that, if an insured refuses to accede to the insurer's reservation of rights, the carrier must either accept liability under the policy and defend unconditionally or surrender control of the defense... .
Id. at 288. We explained in some detail the types of conflicts of interests which arise when the insurer asserts a right to later contest its liability. Id. at 289-90. We noted that these conflicts might be avoided if the insured were offered the right to retain independent counsel:
The possibility of a conflict might be avoided in such cases if the insurance company were to offer its insured the right to retain independent counsel to conduct his defense, and agree to pay all the necessary costs of that defense. In that event, it would seem that the company should be entitled to reserve the right to later litigate an alleged policy defense.
Id. at 291 n. 17. As already stated, the holding in Continental was limited to policy defenses; the question as to whether the same rules should apply where coverage defenses are involved was reserved. Id. at 289.
All three general types of conflicts of interests between insurer and insured which we identified in Continental the insurer may offer mere token defense, the insurer may steer result to judgment under an uninsured theory of recovery, the insurer may gain access to confidential or privileged information which it may later use to its advantage apply in coverage defense cases. However, the second reason does not apply in policy defense cases. Policy defenses, such as lack of notice or noncooperation, involve facts which are generally irrelevant to the litigation between the plaintiff and the insured. Therefore, appointed counsel has no opportunity to "covertly frame [a] defense to achieve a verdict based upon [a theory under which no coverage would result] so that [the insurer] could later assert that the defense was not covered... ." Id. at 289. Thus, the need for independent counsel is, if anything, greater in coverage than in policy defense cases.[9] We conclude that the right to independent counsel recognized in Continental should also apply to cases involving coverage defenses.[10] We thus adhere to the *1119 dicta contained in National Indemnity, which we noted above.
2. Does the two-counsel scheme proposed by Employers and approved by the superior court satisfy CHI's right to independent counsel?
We answer this question in the negative.
The trial court was of the view that neither CHI nor Employers was bound by any determination of fact made in the underlying tort suit concerning whether CHI's conduct was negligent or intentional. From this the trial court concluded that Employers' two-counsel scheme would solve the conflict of interest between the insurer and the insured.[11] The view that issues determined in the initial action as to which a conflict of interest exists between insurer and insured may be subsequently relitigated appears to be sensible and in accordance with a number of authorities.[12] That view, however, does not resolve all conflicts of interest between insurer and insured. It does not alleviate the access of appointed counsel to information in possession of the insured which may be used against the insured in subsequent coverage litigation:
This solution overlooks the fact that, during the initial litigation, the insured may transmit information to counsel that the insurer could use in subsequent litigation to the insured's disadvantage. A heavy burden of silence falls on the attorney the insurer selects to defend the insured.
Berch & Berch, supra, at 32 n. 23. The fact that personal counsel for CHI is acting as co-counsel with counsel appointed by the insurer also does not eliminate this conflict. Appointed counsel has and should have full access to the client so that the defense may be effectively conducted.
Moreover, even where the facts in conflict may be relitigated, the opportunity to direct a case through witness selection, interrogation, and discovery may afford a dispositive advantage in subsequent litigation:
In such cases, the insured's attorney has the opportunity to develop the facts through discovery and to shape the case for, and present the evidence at, the trial. So even though the insured or the insurer may relitigate the coverage issue in a subsequent proceeding, controlling the *1120 defense in the main proceeding could be critical. Testifying under oath in the main proceeding may freeze in the witnesses' minds one version of the facts. Very little latitude may remain in subsequent proceedings to mold the evidence bearing upon coverage.
Id. at 37-38.[13]
We conclude therefore that the two-counsel solution does not satisfactorily resolve the conflicts which have given rise to the right to independent counsel.
3. Does CHI have the unilateral right to select independent counsel?
We answer this question in the affirmative.
Most cases which recognize the right to independent counsel express the view that the insured has the right to select independent counsel of its choice. American Family Life Assur. Co. v. United States Fire Co., 885 F.2d 826, 831 (11th Cir.1989) (if insured had rejected conflicted counsel, insurer "would have been obligated to pay" for defense conducted by insured) (interpreting Georgia law); Rhodes v. Chicago Ins. Co., 719 F.2d 116, 120-21 (5th Cir.1983) ("When a reservation of rights is made ... the insured may ... pursue his own defense [and the] insurer remains liable for attorneys' fees") (interpreting Texas law); Previews Inc. v. California Union Ins. Co., 640 F.2d 1026 (9th Cir.1981) ("the insurer's obligation to defend extends to paying the reasonable value of the legal services and costs performed by independent counsel selected by the insured") (interpreting California law); San Diego Navy Fed. Credit Union v. Cumis Ins. Soc'y, 162 Cal. App.3d 358, 208 Cal. Rptr. 494, 501-02 (1984) ("the insurer must pay the reasonable cost for hiring independent counsel by the insured"); Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24, 31 (1976) (The insured "has the right to be defended ... by an attorney of his own choice who shall have the right to control the conduct of the case."); Illinois Masonic Medical Ctr. v. Turegum Ins. Co., 168 Ill. App.3d 158, 118 Ill.Dec. 941, 943, 522 N.E.2d 611, 613 (1988) ("where a conflict of interest exists the insured, rather than the insurer, is entitled to assume control of the defense of the underlying action; ... the insurer must underwrite the reasonable costs incurred by the insured in defending the action with counsel of his own choosing."); Prashker v. United States Guar. Co., 1 N.Y.2d 584, 154 N.Y.S.2d 910, 915, 136 N.E.2d 871, 876 (1956) ("the selection of the attorneys to represent the assureds should be made by them rather than by the insurance company, which should remain liable for the reasonable value of the services"); Allstate Ins. Co. v. Noorhassan, 158 A.D.2d 638, 551 N.Y.S.2d 942, 944 (1990) (the insured "should be permitted to select their own attorney [and the insurer] is liable for the reasonable value of the services"); Gorman v. Pattengell, 145 A.D.2d 411, 535 N.Y.S.2d 402, 404 (1988) (the insured "is entitled to retain, at her insurer's expense, an attorney with no business connection to her insurance carrier and who will defend solely her interests"); see also Mallen, supra, at 118 ("The right to independent counsel means an attorney of the insured's choice."); Smyth, supra, at 938 ("Most courts appear to allow the insured to select independent counsel when a conflict of interests arises."). Under this line of authority the insurance company is obligated to pay the "reasonable cost for hiring independent counsel by the insured." Cumis, 208 Cal. Rptr. at 506; see also Mallen, supra, at 120.
A recent California case, Center Foundation v. Chicago Insurance Co., 227 Cal. App.3d 547, 278 Cal. Rptr. 13 (App. 1991), has noted that the insured's right to select independent counsel is subject to the implied covenant of good faith and fair dealing. In context, this means that the insured must act reasonably to select an attorney who is capable of presenting an effective defense and who will bill reasonably *1121 for his or her services. The court stated:
In our view, the duty of good faith imposed upon an insured includes the obligation to act reasonably in selecting as independent counsel an experienced attorney qualified to present a meaningful defense and willing to engage in ethical billing practices susceptible to review at a standard stricter than that of the marketplace. Conduct arguably acceptable in the ordinary attorney-client relationship where the latter pays the former from his own pocket is not necessarily appropriate in the tripartite context created when independent counsel undertakes to represent the insured at the expense of the insurer.
Center Foundation, 278 Cal. Rptr. at 21 (footnote omitteed).
A few cases support Employers' argument that it should have the right to approve of CHI's choice for independent counsel. In Employers' Fire Insurance Co. v. Beals, 103 R.I. 623, 240 A.2d 397, 404 (1968), the court approved of the solution suggested in Prashker, that the insured should be allowed to select independent counsel. However, the Beals court added the proviso that counsel selected by the insured should be approved by the insurer and that "[s]uch approval, however, should not be unreasonably withheld." Id. 240 A.2d at 404. Fireman's Fund Insurance Co. v. Waste Management of Wisconsin, 777 F.2d 366 (7th Cir.1985) (apparently interpreting Wisconsin law), involves an atypical fact pattern. The question whether the insurer should have approval rights for independent counsel was not the issue; however, the case does contain dicta which states that giving the insurer the right to approve or disapprove of independent counsel selected by the insured is "fair, sensible and reasonable." Id. at 370.
We conclude that the insured should have the unilateral right to select independent counsel and that this right should be subject to the implied covenant of good faith and fair dealing.[14] In our view the covenant of good faith and fair dealing in this context requires that the insured select an attorney who is, by experience and training, reasonably thought to be competent to conduct the defense of the insured. Such a result, in our view, fairly balances the interest of the insured being defended by competent counsel of undivided loyalty with the interests of the insurer having the defense of the insured conducted by competent counsel. The insurer is only required to pay the reasonable cost of the defense. See, e.g., Turegum, 118 Ill.Dec. at 943, 522 N.E.2d at 613 ("insurer must underwrite reasonable costs incurred by the insured in defending the action"); Noorhassan, 551 N.Y.S.2d at 944 (same). This provides a measure of protection for insurers against overbilling and overlitigating by independent counsel.
In the present case the record is unclear as to whether it is reasonable for CHI to select von Gemmingen as independent counsel. On remand, a hearing should be conducted promptly in order to determine this question. If the trial court finds that von Gemmingen is a reasonable selection, a declaration should be entered that he may conduct the defense of CHI as independent counsel. If the court finds that he is not a reasonable selection, the court should so declare and CHI should proceed to select qualified counsel.
For the above reasons the judgment of the superior court is REVERSED and this case is REMANDED for further proceedings and entry of a declaration in accordance with this opinion.
MOORE, J., concurs in part and dissents in part.
COMPTON, J., dissents.
MOORE, Justice, concurring in part and dissenting in part.
In its decision today, the court holds that an insured has the right to reject the counsel appointed by the insurer and to unilaterally *1122 select replacement counsel whenever dual representation creates a potential conflict of interest. Under the guise of balancing the interests of the insured and the insurer, the court completely abrogates the insurer's right to participate in the insured's defense. Neither existing case law nor sound policy mandates such a drastic curtailment of the insurer's contract rights. Although I agree that the insured is entitled to select independent counsel in conflict of interest situations, I believe the insurer retains the right of reasonable approval. Such a rule accommodates both the important interest of the insured in controlling the litigation and the legitimate interest of the insurer in assuring that the defense will be competently handled by qualified counsel in a cost-effective manner.
Most courts agree that an insured may reject insurer-selected counsel when the insurer assumes the defense under a reservation of rights because of a coverage question.[1]See Ronald E. Mallen, A New Definition of Insurance Defense Counsel, 53 Ins.Couns.J. 108, 113 (Jan. 1986). Most courts also conclude that the presence of a conflict of interest does not relieve an insurer of its obligation to pay defense costs under its duty to defend. See Babcock & Wilcox Co. v. Parsons Corp., 430 F.2d 531, 538 (8th Cir.1970). The critical issue, which few courts have identified, is whether, in this context, an insured has the unilateral right to select replacement counsel when the insurance agreement gives the insurer the right to defend the insured. This is a matter of first impression in Alaska.[2] I would hold that the insurer has the right to approve the counsel selected by the insured, but that the insurer may not unreasonably withhold such approval.[3]
The court simply fails to recognize that Employers has both a contractual right as well as the contractual duty to defend CHI.[4] An insurer's right to control the defense is "a valuable one in that it reserves to the insurer the right to protect itself against unwarranted liability claims and is essential in protecting its financial interest in the outcome of litigation." 7C John A. Appleman, Insurance Law and Practice § 4681 (Walter F. Berdal ed., rev. *1123 ed. 1979). Such an important right should not be ignored in the analysis. Although the insurer's right to control the litigation must yield to the insured's right to independent representation when a conflict arises, this does not mean that the insurer's right to defend is completely extinguished.
Although the court purports to align itself with what it considers to be the "majority view," an analysis of the cases it relies on reveals that most courts which have recognized the insured's "right to independent counsel" have not explicitly analyzed the scope of this right or fully considered its impact on the rights of the insurer.
Two cases cited by the court, while speaking of a "right to independent counsel," implicitly recognize the right of an insurer to participate in the defense of its insured. The courts in both American Family Life Assur. Co. v. U.S. Fire Co., 885 F.2d 826 (11th Cir.1989), and San Diego Navy Fed. Credit Union v. Cumis Ins. Soc'y, Inc., 162 Cal. App.3d 358, 208 Cal. Rptr. 494 (1984), required an insurer to pay the cost of "independent counsel" selected by the insured to act as co-counsel with an attorney selected by the insurer.[5] Neither case stands for the proposition that an insured has a unilateral right to select exclusive defense counsel when a coverage dispute creates a conflict of interest.[6] In fact, American Family Life includes a partial quote from Appleman which recognizes the right of an insured "to refuse to accept an offer of counsel appointed by the insurer," 885 F.2d at 831 (citing 7C Appleman, supra, § 4685.01), but omits that part of the sentence which recognizes the insurer's *1124 right to approve of substitute counsel.[7]
Some courts and commentators recognize that cases permitting an insured to select "independent counsel" do not define what is meant by that term. See, e.g., Federal Ins. Co. v. X-Rite, Inc., 748 F. Supp. 1223, 1228 n. 1 (W.D.Mich. 1990) ("`Independent Counsel' is a term which has not been defined in the case law."); Allan D. Windt, Insurance Claims and Disputes Representation of Insurance Companies and Insureds § 4.20 at 179 (2d ed. 1988). Courts have used the phrase in a variety of contexts,[8] some of them diametrically opposed. Commentators have stated that "[t]he right to independent counsel means an attorney of the insured's choice." Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 23.16 at 418 (3d ed. 1989). On the other hand, courts have also recognized "a right in the insurer to determine whether to provide independent counsel of its choosing or to reimburse the insured for counsel of its choice." Federal Ins. Co., 748 F. Supp. at 1228 (citing nine cases for this proposition). Because there is disagreement as to what the right to independent counsel entails, and because many cases recognize the insurer's right to select replacement "independent counsel," or at a minimum, to participate in the defense of the insured alongside counsel selected by the insured, it is questionable whether the view espoused by the court represents a "majority view," statements by courts and commentators to that effect notwithstanding.
However, if, as the court apparently believes, an insured's interest in fair representation requires the complete abrogation of an insurer's right to participate in the defense, the insurer's right should at least be addressed in terms of established principles of contract law. In interpreting a contract, a court must give effect to the reasonable expectation of the parties. Peterson v. Wirum, 625 P.2d 866 (Alaska 1981); Fairbanks N. Star Borough v. Tundra Tours, Inc., 719 P.2d 1020 (Alaska 1986) (in order to give effect to the parties' reasonable expectations, a court should look to the contract language, relevant extrinsic evidence and case law interpreting similar provisions). Clearly, the insurance agreement here gave Employers a reasonable expectation that it would have some control over the defense. Even if the right to defend provision is deemed ambiguous and is therefore construed against the insurer, see Puritan Life Ins. Co. v. Guess, 598 P.2d 900 (Alaska 1979), it is not necessary to extinguish the right entirely. Rather, the right to defend provision can and should be interpreted in a way which balances the interests of both the insurer and the insured.
As one court has stated when considering the scope of an insurer's contractual right to defend in conflict situations:
Unless "right to defend" is to be deemed mere surplusage, ... it must be viewed as conferring upon [the insurer] some prerogative with respect to the defense beyond simply paying expenses. This prerogative cannot, in a conflict of interest situation, include an absolute right to control the litigation. On the other hand, [the insured's] apparent presumption that the conflict of interest, posing a potential of prejudice to its interests, automatically and completely negated all prerogative, is not reasonable.
... [T]he "right to defend" can hardly be deemed to contemplate anything less *1125 than participation in selection of counsel, which contractual right ought to be enforced unless contrary to public policy.
Federal Ins. Co., 748 F. Supp. at 1229; see also New York State Urban Dev. Corp. v. VSL Corp., 738 F.2d 61, 65-66 (2d Cir.1984). Here, Employers' right to participate in CHI's defense should encompass, at a minimum, the right to have a role in the selection of defense counsel.
Courts which have recognized the right of the insurer to participate in the selection of substitute counsel do not agree as to the latitude an insurer should have. In Federal Ins. Co., the court concluded that, under Michigan law, an insurer is entitled to select replacement counsel, but its selection must be made with the utmost of good faith. 748 F. Supp. at 1229. On the other hand, in Employers' Fire Ins. Co. v. Beals, 240 A.2d 397 (R.I. 1968), the court held that an insured may elect to choose its own counsel, but that the insurer has a right to approve of the counsel selected by the insured. The Beals court stated:
Because the insurer has a legitimate interest in seeing that any recovery based on finding of negligence on the part of its insured is kept within reasonable bounds, and since the total expense of this defense is to be assumed by the insurer under its promise to defend, we believe that ... the engagement of an independent counsel to represent the insured should be approved by the insurer. Such approval, however, should not be unreasonably withheld.
240 A.2d at 404; see Fireman's Fund Ins. Co. v. Waste Management of Wis. Inc., 777 F.2d 366, 370 (7th Cir.1985) (approving parties' agreement to allow insured to select replacement counsel subject to insurer's approval as the most "fair, sensible, and reasonable way for both parties to terminate [conflict of interest] dispute and to get on with trial of the [cases against insured] on their merits"). This approach is also recommended by a noted commentator on insurance law who stated:
[W]here a conflict of interest exists between the insurer and the insured in the conduct of the defense of the action brought against the insured, the insured has the right to refuse to accept an offer of the counsel appointed by the insurer and insurer's desire to control the defense must yield to its obligation to defend the policyholder; and where a conflict of interest exists the engagement of independent counsel to represent the insured should be approved by the insurer to assure the employment of competent counsel. Such approval should not be unreasonably withheld.
7C Appleman, supra, § 4685.01 (footnotes omitted).
The majority dismisses these authorities without analysis, summarily concluding that the insurer's interests are sufficiently protected by the implied covenant of good faith and fair dealing inherent in all contracts. Principally relying on a recent California court of appeals decision, Center Found. v. Chicago Ins. Co., 227 Cal. App.3d 547, 278 Cal. Rptr. 13 (1991), the majority observes that the covenant of good faith and fair dealing requires that the insured "select an attorney who is, by experience and training, reasonably thought to be competent to conduct the defense of the insured."[9] (emphasis added) The majority asserts that the implied covenant "provides a measure of protection for insurers against overbilling and overlitigating by independent counsel."
Unfortunately, the majority fails to specify by whose standards the competency of replacement counsel should be measured. *1126 In the absence of any objective criteria by which to judge whether replacement counsel is "reasonably competent," I believe that this "measure of protection" is both inadequate and unworkable.
Although I have found no cases discussing what constitutes an insurer's reasonable withholding of approval of substitute counsel chosen by the insured, I believe that an insurer should approve of an insured's selection of counsel where the attorney is qualified to handle the case and where there is no reason to expect that the attorney will be unable to maintain a professional working relationship with the insurance company.
In ascertaining whether an attorney is qualified, it may be useful to look to the statute of a state which has turned to the legislature to resolve this issue. California Civil Code Section 2860(c)[10] provides in part:
When the insured has selected independent counsel to represent him or her, the insurer may exercise its right to require that the counsel selected by the insured possess certain minimum qualifications which may include that the selected counsel have (1) at least five years of civil litigation practice which includes substantial defense experience in the subject at issue in the litigation, and (2) errors and omissions coverage.
While I would not adopt this standard as a per se rule in Alaska, I believe that section 2860(c) provides reasonable guidance as to whether an insurer must approve of its insured's selection of substitute counsel.
Here, it is undisputed that attorney Von Gemmingen graduated from law school in May, 1985. When this dispute arose in late 1989, he had been practicing law for approximately four years. Nothing in the record indicates that he had substantial defense experience in the types of disputes at issue in the suit against CHI. For these reasons, I would hold that Employers did not unreasonably withhold its approval of CHI's choice of attorney.
Apparently, the court believes that any participation by the insurer in the appointment of independent counsel automatically taints the outcome. However, it is far from clear that the scope of the conflict of interest problem in the defense context is so broad and the frequency of harm to the insured so great as to warrant such a drastic curtailment of the insurer's contract rights. None of the authorities cited by the court address the prevalence of the problem in quantifiable terms, nor do they address effectiveness of malpractice actions, disciplinary actions, or insurance bad faith actions in remedying the problem. As one commentator has noted, "[t]he validity of the assumption that there exists a severe risk that an insurer will favor its coverage interests over the insured's liability has not been critically examined." Mallen, supra, at 108. The same can be said of the assumption that there is a severe risk that defense attorneys will favor the interests of the insurer over the insured.[11] Assuming without conceding that these *1127 risks are great, conflict of interest concerns would be a compelling policy reason for permitting an insured to reject counsel selected by the insurer. They would also be a reason for allowing the insured to select a new attorney at the insurer's expense. But it goes too far to ignore the insurer's contractual right to defend and to hold that these perceived dangers warrant allowing an insured to unilaterally select substitute counsel regardless of the attorney's qualifications.
In Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 288-91 (Alaska 1980), we discussed the conflicts which can arise between the interests of the insured and the insurer where coverage may be an issue and the insurer defends under a reservation of rights. We noted that when an insurer knows it can assert a coverage defense, it may only offer a token defense of the insured. Id. at 289. We further noted that where coverage depends on which theory of recovery in the suit against the insured is successful, an insurer might conduct the defense in a way which steers the case toward liability based on an uncovered theory. Id. The situations discussed in Continental represent two distinct areas of conflict those between an insured and its insurer and those between the insured and its attorney. When this important distinction is made, an attorney's ethical obligations in these situations are clearly delineated by the Alaska Code of Professional Responsibility.
A potential conflict of interest between the insurer and the insured arises when, as in this case, a plaintiff brings an action against an insured which is based on both covered and uncovered theories of liability. When the complaint alleges both negligent conduct, which is covered under the policy, and intentional conduct, which is not covered, it would be in the best interest of the insurer if liability were ultimately found based on intentional conduct. In such a case, an attorney selected by the insurer to defend the insured would be under an ethical obligation to disclose the effect of this conflict "on the exercise of [the attorney's] independent professional judgment on behalf of each." Alaska Code of Professional Responsibility DR 5-105. Unless "it is obvious that [the attorney] can adequately represent the interest of each" and "each consents to the representation after full disclosure," the attorney would be required to decline the employment.[12]Id. Whether the attorney declines, accepts, or withdraws from the employment, he would be obligated to preserve the confidences of the insured. Alaska Code of Professional Responsibility DR 4-101.
The conflict between the insured and the insurer is to be distinguished from that which arises between the insured and the attorney under these circumstances. As commentators have stated:
In this situation, ... separate counsel retained by the insurance company is under the less-than-subtle influence of the insurance company. Insurance companies concentrate their legal representation into a few firms. The attorney, wishing to maintain the insurer's business, does not want to aggravate the company. Furthermore, the insurance counsel has close ties and a long-term relationship with the insurer, while he has only a transient relationship with the insured. These factors could, unconsciously, dilute the loyalty of the most honest attorney.
Sampson A. Brown & John L. Romaker, Cumis, Conflicts and the Civil Code: Section 2860 Changes Little, 25 Cal.W.L.Rev. 45, 54 (1988) (footnotes omitted). Here again, the attorney's duties are clear. If *1128 the exercise of the attorney's professional judgment on behalf of the insured may be affected by these interests, an attorney can only accept the employment if the client consents after full disclosure. Alaska Code of Professional Responsibility DR 5-101(A). Furthermore, the attorney is prohibited from permitting the insurer to "direct or regulate his professional judgment" in representing the insured. Alaska Code of Professional Responsibility DR 5-107(B). A breach of these ethical obligations may subject an attorney to disciplinary actions and may serve as the basis for a legal malpractice action, thus serving as a deterrent to the kinds of abuses which concern the court. Absent a showing that the Code of Professional Responsibility and the threat of legal malpractice actions are ineffective in preventing such abuses, the broad prophylactic rule adopted by the court seems superfluous.[13]
In further support of its conclusion, the majority voices its concern over the danger that an insurer might gain access to information not otherwise available to it which could be used to its advantage in the coverage dispute. In Continental we discussed this danger in the policy defense context. 608 P.2d at 291. However, in the context of a coverage dispute, I believe this danger to be more imagined than real. It is difficult to imagine a case or set of facts where information tending to defeat coverage would be unavailable to the insurer. Under most insurance agreements, the insured has a duty to cooperate with the insurer.[14] "The duties of the insured have been held to require a fair, frank and truthful disclosure of information reasonably demanded by the insurer, for the purpose of enabling it to determine whether or not there is a genuine defense." 8 John A. Appleman & Jean Appleman, Insurance Law and Practice § 4774 (1981). In addition, facts tending to defeat coverage will most likely be developed in the liability trial and will be discoverable by the insurer in subsequent coverage litigation.[15] Even confidential attorney-client communications may be discoverable by an insurer under certain circumstances. See, e.g., Glacier Gen. Assur. Co. v. Superior Court, 95 Cal. App.3d 836, 157 Cal. Rptr. 435 (1979). See generally John P. Ludington, Annotation, Insured-Insurer Communications As Privileged, 55 A.L.R. 4th 336, 354-59 (1987).
Of course this does not mean the insured's attorney is free to share any confidential or privileged information with the insurer. Regardless of whether defense counsel is selected by the insured or the insurer, the attorney is bound by the same ethical duties regarding confidentiality. See Alaska Code of Professional Responsibility DR 4-101. In those rare cases where such a breach of confidentiality actually occurs, the law affords adequate protection and recourse to the insured. An attorney who breaches a client's confidentiality may be subject to discipline for a violation of his professional responsibility or to a suit by the insured for legal malpractice. Of more significance to the insured, an insurer who relies on breach of confidentiality by defense counsel to assert non-coverage may be subsequently estopped from denying coverage based on policy exclusion. See Parsons v. Continental Nat'l Am. Group, 113 Ariz. 223, 228, 550 P.2d 94, 99 (1976). Such remedies serve as adequate protection of the insured and as a strong disincentive *1129 to both insurers and defense counsel to compromise the insured's interest.
Other considerations prevent me from supporting the rule adopted today. First, "[t]ypically, the coverage issue [and resulting conflict of interest are] not created by the insurer but by the allegations of the claimant. Often those allegations bear little relationship to reality." Mallen & Smith, supra, § 23.16. In light of this, a rule which operates to deprive an insurer of its contractual right to participate in the defense whenever the insurer reserves its rights unnecessarily penalizes the insurer. Second, an insurer may be required to issue a reservation of rights letter or risk its right to later challenge coverage of the claim under the policy. See Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 289 n. 13 (Alaska 1980). The insurer should not be forced to sacrifice its right to participate in the selection of counsel in order to preserve its right to subsequently contest coverage. Third, because an insurer, under agency principles, may be subject to liability for the malpractice of the attorney which represents the insured, see Mallen & Smith, supra, § 23.6, it is fair and reasonable that the insurer should have a role in selection of counsel. Finally, the rule adopted by the court today presupposes that no counsel selected or approved of by an insurer can represent an insured without consciously or unconsciously compromising the insured's interests in favor of those of the insurer. My confidence in the integrity of the members of the Alaska Bar will not allow me to support the adoption of a rule of law based on such an assumption.
In summary, I would hold that CHI was within its rights to reject the tender of a defense by Employers and was entitled to select replacement counsel, subject to the reasonable approval of Employers. Here, Employers' approval of Von Gemmingen was not unreasonably withheld. Nonetheless, because I conclude that the insured has the right to select replacement counsel subject to the reasonable approval of the insurer, CHI cannot be forced to proceed with defense counsel selected by Employers. Accordingly, I concur in the reversal but dissent from the court's reasoning and the rule of law which it adopts.
COMPTON, Justice, dissenting.
I agree with Justice Moore's analysis of the court's opinion. While I prefer his solution to that selected by this court, I believe a third alternative selected by the superior court is preferable to either. Also, I wish to emphasize what I find particularly disturbing with the court's solution.
Since the court abrogates entirely a contractual right, the language of the insurance contract ought at least be reviewed. It provides:
SECTION II
DEFENSE AND SETTLEMENTS. The Corporation, in the Insured's name and behalf, shall have the right to investigate, defend and conduct settlement negotiations in any claim or suit.
The Corporation shall not settle any claim without the consent of the Insured. Should the Insured refuse to consent to any settlement recommended by the Corporation and elect to contest the claim, or continue any legal proceedings in connection with such claim, the Corporation's liability for the claim shall not exceed the amount in excess of the Insured's deductible for which the claim could have been so settled, or the applicable limit of liability, whichever is less, plus the costs and expenses incurred with its consent up to the date of such refusal.
The Insured shall not admit liability for, or make any voluntary settlement, or incur any costs or expenses in connection with any claim involving payment by the Corporation, except with the written consent of the Corporation.
(Emphasis supplied).
The court holds that the insurer forfeits the right even to participate in the selection of counsel, encompassed in the insurer's right to defend, (1) despite its contractual right to do so; and (2) despite the fact that as to covered claims, it is undisputed that *1130 the insurer's money is at risk, not the insured's.[1]
Justice Moore has highlighted the flaw in the court's effort to legitimize its result by proclaiming the result to be in keeping with the "majority view." As the result is not dictated by case law, what compels the court to hold that the insurer has forfeited its contractual right to select counsel to defend covered claims for which its money is at risk?
The court points to perceived problems with selection of counsel hired by insurers to conduct the defense of their insured. These "appointed" counsel may tend to favor the insurer's interests, not the insured's, because of longstanding ties between the insurer and counsel. Appointed counsel may consciously or subconsciously `slant' efforts in favor of the insurer to receive future business from the insurer. Ongoing contractual relationships, strong financial ties, and sincere friendships between the insurer and appointed counsel will influence counsel's conduct.
To cure this problem, the court first implies a contractual right in the insured to select "independent" counsel to represent the insured on both covered and reserved claims. To modify this implied right, the court then applies the implied covenant of good faith and fair dealing. The insured must "select an attorney who is, by experience and training, reasonably thought to be competent to conduct the defense of the insured." "[T]hought" by whom to be competent? The court does not give an answer.
I do not doubt the potential for conflict of interest problems to intrude into relationships between the insurer, the insured and appointed counsel. Yet given the court's view of the willingness of counsel to follow the dollar and not the Code of Professional Responsibility, why does the court not apply the same standard to independent counsel selected by the insured? If counsel selected by the insured `slants' efforts in favor of the insured, is this a less disturbing result? If ongoing contractual relationships, strong financial ties, and sincere friendships between the insured and independent counsel influence counsel's conduct, is this a less disturbing result? Worse, if an insured does not happen to be a significant factor in independent counsel's financial wellbeing, counsel selected by the insured may (consciously or subconsciously) curry favor with the insurer in order to establish an ongoing contractual, financially rewarding relationship with the insurer. Is this a less disturbing result? The dollar still comes out of the same pocket. Once the Code of Professional Responsibility is discarded as setting ethical guidelines for the profession, no attorney/client relationship is safe from manipulation.
The alternative suggested by Justice Moore, but rejected by the court, does not contemplate selection of counsel by an insurer. The insured would select counsel, subject to the insurer's approval. Approval could not be unreasonably withheld. Counsel would be paid for by the insurer. Yet in the court's view, permitting the insurer to approve independent counsel selected by the insured would still taint counsel.
In my view the interests of both the insurer and insured would be better served if this court, the insurer, and the insured acknowledged the irremedial conflict created when reserved claims are asserted against the insured. The insured should be entitled to select counsel, paid for by the insurer, to represent it on the reserved claims, subject only to the insured's contractual obligation to cooperate with the *1131 insurer.[2] The insurer will thereby satisfy its obligation to defend the insured against any claim, while at the same time exercising its contractual right to defend against covered claims for which its money is at risk. The insured will be assured of the loyalty of its counsel. Counsel will not have to wonder whether their client is the insurer or insured. We do not need to strip the insurer of its contractual right to defend covered claims because of a jaded view of an industry.[3]
While the court is correct in pointing out the potential for conflicts when multiple counsel cooperate in a single defense, such conflicts are not unique to insurance defense litigation. Problems of cooperation and strategy are present whenever there are multiple defendants. In this case there are two real parties in interest; the insurer for the covered claims, and the insured for the reserved claims. There is no reason to treat insurance defense litigation differently than other multiple defendant litigation.
I am disturbed that the court is willing to embrace a solution that abrogates entirely a contractual right. This is particularly so because the court rejects reasonable alternatives which would give some effect to the contractual provision. Neither case law nor reason provides more than token support for the court's solution. The court determines what it perceives to be the necessary result, apparently on the basis of its view of an industry. It reforms the contract accordingly. Contract law does not give a court such license. I would affirm the superior court.
NOTES
[1] Sauer v. The Home Indemnity Co., 841 P.2d 176, 180 (Alaska 1992); Alaska Pac. Assur. Co. v. Collins, 794 P.2d 936, 945 (Alaska 1990); National Indem. Co. v. Flesher, 469 P.2d 360, 366 (Alaska 1970); Theodore v. Zurich Gen. Accident & Liab. Ins. Co., 364 P.2d 51, 55 (Alaska 1961).
[2] In this opinion we will refer to such counsel as appointed counsel.
[3] Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 288-89 (Alaska 1980).
[4] See Continental, 608 P.2d at 289.
[5] The duty to defend arises "if the complaint on its face alleges facts which, standing alone, give rise to a possible finding of liability covered by the policy," Afcan v. Mutual Fire, Marine & Inland Ins. Co., 595 P.2d 638, 645 (Alaska 1979); or, if the complaint does not contain such allegations, where "the true facts are within, or potentially within, the policy coverage and are known or reasonably ascertainable to the insurer." National Indem. Co. v. Flesher, 469 P.2d 360, 366 (Alaska 1970).
[6] Ronald E. Mallen, A New Definition of Insurance Defense Counsel, Ins.Couns.J. 108, 108-109 (Jan. 1986).
[7] In addition, at least two of our reported cases demonstrate that appointed counsel sometimes favor the interest of the insurer over those of the insured. Continental, 608 P.2d at 294 ("it is quite apparent that both [appointed counsel] and Continental believed that [appointed counsel's] first loyalty was to Continental, and that throughout the course of the litigation he acted for and on behalf of the insurance company"); Bohna v. Hughes, Thorsness, Gantz, Powell & Brundin, 828 P.2d 745, 749-50 (Alaska 1992) (appointed counsel proposed to put insured through bankruptcy in order to reduce insurer's liability to plaintiff).
[8] "The prevailing view is that the presence of a coverage issue enables the insured to reject appointed counsel, select his own lawyer and control the defense at the expense of the insurer." Mallen, supra, at 113; see, e.g., American Family Life Assur. Co. v. United States Fire Co., 885 F.2d 826, 831 (11th Cir.1989) (interpreting Georgia law); Rhodes v. Chicago Ins. Co., 719 F.2d 116, 120-21 (5th Cir.1983) (interpreting Texas law); Previews Inc. v. California Union Ins. Co., 640 F.2d 1026 (9th Cir.1981) (interpreting California law); San Diego Navy Fed. Credit Union v. Cumis Ins. Soc'y, 162 Cal. App.3d 358, 208 Cal. Rptr. 494, 501-02 (1984); Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24 (1976); Illinois Masonic Medical Ctr. v. Turegum Ins. Co., 168 Ill. App.3d 158, 118 Ill.Dec. 941, 522 N.E.2d 611 (1988); Prashker v. United States Guar. Co., 1 N.Y.2d 584, 154 N.Y.S.2d 910, 915, 136 N.E.2d 871, 876 (1956); Allstate Ins. Co. v. Noorhassan, 158 A.D.2d 638, 551 N.Y.S.2d 942, 944 (1990); Gorman v. Pattengell, 145 A.D.2d 411, 535 N.Y.S.2d 402, 404 (1988); see also Todd R. Smyth, Annotation, Duty of Insurer to Pay for Independent Counsel When Conflict of Interest Exists Between Insured and Insurer, 50 A.L.R.4th 932, 938 (1986). A minority of courts hold that the insured has no right to independent counsel. Mallen, supra, at 113. They rely on appointed counsel to resolve conflicts in favor of the insured. Id.; see, e.g., Federal Ins. Co. v. X-Rite, Inc., 748 F. Supp. 1223, 1229 (W.D.Mich. 1990).
[9] See also Berch & Berch, supra, at 38 ("[policy defense] cases do not present the same dangers [of conflicting interests] that coverage cases present").
[10] We have recently recognized the application of the right to independent counsel expressed in Continental in the context of a coverage defense case in Sauer v. The Home Indemnity Co., 841 P.2d 176, 182, 183 (Alaska 1992), where we stated:
However, if the insured does not consent to a non-waiver agreement, or to a defense under a reservation of rights, then the insurance company must choose whether it wishes to defend unconditionally or pursue other options. One such option is to permit the insured to exercise its right to reject the defense offered by the insurer and to obtain substitute counsel at the insurer's expense. In the event the defense is conducted by substitute counsel, the insurance company retains the right to later contest policy coverage. See Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 291 n. 17 (Alaska 1980).
[11] As noted earlier, Employers offered to pay CHI's personal attorney, von Gemmingen, to defend against the noncovered claims.
[12] See Theodore v. Zurich Gen. Accident & Liab. Ins. Co., 364 P.2d 51, 56 (Alaska 1961) (issues determined in initial action as to which interests of insurer and insured were not conflicting held to be binding on insurer); Farmers Ins. Co. v. Vagnozzi, 138 Ariz. 443, 448, 675 P.2d 703, 708 (1983); Ferguson v. Birmingham Fire Ins. Co., 254 Or. 496, 460 P.2d 342, 349 (1970); Restatement (Second) of Judgments § 58 (1982). Section 58 of Restatement (Second) of Judgments provides:
Effect of Judgment Against Indemnitee on Indemnitor Who Has Independent Duty to Defend Indemnitee
(1) When an indemnitor has an obligation to indemnify an indemnitee (such as an insured) against liability to third persons and also to provide the indemnitee with a defense of actions involving claims that might be within the scope of the indemnity obligation, and an action is brought against the indemnitee involving such a claim and the indemnitor is given reasonable notice of the action and an opportunity to assume its defense, a judgment for the injured person has the following effects on the indemnitor in a subsequent action by the indemnitee for indemnification:
(a) The indemnitor is estopped from disputing the existence and extent of the indemnitee's liability to the injured person; and
(b) The indemnitor is precluded from relitigating those issues determined in the action against the indemnitee as to which there was no conflict of interest between the indemnitor and the indemnitee.
(2) A "conflict of interest" for purposes of this Section exists when the injured person's claim against the indemnitee is such that it could be sustained on different grounds, one of which is within the indemnitor's obligation to indemnify and another of which is not.
[13] CHI also notes that there are unresolved problems of which of the two counsel is to control discovery and trial strategy. One commentator has noted: "The role of a second lawyer with clearly antagonistic coverage interests to the insured is uncertain and seems inappropriate." Mallen, supra, at 119.
[14] We have held that the implied covenant of good faith and fair dealing is inherent in all contractual relationships including the insured-insurer relationship. Guin v. Ha, 591 P.2d 1281, 1291 (Alaska 1979).
[1] The mere reservation of rights in response to a third party complaint alleging covered and uncovered conduct does not in and of itself create a conflict of interest warranting withdrawal of counsel selected by the insurer. Because the liberal rules of pleading permit third party plaintiffs to allege a variety of legal theories, the pleading alone should not be permitted to precipitate a conflict of interest between an insurer and the insured requiring withdrawal of the attorney chosen by the insurer. Nor should the mere fact that an attorney has previously been utilized by an insurer have this effect. Clearly, under the circumstances of this case, an attorney has an obligation to make the insured and the insurer aware of the potential for conflict and to proceed with the representation only with the consent of both. Alaska Code of Professional Responsibility DR 5-105. This is a continuing duty so the appropriateness of representation will have to be constantly monitored by counsel.
[2] CHI, citing National Indem. Co. v. Flesher, 469 P.2d 360, 367-68 n. 22 (Alaska 1970) and Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 291 n. 17 (Alaska 1980), contends that we have previously held that an insured has a right to select independent counsel in a conflict of interest situation. Neither of the passages cited by CHI constitutes a holding of this court, as the issue the court decides today was not before us in either Continental or Flesher. These passages are thus not dispositive of this issue.
[3] Other alternatives also balance the interests of the insurer and the insured. For example, the insured could agree to proceed with an attorney of its choice to serve as co-counsel to the insurer-selected attorney. Here, because CHI rejected this alternative, I limit my discussion to the approach to be taken when the insured rejects the co-counsel approach.
[4] Section II of the contract of insurance between CHI and Employers provides that
[Employers], in Insured's name and behalf, shall have the right to investigate, defend and conduct settlement negotiations in any claim or suit.
.....
The Insured shall not admit liability for, or make any voluntary settlement, or incur any costs or expenses in connection with any claim involving payment by [Employers], except with the written consent of [Employers].
Section III obligates Employers to pay "all expenses incurred in the defense of any claim or suit against Insured" alleging acts covered by the policy.
[5] In American Family Life, the court affirmed an award of attorneys' fees to an insured who hired co-counsel to "monitor and aid in the defense" provided by the insurer. 885 F.2d at 831. In Cumis, the court held that the insurer must pay the fees of an attorney retained by the insured to act as co-counsel to the attorney selected by the insurer. 208 Cal. Rptr. at 497, 506.
[6] The other cases cited for the "majority view" do not hold that an insured has the unilateral right to select defense counsel to the exclusion of any right of the insurer to participate in the defense.
In Rhodes v. Chicago Ins. Co., 719 F.2d 116 (5th Cir.1983), an insured rejected the insurer's tender of a defense under a reservation of rights and pursued its own defense. The party injured by the insured sued the insurer to collect damages assessed against the insured under a settlement approved by the state court. The Fifth Circuit reversed the grant of summary judgment for the insurer, finding unresolved issues of material fact. The right to "independent counsel" was not even an issue in the case; rather, the issue was whether the insurer had breached a duty to defend, and if so, the consequences of the breach. Id. at 119.
In Previews, Inc. v. California Union Ins. Co., 640 F.2d 1026, 1028 (9th Cir.1981), the court, interpreting California law, concludes with little discussion that a conflict existed, that the insured "was entitled to engage outside counsel," and that the insurer was responsible for "reasonable value of the legal services and costs performed by independent counsel selected by the insured."
In Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24, 30-32 (1976), the court held that an insured had the right to select independent counsel and control the case in cases of potential conflict of interest. However, the court also explicitly recognized the insurer's right to have its attorney participate "in all phases of [the] litigation subject to the control of the case by [the insured's] attorney." Id. 355 N.E.2d at 31.
In Illinois Masonic Medical Ctr. v. Turegum Ins. Co., 168 Ill. App.3d 158, 118 Ill.Dec. 941, 948-49, 522 N.E.2d 611, 618-19 (1988), the court held that, under Maryland Casualty, an insured may select its own attorney and control its defense in conflict situations. The court also held that it was within the discretion of the replacement counsel to determine to what extent the counsel appointed by the insurer and rejected by the insured could also participate in the defense. Id.
In Prashker v. U.S. Guar. Co., 1 N.Y.2d 584, 154 N.Y.S.2d 910, 136 N.E.2d 871 (1956), the question of the right of the insured to select independent counsel was not directly before the court. The court stated in dicta that in a conflict of interest situation, the insured, rather than the insurer, should select defense counsel. Id. 154 N.Y.S.2d at 915, 136 N.E.2d at 876. The court provided no analysis, reasoning, or authority to support its statement.
In Gorman v. Pattengell, 145 A.D.2d 411, 535 N.Y.S.2d 402, 404 (1988), the court summarily concluded, citing Prashker, that the insured is entitled to independent counsel at the insurer's expense where there is a conflict of interest.
In Allstate Ins. Co. v. Noorhassan, 158 A.D.2d 638, 551 N.Y.S.2d 942, 944 (1990), the court stated without explanation or analysis that an insured has the right to select independent counsel and the insurer has the duty to pay for this defense whenever a potential conflict of interest arises.
[7] The full sentence from Appleman reads:
But it has been held that where a conflict of interest exists between the insurer and the insured in the conduct of the defense of the action brought against the insured, the insured has the right to refuse to accept an offer of the counsel appointed by the insurer and insurer's desire to control the defense must yield to its obligation to defend the policy-holder; and where a conflict of interest exists the engagement of independent counsel to represent the insured should be approved by the insurer to assure the employment of competent counsel. Such approval should not be unreasonably withheld.
7C Appleman, supra, § 4685.01 (emphasis added) (footnotes omitted).
[8] The "right to independent counsel" could be read narrowly to mean the right to reject an insurer's choice of attorney. It could be read more broadly to encompass the right to select substitute or replacement counsel, either unilaterally or subject to the approval of the insurer.
[9] In Center Foundation, the insureds filed a claim for breach of contract against the insurer after the insurer refused to accept the independent counsel selected by the insureds when the insurer reserved the right to contest coverage. 278 Cal. Rptr. at 15-16. Under the California law operative at the time of the litigation, the court of appeals held that the implied covenant of good faith and fair dealing required the insured to act reasonably in selecting independent counsel. Id. at 21. The court concluded that the insurer therefore did not breach its obligations to the insured by asserting a right to approve the counsel they selected provided that such approval was not unreasonably withheld. Id. The Center Foundation court cited with approval the Beals decision and explicitly recognized the insurer's right to approve the replacement counsel selected by the insured. Id. at 21 & n. 12.
[10] California Civil Code § 2860 was a legislative response to the flood of litigation spawned by the California court of appeals decision in the case of San Diego Navy Fed. Credit Union v. Cumis Ins. Soc'y, Inc., 162 Cal. App.3d 358, 208 Cal. Rptr. 494 (1984). See Sampson A. Brown & John L. Romaker, Cumis, Conflicts and the Civil Code: Section 2860 Changes Little, 25 Cal. W.L.Rev. 45 (1988). The Cumis court held that an insurer who assumed a defense under a reservation of rights must pay the reasonable cost of "independent counsel" hired by the insured. 208 Cal. Rptr. at 506. The Cumis decision created considerable confusion, led to abuses by insurers and attorneys selected by insureds, and probably had an adverse economic impact on the public. Brown & Romaker, supra, at 63-68.
The majority opinion is likely to have similar effects in Alaska and will probably require legislative intervention to ultimately bring fairness and order to this complex area of law.
[11] It seems an equally probable danger that an "independent" attorney selected by the insured would have an interest in favoring the insurer in the hope of establishing a continuing relationship with the insurer, while his relationship with the insured is likely to be transitory. After all, it is the insurer who pays "independent" counsel's fees, too. The rule adopted by the majority does not address this danger and is a radical step which will be of doubtful effectiveness in resolving a problem which may be more pervasive in the minds of academicians than in the real world.
[12] DR 5-105 applies to the situation in which a lawyer represents two clients. In the circumstances discussed here, the attorney has but one client, the insured. See Tank v. State Farm Fire & Casualty Co., 105 Wash.2d 381, 715 P.2d 1133, 1137 (1986) ("Both retained defense counsel and the insurer must understand that only the insured is the client."). Nonetheless, DR 5-105 is applicable by virtue of the obligations the attorney has toward the insurer as a result of the insurance agreement between insurer and insured. While we need not decide the scope of that obligation here, at a minimum it encompasses a duty to communicate with the insurer, to share non-confidential and unprivileged information regarding the case with the insurer, and to cooperate with the insurer in efforts to settle the case.
[13] While that case did not involve the same type of conflict of interest present here, this court's recent decision in Bohna v. Hughes, Thorsness, Gantz, Powell & Brundin, 828 P.2d 745 (Alaska 1992) suggests that existing law is adequate to remedy the abuses of attorneys and insurers who compromise the interest of the insured.
[14] The agreement between CHI and Employers provided:
[CHI] shall cooperate with [Employers], and upon [Employers] request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits.
[15] In the typical coverage dispute case where the party suing the insured alleges both intentional and negligent conduct, the plaintiff has a strong interest in developing facts indicating intentional conduct, as this enhances the strength of the plaintiff's case and may be a basis for an award of punitive damages. Such facts would be discoverable by the insurer in subsequent coverage litigation with the insured.
[1] Interestingly the court affords CHI a right which it did not believe it had, and which it claimed not to be asserting if it did. In a letter from Lee Houston of Clement-Houston Insurance, Inc. (CHI of Alaska, Inc.) to counsel initially selected by Employers, Houston remarks:
I said, as I am repeating here, that we preferred having our own lawyer. Now you are twisting this around to indicate we have terminated you. This is not true. I doubt the policy gives us authority to unilaterally dismiss counsel ... and we are not going to try to do so.
Houston doubted too much. Not only did CHI have the right to unilaterally dismiss counsel selected by Employers, but also it had the unfettered right to unilaterally select counsel regardless of its policy with Employers.
[2] Section X of the insurance contract provides in part:
The Insured shall cooperate with the Corporation, and, upon the Corporation's request, shall attend hearings and trials and assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits.
[3] This is not to say that there must be multiple counsel. The insurer may accept the insured's choice of counsel to represent its interests, or the insured may accept the insurer's choice of counsel to represent its interests. This would be a matter of choice, not contract. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1427700/ | 441 F.Supp. 612 (1977)
UNITED STATES of America
v.
Shelby Ann BAKER and Wayne Edward Garrity.
No. 77-30295-NA-CR.
United States District Court, M. D. Tennessee, Nashville Division.
October 28, 1977.
*613 *614 Hal D. Hardin, U. S. Atty., William H. Farmer, Asst. U. S. Atty., Nashville, Tenn., for plaintiff.
John E. Rodgers, Nashville, Tenn., for Baker.
Alfred H. Knight, III, Nashville, Tenn., for Garrity.
MEMORANDUM
MORTON, Chief Judge.
On September 11, 1977, defendants were arrested for allegedly kidnapping Annette Adams. Bond was initially set for both defendants at $250,000 by Magistrate Barbara H. Delaney of the United States District Court for the Western District of North Carolina. Both defendants were indicted for the alleged kidnapping on September 13, 1977 by the federal grand jury for the Middle District of Tennessee. Each defendant was thereafter removed to the Middle District of Tennessee to stand trial on the indictment.
On September 26, 1977, defendant Baker filed a Motion for Reduction of Bail. A hearing on her motion was held on September 28, 1977. Following argument by both the Government and counsel for defendant Baker, the court made the following statements in denying the motion:
BY THE COURT: All right, it is the judgment of this Court that the bail will not be reduced. I am not going to turn any kidnappers out here on the street and let them take another shot at somebody. So on that basis I will overrule it.
Mr. Rodgers, the Sixth Circuit has a chief judge right downstairs and they have an administrative man up in the Sixth Circuit, and if they think I am wrong, you can put her on the street.
BY MR. RODGERS: Thank you, Your Honor.
BY THE COURT: Draw an order, Mr. I just believe she's a threat to the community. Anybody that will go out here and allegedly I don't know whether she's guilty or not, but she's alleged to have gone out and kidnapped somebody off the campus and kept them for fifty-five hours. How do I know they wouldn't start it again tomorrow. I *615 think she's a threat to the community. On that basis I refuse to do it.
All right, anything further?
BY MR. RODGERS: That's all.
BY THE COURT: All right.
(Tr. 19)
Each defendant thereafter filed a motion for this court to recuse itself in this case. Defendant Baker's motion was filed on October 5, 1977, while defendant Garrity's motion was filed on October 6. Each motion was accompanied by an affidavit signed by the defendant and a certificate of good faith signed by each defendant's counsel. Defendant Baker's affidavit states as follows:
Shelby Ann Baker, being duly sworn, says:
1. I am the Defendant in the above numbered and entitled cause.
2. On September 28, 1977, in a hearing relating to bail in the United States District Court, Honorable L. Clure Morton presiding, I heard the Judge refer to me as a kidnapper and as a result felt he was biased and prejudiced and had formed an opinion as to my guilt or innocence. As a result, I requested my attorney to obtain a transcript and look into the matter of getting the Judge to withdraw from the case.
3. On October 3, 1977 I conferred with my attorney and was presented with a transcript of the Judge's remarks in the proceeding which are attached hereto and made a part of this document as if set out in full.
4. Honorable L. Clure Morton, District Judge, Middle District of Tennessee, Nashville Division is therefore disqualified to act in the above numbered and entitled cause under the provisions of Title 28, U.S. Code, Section 455, and 144 respectively.
Defendant Garrity's affidavit states as follows:
Wayne Edward Garrity deposes and says:
I am one of the defendants in the above-captioned case. After her hearing for reduction of bond, my co-defendant Shelby Baker wrote me a letter indicating that the Honorable L. Clure Morton had made a statement during the hearing, indicating bias or prejudice on his part. On October 4, 1977, I asked my lawyer, Alfred H. Knight, about Judge Morton's statements, and he has provided me with a transcript of them. A copy of the transcript is attached to this motion. The Court's statement in the transcript referring to me as a "kidnapper" indicates that Judge Morton is personally biased and prejudiced against me and I respectfully request that he recuse himself and proceed no further in this case.
Each defendant also claims that the court has extrajudicial knowledge of the facts underlying this case. Both defendants rely on the provisions of 28 U.S.C. §§ 144 and 455 as grounds for their motions. Having carefully considered the respective motions and affidavits, the court finds that they must be denied.
A defendant in a criminal case "is entitled to the cold neutrality of an impartial judge." United States v. Orbiz, 366 F.Supp. 628, 629 (D.P.R.1973). "[D]ue process demands a fair hearing before an impartial tribunal." Duffield v. Charleston Area Medical Center, Inc., 503 F.2d 512, 517 (4th Cir. 1974); Knapp v. Kinsey, 232 F.2d 458, 465 (6th Cir.), cert. denied, 352 U.S. 892, 77 S.Ct. 131, 1 L.Ed.2d 86 (1956); United States v. Thomas, 299 F.Supp. 494, 497 (E.D.Mo.1968). This is particularly important at the time of sentencing. United States v. Thompson, 483 F.2d 527, 529 (3d Cir. 1973). However, neither the government nor a defendant has a right or interest in having a particular judge try a particular case. United States v. Devlin, 284 F.Supp. 477, 482 (D.Conn.1968). A motion to recuse may not be used for the purpose of judge or forum shopping. Mavis v. Commercial Carriers, Inc., 408 F.Supp. 55, 61 (C.D.Cal.1975); United States v. Devlin, supra at 482.
28 U.S.C. § 144 provides as follows:
*616 Whenever a party to any proceeding in a district court makes and files a timely and sufficient affidavit that the judge before whom the matter is pending has a personal bias or prejudice either against him or in favor of any adverse party, such judge shall proceed no further therein, but another judge shall be assigned to hear such proceeding.
The affidavit shall state the facts and the reasons for the belief that bias or prejudice exists, and shall be filed not less than ten days before the beginning of the term at which the proceeding is to be heard, or good cause shall be shown for failure to file it within such time. A party may file only one such affidavit in any case. It shall be accompanied by a certificate of counsel of record stating that it is made in good faith.
Under section 144, a motion to recuse must be filed. Davis v. Board of School Commissioners, 517 F.2d 1044, 1051 (5th Cir. 1975), cert. denied, 425 U.S. 944, 96 S.Ct. 1685, 48 L.Ed.2d 188 (1976). The motion must be promptly filed after the facts forming the basis for disqualification become known. Davis v. Cities Service Oil Co., 420 F.2d 1278, 1282 (10th Cir. 1970); United States v. Hoffa, 382 F.2d 856, 859 (6th Cir. 1967), cert. denied, 390 U.S. 924, 88 S.Ct. 854, 19 L.Ed.2d 984 (1968); Pennsylvania v. Local 542, International Union of Operating Engineers, 388 F.Supp. 155, 158 (E.D.Pa.1974); Molinaro v. Watkins-Johnson CEI Division, 359 F.Supp. 474, 475 (D.Md.1973). An affidavit stating the facts and reasons for the belief that bias or prejudice exists and a certificate signed by counsel of record that the motion to recuse is made in good faith must be filed together with the motion to recuse. United States v. Hoffa, supra at 860; Pennsylvania v. Local 542, International Union of Operating Engineers, supra at 158; Molinaro v. Watkins-Johnson CEI Division, supra at 475.
The standard under section 144 is whether assuming the truth of the facts alleged, a reasonable person would conclude that a particular judge is biased or prejudiced against a particular defendant. Mims v. Shapp, 541 F.2d 415, 417 (3d Cir. 1976); Parrish v. Board of Commissioners, 524 F.2d 98, 100 (5th Cir. 1975), cert. denied, Davis v. Board of School Commissioners of Mobile County, 425 U.S. 944, 96 S.Ct. 1685, 48 L.Ed.2d 188 (1976); United States v. Thompson, 483 F.2d at 528; United States v. Devlin, 284 F.Supp. at 481. There is a substantial burden on a defendant to prove that a judge is not qualified or impartial. Molinaro v. Watkins-Johnson CEI Division, 359 F.Supp. at 476; United States v. Thomas, 299 F.Supp. at 498. Moreover, the defendant must establish that the alleged bias and prejudice is personal, stemming from an extrajudicial source and resulting in an opinion on the merits other than what the judge has learned from his participation in the case. United States v. Grinnell Corp., 384 U.S. 563, 583, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966); United States v. Bernstein, 533 F.2d 775, 785 (2d Cir.), cert. denied, 429 U.S. 998, 97 S.Ct. 523, 50 L.Ed.2d 608 (1976); Davis v. Board of School Commissioners, 517 F.2d at 1051; Duffield v. Charleston Area Medical Center, Inc., 503 F.2d at 517; United States v. English, 501 F.2d 1254, 1263 (7th Cir.), cert. denied, 419 U.S. 1114, 95 S.Ct. 791, 42 L.Ed.2d 811 (1975); United States v. Beneke, 449 F.2d 1259, 1260 (8th Cir. 1971); Davis v. Cities Service Oil Co., 420 F.2d at 1282; Knapp v. Kinsey, 232 F.2d at 466. Personal bias involves antagonism or animosity towards the affiant. United States v. Nehas, 368 F.Supp. 435, 437 (W.D.Pa.1973). The mere fact that a judge has made an adverse ruling to a particular defendant during the course of the present judicial proceedings, has accepted the guilty plea of a codefendant or coconspirator, or has had prior judicial exposure to a defendant does not establish bias or prejudice on the part of a judge. Berger v. United States, 255 U.S. 22, 31, 41 S.Ct. 230, 65 L.Ed. 481 (1921); United States v. Bernstein, supra at 785; Oliver v. Michigan State Board of Education, 508 F.2d 178, 180 (6th Cir. 1974), cert. denied, 421 U.S. 963, 95 S.Ct. 1950, 44 L.Ed.2d 449 (1975); United States v. English, supra at 1263; United States v. Beneke, supra at 1260; Knapp v. Kinsey, supra at 466. "Displeasure on the *617 part of a defendant in a criminal case with the ruling of a judge fixing bail or on a motion to reduce bail is insufficient as a matter of law to establish personal bias or prejudice required for disqualification." United States v. Devlin, supra at 481; United States v. Tropiano, 418 F.2d 1069, 1077 (2d Cir. 1969), cert. denied, 397 U.S. 1021, 90 S.Ct. 1258, 25 L.Ed.2d 530 (1970). However, where such pervasive bias or prejudice is shown by otherwise judicial conduct as would constitute bias against a party, the bias or prejudice need not be extrajudicial in nature. Davis v. Board of School Commissioners, supra at 1051.
In ruling on a motion to recuse under section 144, the court must accept all of the facts stated in the affidavit as being true. United States v. Thompson, 483 F.2d at 528. The court may not inquire into the truth of the facts alleged in the affidavit. Berger v. United States, 255 U.S. at 31, 41 S.Ct. 230; United States v. Ritter, 540 F.2d 459, 462 (10th Cir.), cert. denied, 429 U.S. 951, 97 S.Ct. 370, 50 L.Ed.2d 319 (1976); Davis v. Board of School Commissioners, 517 F.2d at 1051; Oliver v. Michigan State Board of Education, 508 F.2d at 180; United States v. Hoffa, 382 F.2d at 859. However, the court must inquire into the legal sufficiency of the affidavit. Berger v. United States, supra, 255 U.S. at 31, 41 S.Ct. 230; United States v. Ritter, supra, 540 F.2d at 462; Davis v. Board of School Commissioners, supra at 1051; Oliver v. Michigan State Board of Education, supra at 180; United States v. Hoffa, supra at 859. If the statutory standards are met, and if the affidavit is legally sufficient, the court must recuse itself. See Molinaro v. Watkins-Johnson CEI Division, 359 F.Supp. at 476.
28 U.S.C. § 455 provides in pertinent part as follows:
(a) Any justice, judge, magistrate, or referee in bankruptcy of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.
(b) He shall also disqualify himself in the following circumstances:
(1) Where he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding;
Section 455 is the statutory standard for disqualification of a judge. It is self-enforcing on the part of the judge. It may also be asserted by a party by filing a motion to recuse in the trial court. Parrish v. Board of Commissioners, 524 F.2d at 102 n. 8; Davis v. Board of School Commissioners, 517 F.2d at 1051.
Section 455(a) is general in nature and does not rest on the personal bias and prejudice structure of either 28 U.S.C. § 144 or 28 U.S.C. § 455(b)(1). Parrish v. Board of Commissioners, supra at 103. It is broader than section 144, disqualification being warranted not only where there is actual bias or prejudice, but where the impartiality of a judge might reasonably be questioned. United States v. Ritter, 540 F.2d at 462. The standard under section 455(a) is whether a reasonable person would infer that a trial judge's impartiality might reasonably be questioned. Parrish v. Board of Commissioners, supra at 103; Davis v. Board of School Commissioners, supra at 1052; Mavis v. Commercial Carriers, Inc., 408 F.Supp. at 61; Samuel v. University of Pittsburgh, 395 F.Supp. 1275, 1277 (W.D.Pa. 1975), vacated on other grounds, 538 F.2d 991 (3d Cir. 1976). Among the determinations that must be made is whether there exists "a reasonable likelihood that the cause will be tried with the impartiality that litigants have a right to expect in a United States district court." United States v. Ritter, supra at 464. However, the mere fact that a judge has ruled adversely to a party does not mandate a finding that he is not impartial.
If the words "impartiality might reasonably be questioned" and "avoid impropriety and the appearance of impropriety" were to be interpreted to encompass judicial rulings in the course of a trial or other proceedings . . . then there would be almost no limit to disqualification motions and the way would be opened to a return to "judge shopping", a *618 practice which has been for the most part universally condemned. Lazofsky v. Sommerset Bus Co., 389 F.Supp. 1041, 1044 (E.D.N.Y.1975)
Section 455(a) does not "amount to a grant of automatic veto power in order that counsel might choose a judge who meets with their approval." Samuel v. University of Pittsburgh, supra at 1277.
Section 455(b)(1) is substantially similar to 28 U.S.C. § 144. The standard under section 455(b)(1) is similar to the standard under section 144: whether a reasonable person would conclude that a judge is biased or prejudiced against a particular defendant. Davis v. Board of School Commissioners, 517 F.2d at 1052. The mere fact that a judge has prior knowledge of facts concerning a party is not in and of itself sufficient to require the judge to disqualify himself. United States v. Patrick, 542 F.2d 381, 390 (7th Cir. 1976), cert. denied, 430 U.S. 931, 97 S.Ct. 1551, 51 L.Ed.2d 775 (1977). Moreover, facts learned by a judge while acting in his judicial capacity cannot be the basis for disqualification under this section. United States v. Patrick, supra at 390.
In the case sub judice, each defendant has satisfied the statutory standards of section 144 by timely filing motions to recuse, affidavits and certificates of counsel. However, it is the opinion of the court that the affidavits filed by each defendant are not legally sufficient to sustain the motion to recuse and that the court need not recuse itself under section 455. Contrary to the contentions of defendants, this court has had no substantive extrajudicial exposure to the facts surrounding this case. At the very outset of the September 28 bond hearing, this court informed counsel for defendant Baker of this fact. The court specifically stated as follows:
BY THE COURT: Mr. Rodgers, let me disabuse your mind. The only thing I know about this case is what the headlines said. I figured I would have to try this lawsuit, so I did not read in detail the articles, so I have no basic knowledge about this matter. I have before I could turn off the TV set, I have heard certain statements made by newspaper reporters, but that's hearsay, and I have no I have not been persuaded one way or another by the hearsay statements that I have heard, the few I have heard.
BY MR. RODGERS: I am sure of that, Your Honor, and I am sure that regardless of what may have been seen, written or heard, that your decision would be on the merits.
(Tr. 7)
Defendant Baker contends that the fact that during the course of the bond hearing the court made reference to the fact that defendant Baker had allegedly kidnapped Annette Adams from the campus of Vanderbilt University and kept her in custody for some fifty-five hours is "proof" that the court has extrajudicial knowledge of the facts of this case. However, a review of the record reveals that both of these facts, that someone was taken "off the campus" and kept "for fifty-five hours," were made known to the court during the course of regular judicial proceedings. During the course of the bond hearing, counsel for the government stated, "The victim was held for fifty-five hours." (Tr. 17). And in an affidavit in support of a request for an arrest warrant filed with the court on September 11, 1977, Special Agent Richard G. Knudsen of the Federal Bureau of Investigation stated as follows: "On Thursday, September 8, 1977, Annette Adams was forcibly kidnapped from Vanderbilt University campus in Nashville, Tennessee by a white male and white female." Thus, it is clearly evident that the court did not learn of these facts from extrajudicial sources but during the course of judicial proceedings. Therefore, the court need not recuse itself on these grounds.
Defendants also claim that the court showed a bias and prejudice towards them and a partiality against them by calling them kidnappers and by stating "I am not going to turn any kidnappers out here on the street and let them take another shot at somebody," and "How do I know they won't start it again tomorrow." (Tr. 19). However, *619 the court is of the opinion that these statements do not establish bias, prejudice, or lack of impartiality on its part. At the time the bond hearing was held, each defendant had been indicted for kidnapping. Although the court referred to the defendants as kidnappers, it very carefully stated that the defendant Baker was alleged to have kidnapped someone and that the court had no knowledge of whether she was guilty or not. (Tr. 19). Moreover, the court was required to make the determinations it made by the Sixth Circuit's recent decisions regarding release under 18 U.S.C. § 3146. In United States v. Wind, 527 F.2d 672 (6th Cir. 1975), the court held:
We hold that in a pretrial bail hearing on a non-capital offense, a judicial officer may consider evidence that the defendant has threatened witnesses and is a danger to the community in determining whether the defendants should be released pursuant to 18 U.S.C. § 3146.
527 F.2d at 675.
See also United States v. Bigelow, 544 F.2d 904 (6th Cir. 1976). Thus, the court was required to determine whether defendant Baker was a danger to the community in deciding whether she should be released under the provisions of section 3146. The court found that she was a threat to the community, that she potentially posed a danger to innocent individuals on the street. Defendants cannot complain when the court makes adverse findings to them in response to a motion one of them has filed. Moreover, the court finds that the statements in question do not show any antagonism or animosity toward either defendant, that the statements are not so pervasive in nature as to constitute bias or prejudice, and that the statements are not of such a nature as to cause a reasonable man to question the court's impartiality. Defendants may obtain a fair trial in this court. Therefore, for these reasons also, the court finds that the motions to recuse must be denied, the affidavits being legally insufficient to require recusal under 28 U.S.C. § 144 and there existing no reason for the court to recuse itself under either 28 U.S.C. § 455(a) or (b)(1).[1]
An appropriate order will be entered.
NOTES
[1] Defendant Baker also relied on the provisions of 28 U.S.C. § 455(b)(3) as support for her motion. Section 455(b)(3) provides that a judge shall recuse himself:
Where he has served in governmental employment and in such capacity participated as counsel, adviser or material witness concerning the proceeding or expressed an opinion concerning the merits of the particular case in controversy.
Since the court has had no exposure to this case other than in its present judicial capacity, the court finds the provisions of section 455(b)(3) to be inapplicable to this case, and defendant Baker's reliance on them to be misplaced. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1735080/ | 757 So.2d 98 (2000)
Danyele MANNINA
v.
WAL-MART STORES, INC. and National Union Fire Insurance Company of Pittsburgh, PA.
No. 99-CA-1102.
Court of Appeal of Louisiana, Fifth Circuit.
February 29, 2000.
Writ Denied June 2, 2000.
*99 Thomas M. Discon, John G. Discon, Gregory T. Discon, Mandeville, Louisiana, Counsel for Plaintiff-appellee/Cross-appellant Danyele L. Mannina.
Frederick R. Campbell, Geoffrey J. Orr, Campbell, McCranie, Sistrunk, Anzelmo & Hardy, Metairie, Louisiana, Counsel for Defendants-appellants.
Court composed of Judges EDWARD A. DUFRESNE, Jr., THOMAS F. DALEY and CLARENCE E. McMANUS.
*100 McMANUS, Judge.
The matter before us is an appeal from a judgment holding a store liable in a "falling merchandise" case. Because we agree that plaintiff carried her burden to show negligence, we affirm. Further, because we find no abuse of discretion in the award of general damages, we affirm this portion of the judgment, appealed by plaintiff, as well.
The incident occurred on October 24th, 1996, while plaintiff, Danyele Mannina, was shopping at defendant-appellant, Wal-Mart's, Harahan location. Mannina sustained injuries when several wood clocks fell from a display rack and struck the back of her head; these injuries required some months of treatment. Suit was timely filed against Wal-Mart, and on May 17th, 1999, a bench trial was held to decide liability and damages. At the conclusion of trial, the judge ruled in Mannina's favor; a written judgment was signed June 11th, 1999, awarding Mannina stipulated special damages and the sum of $8,500.00 in general damages. Wal-Mart's Petition for Appeal was filed July 9th, 1999, and Mannina's answer to the appeal was filed October 18th, 1999.
On appeal, Wal-Mart assigns one error, which is, that the trial court was manifestly erroneous in finding negligence on their part. Mannina assigns as error an inadequate award for general damages.
The following evidence regarding the facts of the accident and negligence on Wal-Mart's part was produced at trial.
Mannina testified that on the evening the accident occurred, she had been at the Wal-Mart, accompanied by her friend, Christine Gilson, shopping for needlepoint kits. The two had been in the crafts department walking down the aisle where the kits were on display when they had stopped to look at some hanging near the bottom of what they describe as a "gondola." On the gondola above the needlepoint kits had been several rows of wood clocks, dangling from "snap peg hooks" bracketed to the metal grid-type frame of the gondola. Mannina testified that as she had been kneeling in front of the needlepoint kits, with Gilson standing behind her, three clocks and the hook from which they had been hanging fell, two of them striking the back of her head: "I heard a noise, Christine heard a noise, she backed up and then noticed that there was (sic) three clocks falling with a peg. She reacted as fast as she could and grabbed the peg and the last clock, but the other two struck me." She testified that she had noticed the clocks as the two approached the gondola, and that there hadn't seemed to be anything "out of the ordinary" about them. She also testified that neither she nor Christine had had any reason to examine the clocks and that neither had touched them. She stated that she did not know what had caused the hook and clocks to fall.
Christine Gilson also testified that she had not touched the clocks, and stated that she had not consciously realized that the objects were clocks until they fell and she caught one. She testified that she had noticed a "rustling" sound, seen a flash, and looked up in time to catch one of the clocks still attached, "holding onto," the snap peg. Though she testified that she had no idea what had caused the clocks to fall, she did state that they had begun to fall as Mannina tried to pull a needlepoint kit from the bottom of the gondola. She, too, testified that she had not seen anything "odd" about the display or the clocks.
Both Mannina and Gilson testified, without equivocation, that there had been no onenot another customer nor any Wal-Mart employeenear them for as long as they had been on the aisle.
Terri Smith, a former Wal-Mart employee, and the one who had been the first to investigate the accident, testified as follows. Though she had ordinarily been the sales floor associate in the domestic section of the store, on the night in question and at the time of the accident, she had been watching the craft section for *101 another worker who had been at lunch for an hour. She stated that at the time of the accident, she had been about twenty to thirty feet from the gondola. She had not actually witnessed the clocks falling, but had been alerted by the noise they made as they fell. After she had turned towards the noise, she had seen Gilson standing, Mannina "stooping," and the clocks on the floor. She testified that she had inspected the clocks, the hook and the gondola, had not seen "anything wrong" with any of them, and had ultimately attached the hook back to the gondola and hung the clocks from it.
Smith also testified that she was familiar with both the metal gondola and the type of hook from which the clocks had been hanging. She described the hook as being identical to, though a little longer than, one admitted into evidence during her testimony. In addition, she described how the hook is attached to the frame of the gondola: "You have to put the top portion on first over the hook and then slide the bottom over, under ... You take it, you put the top portion on first cause (sic) it fits and then you slide the bottom portion underneath, it will fit between two metal pieces, it's like two metal bars." If we may elaborate, the "top portion" of the hook is the top of a small metal plate which is rounded to hug one of the metal rods forming the gondola and which, when rotated around the rod, allows the "bottom portion" of the plate, which is also slightly rounded, to slide underneath a lower rod of the frame. The hook is thus secured to the frame, and the rods from which merchandise is hung, attached to the metal plate, project outwards from the frame. Smith testified that "in her experience" she had never seen a peg hook "of [this] type" fall off of a display rack, and stated that in her opinion, it takes "the actions of someone" to remove such a hook from its place.
Smith was the only Wal-Mart employee to testify regarding Wal-Mart's procedures for aisle inspection and clean-up. She testified that Wal-Mart utilizes a "zone defense" clean-up strategy to maintain the aisles in a clean and safe state, which she described as follows. The defense is "To make sure nothing was on the floor or nothing could fall and hurt anyone, to make sure that the area was neat or orderly, everything pulled to the front." She testified, however, that this inspection was "basically" a visual one only and that it did not entail making sure that every display was "secure." She testified, since she had been watching the crafts department only during someone else's lunch hour, that she could not remember having done the visual inspection of this department during the hour or having specifically looked at the display where the clocks were hung. Smith did not know whether the Wal-Mart employee who was in charge of the craft department had done an inspection recently before the accident.
Smith did not testify, nor did any other Wal-Mart employee, regarding the assembly of the gondola, the placing of the hooks on the gondola's frame, or the hanging of the clocks on the hooks, or to indicate whether these tasks are performed under safety standards designed with store patrons in mind.
At the conclusion of trial, in rendering judgment, the trial judge stated the following oral reasons:
"In view of the testimony offered I am persuaded that the plaintiff was not negligent. I am also persuaded that there is no inference of negligence on the parts of any other party, excepting the defendant.
"In this particular instance, while we have testimony as to the effort it takes to firmly fasten the peg hook into place, I am also aware through not only personal experience, but I notice by her testimony that it would take an equal amount of effort to make sure that one is securely in place.
"There was no testimony to indicate that customers do not from time to time remove these things because they have difficulty or for that reason they don't know *102 how to get a particular clock or any other appliance off a peg hook.
"Under the circumstances, it is the finding of this Court that the inference of negligence here is on the part of the defendant, as they were responsible for the injuries caused to the plaintiff."
The trial judge, therefore, made the following findings of fact: that Mannina was not at fault, that it takes a certain amount of effort to place the hook on a display rack, and that the hook in question could be, and possibly had been, tampered with, "removed," by another Wal-Mart customer.
As Wal-Mart's only assignment of error, they assert that the trial judge was not correct in finding negligence on their part. Wal-Mart argues that it was "physically impossible" for the snugly fitting hook to have been partly dislodged from the frame of the gondola to fall in stops and starts. They suggest that once the hook had been even slightly disengaged, under the weight of the merchandise and subject to the pull of gravity, the hook and merchandise would have fallen immediately to the floor. Wal-Mart further argues that since it is physically impossible for the clock to have fallen without human intervention, and since Mannina and Gilson had been the only persons near the clocks when the clocks fell, the inference is that it had been they who dislodged the hooks. Wal-Mart suggests that the two are lying when they deny having touched the clocks. Having reviewed the record before us, we cannot agree with Wal-Mart's first assertion. And being a reviewing court, though we agree that someone touched the hook, we cannot disturb the trial court's rejection of the second.
A merchant's duty to keep customers safe from harm caused by stray or falling merchandise is set out, in rules that refine the more general tort liability law, under LSA-R.S. 9:2800.6 and cases following the article. The provisions of LSA-R.S. 9:2800.6 regarding falling merchandise read as follows:
A. A merchant owes a duty to persons who use his premises to exercise reasonable care to keep his aisles, passageways, and floors in a reasonably safe condition. This duty includes a reasonable effort to keep the premises free of any hazardous conditions which reasonably might give rise to damage.[1]
This duty encompasses the responsibility on the part of store employees to place the merchandise safely on the shelf in such a manner that the merchandise will not fall, as well as to replace safely on the shelf such merchandise as has been moved or removed. The employees have the additional responsibility to check the shelves periodically to ensure that the merchandise is in a safe position and does not present an unsafe condition. Smith v. Toys "R" Us, Inc., 98-2085, at p. 4 (La.11/30/99), 754 So.2d 209, 213. Put another way, the duty to "check the shelves" requires employees to exercise "... the degree of care which would lead to discovery of most hazards." Matthews v. Schwegmann Giant Supermarkets Inc., 559 So.2d 488 (La.1990) (emphasis supplied); Whitt v. Wal-Mart Stores, Inc., 96-906 (La.App. 5th Cir. 3/12/97), 690 So.2d 1009, 1012.
Once an accident has happened on a merchant's premises, and the matter has proceeded to trial, the burden is on the customer seeking to prove negligence on the part of the merchant for having neglected the above responsibilities. And we are fortunate, in our review of the accident at hand, to be guided by the Supreme Court's very recent clarification of the burden incumbent on such customers, found in *103 the Smith case, cited above.[2] To prevail in a "falling merchandise" case, the customer must now demonstrate that he or she did not cause the merchandise to fall, that another customer in the aisle at that moment did not cause the merchandise to fall, and that the merchant's negligence was the cause of the accident: the customer must show that either a store employee or another customer placed the merchandise in an unsafe position on the shelf or otherwise caused the merchandise to be in such a precarious position that eventually, it does fall. Only when the customer has negated the first two possibilities and demonstrated the last will he or she have proved the existence of an "unreasonably dangerous" condition on the merchant's premises. Smith, 98-2085 at p. 4, 754 So.2d at 212. Formerly, under Matthews and cases following that decision, the customer's burden had been satisfied by simply showing the first two prongs of the abovethat neither the plaintiff customer nor any other nearby customer had caused merchandise to fall from its shelved position. Matthews, 559 So.2d at 488; Whitt, 690 So.2d at 1011-12. Under Matthews, the customer's having ruled out these two possibilities shifted the burden of proof to the merchant, requiring it to show that it used reasonable care to avoid such hazards by means such as periodic cleanup and inspection procedures. Lapeyrouse v. Wal-Mart Stores, Inc., 98-547 (La.App. 5th Cir. 12/16/98), 725 So.2d 61, 63, writ denied, 99-0140 (La.3/12/99), 739 So.2d 209. Now, under Smith, though evidence of adequate inspection and cleanup procedures may yet be part of the merchant's burden to disprove negligence, evidence of the opposite is certainly relevant as part of the customer's burden to prove negligence: plaintiff customer will carry his or her burden if he or she can make a prima facie showing that inadequate or neglected inspection and cleanup procedures left merchandise in such an unstable or precarious position that it falls from its stacked or displayed position to cause injuriesdamagesto him or her. Smith, 98-2085 at p. 5, 754 So.2d at 213. Finally, we note that the burden enunciated in Smith does retain two principles relied on under the former authority: the hazardous condition may still be proved by either direct or circumstantial evidence, and, further, findings of fact regarding such hazardous conditions made at trial level are given manifest error review. Smith, 98-2085 at p. 3, 754 So.2d at 211.
There is no question that Mannina has eliminated the possibility of any negligence on the part of any nearby customer in the aisle when the accident happened. She and Gilson both testified, thus offering direct evidence, that no other person, not another customer nor any Wal-Mart employee, had been in the aisle in the craft department when the clocks fell. Further, both testified positively that neither of them had touched the clocks or caused them to fall. The trial judge found both to be credible; he found no inference of negligence on the part of either. We cannot disturb this finding on appeal. Smith, 98-2085 at p. 3, 754 So.2d at 212.
The evidence regarding Wal-Mart's observance of its duty to keep the aisles in the craft department clean and safe, produced as part of Mannina's case in chief, is as follows.
The only Wal-Mart employee to testify regarding general inspection and clean-up procedures, Terri Smith, testified that such inspections were done visually only, *104 and that employees did not use any other method to insure that merchandise was securely placed on displays or shelves. There was no testimony to indicate whether there was a set schedule for such inspections or how frequently they were done. There were no records of any sort introduced with Smith's testimony. And in addition, even if these practices would pass muster as a sufficient clean-up routine, there was no evidence presented by Wal-Mart that on the night in question the craft department had been given even this cursory inspection. Smith, who had been watching the craft department for the hour while the craft salesperson was lunching, could only testify that this person "would have" done the regular inspection. Nor could Smith remember doing a safety inspection herself while she had been watching the craft departmentshe wasn't "really sure," but "could have done" the aisle check sometime during the hour. This simply is not adequate. The circumstantial evidence clearly implies negligence on Wal-Mart's part.
Wal-Mart introduced no evidence of any sort, direct or circumstantial, to rebut the implication of negligence. No employee testified regarding the assembling of the "gondola" from which the needlepoint kits and clocks were hanging or the placement of the "snap hooks" on the frame of the gondola. Nor was there any testimony regarding inspecting of new displays to insure that they are properly put together. Thus, Wal-Mart presented no evidence that the gondola and hooks had not presented a hazard from the moment they were put up.
Regarding clean-up procedures, the Wal-Mart employee who had been ordinarily assigned to the craft section did not testify, nor did any supervisor who could have confirmed that the sales employee had inspected the aisles where the accident had happened.
Plaintiff has carried her burden to show that on the night in question the craft aisles of the store in question had not been properly policed and cleared of any possible hazards which would cause harm to customers.
We add that we are not convinced by Wal-Mart's arguments that the "laws of physics" would not allow the hook and clocks to gradually slip off of the frame of the gondola. We have examined the hook in question, and viewed the photographs of the gondola frame, and do not agree that the hook could not detach in degrees from the gondola. Nor does, even if true, the fact that human intervention is necessary to move the hook logically eliminate the possibility of the hook's slipping gradually. Further, the testimony of one Wal-Mart employee that she had never seen this happen does not convince us that it could not happen. We repeat, we have examined the hook, and believe that most likely it did get dislodged by another customer perhaps removed and not properly replacedthen slowly fell away from the frame of the display rack. We note, and agree with, the trial judge's observation that customers "from time to time" remove hooks from shelves or displays because sometimes merchandise is difficult to remove from hooks. And at any rate, regarding the weight due appellant's assertions, we must remember that the laws of physics do not resolve the question of legal cause. Jarvis v. J.I. Case Co., 551 So.2d 61, 62 (La.App. 1st Cir.1989).
The hook and gondola in question could have been not properly assembled; the hook could have been dislodged by a customer. The hook could have gradually slipped from the rack. Careful employees, vigilant employees, would have prevented any of this from happening. The trial judge's finding of negligence on Wal-Mart's part was correct.
Turning now to Mannina's error on appeal, we also agree that the trial judge was correct in his assessment of general damages awarded for her injury resulting from the accident.
*105 Mannina testified that two clocks struck her on the back of her head. She stated that immediately after the blow, her vision was blurred, she began to develop a headache, and her neck began to get "stiff." She testified that within ten minutes of the accident her neck began to hurt. Christine Gilson testified that immediately after the accident, Mannina had been so "shaky" that she could hardly stand or walk.
Mannina was treated immediately after the accident at Elmwood Medical Center for scalp contusions and was released with instructions to take over the counter medication as necessary.
Mannina sought medical treatment the day after the accident occurred, and saw Dr. Rhonda Kroll, M.D., and internist, for not quite ten months. On Mannina's first visit, Dr. Kroll noted the presence of spasms in Mannina's cervical spine and tenderness along the occipital area (the back of Mannina's head). Dr. Kroll diagnosed a soft tissue cervical injury, cervical sprain, prescribed headache medication and muscle relaxers, and advised Mannina to not work if she "couldn't handle" the duties. Dr. Kroll noted post-traumatic headaches at Mannina's next visit, on November 1st, 1996, and when Mannina also complained of blurred vision, Dr. Kroll referred her to a neurologist.
Dr. Walter Truax, M.D., a neurologist, saw Mannina at least once, on November 7th, 1996, and ruled out the possibility of any brain injury. Dr. Truax's narrative further indicates that though he "couldn't conceive" that Mannina's visual problems were "real," he recommended her to an ophthalmologist. Though Mannina testified that she saw Dr. Truax on two occasions, Dr. Truax's records do not show as much.
Mannina's next visit with Dr. Kroll was on November 8th, 1996, and at this visit, Dr. Kroll noted that Mannina showed "marked discomfort" when she moved her neck, and when Mannina still complained of "discomfort" at a November 22nd, 1996, visit, Dr. Kroll recommended physical therapy. Mannina continued treating with Dr. Kroll, and at a December 17th, 1997, visit, Dr. Kroll noted the development of increased spasm since the last visit. Mannina was still complaining of headaches in February of 1997, and at an April 28th visit, Mannina complained of pain and a burning sensation, and Dr. Kroll noted that the neck spasms had not abated. At an August visit, Dr. Kroll noted that Mannina was "improved," and at a September 9th, 1997, visit, Dr. Kroll found "no active cervical sprain."
Coincidentally, over the course of treatment for her neck injury, Mannina had been suffering from sinusitis, and had complained of symptoms related to this condition at almost every visit with Dr. Kroll. Regarding Mannina's headaches, Dr. Kroll testified that the sinusitis could have been a contributing factor in their recurring over the course of the neck injury.
Mannina did attend therapy over the course of her treatment with Dr. Kroll at Professional Therapy Services, Inc.. She commenced therapy on November 27th, 1996, and for the first month, went almost three times a week. The frequency of visits had diminished sharply by the next month, but increased again in the month of February of 1997. This pattern repeated itself, with therapy tapering off, then increasing, and by the last month of Mannina's treatment, roughly the beginning of June through the beginning of July 1997, Mannina was going to therapy only once a week.
Mannina herself testified that the therapy at first gave only "temporary" relief, but eventually, as she "kept going back," it helped, and she did begin to feel better. She also testified that by the time she was discharged from Dr. Kroll, she felt "better," though she still had back pain "on occasion," and that her headaches had discontinued.
Dr. Kroll directly related Mannina's injuries and treatment to the accident at Wal-Mart. And though Dr. Kroll did testify *106 that she had advised Mannina to not work over the course of treatment, she did not diagnose any permanent effects from the injury.
In the assessment of damages in cases of offenses and quasi offenses, much discretion must be left to the judge or jury. LSA C.C. art. 2324.1. Absent a determination that the trial court's very great discretion in the award of general damages has been abused in the matter under review, the reviewing court should not disturb the trier's award. Reck v. Stevens, 373 So.2d 498, 501 (La.1979), citing Wilson v. Magee, 367 So.2d 314 (La. 1979). The discretion vested in the trier of fact is "great," and even vast, so that an appellate court should rarely disturb an award of general damages. Youn v. Maritime Overseas Corp., 623 So.2d 1257, 1261 (La.1993); Stevenson v. Louisiana Patient's Compensation Fund, 97-709 (La. App. 5th Cir. 4/9/98), 710 So.2d 1178, 1181.
We cannot say that the trial judge abused his "great" discretion in the instant matter. Mannina suffered only a soft tissue injury to her neck which resolved over the course of conservative treatment with no complications and no permanent damages. One of the symptoms resulting from the neck injurythe headacheshad another contributing factor, Mannina's sinusitis. Further, the consulting neurologist seen by Mannina did not find objective evidence to confirm one of Mannina's other complaints, blurred vision. Mannina offered no testimony to show that her injury significantly disrupted her daily routines or activities, or that it otherwise diminished the quality of her life. We understand, of course, that this would have occurred, to a degree. And we are not forgetting that Mannina was unable to work until her injury had resolved. However, we must remember that Mannina was compensated for her lost income as an element of special damages. We have not found anything in this record which would allow us, a reviewing court, to say that the trial judge's award for a roughly ten month soft tissue neck injury, manageable with conservative treatment, and without any other aggravating factors, was not adequate.
For the above reasons, we affirm the trial court's judgment in all respects. Appellants, Wal-Mart Stores, Inc., and National Union Fire Insurance Company of Pittsburgh, Pennsylvania, are to bear all costs of appeal, including those incurred by Danyele Mannina.
AFFIRMED.
DALEY, J., DISSENTS WITH REASONS.
DALEY, J., dissenting.
I respectfully dissent. I find that the plaintiff failed to prove by a preponderance of the evidence that Wal-Mart's negligence caused the accident. I disagree with the trial court's oral reasons for judgment that an inference of negligence meets plaintiff's statutory burden of proof. Negligence must be proved by a preponderance of the evidence; it cannot be inferred by the lack of evidence.
Plaintiff proved that an accident happened, but did not prove by a preponderance of the evidence that it was caused by defendant's negligence. Plaintiff and her witness only showed that the hook fell. Neither knew how or why the hook fell. The Wal-Mart witness testified that the hook and display looked normal and that she replaced the hook and the merchandise. There was no showing that Wal-Mart was negligent. This is not a res ipsa situation. We cannot assume that just because the hook fell, the defendant was negligent.
A look at the picture of the display and an examination of the hook which was entered into evidence supports the conclusion that to fall, the hook needed to dislodged by someone. The trial court recognized through its own experience that customers sometimes dislodge display hooks when removing merchandise and *107 that they do not always properly re-fasten the hooks. Plaintiff and her friend testified that neither of them touched the clocks or the hook the clocks were on prior to the clocks falling. Defendant argues that the plaintiff or her friend must have touched the clocks or they would not have fallen. The evidence established that when the plaintiff removed the needle point kit from the lower hook the upper hook with the clocks on it fell. The inference referred to by the trial court appears to be that a properly fastened hook would not have fallen when plaintiff removed the needle point kit from the lower hook.
The defendant, Wal-Mart does have a duty to safely display its merchandise. I cannot infer negligence because in this case Wal-Mart did not identify some policy of checking all of the hooks on every display in every aisle on a routine basis. I find that the plaintiff did not meet the burden of proof required. See Jupiter v. Family Dollar Stores of Louisiana, Inc., 99-414 (La.App. 5 Cir. 9/28/99), 742 So.2d 1065.
I, therefore, would reverse the trial court finding.
NOTES
[1] We note that the more stringent burden under LSA-R.S. 9:2800.6B is applicable only in situations where a customer falls on a merchant's premises. Smith v. Toys "R" Us, Inc., 98-2085, at p. 5, 754 So.2d 209, 212, footnote 2 (La.11/30/99); Davis v. Wal-Mart Stores, Inc., 99-723 (La.App. 5th Cir. 1/12/00), 751 So.2d 357.
[2] The Smith case was decided while the instant matter was on appeal, and it is "axiomatic" that changes in law brought about by judicial decision will be given effect in judgments on direct appeal. Guillie v. Marine Towing, Inc., 95-355 (La.App. 5th Cir. 2/14/96), 670 So.2d 1298, 1304. In the instant matter, the Petition for Appeal (as appellant styled it) was signed July 9th, 1999; the Smith case was decided November 30th, 1999. It is therefore binding here. We note also that generally, laws affecting various burdens of proof are procedural and may be applied retroactively. Sudwischer v. Estate of Hoffpauir, 97-0785 (La.12/12/97), 705 So.2d 724, 729. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3356892/ | [EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]
MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT
This is an action to recover a broker's commission. The defendant has filed a motion for summary judgment claiming that the plaintiff cannot recover because there was no written listing agreement in effect for the sale of the property which is the basis for the plaintiff's claim. As part of the motion the defendant filed a copy of the original listing agreement, an addendum to that listing agreement, copies of sales contracts between the defendant and a prospective buyer, Running Brook Properties, a letter and an affidavit. In opposition to the motion the plaintiff has filed some of the same documents and an affidavit.
A summary judgment may be granted under section 384 of the Connecticut Practice Book if the pleadings, affidavits and other proof submitted with the motion show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Connelly v. Housing Authority, 213 Conn. 254, 264; Bartha v. Waterbury House Wrecking Co., 190 Conn. 8, 11; Yanow v. Teal Industries, Inc., 178 Conn. 262, 268. To satisfy this burden, the moving party must make a showing that it is quite clear what the truth is, and that it excludes any real doubt as to the existence of any material fact. D.H.R. Construction Co. v. Donnelly, 180 Conn. 430, 434; Fogarty v. Rashaw, 193 Conn. 442,445. In determining whether there is a material issue of fact, the evidence is considered in the light most favorable to the nonmoving party. Strada v. Connecticut Newspapers, Inc., 193 Conn. 313, 317; Connell v. Colwell, 214 Conn. 242,246, 247. Once the moving party has presented evidence in support of the motion for summary judgment, the opposing party must present evidence that demonstrates the existence of some disputed factual issue. State v. Goggin, 208 Conn. 606,616; Bartha v. Waterbury House Wrecking Co., supra, 11, CT Page 1916 12. The test as to whether a summary judgment should be granted, namely that the moving party must be entitled to judgment as a matter of law, is resolved by applying to the established facts the same criteria as is used in determining whether a party would be entitled to a directed verdict on the same facts. Connelly v. Housing Authority, supra, 364; Connell v. Colwell, supra, 247; State v. Goggin, supra, 616; Batick v. Seymour, 186 Conn. 632, 647.
A party opposing summary judgment must present evidence that demonstrates the existence of some disputed material factual issue. Daily v. New Britain Machine Co., 200 Conn. 562,568; State v. Goggin, supra, 616; Bartha v. Waterbury House Wrecking Co., supra, 11, 12. General claims and conclusory statements that there is a material issue of fact are insufficient to defeat the motion. Daily v. New Britain Machine Co., supra, 569; Burns v. Hartford Hospital,192 Conn. 451, 455. To oppose a summary judgment the nonmoving party must bring forward evidentiary facts or substantial evidence outside the pleadings from which the material facts alleged in the pleadings can reasonably be inferred. Sheridan v. Board of Education, 20 Conn. App. 231, 239; State v. Goggin, supra, 616, 617. A claim that factual issues exist is insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under section 380 of the Practice Book. Connell v. Colwell, supra, 254; Bartha v. Waterbury House Wrecking Co., supra 12.
The parties have filed substantially the same documentary evidence on this motion. They originally entered into a written listing agreement dated May 29, 1986 which stated that the listing was in effect for six months until November 29, 1986, and provided that the plaintiff/broker would receive a 10% commission of the agreed sales price "if during the term of this contract (a) the listed property is sold or (b) we, you, or anyone else finds a buyer ready, willing and able to buy the listed property, either for the listed price or for any other price acceptable to me." During the term of the listing, on August 1, 1986, the defendant property owner signed a sales contract to sell the property to Running Brook Properties (hereafter RBP), contingent upon approval of a 200 unit condominium project for the subject property. In August 1987, when problems developed with the project, the defendant renegotiated the transaction and signed a new sales contract contingent upon zoning approval for a 74 unit condominium complex. On September 24, 1987, the defendant signed an agreement with the plaintiff that the plaintiff would receive a commission of 5% of the sales price for the sale of the property in the contract dated August 13, CT Page 1917 1987 between the defendant as seller and RBP as buyer. This instrument was a modification of any prior agreement to pay a commission based upon the original listing and the fact that the broker had procured a customer which had entered into a contingent sales contract. It was not a renewal of the listing agreement. The defendant never signed any written listing agreement with the plaintiff after May 29, 1986.
The plaintiff's affidavit alleges work done by the plaintiff as broker on the property between August 1, 1986 and August 13, 1987. There is no claim that there was another listing agreement or that the broker did work subsequent to that date.
The documentary evidence discloses that the necessary zoning approval which was a contingency in the August 13, 1987 contract was not obtained from the Milford Planning and Zoning Board. A sale based on the contract never occurred. In late Spring, 1989 the defendant was approached again by RBP, and on June 1, 1989 they entered into a sales contract to sell the subject property for $1,000,000. The plaintiff's affidavit does not allege any conduct which resulted in the sale, although Paragraph 11 of the plaintiff's affidavit claims that the broker was the sole procuring cause of the sale. There is a discrepancy between the affidavits as to the closing date, with the plaintiff claiming it occurred on September 29, 1989, while the defendant states that a closing was held November 3, 1989.
While some of the statements in the affidavits are not fully consistent, a review of all the documentary evidence indicates that there is no genuine issue as to any material fact. It is clear that the ultimate sale to RBP resulted from new negotiations after the original contracts fell through when the contengencies were not satisfied. It is also clear that the plaintiff did not have a written listing agreement after November 29, 1986 and that the agreement of September 24, 1987 was an agreement to pay a commission based upon the August 13, 1987 contract. While the court does not have to accept the conclusion of the plaintiff that it was the sole procuring cause of the sale, Farrell v. Farrell, 182 Conn. 34,39; Daily v. New Britain Machine Co., 200 Conn. 562, 569, even if the plaintiff was the sole procuring cause of the sale, it is not entitled to a commission unless it has a written listing agreement.
The right of a real estate broker to recover a commission depends upon whether there is a written listing agreement in effect containing the essential information in section 20-325a of the Connecticut General Statutes. Revere CT Page 1918 Real Estate Inc. v. Cerato, 186 Conn. 74, 77; Thornton Real Estate Inc. v. Lobdell, 184 Conn. 228, 229, 230; Hossan v. Hudiakoff, 178 Conn. 381, 383; Rostenberg-Doern Co. v. Weiner, 17 Conn. App. 294, 305. The broker's right to a commission is controlled by the terms of the listing agreement. John F. Epina Realty Inc. v. Space Realty Inc.,194 Conn. 71, 78. There was no written listing agreement giving the plaintiff/broker the right to a commission for the sale that was ultimately agreed to and carried out. An action to recover a commission arising out of a real estate transaction cannot be maintained unless there is a written contract or authorization expressing the underlying agreement. Francis P. Zappone Co. v. Mark, 197 Conn. 264,266. It was held in Currie v. Morano, 13 Conn. App. 527, 530
and Howland v. Schweir, 7 Conn. App. 709, 715, that there is no liability for a property owner to pay a broker's commission for services rendered by the broker after the written listing agreement or the extension of it expired. The original deals terminated when the contingencies were not satisfied. See Menard v. Coronet Motel, Inc., 152 Conn. 710; Setaro v. Botelho, 4 Conn. Cir. 721. It is clear that brokers are not entitled to commissions merely because the buyer and seller get together and arrange an entirely new transaction between them long after the listing agreement has expired. In fact, open ended exclusive listing agreements are illegal. Section 20-320 (6) C.G.S.; Maretz Franford Inc. v. Kramer, 7 Conn. App. 120, 128 n. 2. The fact that the broker performed valuable services when a valid listing agreement was in effect, which led to a contract between buyer and seller which later fell through does not allow the broker to circumvent the requirements of section 20-325 (a) when the buyer and seller enter into a new agreement long after the listing has expired. There is no genuine issue as to any material fact. The defendant is entitled to judgment as a matter of law.
The motion for summary judgment is granted.
ROBERT A. FULLER, JUDGE | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/3356894/ | I. STATEMENT OF APPEAL
The plaintiff, Nick Nicholas, appeals from the decision of the defendant, the zoning board of appeals of the town of Wilton, sustaining the Wilton zoning enforcement officer's (ZEO) denial of an application for a zoning permit. Nicholas appeals pursuant to General Statutes §8-8.
II. BACKGROUND
The record reveals the following facts. Since 1976, Nicholas has owned the subject property, a parcel of land located at 92 Hulda Hill Road, Wilton, Connecticut, in a Residence 2 zone (R-2 zone). (Return of Record [ROR], Items A; B-1, exhibit h; G-3.) The property, known as Lot 1, is part of a three-lot subdivision, which was created in 1969 by Nicholas' predecessors in title. James Woolson and Beverly Woolson. (ROR, Items B-1, exhibits a-d; C-2, p. 3; G-1.) The subdivision plan, including the map (#2829), was approved by the Wilton planning and zoning commission (commission), with conditions, and was recorded in the Wilton land records. (ROR, Items B-1, exhibits a-d; D-2.) At the time the subdivision was approved, the owners of Lot 1 held title to parcels B and D; an adjoining lot owner held title to parcel A; and another adjacent lot owner held title to Parcel C. (ROR, Item B-1, exhibits e, g.) Notes written on the subdivision map indicate that after two separate exchanges of property, Lot 1 is to consist of parcels A and C. (ROR, Item G-1.) Parcels C and D were exchanged in 1970; (ROR, Item B-1, exhibits e-f.); however; the exchange of parcels A and B never occurred. (ROR, Items B-1, exhibit h; C-2, pp. 2-5.) Presently, Lot 1 consists of parcels B and C. (ROR, Items B-1, exhibit h; C-2, p. 2-5.)
On September 20, 1999, Nicholas applied for a zoning permit to construct a single family residence on Lot 1. (ROR, Items B-3; D-2.) On CT Page 443 September 23, 1999, the ZEO denied the application stating that the property for which Nicholas seeks a zoning permit "is not a valid building lot." (ROR, Item D-2.) In the letter denying the application, the ZEO noted that the basis for denying the application was more fully explained in the opinion letter of Marianne Dubuque, counsel acting on behalf of the town of Wilton. (ROR, Item D-2.) Additionally, the ZEO also noted that "the property shown on the map [submitted by Nicholas] is not the property shown for that address on subdivision map #2829 which is on file in the Town of Wilton land records." (ROR, Item D-2.) Nicholas filed an application for appeal with the ZBA on October 21, 1999, on the ground that the property for which he seeks a zoning permit is a valid building lot. (ROR, Items A, D-3.)
Notice of the public hearing was published in the Norwalk Hour on December 11, 1999, and in the Wilton Bulletin on December 16, 1999. (ROR, Item B-1.) The ZBA conducted a public hearing on December 20, 1999 to consider Nicholas' appeal. (ROR, Items C-2; F.) Following the testimony of several witnesses, including Nicholas, John Koster, the ZEO; Roland Gardner, a licensed surveyor who had prepared the original subdivision map and the map submitted with the zoning permit application; and Robert Fuller (presently representing Nicholas in this appeal), the ZBA closed the public hearing and announced that a decision would be rendered at the January meeting. (ROR, Item F, pp. 31-32.)
On January 19, 2000, the ZBA reconvened and unammously voted to sustain the denial of Nicholas' application for a zoning permit "on grounds that the [ZEO's] written opinion is valid and reasonable." (ROR, Item C-3.) The ZBA's decision was published in the Wilton Bulletin on January 27, 2000. (ROR, Item E-2.) Nicholas now appeals the decision of the ZBA.
III. JURISDICTION
General Statutes § 8-8 governs an appeal from a decision of a zoning board to the superior court. "A statutory right to appeal may be taken advantage of only by strict compliance with the statutory provisions by which it is created." (Internal quotation marks omitted.)Cardoza v. Zoning Commission, 211 Conn. 78, 82, 557 A.2d 545 (1989).
A. Aggrievement
"[P]leading and proof of aggrievement are prerequisites to the trial court's jurisdiction over the subject matter of a plaintiff's appeal."Jolly, Inc. v. Zoning Board of Appeals, 237 Conn. 184, 192, 676 A.2d 831
(1996). A plaintiff's status as owner of the subject property establishes CT Page 444 aggrievement. Winchester Woods Association v. Planning and ZoningCommission, 219 Conn. 303, 308, 592 A.2d 953 (1991).
Nicholas alleges that he owns the property that is the subject of this appeal. (Complaint, ¶¶ 1, 15.) Additionally, a deed, which was submitted as part of the return of record, indicates that Nicholas is the owner of the subject property. (ROR, Item B-1, exhibit h.)
B. Timeliness of the Appeal and Service of Process
General Statutes § 8-8 (b) provides, in pertinent part, that an "appeal shall be commenced by service of process in accordance with subsections (e) and (f) [now subsections (f) and (g)] of this section within fifteen days from the date that notice of the decision was published as required by the general statutes." Service of process "shall be made by leaving a true and attested copy of the process with, or at the usual place of abode of, the chairman or clerk of the board, and by leaving a true and attested copy with the clerk of the municipality." General Statutes § 8-8 (e), now § 8-8 (f).
The ZBA's decision was published in the Wilton Bulletin on January 27, 2000. (ROR, Item E-2.) Service of process was made on the town clerk of the town of Wilton and the chairman of the ZBA on February 8, 2000. (Sheriff's return.) Accordingly, this court finds that service of process was made in a timely manner on the proper parties.
IV. SCOPE OF REVIEW
When the action of a zoning enforcement officer is the subject of an appeal to the zoning board of appeals, the decision of the board, and the record before it is the focus of the court's review. Caserta v. ZoningBoard of Appeals, 226 Conn. 80, 82, 626 A.2d 744 (1993). The court does not focus on the decision of the zoning enforcement officer when reviewing the decision of the board. Id. "Local zoning boards are vested with a liberal discretion. . . . A trial court must, however, review the decision of a zoning board of appeals to determine if the board acted arbitrarily, illegally or unreasonably." Wnuk v. Zoning Board ofAppeals, 225 Conn. 691, 695-96, 626 A.2d 698 (1993). "The court's function is to determine on the basis of the record whether substantial evidence has been presented to the board to support its findings." (Internal quotation marks omitted.) Conetta v. Zoning Board of Appeals,42 Conn. App. 133, 138, 677 A.2d 987 (1996). In searching the record, the court must determine whether it contains substantial evidence from which the ultimate finding could be inferred. Grillo v. Zoning Board ofCT Page 445Appeals, 206 Conn. 362, 369, 537 A.2d 1030 (1988). "Courts are not to substitute their judgment for that of the board . . . and decisions of local boards will not be disturbed so long as honest judgment has been reasonably and fairly exercised after a full hearing. . . . Upon appeal, the trial court reviews the record before the board to determine whether it has acted fairly or with proper motives or upon valid reasons. . . . The burden of proof to demonstrate that the board acted improperly is upon the plaintiffs." (Internal quotation marks omitted.) Bloom v. ZoningBoard of Appeals, 233 Conn. 198, 206, 658 A.2d 559 (1995).
V. DISCUSSION
The ZBA sustained the ZEO's denial of Nicholas' application for a zoning permit. Nicholas appeals that decision on the ground that the ZBA acted arbitrarily, illegally and in abuse of its discretion. Nicholas alleges that: (1) record evidence supports a finding that Lot 1, with or without parcel A, conforms with the zoning regulations in effect in 1969; (2) the notes on the subdivision map pertaining to the exchanges of parcels of land were not conditions to the approval of the subdivision; (3) Lot 1, without parcel A, is protected by General Statutes § 8-26a
and § 29-4 F (2)(a) of the zoning regulations as a nonconforming lot; (4) the town of Wilton and its officials are estopped from denying the zoning permit because of a ruling issued in 1975; and (5) the denial of the zoning permit "amounts to an unconstitutional taking."
Nicholas argues that the notes written on the subdivision map regarding exchanges of parcels of land were merely advisory, and not mandatory, and that the ZBA's decision on this issue contradicts the evidence presented at the hearing by Nicholas' witnesses. Nicholas further contends that Lot 1 conforms with the minimum lot width requirement of the 1966 Wilton zoning regulations that were in effect in 1969 (1969 zoning regulations), whether or not the exchange of parcels A and C occurred. Nicholas also argues that Lot 1 is protected from subsequent changes in the zoning and subdivision regulations by General Statutes § 8-26a, and § 29-4 F (2)(a) of the current zoning regulations. Additionally, Nicholas argues that Lot 1 meets the current Wilton zoning regulations lot width, frontage and setback requirements. Lastly, Nicholas argues that the denial of the zoning permit amounts to a confiscation.1
The ZBA asserts that Nicholas failed to demonstrate that the ZBA's decision to sustain the denial the application for a zoning permit was arbitrary, capricious or an abuse of its discretion. The ZBA further argues that Lot 1, without parcel A, is not the lot that was approved in 1969, and that the combination of parcel A with Lot 1 was "akin to [a CT Page 446 condition] proposed by the subdivision applicant and accepted by the Commission," despite the testimony of Nicholas' witnesses. (ZBA's Brief, p. 14.) Additionally, the ZBA contends that it was "fully within its rights to disregard the opinions of other attorneys and a surveyor, and to rely on the opinion of its own counsel." (ZBA's Brief, p. 20.) The ZBA also argues that without parcel A, Lot 1 does not meet the minimum lot width requirement established by the 1969 or the current zoning regulations, therefore, the lot is not a valid building lot. Moreover, because Lot 1 is not an approved subdivision lot, the ZBA contends that General Statutes § 8-26a and § 29-4 F (2)(a) of the current zoning regulations do not apply to this appeal. In regards to Nicholas' confiscation claim, the ZBA argues that the denial of the application for a zoning permit does not amount to a confiscation of Lot 1.
A. Whether the ZBA correctly interpreted § 29.6 of the 1969 Wilton Zoning Regulations.
The parties do not dispute that, pursuant to § 29-6 of the 1969 zoning regulations, a lot in an R-2 zone must measure 150 feet in width at the building line. The location of the building line, however, is in dispute. Nicholas argues that § 29-6 requires that the building line be at or behind the front yard setback line, which is forty feet from the road. The ZBA argues, however, that under § 29-6, the forty foot front yard setback line constitutes the building line where the width of the lot must measure at least 150 feet.2
"[T]he interpretation of provisions in the ordinance is . . . a question of law for the court . . . The court is not bound by the legal interpretation of the ordinance by the [ZBA]. . . . Rather, the court determines legislative intent from the language used in the regulations. . . . We interpret an enactment to find the expressed intent of the legislative body from the language it used to manifest that intent. . . . Zoning regulations, as they are in derogation of common law property rights, cannot be construed to include or exclude by implication what is not clearly within their express terms. . . . The words used in zoning [regulations] are to be interpreted according to their usual and natural meaning and the regulations should not be extended, by implication, beyond their expressed terms." (Internal quotation marks omitted.) Children's School, Inc. v. Zoning Boardof Appeals, 66 Conn. App. 615, 622, ___ A.2d ___ (2001). Furthermore, when interpreting statutory language, the court must read the statute as a whole. Hyllen-Davey v. Planning and ZoningCommission, 57 Conn. App. 589, 595, 749 A.2d 682, cert. denied, 253 Conn. 926, 754 A.2d 796 (2000). CT Page 447
Section 29-6 A of the 1969 Wilton zoning regulations provides, in part: "No lot shall be less in area or less in width than set forth below and no residential structure shall be built on or moved onto a lot containing less than the area set forth below for each family unit contained therein. The width of a lot shall be measured in a straightline in general parallel to the street, which line shall be touching butnot in front of the building line required by these regulations. . . ." (Emphasis added.) Section 29-6 A also requires that a lot in an R-2 zone must be at least two acres in area and have a minimum lot width of 150 feet.
Section 29-6 C (1) of the 1969 zoning regulations requires that a lot in an R-2 zone have a front yard not less than forty feet in depth, side yards not less than thirty feet in width and a rear yard not less than forty feet in depth. Additionally, in an R-2 zone, "[n]o structure shall be . . . less than forty . . . feet from any highway line. . . ." Wilton Zoning Regulations § 29-6 C (2).
The record reveals the following regarding the minimum lot width requirement of § 29-6 of the 1969 zoning regulations. At the public hearing, Gardner, a licensed surveyor who prepared the original subdivision map as well as the map submitted with Nicholas' application for a zoning permit, testified at the public hearing on December 20, 1999, that § 29-6 requires that the width of lot is to measure at least 150 feet at or behind the forty foot setback line. (ROR, Item F, p. 17.) Fuller also testified at the public hearing that the setback requirement in 1969 was forty feet, therefore, "you have to go back at least 40 feet and if your lot is not 150 feet wide you have to go back until you get 150 feet, and at that point, beyond that, you can put your house." (ROR, Item F-1, pp. 19-20.) The ZEO testified, however, that the building line required by the 1969 regulations is the forty foot setback line. (ROR, Item F-1, p. 31.) "So that means that a line, which is touching that 40-foot generally parallel with the front, front lot line, shall be 150 feet in width." (ROR, Item F-1, p. 31.)
The record also demonstrates that the ZBA unanimously denied Nicholas' appeal "on the ground that the [ZEO's] written opinion is valid and reasonable." (ROR, Item C-3.) The ZEO's written opinion reveals that Nicholas' application for a zoning permit was denied because Lot 1 was determined to be an invalid building lot. (ROR, Item D-2.) The ZEO further stated that the basis for his decision is more fully explained in the opinion letter by Dubuque, counsel acting on behalf of the town. (ROR, Item D-2.) Dubuque states in her opinion letter that § 29-6 A of the 1969 zoning regulations requires that a lot have a minimum width of 150 feet at the building line, and because of the irregular shape of Lot 1, the minimum width requirement cannot be met. (ROR, Item D-1, pp. CT Page 448 3-4.) The location of the building line, however, is not discussed in Dubuque's letter. (ROR, Item D-1.) The record also reveals that, at the January 19, 2000 ZBA meeting, and prior to voting on Nicholas's appeal, a letter from Dubuque to the town planner, Wendy Johnson, was read aloud.3 (ROR, Item C-3.) In this letter, Dubuque asserts that § 29-6 A requires that the width of the lot is "to be calculated at a point where it is `touching' the building line." (ROR, Item D-6.) Dubuque further asserts that given the ordinary meaning of touch, "the width requirement under [§] 29-6
A must be met at the building line, not at a point behind it." (ROR, Item D-6.) Dubuque does not discuss, however, the location of the building line. (ROR, Item D-6.)
This court finds that the ZBA erroneously interpreted the meaning of "building line" as used in § 29-6 of the 1969 zoning regulations. Subsection A of § 29-6 requires that the width of the lot, which must be at least 150 feet, "shall be measured in a straight line in general parallel to the street. . . ." Subsection A also requires that the lot width requirement must be met at a point that "[touches] but [is] not in front of the building line required by these regulations. . . ." Additionally. subsection C (1) requires that a lot in an R-2 zone have a front yard setback not less than forty feet, and subsection C (2) requires that "[n]o structure shall be . . . less than forty . . . feet from any highway line in [an R-2 zone]." This court finds, therefore, that reading § 29-6 as a whole and applying the plain and ordinary meaning to the language contained therein, it is reasonable for this court to interpret "building line" as located at a point at or behind the forty foot front yard setback line. "Common sense must be used in interpreting a zoning regulation, because it is assumed that the zoning authority intended to accomplish a reasonable and rational result."Daughters of St. Paul, Inc. v. Zoning Board, 17 Conn. App. 53, 66-67,549 A.2d 1076 (1988).
B. Whether There is Substantial Evidence in the Record to Support the ZBA's Decision to Deny Nicholas' Appeal Based on Lot 1 Not Being a Valid Building Lot
Nicholas argues that Lot 1, without parcel A, is a buildable lot, and that the notes on the subdivision map pertaining to exchanges of parcels of property are not mandatory. Nicholas contends that the commission approved the subdivision plan with conditions, however, these conditions do not include, as a requirement to approval, the exchanges of the parcels of property that are noted on the subdivision map. Additionally, Nicholas argues that because General Statutes § 8-26 requires a subdivision to conform to the applicable zoning regulations, the CT Page 449 commission would not have approved a subdivision plan that consisted of a lot in violation of the zoning regulations. Moreover, Nicholas contends that Lot 1, without the exchange of the parcels of property, conforms with the 1969 zoning regulations. Nicholas argues that, although one of the property exchanges did eventually occur, the exchange of parcel B for parcel A was not necessary to achieve the 150 foot minimum lot width, as required by the 1969 zoning regulations.
The ZBA argues that the notes on the subdivision map pertaining to the exchanges of parcels of land are mandatory conditions, and that because the exchange between parcels A and B never occurred, Lot 1 is not a buildable lot. The ZBA contends that Lot 1, without Parcel A, is not the Lot 1 that was approved by the commission in 1969. The ZBA supports its argument with the contention that the exchange of parcel B for parcel A is necessary because without parcel A, Lot 1 does not satisfy the minimum lot width requirement of the 1969, or the current, zoning regulations. Additionally, the ZBA contends that "[t]he Z-shaped lines connecting parcels [on the subdivision map] are interpreted to mean that those parcels are part of the same lot."4 (ZBA's Brief, p. 15.)
General Statutes § 8-26 governs the approval of subdivision plans. Section 8-26 provides, in relevant part: "All plans for subdivisions . . . shall be submitted to the commission with an application in the form to be prescribed by it. The commission shall have the authority to determine whether the existing division of land constitutes a subdivision . . . under the provisions of this chapter, provided nothing in this section shall be deemed to authorize the commission to approve any such subdivision . . . which conflicts with applicable zoning regulations." "[W]here . . . the approval [of the subdivision] is subject to a condition over which neither the commission nor the subdivision applicant has control, such action is not an "approval' within [General Statutes §] 8-26. . . . [W]here a commission makes the approval of a plan of subdivision subject to a condition the fulfillment of which is within the control of neither the commission nor the applicant . . . the commission has "failed to act' within the intendment of General Statutes [§§] 8-26 and 8-28 . . .Carpenter v. Planning and Zoning Commission, 176 Conn. 581,592-93, 409 A.2d 1029 (1979).
The record indicates that on March 24, 1969, the commission approved the subdivision application by the following resolution: "That the subdivision plan for property of James B. Woolson and Beverly D. Woolson on the easterly side of Hulda Hill Road, submitted by James E. Woolson and Beverly D. Woolson, owner, as shown on the map entitled: Subdivision Map . . . be and it is approved subject to [seven listed conditions]. . . ." (ROR, Item B-1, exhibits a-b, d.) The record further CT Page 450 indicates that the approved subdivision map was recorded in the Wilton land records on April 18, 1969. (ROR, Items B-8, p. 2; G-1.) Additionally, the record reveals that the following notes were written on the subdivision map:
"Note: Parcel `A' not constituted as a separate building lot, but is to be combined with Lot 1.
"Note: Parcel `B' not constituted as a separate building lot, but is to be combined with adjoining land of Sally D. Lefferts.
"Note: Parcel `C' not constituted as a separate building lot, but is to be combined with Lot 1.
"Note: Parcel `D' not constituted as a separate building lot, but is to be combined with adjoining land of Edith H. Nolder."
(ROR, Item G-1.)
As discussed in the previous section, the 1969 zoning regulations required that lots in an R-2 zone have a forty foot front yard setback and that the width of the lot measure at least 150 feet at the building line. Wilton Zoning Regulations § 29-6 A, C. The regulations also required that the width of the lot was to be measured in a straight line, generally parallel with the road, at a point at or behind the front yard setback line. Wilton Zoning Regulations § 29-6 A, C.
The record demonstrates that Gardner, a licensed surveyor who prepared the original subdivision map, testified at the December 20, 1999 public hearing as to the yard requirements under the 1969 zoning regulations and stated that the map depicting the proposed residence and the original subdivision map, which are a part of the return of record, demonstrate that the lot is in compliance with the 1969 zoning regulations. (ROR, Items F-1, pp. 14-17; G-1, 3.) Gardner also testified that in accordance with the 1969 zoning regulations, the width of Lot 1 measures 150 feet at the building line, which is located 139 feet from the road. (ROR, Item F-1, p. 18.) Gardner further testified that, with or without the exchange of parcel B for parcel A, Lot 1 is in conformity with the 1969 zoning regulations, and, thus, Lot 1 is a valid buildable lot. (ROR, Item F-1, pp. 16-17.)
The record further reveals that Fuller, appearing as a witness at the CT Page 451 public hearing on behalf of Nicholas, also testified that the notes on the subdivision map were not conditions because they were not made a part of the listed conditions at the time the commission approved the subdivision, and that the exchanges of the parcels of property were not necessary to comply with the 1969 zoning regulations. (ROR, Item F, pp. 18-27.) Fuller also testified that the location of the proposed residence on Lot 1 complies with the minimum lot width requirement of the 1969 zoning regulations. (ROR, Item F, pp. 19-20.)
"In appeals from administrative zoning decisions, the commission's conclusions will be invalidated only if they are not supported by substantial evidence in the record. . . . The substantial evidence rule is similar to the `sufficiency of the evidence' standard applied in judicial review of jury verdicts, and evidence is sufficient to sustain an agency finding if it affords a substantial basis of fact from which the fact in issue can be reasonably inferred. It must be enough to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion sought to be drawn from it is one of fact for the jury." (Internal quotation marks omitted.) Boris v. Garbo Lobster Company,Inc., 58 Conn. App. 29, 32-33, 750 A.2d 1152, cert. denied, 254 Conn. 910,759 A.2d 504 (2000).
This court finds, based on the evidence before it, that the ZBA's decision to deny Nicholas' appeal is not supported by substantial evidence in the record because the record is devoid of any evidence to support a finding that Lot 1, without parcel A, is not a buildable lot. The ZBA did submit, however, as evidence at the trial before this court,Hickey, J., a copy of a petition to the board of tax review for correction of assessed value of property, signed by Nicholas and dated February 26, 1985. (ZBA's exhibit 1, September 17, 2001.) Nicholas was petitioning for a correction of the assessed value of Lot 1 because Lot 1 was "assessed on the basis of being buildable which it is not." (ZBA's exhibit 1, September 17, 2001.) Nonetheless, this court finds that the petition is not substantial evidence to support a finding that Lot 1, without parcel A, is not a valid building lot.
Furthermore, this court finds that the record does not support a finding that the notes written on the subdivision map regarding the exchanges of the parcels of property are mandatory, rather, there is substantial record evidence to support a finding that the notes are not mandatory nor akin to a condition to approval. This evidence includes: (1) the testimony of Gardner, that the notes were not made conditions to the approval of the subdivision, and Gardner is an experienced surveyor who has first hand knowledge of the original subdivision map since he is the one who prepared it; and (2) the testimony of Gardner, supported by the submission of the 1969 subdivision map and the map submitted with CT Page 452 Nicholas' application, that without Parcel A, Lot 1 satisfies the minimum lot width requirement set forth in § 29-6 of the 1969 zoning regulations.
C. Whether Lot 1 is Protected as a Nonconforming Lot.
Nicholas contends that Lot 1 is protected as a nonconforming lot by General Statutes § 8-26a and § 29.4 F of the Wilton zoning regulations. Nicholas argues that because the subdivision map, which contains Lot 1, was approved by the commission, and was signed and recorded in the land records, it, therefore, met the zoning requirement in effect at that time. Nicholas further asserts that because Lot 1, without parcel A, was in compliance with the minimum lot width required by the 1969 zoning regulations, Lot 1 need not conform with subsequent changes in the zoning regulations. The ZBA argues, however, that General Statutes § 8-26a and § 29-4 F of the zoning regulations do not apply to the present appeal because Lot 1, without parcel A, is not an approved lot, therefore, it is not protected from subsequent zoning changes as a nonconforming lot.
Section 8-26a (b) provides: "Notwithstanding the provisions of any general or special act or local ordinance, when a change is adopted in the zoning regulations or boundaries of zoning districts of any town, city or borough, no lot or lots shown on a subdivision plan for residential property which has been approved, prior to the effective date of such change, by the planning commission of such town, city or borough, or other body exercising the powers of such commission, and filed or recorded with the town clerk, shall be required to conform to such change."
Section 29-4 F (2)(a) of the Wilton zoning regulations, which pertains to nonconforming lots, provides: "In any single-family Residential district, a single-family dwelling and customary accessory buildings may be erected on a lot of record as of the effective date of adoption or amendment to these Regulations, notwithstanding requirements imposed by other provisions of these Regulations. Such lot shall be in separate ownership and shall not have continuous frontage with other lots under the same ownership. This provision shall apply even though such lot fails to meet the lot area and/or lot width requirements of the district in which such lot is located, provided that the yard dimensions and requirements other than those applying to lot area and/or lot width shall conform to the requirements of the district in which such lot is located."
"A nonconformity is a use or structure prohibited by the zoning CT Page 453 regulations but is permitted because of its existence at the time the regulations are adopted." Adolphson v. Zoning Board of Appeals,205 Conn. 703, 710, 535 A.2d 799 (1988). To be considered a nonconforming use, "[f]irst, [the use] must be lawful and second, it must be inexistence at the time the zoning regulation making the use nonconforming was enacted." (Emphasis in original.) Cummins v. Tripp, 204 Conn. 67,91-92, 527 A.2d 230 (1987). A lot that is undeveloped when later zoning regulations are adopted, is not in use, and, therefore, not protected as a nonconforming lot. Miller v. Zoning Board of Appeals, 36 Conn. App. 98,105, 647 A.2d 1050 (1994). A lot is exempt, however, from changes in zoning regulations as a nonconforming lot, under General Statutes §8-26a (b), if the property is part of a valid subdivision approved before the adoption of the new regulations. Id. "The [property owner] bears the burden of proving the existence of a nonconforming use. . . ." (Citation omitted; internal quotation marks omitted.) Bauer v. Waste Management ofConnecticut, Inc., 234 Conn. 221, 240, 662 A.2d 1179 (1995).
Evidence and testimony contained in the return of record reveals that Lot 1, without parcel A, is part of an approved three-lot subdivision, and that the subdivision plans were signed and recorded in the Wilton land records. (ROR, Items B-1, exhibits a-d; C-2; G-1.) The record also reveals that Lot 1, without parcel A, conforms with the 1969 minimum lot width requirement of 150 feet. (ROR, Items F-1, pp. 18-20; G-1, 3.) The record further reveals that § 29-5 D of the current zoning regulations, effective March 15, 1994, and revised December 1, 1998, requires a minimum lot width of 200 feet in an R-2 zone. (ROR, Item H, p. 66.)
"It is the board's responsibility, pursuant to the statutorily required hearing, to find the facts and to apply the pertinent zoning regulations to those facts." (Internal quotation marks omitted.) Wing v. Zoning Boardof Appeals, 61 Conn. App. 639, 643-44, 767 A.2d 131. cert. denied,256 Conn. 908, 772 A.2d 602 (2001). "Generally, it is the function of a zoning board or commission to decide within prescribed limits and consistent with the exercise of [its] legal discretion, whether a particular section of the zoning regulations applies to a given situation and the manner in which it does apply. The trial court has to decide whether the board correctly interpreted the section [of the regulations] and applied it with reasonable discretion to the facts. . . ." (Citation omitted; internal quotation marks omitted.) Spero v. Zoning Board ofAppeals, 217 Conn. 435, 440, 586 A.2d 590 (1991).
Mindful that the ZBA is entitled to some discretion in enforcing its regulations, this court finds that the ZBA's contention that Lot 1, without parcel A, is not protected as a nonconforming lot, is not supported by substantial record evidence. Furthermore, this court finds CT Page 454 that Lot 1, without parcel A, is protected by General Statutes § 8-26a
and § 29.4 F (2)(a) of the current zoning regulations as a nonconforming lot because: (1) although, Lot 1, without parcel A, has not yet been developed, it is part of an approved, three-lot subdivision; (2) Lot 1, without parcel A, complies with the 1969 zoning regulations, more specifically, the minimum lot width requirement; and (3) there is no evidence in the record that Lot 1 merged with a lot having a continuance frontage prior to the enactment of the current zoning regulations.5
VI. CONCLUSION
Based upon the foregoing analysis, this court finds that Nicholas' appeal should be sustained. This court finds that the ZBA's decision to deny Nicholas' appeal was not based on substantial evidence in the record, and, therefore, the ZBA acted arbitrarily, illegally, capriciously and in abuse of its discretion. Accordingly, Nicholas' appeal is hereby sustained.
HICKEY, J. | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/3356895/ | [EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]
MEMORANDUM IN RE: MOTION TO STRIKE #117
A motion to strike is used to "test the legal sufficiency of a pleading." Alarm Applications Company v. Simsbury Volunteer Fire Co. 179 Conn. 541, 545, 427 A.2d 822 (1980). It admits all facts alleged and the complaint is viewed in the light most favorable to the pleader. Blancato v. Feldspar Corporation203 Conn. 34 36 522 A.2d 1235 (1989). The motion to strike "does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings" (citations omitted). Mingachos v. CBS Inc., 196 Conn. 91, 108, 491 A.2d 368 (1985). The motion to strike can be used to contest "the legal sufficiency of any answer to any complaint", Practice Book 152(5) or "to raise the issue of the legal sufficiency of a special defense to a cause of action." Passini v. Decker, 39 Conn. Sup. 20, 21, 467 A.2d 442 (1983, Pickett, J.) The plaintiff has accompanied its motion to strike with a memorandum of law in compliance with Practice Book 155.
CT Page 9741 A special defense is used to obtain admission of evidence to show that despite the plaintiff's allegations, that he has no cause of action. Pawlinski v. Allstate Ins. Co., 165 Conn. 1, 4,327 A.2d 583 (1973). "A `set-off' envisions a debt owing from the plaintiff to the defendant or at least a claim by the defendant against the plaintiff." (citations omitted). Saladino v. Barry, 5 CTLR 405, 40Z (January 3, 1992) (Rush J.).
C.G.S. 52-225a(b) states
Upon a finding of liability and awarding of damages by the trier of fact and before the court enters judgment the court shall receive evidence from the claimant and other appropriate persons concerning the total amount of collateral sources which have been paid for the benefit of the claimant as of the date the court enters judgment.
(emphasis added).
The plaintiff argues that the legislature's intent in enacting C.G.S. 52-225a was to avoid the jury's knowledge of money already paid to the plaintiff so as not to prejudice either party in the action. The defendant has not responded to this motion with a memorandum of law.
The legislature's intent in enacting 52-225a was to "avoid having the jury hear of collateral sources, as this might prove prejudicial to the plaintiff." Zujewski v. Allen, 2 CTLR 92 (July 16, 1990) (Fuller. J.). Since the statute "imposes on the court the affirmative responsibility of taking evidence and making the required reduction in damages after the verdict, a simple request to the court by the defendant at that time will suffice to trigger the procedure, if it is necessary." (emphasis added) (citations omitted) Derdiarian v. Clinton, 3 CTLR 299, 300 (February 26, 1991) (Ryan, J.). "[Credits for collateral source payments are considered by the court after the plaintiff's damages are determined by the trier." (emphasis added). Cheneski v. Barber, 7 CTLR 92, 93 (February 7, 1992) (Fuller, J.).
The proper time to ask for a reduction of an award under C.G.S. 52-225a is after a finding of liability by the trier of fact. The plaintiff's motion to strike the defendant's fourth special defense is granted. CT Page 9742
SYLVESTER, J. | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/1183224/ | 708 P.2d 577 (1985)
DOBBINS, DEGUIRE & TUCKER, P.C., Plaintiff and Appellant,
v.
RUTHERFORD, MacDONALD & OLSON, a partnership, et al., Defendants and Respondents.
No. 85-86.
Supreme Court of Montana.
Submitted on Briefs June 28, 1985.
Decided November 6, 1985.
Worden, Thane & Haines, Ronald A. Bender, Missoula, for plaintiff and appellant.
Mulroney, Delaney & Scott, P. Mars Scott, Missoula, for defendants and respondents.
WEBER, Justice.
Dobbins, DeGuire & Tucker, P.C., (Dobbins) sued Rutherford, MacDonald and Olson (defendants) as a partnership and individually, *578 for violation of a public accounting employment contract. The contract required payment to Dobbins if defendants obtained certain clients of Dobbins within 12 months after employment termination. Upon motion of defendants to dismiss the complaint for failure to state sufficient facts upon which relief could be granted, the Missoula County District Court dismissed the complaint. Dobbins appeals. We reverse.
The sole issue on appeal is whether the District Court erred in dismissing Dobbins' complaint.
The complaint alleged the following facts:
Between November 1978 and October 1980, defendants signed written employment contracts with Dobbins under which each agreed that certain restrictions would apply following termination of employment. The contracts in pertinent part stated:
5. If this Agreement is terminated and Employee enters into a public accounting business for himself, in partnership with one or more accountants ... Employee agrees as follows:
a. To pay to employer an amount equal to one hundred percent (100%) of the gross fees billed by Employer to a particular client over the twelve month period immediately preceding such termination which was a client of Employer within the twelve month period prior to Employee's leaving Employer's employment, but which client is thereafter within one year of date of termination served by Employee, Employee's partners, ...
b. Such sum shall be paid in monthly installments over a three year period, the first such installment being due within thirty (30) days of the date when Employee, Employee's partners, ... does work for a particular client, and which payments, exclusive of the initial payment shall include interest as hereinafter stated.
c. Such sum shall bear interest at the rate of eight percent (8%) per annum on the declining balance which interest shall commence the date first payment is due. Employee or his authorized representatives shall be allowed to prepay any such amounts in full, or in part, without penalty, provided that if paid only in part, that the monthly installments thereafter required shall not be reduced.
d. Employee agrees that he shall provide all records necessary to carry out the intent of this Agreement and shall report immediately to Employer when services have been provided a particular client.
6. Employee enters into this Agreement with full understanding of the nature and extent covered by the restrictive agreements contained in the immediately preceding paragraph, and Employee realizes that because of the unique nature of the business, this Agreement would not be entered into without the Agreements contained herein... .
One of the defendants worked for Dobbins until September 30, 1983; the other two until October 31, 1983. While employed by Dobbins, the defendants became acquainted with Dobbins' clients. In November 1983, the defendants opened a public accounting office in Missoula where the Dobbins' office is located. Finally, the complaint alleges that the defendants have been engaged, and are now engaged, directly and indirectly through others, in accepting and soliciting accounting work from Dobbins' clients. The complaint also alleges that Dobbins has demanded an accounting, which the defendants have refused to give. The complaint prays for an accounting and payment of the sum determined to be due plus 8 percent interest.
The issue of whether the District Court erred in dismissing Dobbins' complaint turns on whether the above-quoted provisions of the employment contract are enforceable. Section 28-2-703, MCA, provides in pertinent part:
Contracts in restraint of trade generally void. Any contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided for by *579 28-2-704 or 28-2-705, is to that extent void.
Section 28-2-704, MCA, in substance provides that one who sells the goodwill of a business may agree to refrain from carrying on a similar business under certain conditions within certain areas. In a similar manner, § 28-2-705, MCA, in substance provides that on dissolution of a partnership, partners may agree that a partner may not carry on a similar business within those areas. As pointed out by the District Court, neither §§ 28-2-704 or -705 is applicable in the present case.
The District Court relied on J.T. Miller Co. v. Madel (1978), 176 Mont. 49, 575 P.2d 1321, in reaching its conclusion that the contract provisions were void under § 28-2-703, MCA. In Madel, an insurance salesman signed an employment contract with the following covenants:
The Employee agrees and covenants that for a period of five (5) years after the termination of this Agreement, he will not directly or indirectly own, manage, operate, control, be employed by, participate in or be connected in any manner with the ownership, management, operation or control of any business which sells credit life, credit accident, health or other insurance to any customer of the Employer with whom the Employee has at any time had any dealings on behalf of the Employer; contact or solicit any customers of the Employer with whom the Employee has at any time had any dealings on behalf of the Employer; or sell or deliver to any customers of the Employer any insurance sold by the Employee while an Employee of the Employer as set out in this contract.
Madel, 176 Mont. 51, 575 P.2d 1322. The covenant effectively prohibited the insurance salesman from engaging in the sale of insurance in any manner for a period of 5 years. This Court concluded that the restrictive covenant did not qualify under the statutory exceptions of what is now § 28-2-703, MCA, and that accordingly, the statute prohibited the restraint asserted in the covenant. With regard to the use of confidential information, this Court pointed out that the insurance salesman did nothing more than to contact banks, which were obviously known and open to all vendors of credit life insurance, and that no privileged information was required.
There are statements made in Madel which are sufficiently broad to support the conclusion of the District Court that any type of a restriction upon the exercise of a lawful profession must be invalidated. However, in Madel the covenant not to compete was, in effect, an absolute prohibition upon Madel's right to engage in the business of selling insurance. We construe the holding in Madel as being limited by that fact.
In contrast to Madel, here the contract does not on its face prohibit the defendants from engaging in the business of public accounting. In fact, the contract does not even directly restrain the defendants from exercising or engaging in the profession of public accounting. The contract contains neither area nor time limitations on defendants' practice of accounting. In addition, it does not prohibit the defendants from using confidential information obtained in the course of their employment at Dobbins as a basis for securing Dobbins' clients.
In substance, the contract required payment of a fee if the defendants obtained a Dobbins' client within 12 months after their employment with Dobbins ceased. On its face, that is not an unreasonably long period. In addition, an amount equal to 100% of the gross fees billed by Dobbins over the 12 month period preceding termination must be paid in monthly installments over a three year period. This suggests that the amount of the fee and the method of payment on the face of the contract do not appear unreasonable. In a similar manner, the requirement for the payment of interest at the rate of 8% does not appear unreasonable on its face. We conclude that the contract provisions between Dobbins and the defendants are not comparable to the contract provisions in Madel.
In O'Neill v. Ferraro (1979), 182 Mont. 214, 596 P.2d 197, this Court considered a *580 lease provision under which the landlord agreed it would not permit a competing full service restaurant to be maintained at the Bozeman Hotel. The Court concluded that the covenant prevented the operation of a Mexican food restaurant in the same hotel and that § 28-2-703, MCA, did not require a voiding of all restrictions on engaging in a trade. The Court adopted a test by which reasonable covenants are to be distinguished from unreasonable restraints:
Three things are essential ... [for a reasonable] covenant:
"(1) it must be partial or restricted in its operation in respect either to time or place; (2) it must be on some good consideration; and (3) it must be reasonable, that is, it should afford only a fair protection to the interests of the party in whose favor it is made, and must not be so large in its operation as to interfere with the interests of the public." Eldridge v. Johnston (1952), 195 Or. 379, 245 P.2d 239, 250.
O'Neill, 182 Mont. 218-19, 596 P.2d 199. Although O'Neill was decided in the context of trade, we conclude that similar principles should be applied in the present case.
The District Court referred to the annotation in 13 A.L.R. Fourth 661. We note the general conclusion of that annotation is consistent with our holding in the present case. The annotation points out that in the absence of a controlling statute the enforceability of a covenant not to compete, ancillary to the withdrawal of a partner from an accounting firm, depends upon whether the restriction is reasonably related to the legitimate business interest of the remaining partners and is not unduly burdensome to the covenantor or the public.
For the assistance of the District Court in the event of trial, we state the following rule to be applied in determining whether a covenant is a reasonable restraint on the profession of public accounting:
(1) The covenant should be limited in operation either as to time or place; (2) the covenant should be based on some good consideration; and (3) the covenant should afford a reasonable protection for and not impose an unreasonable burden upon the employer, the employee or the public.
This test requires a balancing of the competing interests of the public as well as the employer and employee.
We hold that the written contract provisions do not constitute a restraint prohibited by § 28-2-703, MCA. We reverse and remand with instructions that the complaint shall be reinstated by the District Court and further proceedings had consistent with this opinion.
TURNAGE, C.J., and HARRISON, HUNT, MORRISON, SHEEHY and GULBRANDSON, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1220351/ | 214 Ga. 842 (1959)
108 S.E.2d 264
SCHEUER
v.
HOUSING AUTHORITY OF CITY OF CARTERSVILLE.
20408.
Supreme Court of Georgia.
Argued March 10, 1959.
Decided April 9, 1959.
Al D. Tull, for plaintiff in error.
Warren Akin, contra.
DUCKWORTH, Chief Justice.
1. Code (Ann.) § 99-1119 (Ga. L. 1937, pp. 210, 223) provides that an Authority shall have the right to acquire by the exercise of the power of eminent domain "any real property which it may deem necessary for its purposes . . . after the adoption by it of a resolution declaring that the acquisition of the real property described therein is necessary for such purpose." The right to take private property by the exercise of the power of eminent domain is an element of sovereignty, and will be upheld only when every prerequisite to its exercise has been fully met. It is not for the Judiciary to give a reason for the condition precedent to the exercise of the power stipulated by the legislature, but only to recognize that condition and forbid the exercise of the power until the condition has been met. The Authority in this case on January 21, 1957, adopted a resolution finding that there was a need for low rent housing to meet needs not being met by private enterprise within its area of operation. Then on October 15, 1957, the recorded minutes of a meeting of the commissioners of the Authority recites that land selected for Summer Hill Project known as "Project Ga. 68-4 (formerly 68-B)" was on a motion of a member and by vote of the commission approved and defined *843 as being about 9 or 10 acres, described by metes and bounds. Then on November 18, 1957, a resolution was adopted by the commissioners, which in substance recited that they had determined that the original area selected for "Project Ga. 68-4" contained insufficient acreage and recommendation was made for approval of described lands, which includes that of the defendant and intervenor in this case. It is manifest that the recited actions of the authority constitute a substantial compliance with the condition precedent pointed out above. Code § 102-102 (6) provides: "A substantial compliance with any requirement of the Code, or laws amendatory thereof, especially on the part of public officers, shall be deemed and held sufficient, and no proceeding shall be declared void for want of such compliance, unless expressly so provided by the enactment." We therefore affirm the judgments overruling the plea in abatement and the general demurrers to the amended petition.
2. Code (Ann.) § 99-1108 (Ga. L. 1937, pp. 210, 216; Ga. L. 1943, p. 166) requires approval by the State Director of any proposed project. There is nothing in the law that requires projects to be located only where slum residences exist. The object of the law is (a) clear slums and (b) afford cheap housing for low-income people. The complaints in the answer that the property is not residential, that it is needed for the purposes for which it is now being used, etc., constitute no grounds for preventing a housing project to meet the purpose of the law, i. e., get people out of slums and into sanitary low-rent houses. Accordingly, the court did not err in sustaining the demurrer and in dismissing the answer.
Judgment affirmed. All the Justices concur, except Wyatt, P. J., who dissents. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1485001/ | 554 S.W.2d 677 (1977)
Leon Davis BROWN and Percy Eugene Williams, Appellant,
v.
The STATE of Texas, Appellee.
No. 52675.
Court of Criminal Appeals of Texas.
June 29, 1977.
*678 James E. Davis, Texarkana, Ark., and Charles M. Bleil, Texarkana, on appeal, for appellant.
Lynn Cooksey, Dist. Atty., Texarkana, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
ROBERTS, Judge.
These are appeals from convictions for capital murder. Appellants were tried jointly and the two punishment issues submitted to the jury were answered in the negative. Accordingly, the trial court assessed punishment for each appellant at life confinement in the Texas Department of Corrections.
The sufficiency of the evidence is not challenged. Briefly, the record reflects that the deceased was murdered in the course of a robbery while he was working at a pawn shop. The evidence shows that the deceased died as a result of gunshot wounds inflicted upon him. The appellants were arrested approximately 20 minutes after the shooting took place. Each appellant gave a voluntary statement, both admitting the robbery and one admitting the shooting.
Appellants initially contend that "... Article 19.03, Texas Penal Code, is unconstitutional for the reason the caption or title to the 1973 Act H.B. 200, appearing in Chapter 426 Acts, regular session of the 63rd Legislature of 1973, fails to meet the requirement of Article III, Section 35 of the Constitution of Texas, in that it embraces more than one subject and is therefore insufficient to inform the Legislature and the public of the full effect of the amendment."
In Burns v. State, 556 S.W.2d 270 (Tex. Cr.App., delivered May 3, 1977) and Smith v. State, 540 S.W.2d 693 (Tex.Cr.App.1976), the same contention was raised and it was rejected by this Court.
Appellants' first ground of error is overruled.
Appellants next complain that Article 37.071, V.A.C.C.P. "... confers upon the trial court standardless discretion in determining the evidence which may be presented as to any matter relative to sentence."
We note that Article 37.071 provides that "This subsection shall not be construed to authorize the introduction of any evidence secured in violation of the Constitution of the United States or of the State of Texas." See also, Gholson v. State, 542 S.W.2d 395, 397-398 (Tex.Cr.App.1976).
Appellants' second ground of error is overruled.
By their fifth ground of error, appellants contend that Article 37.071, V.A.C.C.P., is unconstitutional "... because the statute shifts the burden of proof to the defendant by requiring that in order to answer an issue (`No'), ten (10) or more jurors must agree."
At the guilt stage of the trial, in order to be acquitted, the defendant must receive 12 favorable votes. In order to convict, the State must receive 12 favorable votes. At the punishment stage of the trial, the procedure is the same with the exception that if the defendant has ten votes he receives a favorable verdict instead of a hung jury. Furthermore, Article 37.071(c) provides that "The State must prove each issue submitted beyond a reasonable doubt ..." and in the case at bar the jury was so instructed.
Appellants' fifth ground of error is overruled.
By their sixth ground of error, appellants contend that Article 37.071 is unconstitutional "... because it denies defendants the right to an impartial jury in assessing punishment because Article 37.071(b)(1) and (3) require the same finding as a finding of guilt under Article 19.03, Texas Penal Code."
In Jurek v. Texas, 428 U.S. 262, 96 S. Ct. 2950, 49 L. Ed. 2d 929 (1976), the Supreme Court of the United States upheld the Texas capital murder procedure and, in speaking *679 of the enumerated punishment issues provided by Article 37.071, stated that, "[t]hus, the constitutionality of the Texas procedures turns on whether the enumerated questions allow consideration of particularized mitigating factors." Id., at 272, 96 S.Ct. at 2956.
While the second statutory question was discussed by the Supreme Court in Jurek, the Court had only this to say about the first and third questions enumerated in Article 37.071:
"The Texas Court of Criminal Appeals has not yet construed the first and third questions (which are set out in the text, supra, at 269, 96 S.Ct. at 2954-2955); thus it is as yet undetermined whether or not the jury's consideration of those questions would properly include consideration of mitigating circumstances. In at least some situations the questions could, however, comprehend such an inquiry. For example, the third question asks whether the conduct of the defendant was unreasonable in response to any provocation by the deceased. This might be construed to allow the jury to consider circumstances which, though not sufficient as a defense to the crime itself, might nevertheless have enough mitigating force to avoid the death penaltya claim, for example, that a woman who hired an assassin to kill her husband was driven to it by his continued cruelty to her. We cannot, however, construe the statute; that power is reserved to the Texas courts." Id., at 272, n. 7, 96 S.Ct. at 2956.
However, in this Court's opinion in Jurek v. State, 522 S.W.2d 934 (Tex.Cr.App.1975), we addressed the purpose of the punishment issues provided for in Article 37.071:
"These questions direct and guide [the jury's] deliberations. They channel the jury's consideration on punishment and effectively insure against the arbitrary and wanton imposition of the death penalty." Id., at 939.
We hold that the punishment issues enumerated in Article 37.071(b)(1) and (3) serve the purpose of guiding the jury's punishment deliberations and do not deny a defendant the right to an impartial jury in assessing punishment.
Appellants' sixth ground of error is overruled.
In grounds of error three, four, seven and eight, appellants contend that the Texas capital murder procedure is unconstitutional because it "... allows the jury to decide case by case whether or not the death penalty shall be applied," ".. confers upon the jury the power to determine the defendant's proclivity to commit criminal acts of violence in the future without setting forth any guidelines ...," "... is too vague to be interpreted by reasonable men," and "... makes an unreasonable classification in violation of rights secured to appellant by the equal protection clause...."
Appellants argue the above points together and state that "The argument regarding the above points of error is essentially the same for each and raises the constitutional infirmities of the Texas death penalty statutes...."
Appellants' contentions were answered adversely to them by the Supreme Court's decision upholding the constitutionality of the Texas death penalty procedure in Jurek v. Texas, supra. See also, Jurek v. State, supra.
Appellants' remaining grounds of error are overruled.
The judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1517399/ | 755 A.2d 513 (2000)
2000 ME 135
Debra HUGHES
v.
Michael MORIN.
Supreme Judicial Court of Maine.
Submitted on Briefs April 14, 2000.
Decided July 12, 2000.
*514 James A. Mitchell, Butler, Whittier, LaLiberty & Mitchell, P.A., Waterville, for plaintiff.
Robert J. Ringer Jr., Daviau, Jabar & Batten, Waterville, for defendant.
Panel: WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and CALKINS, JJ.
DANA, J.
[¶ 1] Michael Morin appeals from the judgment of the Superior Court (Kennebec County, Atwood, J.) affirming the judgment of the District Court (Waterville, French, J.) construing disputed language in the parties' divorce decree in favor of Debra Hughes, f/k/a Debra Morin, and limiting Michael's share of the equity in their marital home to half the equity the couple had in the property at the time of their divorce. On appeal, he argues that he is entitled to half of the present equity in the property and that it was error for the court to determine otherwise. We affirm.
[¶ 2] The parties were divorced pursuant to a judgment of the District Court (Studstrup, J.) dated June 18, 1986. In the judgment, the court provided for the welfare of the couple's child, ordered that neither party would be required to provide the other spousal support, and divided the couple's personal and real property. The original divorce decree provided that the couple's minor child would reside primarily with Hughes in the marital home until such time as Hughes sold it, otherwise forfeited her right to possession, or until the child reached the age of eighteen, whichever came first.
[¶ 3] After the judgment was entered, in response to a motion for relief from judgment pursuant to Rule 60(a) of the Maine Rules of Civil Procedure,[1] the parties agreed and the court amended paragraph # 8 of the judgment to read as follows:
The family residence and adjoining property on East Pond Road, Oakland, Maine, as more fully described in the Kennebec County Registry of Deeds in Book 1894, Page 305 and in Book 2164, Page 108, are determined to be marital property. The real estate was held in joint tenancy and shall now be changed to tenants in common. The Plaintiff shall have exclusive possession of said property with the minor child, so long as she pays all mortgage, insurance and tax payments. This right will end when the minor child reaches age (18). At such time as the Plaintiff decides not to exercise the right of residence or that right expires, the property shall be sold and the proceeds shall be divided as follows; the current value of the property has been stipulated to be $54,500.00 and the parties' current equity is found to be $32,940.00. It is ordered that the equity is divided equally between the parties with each party receiving fifty percent (50%) of the equity after the expenses of the sale at the time the equity becomes available for distribution.
[¶ 4] After the divorce, Hughes continued to live in the residence and made all of the mortgage, tax and insurance payments. The mortgage payments made by Hughes reduced the mortgage to $9,000. In addition, Hughes spent approximately $40,000 enlarging and improving the home. As a result of these expenditures, in December of 1997, when their child turned eighteen, the property was appraised at $94,000 and the equity in the property had increased to $85,000.
*515 [¶ 5] Hughes believed that paragraph # 8 should be read to mean that on the occurrence of their child's eighteenth birthday Morin was entitled to receive one-half of the equity identified in paragraph #8, i.e., $16,470 (one-half of $32,940). Accordingly, she obtained financing for that amount and offered it to Morin. Morin rejected the offer and insisted on $42,500 (one-half of the current equity of $85,000). Hughes then filed a motion for post-judgment relief, and the parties filed opposing memoranda in support of their respective positions.
[¶ 6] The District Court interpreted paragraph #8 to mean that Morin was entitled to one-half of the equity at the time of their divorce. The court concluded that paragraph #8 stated that the parties' equity was $32,940 and Morin was to receive one-half of that amount after deducting the expenses of sale. This interpretation was affirmed on appeal to the Superior Court. Morin appeals from this judgment and argues that the only reasonable interpretation of the provision is that offered by him.
[¶ 7] Title 19-A, section 953 controls property divisions in divorce actions and provides that the court "shall divide the marital property in proportions the court considers just" after considering all the relevant factors. 19-A M.R.S.A. § 953 (1997).[2] "[T]here is no question that the court has the inherent and continuing authority to construe and clarify its judgment when that judgment is ambiguous." MacDonald v. MacDonald, 582 A.2d 976, 977 (Me.1990) (citations omitted). The court always has the authority to "make clear the meaning of a prior decree where necessary to guide the conduct of the parties," id. (quoting Randlett v. Randlett, 401 A.2d 1008, 1010 (Me.1979)).[3]
[¶ 8] We apply an objective test to determine whether a court has properly exercised its authority to construe and clarify its own judgment. To uphold the clarifying order of a court, "we must answer the following two questions in the affirmative: (1) whether the court's prior judgment was ambiguous as a matter of law . . . and (2) whether the court's construction of its prior judgment is consistent with its language read as a whole and is objectively supported by the record." MacDonald, 582 A.2d at 977 (citations omitted). "In resolving any ambiguity in a divorce judgment, it is the intent of the divorce court, as revealed in the language of the judgment, that controls." Greenwood v. Greenwood, 2000 ME 37, ¶ 9, 746 A.2d 358, 361.[4]
[¶ 9] The first question may properly be answered in the affirmative. At issue in the present case is the meaning of the amended paragraph #8 that describes how and when the equity in the real property is to be divided. Although the trial court ultimately concluded that Hughes's position was correct and that Morin was entitled only to one-half of the $32,940 minus his share of the expenses of the sale, each party set forth before the trial *516 court a plausible interpretation of the provision. Cf. Portland Valve, Inc. v. Rockwood Systems Corp., 460 A.2d 1383, 1387 (Me.1983) ("Contract language is ambiguous when it is reasonably susceptible of different interpretations.").
[¶ 10] We next determine "whether the court's construction of its prior judgment is consistent with its language read as a whole and is objectively supported by the record." MacDonald, 582 A.2d at 977. "When the meaning of ambiguous language used in a judgment is determined by a consideration of the language in context of the judgment, that meaning also becomes a question of law for the court." Bliss, 583 A.2d at 210. We review questions of law de novo. See id.
[¶ 11] A review of the judgment as a whole demonstrates that the divorce court intended to treat Hughes and Morin equally at the time of the divorce. The parties were ordered to share the parental rights and obligations as to their minor child and neither party was obligated to pay the other spousal support. In addition, the personal property was divided equally, and bank accounts, stocks and retirement plans were awarded to the party in whose name they were held at the time of the divorce. Based on this equal division of all of the other marital property, it is likely that the court also intended to treat the parties equally when it provided for a division of the real property.
[¶ 12] At the time of the divorce, the value of the property was stipulated to be $54,500 and the parties' then "current equity" was found to be $32,940. The court ordered that, although the sale of the property was to be deferred, the equity was to be divided equally between the parties with each party receiving fifty percent (50%) of the equity, after expenses, at the time the equity became available for distribution. While it certainly could have expressed its intent more clearly, the court's effort to calculate the equity that the couple had in the property at the time of the divorce demonstrates its intent that the $32,940 was the amount that was to be divided at the time of the sale. If the court had intended otherwise, the mention of the current equity amount would serve no purpose.
[¶ 13] In addition to its language with respect to the equity, the court's order stated that Hughes and Morin would continue to own the real property as tenants in common. The court added, however, that Hughes was entitled to exclusive possession of the property and that she was solely responsible for the mortgage, insurance and tax payments. Thus, while Morin was to continue to hold half of the legal interest in the property until the property was to be sold, he was freed of all financial obligations with respect to its maintenance.
[¶ 14] When clarifying its order, the court stated that when it divided the real property it had intended to recognize both Morin's investment in the property until the time of the divorce and the financial requirements it had imposed on Hughes to maintain the property after the divorce. Accordingly, while Morin was entitled to receive one-half of the equity in the property that he had been partially responsible for accumulating, i.e., $16,470, Hughes was entitled to any additional equity that accumulated in the property as a result of both her investment in the property and her maintaining the property until their child's eighteenth birthday.[5]
[¶ 15] This interpretation protects both parties' interest in the property. It preserves both Morin's investment in the property before the divorce and Hughes's continued investment in the property after the divorce. Accordingly, the court did not err when it determined that Morin was *517 entitled to one-half of the equity in the property at the time of the divorce.
The entry is:
Judgment affirmed.
NOTES
[1] M.R. Civ. P. 60(a) provides in pertinent part as follows:
Clerical mistakes in judgments, orders or other parts of the record and errors therein arising from oversight or omission may be corrected by the court at any time of its own initiative or on the motion of any party and after such notice, if any, as the court orders.
[2] Pursuant to section 953 the court shall consider all relevant factors, including the following:
A. The contribution of each spouse to the acquisition of the marital property, including the contribution of a spouse as homemaker;
B. The value of the property set aside to each spouse; and
C. The economic circumstances of each spouse at the time of the division of property is to become effective, including the desirability of awarding the family home or the right to live in the home for reasonable periods to the spouse having custody of the children.
[3] A court may not, however, "under the guise of a clarification order make any material change that will modify the property division provided by the original judgment." Bliss v. Bliss, 583 A.2d 208, 210 (Me.1990).
[4] Although the court's intent controls, we have considered the intent of the parties as relevant to determining the intent of the court. See Greenwood, 2000 ME 37, ¶ 9, 746 A.2d at 361 n. 4 (citing Cyr v. Cyr, 469 A.2d 836, 839-40 (Me.1983)).
[5] Morin argues that he was deprived of the use of the $16,470 during the period of time that Hughes lived in the home with their child. His argument fails to appreciate, however, that the deprivation he endured was at least partially for the benefit of his child. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1517392/ | 755 A.2d 1058 (2000)
2000 ME 130
HILLTOP COMMUNITY SPORTS CENTER, INC.
v.
Michael A. HOFFMAN et al.
Supreme Judicial Court of Maine.
Argued May 1, 2000.
Decided July 5, 2000.
*1059 Coleman G. Coyne, Jr., Esq. (orally), Paul Murphy, Esq., Murphy & Coyne, Lewiston, for the plaintiff.
John W. Conway, Esq. (orally), Linnell, Choate & Webber, Auburn, for the defendants.
Panel: WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and CALKINS, JJ.
CLIFFORD, J.
[¶ 1] Randall and Karen Morin appeal from a judgment entered in the Superior Court (Androscoggin County, Atwood J.) affirming a deficiency judgment entered in the District Court (Lewiston, Gorman, J.) in favor of Hilltop Community Sports Center, Inc. in the amount of $17,298. The judgment reflects the amount owed, as evidenced by a promissory note, after the personal property securing the note had been sold and the proceeds applied to the debt. The Morins argue that because Hilltop failed to give them proper notice of the sale of the property, the trial court erred in allowing Hilltop to recover any deficiency. We discern no error and affirm the judgment.
[¶ 2] On March 1, 1996, Randall and Karen Morin, along with their business partners Michael and Linda Hoffman, purchased athletic and exercise equipment and a customer list for their health and fitness center from Hilltop, and they gave Hilltop a promissory note to evidence their debt and executed a security agreement to secure the debt. Shortly thereafter, the Morins sold their interest in the fitness center to Joseph Daniel Sullivan Jr., but they never obtained from Hilltop any release from their obligations under the promissory note and security agreement. Payments were made on the obligations for only six months, at which point Sullivan and the Hoffmans defaulted, with $37,098 still owing to Hilltop.
*1060 [¶ 3] Hilltop filed a complaint in the District Court, and in April of 1997, Hilltop was granted possession of the personal property that was the subject of the security agreement. The court ordered Hilltop "to sell the collateral at public or private sale as soon as practical and to give notice to the debtors of any intended disposition."
[¶ 4] On April 25, 1997, Hilltop notified the Morins that it would "sell the collateral at private sale after May 8, 1997." Between April 25 and May 8, the Morins did nothing to redeem the collateral. On May 1, however, prior to the date specified in the notice, Hilltop entered into an agreement with Andy Valley Racquet Club, Inc.
[¶ 5] On May 1, Paul Gosselin, attorney for Andy Valley Racquet Club, delivered a letter to Paul Murphy, attorney for Hilltop, outlining the terms of an agreement to purchase the collateral:
Enclosed are the originals of the Asset Purchase and Sale Agreement and Bill of Sale which have been executed by [Andy Valley Racquet Club] in duplicate. Also enclosed are our checks in the total amount of $17,500. These checks are tendered to you on the understanding and condition that they will be held in escrow and not released to your clients until the following have occurred:
. . . .
3. You have delivered an executed original of the Purchase and Sale Agreement and Bill of Sale; and
4. You have complied with all other terms and conditions of the Purchase and Sale Agreement.
. . . .
In the event that the above conditions are not complied with on or before May 15, 1997, you will return my client's checks and our clients will retain all rights and remedies against each other.
Murphy signed the letter indicating that he agreed to its terms.
[¶ 6] Also on May 1, the parties signed a bill of sale which stated that Hilltop, for consideration paid, "does hereby grant, sell, transfer and deliver unto ANDY VALLEY RACQUET CLUB, INC., all of its right, title and interest in and to the following goods." Attached to the document were two exhibits listing the property to be conveyed, and at the bottom of the document, the following notation appeared: "Signed, Sealed and Delivered in presence of Paul Murphy [/s/]."
[¶ 7] Accompanying the bill of sale and the letter were two checks and a purchase and sale agreement. One check was in the amount of $1000 and the other was for $16,500. The purchase and sale agreement read, in part, as follows:
AGREEMENT made this 1st day of May, 1997, by and between [Hilltop and Andy Valley Racquet Club] ....
. . . .
NOW THEREFORE, in consideration of the promises and covenants contained herein, it is hereby agreed as follows:
1. Sale of Assets: The Seller agrees to sell, assign and transfer to the Buyer on the closing date stated herein and the Buyer agrees to buy from the Seller all of the assets described [in the accompanying exhibits]. The Sale will be free of all debts, claims, security interests or liabilities other than the potential claim of Randall Morin, Karen Morin, Michael Hoffman and Linda Morin ....
. . . .
3. Payment of Purchase Price: Buyer will pay the purchase price in the following manner.
A. A down payment of $1,500 upon execution of this Agreement .... Said down payment shall be a non-refundable deposit, however, it will be applied as part payment toward the purchase payment. The balance of $16,000.00 shall be payable at closing.
4. Closing Date: The purchase of the assets shall take place at the offices of Murphy & Coyne ... not later than fourteen (14) days from the date of this *1061 Agreement, unless extended in writing by the parties.
5. Conditions: This Agreement is pursuant to and subject to the Order of the Eighth District Court dated April 8, 1997 a copy of which is attached hereto and incorporated herein and further subject to notification to the debtors described therein of sale and any valid objections then may be raised prior to such sale by said debtors.
[¶ 8] After the sale was complete, Hilltop sought a judgment against the Morins for the amount still owed on the promissory note. The Morins challenged the sale, arguing that the notice they had received stating that the sale would take place after May 8, 1997, was deficient because the sale actually occurred on May 1, 1997. Hilltop asserted that, though the agreement was entered into on May 1, the sale did not occur until May 9. The District Court held two hearings to establish whether the notice provided to the Morins was sufficient.
[¶ 9] At the second hearing on September 15, 1998, Attorney Gosselin testified that on May 1 he simultaneously delivered to Attorney Murphy the letter, the purchase and sale agreement, the bill of sale, and the two checks. Gosselin also testified that he included both checks because the sale was contentious and Murphy had required that there be "cash on the table." To protect his clients, however, Gosselin intended that the money be held in escrow until the conditions outlined in the letter had been complied with.
[¶ 10] When Gosselin delivered the documents on May 1, he did not believe that the transaction was complete. On May 9, Gosselin received the releases required by the purchase and sale agreement, as well as a signed purchase and sale agreement and a signed bill of sale from Hilltop.
[¶ 11] Jane Brainerd, co-owner of Hilltop, also testified at the hearing. She signed the purchase and sale agreement and the bill of sale on May 1, but she did not receive any money at that time. On May 9, Brainerd received the checks from Attorney Murphy and deposited them in the bank.
[¶ 12] Based on the terms of the written agreement and the extrinsic evidence offered by Hilltop, the District Court found that the sale had occurred on May 9, 1997, and that Hilltop had given the Morins sufficient notice of the sale. Following an unsuccessful appeal to the Superior Court, the Morins filed this appeal.
I.
[¶ 13] In contending that the notice they received was inadequate, the Morins maintain that the bill of sale, dated May 1 and signed by both parties, is an integrated agreement and that the court erred by admitting parol evidence and by concluding that the date of sale was May 9. The court concluded that the purchase and sale agreement, along with the letter, are part of the written agreement and considered them in construing the agreement. Because the written agreement is ambiguous with respect to the date on which the sale would become final, the trial court considered the testimony of both Gosselin and Brainerd to ascertain the intent of the parties with respect to the date on which the sale became final, and it concluded that the sale became final on May 9.
[¶ 14] "When the Superior Court acts as an intermediate appellate court, we directly review the decision of the District Court." Bangor Publ'g Co. v. Union St. Market, 1998 ME 37, ¶ 5, 706 A.2d 595, 597.
[¶ 15] At the trial, Hilltop had the burden of establishing, as a condition precedent for obtaining a deficiency judgment, that it provided proper notification to the Morins, pursuant to 11 M.R.S.A. § 9-504(3) (1995).[1]See Camden Nat'l Bank v. *1062 St. Clair, 309 A.2d 329, 333 (Me.1973). We have stated
that the reasons for requiring a creditor to give the defaulting debtor notice of the impending disposition of the collateral are to afford the debtor an opportunity to discharge the debt and redeem the collateral, produce another purchaser, or see that the sale is conducted in a commercially reasonable manner. Any aspect of a sale notice contrary to these purposes necessarily prevents it from being a reasonable notification.
Peoples Heritage Sav. Bank v. Theriault, 670 A.2d 1391, 1393 (Me.1996) (citations omitted).
A. The Documents Included in the Written Agreement
[¶ 16] "The general rule is that in the absence of anything to indicate a contrary intention, instruments executed at the same time, by the same contracting parties, for the same purposes, and in the course of the same transaction will be considered and construed together, since they are, in the eyes of the law, one contract or instrument."
Kandlis v. Huotari, 678 A.2d 41, 43 (Me. 1996) (quoting 17A AM. JUR.2d Contracts § 388 (1991)), quoted in Bumila v. Keiser Homes of Me., Inc., 1997 ME 139, ¶ 12, 696 A.2d 1091, 1094. Extrinsic evidence may be offered to prove that separate writings should be read together as a single transaction. See Kandlis v. Huotari, 678 A.2d at 43 (relying, in part, on affidavits to conclude that guarantee agreements signed by several shareholders during a two week period were part of the same transaction).
[¶ 17] Here, contrary to the contentions of the Morins, the bill of sale cannot be read in isolation. The purchase and sale agreement, the letter, and the bill of sale, executed at the same time by the same contracting parties, for the same purpose, in the course of the same transaction, and in the absence of contrary intention, should be considered and construed together because they are, in the eyes of the law, one contract or instrument. See Kandlis v. Huotari, 678 A.2d at 43; see also Rosenthal v. Means, 388 A.2d 113, 115 (Me.1978).
[¶ 18] Both the language of the purchase and sale agreement and the letter make it clear the written agreement consisted of those documents and the bill of sale. Moreover, the court found that there was "no dispute between the parties [to the sale] but that the conditions listed in Attorney Gosselin's letter were part of the agreement between these parties." That factual finding is not clearly erroneous, supported as it is by testimony that the letter was delivered together with the other documents and that the attorney for Andy Valley Racquet Club intended and believed that the letter was part of the agreement. The finding is further supported by Jane Brainerd's testimony that she was aware of the conditions imposed by the Gosselin letter and that she agreed to them. Accordingly, the District Court committed no error in considering all of the written documents as parts of a single agreement.
B. Construction of the Written Agreement
[¶ 19] It must be determined whether the agreement, comprised as it is of the several documents, is ambiguous, *1063 especially with respect to the date the sale was to be finalized. See Spottiswoode v. Levine, 1999 ME 79, ¶ 16, 730 A.2d 166, 172. Whether a term in a contract is ambiguous is an issue of law. See id. A contract is ambiguous if it is reasonably susceptible to more than one interpretation. See Fitzgerald v. Gamester, 658 A.2d 1065, 1069 (Me.1995).
[¶ 20] Here, the bill of sale acknowledges "receipt and delivery" of the property on May 1, yet the purchase and sale agreement does not define a closing date, simply stating that the purchase "shall take place. . . not later than fourteen (14) days from the date of this Agreement." Moreover, the letter from Attorney Gosselin notes that certain conditions have to be met before the sale is to be completed. Given the conflicting statements in the written documents, it is clear that the agreement is ambiguous with respect to the date the sale was to be finalized.
[¶ 21] When a written agreement is ambiguous, the court must determine the intent of the parties in entering that contract, and that determination is a question of fact that we review for clear error. See Spottiswoode v. Levine, 1999 ME 79, ¶ 16, 730 A.2d at 172; see also Bangor Publ'g Co. v. Union St. Market, 1998 ME 37, ¶ 5, 706 A.2d 595, 597. To aid it in construing the agreement, "the factfinder may `entertain extrinsic evidence casting light upon the intention of the parties with respect to the meaning of the unclear language'" Bangor Publ'g Co. v. Union St. Market, 1998 ME 37, ¶ 5, 706 A.2d at 597 (quoting T-M Oil Co., Inc. v. Pasquale, 388 A.2d 82, 85 (Me.1978)). Accordingly, it was appropriate for the court to accept extrinsic evidence to aid it in determining the date on which the parties intended the sale to be finalized.[2]See Bangor Publ'g Co. v. Union St. Market, 1998 ME 37, ¶ 6, 706 A.2d at 597.
[¶ 22] The court heard evidence that Gosselin and Brainerd both understood and intended that the sale would not be complete until the conditions in Gosselin's letter had been satisfied. Moreover, Brainerd also testified that she did not receive and deposit any money until May 9. Finally, Gosselin testified that he did not receive the signed bill of sale and the signed purchase and sale agreement from Hilltop until May 9. Given this evidence and the language contained in the written agreement itself, the court's finding that the sale did not take place until May 9 is supported by the evidence and is not clearly erroneous.[3]
*1064 The entry is:
Judgment affirmed.
NOTES
[1] Title 11, section 9-504(3) provides, in part:
Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor.
11 M.R.S.A. § 9-504(3) (1995) (emphasis added).
[2] Because the written agreement is ambiguous with respect to the date the sale was to be finalized, we do not address the Morins' argument that extrinsic evidence was barred by the parol evidence rule because that rule applies only when extrinsic evidence is "offered to alter, augment, or contradict the unambiguous language of an integrated written agreement." See Handy Boat Serv., Inc. v. Professional Servs., Inc., 1998 ME 134, ¶ 11, 711 A.2d 1306, 1308-09 (emphasis added).
[3] The Morins also argue that Attorney Murphy was acting as an agent for Hilltop and not as an escrow agent on May 1 when Attorney Gosselin delivered the checks, the signed purchase and sale agreement, and the bill of sale on behalf of Andy Valley Racquet Club. They contend that because Murphy was Hilltop's agent, the sale was complete upon delivery of the signed documents. That argument fails for two reasons. First, an attorney for one party can act as an escrow agent in a transaction between his principal and another party, as long as his escrow role "`involves no violation of duty to the principal and the person acts as an individual and not as an agent.'" See Progressive Iron Works Realty Corp. v. Eastern Milling Co., 155 Me. 16, 19, 150 A.2d 760, 762 (1959) (quoting 30 C.J.S. Escrows § 7d). In making this determination, it is "the intention of the parties at the time of deposit [that] is controlling," see Progressive Iron Works Realty Corp. v. Eastern Milling Co., 155 Me. at 20, 150 A.2d at 762, and in this case the trial court's findings support the conclusion that Attorney Murphy properly acted as an escrow agent in this case. Second, even if Attorney Murphy acted solely as agent for Hilltop, the delivery of documents by Andy Valley Racquet Club did not operate to finalize the sale. Because the agreement called for the sale to be completed only after certain conditions were met, the sale was not finalized until those conditions were met and the documents were signed and delivered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1517397/ | 933 S.W.2d 538 (1995)
Ronald Jesus BONILLA, Sr., Appellant,
v.
The STATE of Texas, Appellee.
No. 01-94-00295-CR.
Court of Appeals of Texas, Houston (1st Dist.).
November 16, 1995.
Rehearing Overruled February 22, 1996.
*539 Feliz Salazar, Jr., Houston, for Appellant.
Jerome Aldrich, Brazoria, David Bosserman, Angleton, for Appellee.
Before COHEN, TAFT and HEDGES, JJ.
OPINION
HEDGES, Justice.
Ronald Jesus Bonilla appeals his felony conviction of two counts of aggravated perjury. TEX.PENAL CODE ANN. §§ 37.02(a)(1), 37.03 (Vernon 1994). A jury found him guilty, and the court assessed punishment at five-years confinement probated for five years. In two points of error, appellant challenges the sufficiency of the evidence to support his conviction. We affirm.
FACTS
Appellant was a deputy sheriff in Brazoria County and served as jailer at the county jail. His minor son, Jameslee Bonilla, was charged with aggravated assault occurring July 16, 1993 at Albert Finkle Park in Liverpool, Texas. At a juvenile detention hearing held August 23, 1993, appellant testified on his son's behalf. Appellant was later charged with four counts of aggravated perjury in connection with his testimony at the juvenile detention hearing.
At that hearing, appellant testified on direct examination that Jameslee was at their home at 1:30 p.m. on July 16, 1993, and that Jameslee never left home that day. On cross-examination, however, appellant testified that he (appellant) was away from home working from 6:00 a.m. until 6:00 p.m. on July 16. There was also other evidence, including testimony from four eyewitnesses, that Jameslee was at Albert Finkle Park at 1:30 p.m. on July 16, 1993. Appellant also testified that he (appellant) was off work on Saturday (the 17th), Sunday, Monday, and Tuesday of that week, and that he was home all day on Saturday, July 17, 1993.
At appellant's perjury trial, two witnesses testified that appellant did not stay home all *540 day on July 17, 1993, but that he worked from 9:00 p.m. until 2:00 a.m. Appellant admitted that he left home a little after 8:00 p.m. to go to work.
STANDARD OF REVIEW
In two points of error, appellant contends that the evidence is insufficient to sustain the jury's verdict finding him guilty of two counts of aggravated perjury. In reviewing legal sufficiency this Court must view all the evidence in the light most favorable to the jury's verdict. Madden v. State, 799 S.W.2d 683, 686 (Tex.Crim.App.1990), cert. denied, 499 U.S. 954, 111 S. Ct. 1432, 113 L. Ed. 2d 483 (1991). We must then determine whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 2789, 61 L. Ed. 2d 560 (1979); Turro v. State, 867 S.W.2d 43, 47 (Tex.Crim.App.1993).
When faced with conflicting inferences, a reviewing court must presume that the trier of fact resolved any such conflict in favor of the prosecution and must defer to that resolution. Matson v. State, 819 S.W.2d 839, 846 (Tex.Crim.App.1991). It is not the reviewing court's duty to disregard, realign, or weigh evidence. Id.
COUNT ONE
Count one of the indictment for aggravated perjury states in relevant part:
Ronald Jesus Bonilla, Sr. hereinafter styled Defendant, on or about the 23rd day of August, A.D. 1993, ... did then and there with intent to deceive and with knowledge of the statement's meaning, intentionally and knowingly make a false statement under oath, and false statement being to-wit:
that Jameslee Bonilla was present at the Defendant's house at 1:30 P.M on July 16, 1993;
and said statement being authorized by law to be made under oath, and said statement was made during an official proceeding to-wit: a juvenile court, and said court having jurisdiction of said juvenile detention hearing and said statement made by the Defendant was material to the official proceeding, and the said statement was made after the Defendant was duly sworn by ... Clerk of the Court for said official proceeding;
To establish aggravated perjury, the State was required to prove that appellant, (1) with intent to deceive and (2) with knowledge of the statement's meaning, (3) made a false statement under oath, (4) that was required or authorized by law to be made under oath, (5) in connection with an official proceeding, and (6) that the false statement was material. See TEX.PENAL CODE ANN. §§ 37.02-.03; McCullar v. State, 696 S.W.2d 579, 581 (Tex.Crim.App.1985). Appellant does not contest elements two through six; indeed, he concedes that the evidence was sufficient to sustain a finding that he made a false statement. He claims, however, that there was no evidence that he "intended to deceive." We disagree.
A person commits perjury if he swears to a matter about which he has no conscious knowledge. Butler v. State, 429 S.W.2d 497, 502 (Tex.Crim.App.1968); Tanner v. State, 681 S.W.2d 626, 628 (Tex.App. Houston [14th Dist.] 1983, pet. ref'd). The gravamen of sworn testimony is that the witness declares that he knows the truth of what he states. If he is conscious that he does not know the truth of his sworn statement, then he intends to swear falsely. Butler, 429 S.W.2d at 502.
In reviewing the evidence relating to the element of "intent to deceive," it is clear that appellant knew that he had no conscious knowledge about his son's whereabouts at 1:30 p.m. on July 16, 1993. He could not know because he was not home at that time. At the detention hearing, he testified on direct examination as follows:
Q: Was Jameslee present in your home on July 16, 1993?
A: Yes, sir.
Q: Was he present in your home at 1:30 p.m. on that date?
A: He was home, yes, sir.
Q: Was he present in your home on July 17, 1993?
*541 A: Yes, sir.
Q: Was he present in your home at 1:30 p.m. on July 17, 1993?
A: He was home.
Q: Do you recall him having left your home at any time during either of those two days?
A: No, sir. He's not allowed to leave the house.
....
Q: How can you be so sure he was there over those two days?
A: First of all, July 16 it's my brother's Angel's birthday. I know that for a fact this was that day.
Q: Did you contact your brother on that date?
A: Yes, sir.
Q: Did you call him by long distance telephone?
A: Yes, sir.
Q: Was your son there when you called him?
A: He was home, yes sir.
However, on cross-examination by the prosecutor, appellant testified as follows:
Q: Mr. Bonilla, I believe you stated your son was home all day on July 16. Is that your testimony?
A: Yes, Ma'am.
Q: Okay. Were you home all day on July 16?
A: July 16 I worked from in the morning until in the afternoon, in the afternoon about twenty after six.
Q: So, your hours were
A: Twelve-hour shifts.
Q: So, it began at six in the morning until six in the evening?
A: Yes, ma'am.
Q: Was your wife home all day?
A: She was home, yes. There is always somebody there, a member of the family. There is always somebody home.
Q: So, she was home all day Friday, July 16, to your knowledge?
A: Friday?
Q: That's the Friday, uh-huh?
A: Okay. Friday she worked, but she is home after noon at about 3:30.
Q: Okay. Who would have been home?
A: My daughter, Lonnie Bonilla.
Q: So, she was home when your wife was working?
A: Uh-huh.
Q: Do you know if she was home all day?
A: Yes, she has been home.
Q: I believe you stated y'all remember this because this is your brother's birthday, Angel's birthday.
A: Yes, sir, on the 16th.
Q: Where does he live?
A: In Hawaii, Maui, Island of Maui.
This testimony was read into the record at appellant's perjury trial.
A security manager for Southwestern Bell Telephone testified that based on telephone records for appellant's home phone, no calls were made from appellant's home phone to Hawaii on July 16. This evidence contradicts appellant's testimony that he called his brother from home on July 16 to wish him a happy birthday and that his son was present at the time. Judge Blackstock, the judge who presided over Jameslee Bonilla's detention hearing, testified that he specifically remembered appellant testifying that his son never left the house on July 16 or 17, 1993.
Testimony from witnesses at the scene of the assault provide circumstantial evidence that appellant lied about his son's whereabouts on July 16, 1993 at 1:30 p.m. First, Odis Jeane testified that he saw appellant's son at Albert Finkle Park in Liverpool on Friday, July 16, about 45 minutes before the police arrived, and that he had a gun. The sheriff's department call sheet showed that the disturbance was called in at 2:15 p.m. and that two officers arrived at the park at 2:26 and 2:32. Roy Gray, Jr. also observed appellant's son in a "park at Liverpool" on July 16, 1993. Christopher Piel testified that he was with Gray at the park, that the appellant's son arrived shortly after them, and that the police arrived about 45 minutes later. Finally, Ricky Garcia testified that on July 16 he and appellant's son went to Albert Finkle Park in Liverpool in the afternoon. He further *542 testified that they went to the park to swim and fight, that he saw appellant's son with a gun, and that the police got to the park about 15 to 20 minutes after he got there. This testimony is evidence to support the proposition that appellant's son was in the park and not in his house on the afternoon of July 16, 1993 at 1:30 p.m. It provides solid circumstantial evidence that appellant committed perjury when he said that he knew his son was at home at that same time.
Appellant now admits that his statement that his son was home at 1:30 on July 16, 1993 was not based on personal knowledge. He argues that a lack of personal knowledge is not the same thing as no conscious knowledge if he had reason to have a good faith belief that his sworn testimony was true. This is another way of arguing that he had no intent to deceive because he only intended to communicate a good faith belief, not his personal knowledge. We conclude that appellant's intent was a matter for the jury to discern in a case like this, where conflicting inferences could be drawn.
Viewing all of the evidence in the light most favorable to the verdict, we find the evidence sufficient to support the jury's finding on count one.
We overrule point of error one.
COUNT TWO
In point of error two, appellant claims that the evidence is insufficient to sustain the jury's finding of guilty on count two of the indictment. That count charged that appellant committed aggravated perjury when he testified at the juvenile detention hearing that he (appellant) was home all day Saturday, July 17, 1993, when it was later shown that he worked the late shift on that date. Count two states:
Ronald Jesus Bonilla, Sr. hereinafter styled Defendant, on or about the 23rd day of August, A.D. 1993, ... did then and there with intent to deceive and with knowledge of the statement's meaning, intentionally and knowingly make a false statement under oath, and false statement being to-wit:
that the Defendant was home all day Saturday, July 17, 1993;
and said statement being authorized by law to be made under oath, and said statement was made during an official proceeding to-wit: a juvenile court, and said court having jurisdiction of said juvenile detention hearing and said statement made by the Defendant was material to the official proceeding, and the said statement was made after the Defendant was duly sworn by ... Clerk of the Court for said official proceeding;
Appellant contends that there was insufficient evidence to establish that he intended to deceive when he made the statement.
To interpret the meaning of this statement, we must examine it in the context in which it was made. At the detention hearing, appellant testified on cross-examination as follows:
Q: Let's go to Saturday the 17th. Did you work that day?
A: I was off.
Q: You were off.
A: I work Wednesday, Thursday and Friday, three twelves.
Q: You were off that Saturday and Sunday?
A: Saturday, Sunday, Monday, Tuesday.
Q: And were you home all day?
A: Yes.
Q: Did you ever leave the house?
A: No.
Q: And your testimony is that Jameslee never left the house?
A: Jameslee never left the house, yes.
This testimony was read into the record at appellant's perjury trial.
This testimony is meaningful in the context of appellant's request that the court release his son from detention. To that end, it was important that the court feel that appellant was providing proper supervision of his son. Appellant testified that, in his belief, he was exercising suitable supervision, care, and protection of his son. Appellant testified that he was off work Saturday, Sunday, Monday, and Tuesday. His sworn statement that he never left the house on those days supported *543 the statement that his son was well supervised. Judge Blackstock testified that appellant's sworn statement at the detention hearing led him to believe that appellant was at home on July 16 and 17, and that this was the reason why he released Jameslee.
The State presented controverting evidence that appellant did, in fact, work on Saturday, July 17, and that he did, in fact, leave his house on July 17. Richard Dix, a security officer for the Texas Rose Hall in Alvin, testified that appellant began work there at 9:00 p.m. on Saturday, July 17, 1993. Benny Moore, the manager of the Texas Rose Hall testified that according to the payroll records, appellant worked there from 9:00 p.m. on Saturday, July 17, 1993 until 2:00 a.m. on Sunday, July 18, 1993. Appellant admitted that he left his house a little after 8:00 p.m. on July 17, 1983 to go to work at the Texas Rose Hall in Alvin. We hold that there is sufficient evidence that appellant committed perjury when he said he was off on Saturday, July 17, and that he was home all that day.
In an attempt to explain this inconsistency, appellant refers us to the dictionary meaning of the word "day." He claims that, by his statement at the detention hearing that he was home all day on the seventeenth, he meant during daylight hours. Appellant made this same argument to the jury, that by "all day" he meant "all day during daylight hours," and the jury obviously did not believe him. Faced with conflicting inferences, we must presume that the jury resolved any conflict in favor of the prosecution, and must defer to that resolution. See Matson, 819 S.W.2d at 846. It is not this Court's duty to realign or weigh the evidence. Id.
Viewing all the evidence in the light most favorable to the jury's verdict, we believe that a rational trier of fact could have found, beyond a reasonable doubt, that appellant had intent to deceive as to count two.
We overrule point of error two.
State's Cross-point
In one cross-point, the State contends that the trial court erred in charging the jury that they must find, as an element of the first count, that the statement that appellant made under oath was false, when in fact, the State was required to prove only that he had no conscious knowledge whether the statement was true. Because of our disposition of appellant's points of error, we decline to address the cross-point.
We affirm the judgment of the trial court.
ORDER ON MOTION FOR REHEARING
Appellant filed a motion for rehearing alleging that a portion of the Texas perjury statute is unconstitutional.[1] Although we overrule appellant's motion in this case, we address his ground for rehearing as a supplement to our original opinion.
Specifically, appellant points out that the United States Supreme Court, in United States v. Gaudin, found that materiality, in the context of a perjury prosecution, is a "mixed question of law and fact" and thus should go to the jury. ___ U.S.___, ___, 115 S. Ct. 2310, 2320, 132 L. Ed. 2d 444 (1995). The Gaudin Court held that the trial judge's refusal to submit the question of materiality to the jury was unconstitutional. Id. Thus, appellant argues that section 37.04(c) of the Texas Penal Code, which states that materiality is a question of law, is unconstitutional. Appellant further argues that because the issue of materiality did not go to the jury in this case, his conviction must be reversed.
We agree with appellant that Gaudin implicates the constitutionality of section 37.04(c) of the Texas Penal Code. However, rule 100(a) of the Texas Rules of Appellate Procedure restricts a motion for rehearing to "any matter determined by a court of appeals or any panel thereof." TEX.R.APP.P. 100(a) (emphasis added). Whether to consider a new ground raised for the first time on a motion for rehearing is a decision left to the sound discretion of the court of appeals. Rochelle *544 v. State, 791 S.W.2d 121, 124-25 (Tex. Crim.App.1990); Tallant v. State, 742 S.W.2d 292, 294 (Tex.Crim.App.1987); Perkins v. State, 905 S.W.2d 452, 453 (Tex.App.El Paso 1995, pet. ref'd).
In this case, the issue of "materiality" of the allegedly false statement was not argued by appellant in his points of error, but was raised for the first time in his motion for rehearing. In his points of error, appellant challenged only the sufficiency of the evidence to prove that he had "intent to deceive." Appellant never claimed, at trial or on appeal, that his statements were not material.[2] Based on this record, we exercise our discretion to decline to review this new ground regarding materiality because it was an uncontested issue at trial and on appeal.
We overrule appellant's motion for rehearing.
COHEN, Justice, concurring to order overruling motion for rehearing.
I agree with appellant that Tex.Penal Code Ann. § 37.04(c) (Vernon 1994) is unconstitutional for the reasons stated in United States v. Gaudin, ___ U.S.___, ___, 115 S. Ct. 2310, 2320, 132 L. Ed. 2d 444 (1995). Thus, the jury instruction here was unconstitutional for the same reasons as the instruction in Gaudin.
Trial judges should no longer instruct juries that materiality is a question of law. Instead, they should instruct juries that materiality, like all other elements, must be proved by the State beyond a reasonable doubt. TEX.PENAL CODE ANN. § 2.01 (Vernon 1994).
NOTES
[1] Whether a statement is material in a given factual situation is a question of law. TEX.PENAL CODE ANN. § 37.04(c) (Vernon 1994).
[2] If we were to reach the merits, we would find that any error was harmless beyond a reasonable doubt in this case. There was no dispute at trial about materiality, probably because materiality was obvious. See Almanza v. State, 686 S.W.2d 157, 174 (Tex.Crim.App.1984). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1577083/ | 790 S.W.2d 299 (1990)
Charles M. ACKER Petitioner,
v.
TEXAS WATER COMMISSION Respondent.
No. C-9031.
Supreme Court of Texas.
May 2, 1990.
Rehearing Overruled June 13, 1990.
J. Bruce Bennett, Jeffery L. Hart, Austin, for petitioner.
Linda B. Secord, Austin, for respondent.
OPINION
DOGGETT, Justice.
The vital issue in this case is whether the decisionmaking of a state agency in a contested administrative case should be done openly or secretly. We believe the law requires openness.
*300 Charles M. Acker received a favorable recommendation from the hearings examiner at the Texas Water Commission on a requested permit for a wastewater treatment plant. Thereafter, during a recess of a public hearing conducted by the three member Commission, Commissioners Hopkins and Roming were allegedly overheard conversing about this application in a restroom. This purported discussion concerned Acker's costs in complying with a city subdivision ordinance. When the public meeting reconvened, Commissioners Hopkins and Houchins voted to deny the application, and Commissioner Roming voted to grant it. Claiming a violation of the Texas Open Meetings Act, Tex.Rev.Civ.Stat.Ann. art. 6252-17 (Vernon Supp.1990), had occurred, Acker brought suit seeking to set aside this order. The trial court granted Acker summary judgment based upon this asserted violation, but was reversed by the court of appeals on grounds that section 17 of the Texas Administrative Procedure and Texas Register Act, Tex.Rev.Civ.Stat.Ann. art. 6252-13a (Vernon Supp.1990) (APTRA), allows private communications between agency members. 774 S.W.2d 270. We affirm the judgment, although not the reasoning, of the court of appeals and remand to the trial court for further proceedings.
The Open Meetings Act was enacted in 1967 for the purpose "of assuring that the public has the opportunity to be informed concerning the transactions of public business." Acts 1967, ch. 271, § 7, 1967 Tex.Gen.Laws 597, 598. It recognized the wisdom contained in the words of Justice Brandeis that: "Sunlight is said to be the best of disinfectants; electric light the most efficient policeman." L. Brandeis, Other People's Money 92 (1914 ed.). The executive and legislative decisions of our governmental officials as well as the underlying reasoning must be discussed openly before the public rather than secretly behind closed doors. In order to effect this policy, this statute requires that "every regular, special, or called meeting or session of every governmental body shall be open to the public." Tex.Rev.Civ.Stat.Ann. art. 6252-17, § 2(a) (Vernon Supp.1990).[1] A "meeting" includes any deliberation involving a "quorum" or majority of the members of a governing body at which they act on or discuss any public business or policy over which they have control. Id. at §§ 1(a) and (d). Any verbal exchange between a majority of the members concerning any issue within their jurisdiction constitutes a "deliberation." Id. at § 1(b). When a majority of a public decisionmaking body is considering a pending issue, there can be no "informal" discussion. There is either formal consideration of a matter in compliance with the Open Meetings Act or an illegal meeting. We have previously noted that there is a broad scope to the coverage of the Open Meetings Act and a narrowness to its few exceptions. Cox Enterprises, Inc. v. Board of Trustees, 706 S.W.2d 956, 958 (Tex.1986). Its breadth is consistent with the recommendation of Woodrow Wilson that "Government ought to be all outside and no inside."[2] Our citizens are entitled to more than a result. They are entitled not only to know what government decides but to observe how and why every decision is reached. The explicit command of the statute is for openness at every stage of the deliberations. Accordingly, we have demanded exact and literal compliance with the terms of this statute. Smith County v. Thornton, 726 S.W.2d 2, 3 (Tex.1986).
*301 Rather than applying it literally, the court of appeals created a gaping hole in the Open Meetings Act through the meaning accorded to the subsequent enactment of section 17 of APTRA. That court held that APTRA authorizes a quorum of a state commission without any prior notice to meet and deliberate privately about any aspect of a pending contested proceeding. This holding effectively eviscerates the Open Meetings Act for application to the executive branch of our government. In administrative review of contested issues from a to zfrom alcoholic beverages to zoos, secrecy would suddenly be authorized.
This serious circumvention of open government is not warranted under the rules of statutory construction. A statute is presumed to have been enacted by the legislature with complete knowledge of the existing law and with reference to it. McBride v. Clayton, 140 Tex. 71, 76, 166 S.W.2d 125, 128 (Tex.Comm'n App.1942, opinion adopted). APTRA was enacted in 1975 to "afford minimum standards of uniform practice and procedure for state agencies." Acts 1975, ch. 61, § 1, 1975 Tex. Gen.Laws 136. A subsequent amendment to section 17 of APTRA provided that "[a]n agency member may communicate ex parte with other members of the agency." Acts 1977, ch. 780, § 1, 1977 Tex.Gen.Laws 1959, 1960. Without attempting to reconcile the Open Meetings Act with this provision, the court of appeals considered the latter impliedly to have repealed the former for purposes of all administrative agency consideration of contested cases. Such statutory repeals by implication are not favored. Gordon v. Lake, 163 Tex. 392, 394, 356 S.W.2d 138, 139 (1962). A legislative enactment covering a subject dealt with by an older law, but not repealing that law, should be harmonized whenever possible with its predecessor in such a manner as to give effect to both. Standard v. Sadler, 383 S.W.2d 391, 395 (Tex.1964); Conley v. Daughters of the Republic, 106 Tex. 80, 92, 156 S.W. 197, 201 (1913). Accordingly, section 17 of APTRA can be harmonized with the Open Meetings Act by allowing a state commission's members to confer ex parte, but only when less than a quorum is present.[3] Such coordinating preserves both APTRA and the objective of the Open Meetings Act to forbid ex parte deliberations between a majority of governmental decisionmakers.[4]
Since the two statutes in question can be harmonized in a manner not compelling implicit revocation of the Open Meetings Act, we now consider whether the Commission violated the Act as a matter of law. In the review of a summary judgment, the movant has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment *302 as a matter of law. Evidence favorable to the non-movant will be taken as true when deciding whether a material fact issue exists. All reasonable inferences must be indulged in favor of the non-movant and any doubts resolved in its favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).
The trial court's finding of an improper, closed meeting by two of the three members of the Commission is supported by the affidavit of Andrew M. Taylor who overheard the Roming/Hopkins conversation. As one of Acker's attorneys in the proceedings before the Commission, Taylor was an interested witness. See Audiomedia Inc. v. Rollins Outdoor Advertising, Inc., 477 S.W.2d 370, 373 n. 4 (Tex.Civ.App. San Antonio 1972, writ ref'd n.r.e.). His relationship with Acker, however, is not enough to defeat the motion. See Ellis v. Mortgage and Trust, Inc., 751 S.W.2d 721, 724 (Tex.App.Ft. Worth 1988, no writ). "A summary judgment may be granted based on uncontroverted testimonial evidence of an interested witness ... if the evidence is clear, positive and direct, otherwise credible and free from contradictions and inconsistencies, and could have been readily controverted." Tex.R.Civ.P. 166a(c). Both Commissioners Roming and Hopkins testified by affidavit that they had no recollection of any conversation outside the hearing, and that considering their past behavior and habit at the Texas Water Commission, the occurrence of such a conversation was highly unlikely. The habit or custom of a person doing a particular act is relevant in determining his conduct on the occasion in question. Tex.R.Civ. Evid. 406. See also George Linskie Co. v. Miller-Picking Corp., 463 S.W.2d 170, 173 (Tex.1971); Cooper v. Hall, 489 S.W.2d 409, 415 (Tex.Civ.App.Amarillo 1972, writ ref'd n.r.e.); Allstate Ins. Co. v. Smith, 471 S.W.2d 620, 625 (Tex.Civ.App.El Paso 1971, no writ).[5] These affidavits are sufficient to controvert the summary judgment evidence of Taylor, thereby raising a fact question and defeating Acker's motion.
We hold that a meeting between a majority of the Commissioners to discuss among themselves contested issues outside a public hearing violates section 2 of the Open Meetings Act. We further hold that in this case the Commissioners' affidavits raised a material fact issue precluding summary judgment. We affirm the judgment, although not the reasoning, of the court of appeals and remand this cause to the trial court for further proceedings consistent with this opinion.
NOTES
[1] Recently the Texas Water Commission adopted a rule subjecting all of its meetings to the Open Meetings Law. Tex.Water Comm'n, 13 Tex.Reg. 276 (1988), adopted 13 Tex.Reg. 3579 (1988) (codified at 31 Tex.Admin.Code § 261.4). See also Securities Board rule 7 Tex.Admin. Code. § 105.1 (Hart Nov. 1, 1986) (all hearings in contested cases to be held in accordance with the Open Meetings Act).
[2] Woodrow Wilson, The New Freedom 76 (1961). "Light is the only thing that can sweeten our political atmospherelight thrown upon every detail of administration in the departments; light diffused through every passage of policy; light blazed full upon every feature of legislation; light that can penetrate every recess or corner in which any intrigue might hide; light that will open to view the innermost chambers of government...." Woodrow Wilson, "Committee or Cabinet Government?" Overland Monthly, January 1884, in II The Papers of Woodrow Wilson 629 (A.S. Link ed. 1967).
[3] This harmonizing admittedly denies to three member commissions the opportunity to meet ex parte, since any meeting of more than one commissioner obviously constitutes a quorum. APTRA, however, applies to all statewide boards, commissions, departments or officers, regardless of size, that make rules or determine contested cases, except those wholly financed by federal funds, the legislature, the courts, the Industrial Accident Board, and institutions of higher education. Article 6252-13a, § 3(1). Hence, our approach to interpreting APTRA and the Open Meetings Act together accords meaning to both.
[4] Recent legislative action supports this construction. Under the court of appeals' reasoning, the legislature by enacting APTRA intended for the three member State Board of Insurance to be exempt from the requirements of the Open Meetings Act when considering contested cases. Nevertheless, in 1985, the legislature considered it necessary to enact Insurance Code Article 1.05(c), providing:
Notwithstanding any other provision of law, members of the State Board of Insurance may meet in closed session to deliberate and determine any matter respecting an appeal from an order of the Commissioner of Insurance in a contested case: provided, however, all evidence on which such decision is made must be presented to the board in accordance with the open meetings law, Chapter 271, Acts of the 60th Legislature, Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil Statutes), and the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes).
Acts 1985, ch. 834, § 3, 1985 Tex.Gen.Laws 2899, 2900 (codified at Tex.Ins.Code Ann. art. 1.05(c) (Vernon Supp.1990)). The legislature is certainly capable of making such express exceptions to the Open Meetings Act but has not done so through APTRA.
[5] Recently, a summary judgment affiant's testimony about industry custom was held to raise fact issues regarding industry custom and whether non-compliance therewith constituted negligence. Knopf v. Dallas-Fort Worth Roofing Supply Company, Inc., 786 S.W.2d 37 No. 05-89-00750-CV (Tex.App.Dallas 1990, no writ). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1849348/ | 117 B.R. 352 (1990)
In re ENGLEWOOD COMMUNITY HOSPITAL CORPORATION, Debtor.
Bankruptcy No. 88 B 04795.
United States Bankruptcy Court, N.D. Illinois, E.D.
July 26, 1990.
*353 *354 Richard G. Smolev, Sachnoff & Weaver, Ltd., Chicago, Ill., for trustee.
Joseph Stein, Sachnoff & Weaver, Ltd., Chicago, Ill., trustee.
Ariel Weissberg, Anthony V. Ponzio, Weissberg and Associates, Ltd., Chicago, Ill., for Photographic Conservation Associates, Ltd.
MEMORANDUM OPINION
JOHN H. SQUIRES, Bankruptcy Judge.
This matter comes before the Court on the motion of Photographic Conservation Associates Ltd. ("PCA") for the allowance and payment of administrative and possessory lien claims.[1] For the reasons set forth herein, the Court hereby denies the motion.
*355 I. JURISDICTION AND PROCEDURE
The Court has jurisdiction to entertain this motion pursuant to 28 U.S.C. § 1334 and General Rule 2.33(A) of the United States District Court for the Northern District of Illinois. This matter constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(B).
II. FACTS AND BACKGROUND
Englewood Community Hospital Corporation (the "Debtor") ceased its business operations in February 1988. The Debtor operated a community hospital. When the Debtor closed, it housed forty years of medical records dating from approximately 1947. On March 25, 1988, shortly after the Debtor ceased operations, it filed a Chapter 7 petition. Subsequently, Joseph Stein (the "Trustee") was appointed trustee of the estate. Hence, rights to, possession of, and duties to maintain the Debtor's records became the responsibility of the Trustee as representative of the estate. See 11 U.S.C. §§ 323, 521(4), 541(a)(1), 542(a) and 704(2).
On July 20, 1988, the Trustee presented an emergency motion for authority to retain The Devon Group for the purpose of establishing a retention and disposition program for the Debtor's medical records. (PCA Exhibit No. 3, p. 6). At that hearing, after notice (PCA Exhibit No. 4), the Court entered an order authorizing the Trustee, inter alia, to retain The Devon Group for the purpose of removing microfilmed records from the premises of the Debtor. On August 1, 1988, after further hearing on that motion, the Court entered an Order authorizing "The Devon Group to undertake a records disposition and retention program with respect to all records of the Debtor and to expend $59,700.00 in connection therewith." (PCA Exhibit No. 3, p. 8). It is undisputed that this sum has been paid from estate funds to The Devon Group.
The Trustee's emergency motion related to a July 6, 1988 proposal submitted to the Trustee by Ira Berlin ("Berlin") as director of The Devon Group, entitled "Records Disposition Program for the Hospital of Englewood." (PCA Exhibit No. 1). The proposal dealt with both hard copy and microfilm patient records and states in relevant part:
Given the number of departments whose document must be checked against the medical records, this department's records must be the last in the disposition process. When the updating of records has been completed, the medical records can be donated to another nonprofit organization. The Devon Group has located on [sic] organization that has agreed to accept these permanent records.
(PCA Exhibit No. 1, p. 64).
The proposal also identified the quantity and location of the records and proposed that they be permanently retained but relocated. (PCA Exhibit No. 1, p. 64-65). It also contained photographs illustrating the volume and manner of storage, the location of both the boxed and shelved hard copy records, the microfilm records stored in cabinets and the related equipment used for retrieval and viewing of same. (PCA Exhibit No. 1, p. 66-68).
On August 25, 1988, the Trustee entered into an agreement with the Jewish International Photodocumentary Society, a not-for-profit corporation, (the "Society"), located at 1554 West Devon Avenue, Chicago, Illinois. (PCA Exhibit No. 5). The agreement which was not prepared by the Trustee, but of unknown authorship, states in relevant part: "the Society has been requested by the Trustee to retain the medical records (Appendix I); and to under take [sic] the legal retention, protection, storage and retrieval of these medical records for the former patients of Englewood Hospital; and whereas, the Society has agreed to this undertaking. . . ." (PCA Exhibit No. 5, p. 1). The Society was to commence providing these services for the medical records on September 1, 1988. The Trustee's delegate was to deliver the records to the Society. The Society agreed to abide by all record retention requirements and to respond to requests and subpoenas for the medical records, but not to charge the Trustee for these services. The agreement was signed by the Trustee and Murray M. Mattenson ("Mattenson") as executive director *356 of the Society. The Court, however, did not authorize the Trustee to enter into this agreement with the Society.
PCA filed the instant motion and its proof of claim on April 16, 1990, (PCA Exhibit No. 17), asserting an administrative claim pursuant to 11 U.S.C. §§ 507(a)(1) and 503(b) in the amount of $19,031.00. PCA is an Illinois corporation, of which Mattenson is the sole officer, director and shareholder. (PCA Exhibit Nos. 13, 14 and 15). PCA is in the photographic conservation business. The motion alleges that PCA organizes, maintains, accesses and transports hospital and medical records. PCA has maintained a portion of the Debtor's records from October 1988 through June 1990 at its leased business facility. The Trustee filed a response in opposition to the motion, to which PCA replied. The Court conducted an evidentiary hearing on June 21 and 22, 1990.
The Devon Group is, or was, a consortium of members whose exact identities were unknown to the Trustee. The Trustee testified that the procedure to access the records prior to Berlin's death, was to send Berlin the subpoenas received by the Trustee with the checks for the fees endorsed over to Berlin. (PCA Exhibit No. 6). Subsequent to Berlin's demise, the Trustee followed the same procedure, but would endorse the checks over to Mattenson. (Trustee Exhibit Nos. 2, 3, 4, 5, 6, 7 and 8, and PCA Exhibit No. 11).
The Trustee further testified that prior to Berlin's death, no demands for rent, services or expenses were made by PCA or Mattenson. Moreover, the Trustee claimed that he never had a conversation with Mattenson prior to Berlin's death. He stated that he spoke to Mattenson two weeks after Berlin's death in regards to acting on the subpoenas. The Trustee stated that no discussions were had with Mattenson with respect to rent due and owing to PCA until March 21, 1990. (Trustee Exhibit Nos. 9 and 10).
Mattenson testified that he is sole officer, director and shareholder of PCA and resides at 1554 West Devon Avenue, Chicago, Illinois, where PCA has its principal place of business. He founded the Society, admitted that he signed the agreement between the Society and the Trustee (PCA Exhibit No. 5), but currently holds no position with the Society. Berlin was never affiliated with nor an agent for the Society except for the closing of a purchase of certain real estate. (Trustee Exhibit No. 1). Mattenson testified that in 1989 he began storing some of the hard copy records and microfilm. He stated that Berlin rented space from PCA to store the Debtor's medical records and that the Society was a subtenant of PCA under PCA's leasehold interest. (PCA Exhibit No. 12). Mattenson testified he had an oral agreement with Berlin under which he was to be paid monthly rent of $754.50 plus the subpoena fees for search, retrieval and copying the medical records. In addition, Mattenson stated that he had a conversation with Berlin, wherein Berlin assured him that the Trustee would pay rental and turn over the subpoena fees to him. Berlin made certain payments to PCA totaling $907.50 (PCA Exhibit Nos. 7 and 8) by checks imprinted as drawn on an account entitled:
Englewood Community Hospital Corporation
Debtor in Possession
The Devon Administrative Consultants Group
860 DeWitt Place, Suite 1008
Chicago, IL 60611
The hard copy medical records and microfilm comprise a total of 40,000 pounds and occupy approximately one-third of PCA's rented premises. Mattenson stated that before Berlin's death, he never had a conversation with the Trustee with regards to the medical records. The current rental paid by PCA under its lease for the entire premises is $650.00 per month plus $10.00 per month for water. (PCA Exhibit No. 12). At the time of trial, PCA increased its claim to include Mattenson's time for supervising the moving of the records in 1988 for an added charge of $5,120.00. The total of PCA's amended claim for storage ($15,844.50), microfilm and related equipment ($184.50), moving ($5,120.00), and *357 records retrieval for the Trustee ($330.00) equals $21,479.00. (PCA Exhibit No. 16).
III. ARGUMENTS OF THE PARTIES
PCA alleges that the central issue is that the Trustee engaged Berlin as his agent who, in turn, hired PCA as a subcontractor to perform such services. PCA argues that the Trustee is estopped to deny that Berlin was his agent because the Trustee's agreement with the Society referenced that a "delegate" was to deliver the records to the Society and the earlier agreement with The Devon Group created an agency with the Trustee.
In his response, the Trustee maintains that the estate is not indebted to PCA. The Trustee claims that with the approval of the Court, he entered into the agreement with The Devon Group, to which the estate has paid the agreed and approved consideration for the maintenance of and access to all of the Debtor's records. Pursuant to that authority, the Trustee entered into the subsequent agreement with the Society. The Trustee contends that Mattenson, through The Devon Group, maintained the Debtor's records and performed the other required obligations along with Berlin until September, 1989, when Berlin died. The Trustee argues that at that point in time, the sole responsibility for the discharge of the obligation under the agreement with the Society fell to Mattenson.
The Trustee further alleges that Mattenson refused to discharge those obligations because he contends that he was not paid by Berlin or The Devon Group. The Trustee asserts that The Devon Group was an independent contractor, not his agent. The Trustee contends that Berlin was not his agent any more than Mattenson or PCA. None of them were authorized to be retained as professional persons under 11 U.S.C. § 327 and Bankruptcy Rule 2014(a) entitling any to compensation under sections 330 and 331. The Trustee contends that no agency by estoppel was shown by the evidence or is permitted by law under the Bankruptcy Code. Additionally, the Trustee claims that the disagreements among Mattenson, the Society, PCA and The Devon Group should not be a burden to the estate and that PCA's administrative claim under sections 503(b) and 507(a)(1) is an attempted end run to evade or circumvent section 327(a).
Furthermore, the Trustee states that Mattenson is attempting to use PCA to seek payment for services he (through the Society) is obligated to perform under the terms of the agreement between the Trustee and the Society. The Trustee asserts that there is no basis for the allowance of PCA's administrative claim. Moreover, the Trustee argues that Mattenson's refusal to honor the terms of the agreement has prevented access to the Debtor's records by those in need of same. Lastly, the Trustee alleges that PCA's claim was not filed in accordance with Bankruptcy Rule 7001 and that the motion at bar is a proceeding to recover money which requires an adversary proceeding.
In reply, PCA asserts that section 327 is inapplicable to bar its claim. PCA argues that the Trustee failed to obtain express approval of the Court under that section to enter into the agreement with the Society. PCA further states that the agreement between the Trustee and the Society was limited to microfilm medical records as was the agreement between The Devon Group and the Trustee. PCA alleges that the agreement with the Society was never carried out and subject to numerous breaches by the Trustee. PCA argues that the Trustee was to send the Society all subpoenas and subpoena fees in connection with document requests for medical records. Supposedly, the Trustee turned over the subpoenas and the fees to Berlin on behalf of The Devon Group. PCA concludes that it has an allowable administrative claim against the estate.
IV. APPLICABLE STANDARDS
Adjudication of disputed claims is one of the core proceedings listed in 28 U.S.C. § 157(b)(2)(B). Pursuant to 11 U.S.C. § 503(b)(1)(A), post-petition costs and expenses of preserving the estate are allowed as administrative expenses. Section 503 provides:
*358 (b) After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including
(1)(A) the actual necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case:. . . .
11 U.S.C. § 503(b)(1)(A).
Priority statutes such as section 503 are to be strictly construed. In re Sinclair, 92 B.R. 787, 788 (Bankr.S.D.Ill.1988).
The burden of proving entitlement to an administrative expense is on the claimant and the standard of proof is a preponderance of the evidence. In re Sinclair, 92 B.R. at 788; In re 1 Potato 2, Inc., 71 B.R. 615, 618 (Bankr.D.Minn.1987). The Seventh Circuit has set forth a two-prong test for determining an administrative claim pursuant to section 503(b)(1)(A). A claim will be afforded such priority if the debt both (1) arises from a transaction with the debtor (the Trustee) and (2) that transaction benefited the debtor (the estate) in the operation of its post-petition business. In re Jartran, Inc., 732 F.2d 584, 587 (7th Cir.1984). The post-petition business involved in this matter is the maintenance, storage and retrieval of the Debtor's medical records for the benefit of former patients and other interested parties as required by applicable federal and state law.
Claims should be granted administrative priority status only if the claim comports with the language and underlying purposes of section 503. In re Jartran, Inc., 732 F.2d 584 (7th Cir.1984); In re Chicago, Milwaukee, St. Paul & Pacific Railroad Co., 658 F.2d 1149, 1163 (7th Cir.1981), cert. denied, 455 U.S. 1000, 102 S. Ct. 1632, 71 L. Ed. 2d 867 (1982) (general rule is equality of distribution; deviation must appear in the statute). In Jartran, the Seventh Circuit held that when third parties are induced to supply goods or services to the debtor, and the estate is benefited, the claims of those entities should be afforded priority so as to provide incentive to third parties to furnish credit necessary for the debtor's reorganization. It cannot be said that providing administrative priority to a pre-petition claim would further this policy. Id. at 588-589.
In order to qualify as "actual" and "necessary" administrative expenses, expenditures must benefit the estate as a whole rather than just the creditor claimant. In re Jartran, Inc., 886 F.2d 859, 871 (7th Cir.1989); In re Jartran, Inc., 71 B.R. 938, 945 (Bankr.N.D.Ill.1987), aff'd, 886 F.2d 859 (7th Cir.1989); see also In re Patch Graphics, 58 B.R. 743, 746 (Bankr. W.D.Wis.1986); In re McK, Ltd., 14 B.R. 518, 520 (Bankr.D.Colo.1981). In the case of In re Subscription Television of Greater Atlanta, 789 F.2d 1530 (11th Cir.1986), the court noted that the inclusion of the words "actual" and "necessary" in section 503(b)(1) mean that the estate must accrue a real benefit from the transaction, as opposed to mere potential benefit, for administrative expense priority to be granted on claims against the estate. The use of the terms "actual" and "necessary" were not accidental, but were included to impose the requirement that the estate is actually benefitted. In re Carmichael, 109 B.R. 849, 851 (Bankr.N.D.Ill.1990). The language of section 503 continues the rule under the former Bankruptcy Act that a creditor's right to payment will be afforded priority only to the extent the estate was benefited in fact from the consideration supporting the creditor's claim. See In re Mammoth Mart, Inc., 536 F.2d 950 (1st Cir.1976); American Anthracite & Bituminous Coal Corp. v. Leonardo Arrivabene, S.A., 280 F.2d 119 (2nd Cir.1960).
When the claimant has established that the estate actually benefited from the transaction, then the Court can estimate the amount of the benefit by considering the reasonable use of the property. In re Carmichael, 109 B.R. at 851; In re Pickens-Bond Construction Co., 83 B.R. 581 (Bankr.E.D.Ark.1988); In re N-Ren Corp., 68 B.R. 404 (Bankr.S.D.Ohio 1986); In re Intran Corp., 62 B.R. 435 (Bankr.D. Minn.1986). The bankruptcy courts have broad discretion in determining whether to award administrative expense priority. *359 That discretion is limited by the clear intent of section 503(b)(1)(A): the actual and necessary costs of preserving the estate. See Jartran, 732 F.2d at 586.
V. DISCUSSION
1. PCA'S CLAIM NEED NOT BE FILED AS AN ADVERSARY PROCEEDING
The Trustee argues that PCA's claim was not filed in accordance with Bankruptcy Rule 7001 and therefore should be dismissed. The Trustee claims that a proceeding to recover money must be filed as an adversary proceeding. Bankruptcy Rule 3001 et seq. governs the filing of claims against an estate. The starting point for the analysis is bankruptcy Rule 3002(a) which states:
An unsecured creditor or an equity security holder must file a proof of claim or interest in accordance with this rule for the claim or interest to be allowed, except as provided in Rules 1019(4), 3003, 3004, and 3005.
Fed.R.Bankr.P. 3002(a).
An exception from Bankruptcy Rule 3002(a) for administrative expenses is discussed in In re Parker, 15 B.R. 980 (Bankr. E.D.Tenn.1981), aff'd, 21 B.R. 692 (E.D. Tenn.1982). The Parker court stated in the context of a Chapter 13 case, "[a]dministrative expenses are paid without the filing of a proof of claim. Only a `request' for payment is required." (citations omitted). Id. at 982. The proposition that a holder of an administrative expense claim need not file a proof of claim, was applied in the Chapter 11 setting. See In re Chicago Pacific Corp., 773 F.2d 909, 917 (7th Cir.1985).
The Trustee's response in opposition to PCA's motion, which attached its proof of claim as an exhibit, is in substance, rather than in form, an objection to the allowance of PCA's claim. The response was in writing, filed with the Court, and served more that thirty days prior to commencement of the trial. The Trustee's response only seeks disallowance of PCA's claim and does not join a demand for relief of the kind specified in Bankruptcy Rule 7001. Thus, under Bankruptcy Rule 3007, the contested motion did not become an adversary proceeding. The Court finds that PCA's motion constitutes a "request for payment" pursuant to section 503(a) and is procedurally sufficient to be decided as a contested matter under Bankruptcy Rule 9014. Accordingly, the Court concludes that a formal adversary proceeding need not be commenced to decide the issues raised at bar.
2. THE AGENCY ARGUMENT
PCA alleges that Berlin, acting in the capacity of the Trustee's agent for the medical records, made certain representations to Mattenson of PCA, which it in turn relied upon in storing the Debtor's hard copy and microfilm medical records. PCA argues that Berlin, via the Order authorizing the retention of The Devon Group, disseminated certain tasks with regard to the storage of the records. PCA argues that The Devon Group's proposal (PCA Exhibit No. 1) established an agency relationship and that Berlin himself was an agent of the Trustee shown by use of the term "delegate" in the Trustee's agreement with the Society. (PCA Exhibit No. 5, p. 2, ¶ 1). In addition, PCA submitted copies of checks payable to PCA, signed by Berlin and paid from an account in the name of Englewood Community Hospital Corporation, Debtor in Possession. (PCA Exhibit Nos. 7 and 8). PCA states that these checks further support its reliance on Berlin as the Trustee's agent.
The Bankruptcy Code itself does not speak to disputed agency relationships between trustees and their alleged agents. Turning to applicable Illinois state law on the question, it is well established that the existence and extent of an agency relationship may be established by circumstantial evidence based upon an examination of the situation of the parties, their acts, and other relevant information. St. Ann's Home for the Aged v. Daniels, 95 Ill.App.3d 576, 51 Ill. Dec. 64, 420 N.E.2d 478 (1st Dist.1981); Kalman v. Bertacchi, 57 Ill.App.3d 542, 15 Ill. Dec. 204, 373 N.E.2d 550 (1st Dist.1978). Agency is a *360 consensual, fiduciary relationship whereby the principal has the right to control the conduct of the agent and the agent has the power to effect the legal relations of the principal. Stefani v. Baird & Warner, Inc., 157 Ill.App.3d 167, 109 Ill. Dec. 444, 510 N.E.2d 65 (1st Dist.1987); Milwaukee Mutual Insurance Co. v. Wessels, 114 Ill. App. 3d 746, 749, 70 Ill. Dec. 550, 449 N.E.2d 897 (2nd Dist.1983). There is no short formula for determining whether a particular individual is an agent or independent contractor. NLRB v. United Insurance Co., 390 U.S. 254, 258, 88 S. Ct. 988, 990, 19 L. Ed. 2d 1083 (1968). The key consideration in determining whether an agency relationship exists is whether the principal had the right to control the activities of the agent. Oberlin v. Marlin American Corp., 596 F.2d 1322, 1326 (7th Cir.1979); Phipps v. Cohn, 139 Ill.App.3d 210, 212, 93 Ill. Dec. 761, 487 N.E.2d 428 (5th Dist.1985). This critical control factor by the Trustee over The Devon Group, the Society, or Berlin, is completely lacking from the evidence adduced at trial.
Under Illinois law, an agency relationship need not be based on express appointment or acceptance. Lilly v. County of Cook, 60 Ill.App.3d 573, 17 Ill. Dec. 946, 377 N.E.2d 136 (1st Dist.1978). It can be inferred from circumstantial evidence, including the situation occupied by the parties, their acts and other relevant circumstances. Evanston v. Piotrowicz, 20 Ill. 2d 512, 518, 170 N.E.2d 569 (1960); Milwaukee Mutual Insurance Co. v. Wessels, 114 Ill.App.3d 746, 70 Ill. Dec. 550, 449 N.E.2d 897 (2d Dist.1983); Szymkowski v. Szymkowski, 104 Ill.App.3d 630, 60 Ill. Dec. 310, 432 N.E.2d 1209 (1st Dist.1982). Where the existence of an agency relationship is in issue, as in the case at bar, it may be proved by the testimony of the agent regarding the facts and surrounding circumstances that imply knowledge on the part of the supposed principal of certain acts of the agent. Evanston v. Piotrowicz, 20 Ill.2d at 518, 170 N.E.2d 569. There is no presumption of an agency relationship. Louisiana Farm Supply Co. v. Carroll, 56 Ill.App.2d 175, 205 N.E.2d 478 (4th Dist. 1965). Rather, the existence of an agency relationship is a question of fact to be decided by the fact finder. Mateyka v. Schroeder, 152 Ill.App.3d 854, 862, 105 Ill. Dec. 771, 504 N.E.2d 1289 (5th Dist.1987). The party alleging such a relationship has the burden of proving same by a preponderance of the evidence. Schmidt v. Shaver, 196 Ill. 108, 115, 63 N.E. 655 (1902); Mitchell Buick & Oldsmobile Sales, Inc. v. National Dealer Services, Inc., 138 Ill. App. 3d 574, 582, 93 Ill. Dec. 71, 485 N.E.2d 1281 (2nd Dist.1985); Lazarus v. Pascucci, 74 Ill.App.3d 633, 639-640, 30 Ill. Dec. 727, 393 N.E.2d 1074 (1st Dist.1979).
The authority of an agent must find its ultimate source in some act or word of the principal, indicative of his intention either express or implied. Hofner v. Glenn Ingram & Co., 140 Ill.App.3d 874, 882, 95 Ill. Dec. 90, 489 N.E.2d 311 (1st Dist.1985); Johnston v. Suckow, 55 Ill. App. 3d 277, 280, 12 Ill. Dec. 846, 370 N.E.2d 650 (5th Dist.1977). The relationship of principal and agent ordinarily cannot be established by statements of the agent, made outside of the presence of the principal. Kusek v. Allied Packers, Inc., 246 Ill.App. 209 (1927); see also Haynes v. Holman, 319 Ill.App. 396, 49 N.E.2d 324 (1943). The self-serving characterizations of the purported agent are irrelevant. Wright v. United States, 537 F. Supp. 568, 570 (N.D.Ill.1982).
The Court has carefully reviewed both The Devon Group proposal and the agreement with Society, and concludes that neither expressly nor impliedly created any agency relationship between the Trustee and The Devon Group, the Trustee and the Society, or the Trustee and Berlin. The agreements established independent contractor relationships between the Trustee for the benefit of the Debtor's estate and The Devon Group and the Society respectively. Sole control over the ways and means of archiving, storage, maintenance, access and retrieval of the records resided in The Devon Group and the Society. (PCA Exhibits 1 and 5). Although the Society agreed to abide by the policies and procedures established by the Trustee in providing *361 reference service for the medical records, (PCA Exhibit No. 5, p. 2, ¶ 6), and the Trustee was to supply all existing shelving and filing cabinets needed to house the records, (PCA Exhibit No. 5, p. 2, ¶ 8), and the microfilm reader/printer and related desks and chairs, (PCA Exhibit No. 5, p. 3, ¶ 10), those provisions did not afford the Trustee any right or privilege to control or direct the Society's action in performance of its obligations under that agreement. Berlin is nowhere referred to as an agent of the Trustee in either The Devon Group proposal or the Society's agreement and never was so authorized by any Court order.
To the contrary, Berlin made The Devon Group's proposal as its director, and thus its agent to the Trustee, (PCA Exhibit No. 1, second page), just as Mattenson executed the agreement with the Trustee on behalf of the Society as its then executive director, and consequently its agent. (PCA Exhibit No. 5, p. 3). After hearing all the testimonial evidence and reviewing all of the admitted documentary exhibits, the Court is clearly convinced that Berlin was the agent for The Devon Group, not the Trustee. Berlin was the agent of the Society because he submitted and perhaps drew the agreement with the Society which the Trustee signed and Berlin closed a real estate transaction for the Society (Trustee Exhibit No. 1). It is also clear from Mattenson's testimony, that Berlin was Mattenson's friend, although not as good a friend as Mattenson might have formerly believed, because Berlin died without having paid Mattenson anything for his services except approximately $907.50. (PCA Exhibit Nos. 7 and 8). The fact that Berlin made those payments to PCA with checks imprinted with the reference to the Debtor does not establish an agency relationship between the Trustee and Berlin. The Debtor was never a Chapter 11 debtor-in-possession as the case was filed and always has been administered under Chapter 7. Moreover, the checks were drawn on an account by Berlin at a Bank where the Trustee testified he has never had estate funds on deposit. That Mattenson may have concluded from Berlin's actions and statements that he was acting as the Trustee's agent, does not establish any agency relation under the facts of the evidence adduced at trial or under the applicable law.
PCA has failed to prove by a preponderance of the evidence that Berlin was acting as an agent on behalf of the Trustee. In fact, the Trustee unequivocally testified that he never authorized Berlin to act as his agent. Furthermore, he stated that he was completely unaware of the existence of the two bank checks drawn by Berlin referencing the estate. PCA failed to adduce any evidence that the Trustee controlled the activities of Berlin with regard to the storage of the medical records. Thus, the exercise of control that is a necessary element in order to establish an agency relationship is totally absent in this case.
The self-serving testimony of Mattenson to the effect that he believed Berlin to be the agent of the Trustee does not prove the existence of same. The Court significantly notes that Mattenson and PCA waited until March 1990 to present a bill or written demand for payment, a date approximately a year and one-half after the records were transferred and moved, and over six months after Berlin died. It is incredible that a substantial claim as asserted by PCA dating back to fall 1988 would not be initially raised until March 1990. Mattenson's credibility is in serious doubt given his strong economic interest in PCA, and the fact that he asserts he had only an oral understanding with the now deceased Berlin under which PCA would be paid a greater monthly storage and maintenance charge ($754.50 per month PCA Exhibit No. 17) for the records occupying one-third of PCA's leasehold for which it only pays its landlord a lesser sum for the entire premises ($660.00 per month PCA Exhibit No. 12).
The only direct conflict in the testimony of Mattenson and the Trustee is that Mattenson claims that after Berlin's death, the Trustee and he discussed PCA's claims against the estate, and in substance, the Trustee avoided his oral demands for payment, which facts the Trustee flatly denies. According to the Trustee's testimony, he *362 never received any request for money or demand for payment from Mattenson or PCA until March, 1990. (Trustee Exhibit Nos. 10 and 11). Having carefully considered the demeanor and the testimony of both witnesses, in light of all the other evidence, the Court finds the Trustee's testimony on this point more credible than Mattenson's. Moreover, the Court credits the Trustee's further testimony that he hired The Devon Group as an independent contractor. This conclusion is supported by the Order authorizing the retention of The Devon Group which makes no reference to Berlin or The Devon Group acting as agents of the Trustee.
Additionally, the Court finds that Berlin did not possess apparent authority to act on behalf of the Trustee as his agent. The evidence shows the Trustee did not act or engage in any conduct that would have lead a reasonably prudent person to believe that Berlin was his agent. The record is devoid of any credible evidence demonstrating that Berlin was an agent of the Trustee and/or the estate. Accordingly, PCA has failed to prove by a preponderance of the evidence the existence of an agency relationship between Berlin and the Trustee, The Devon Group and the Trustee, or the Society and the Trustee.
3. PCA DOES NOT HAVE AN EXPRESS OR IMPLIED CONTRACT WITH THE ESTATE
In addition, PCA argues that it has an express contract with the Debtor's estate, or in the alternative an implied contract. The Court finds that PCA has not entered into either an express or implied contract with the estate for the storage and payment of the Debtor's medical records. In order for the Court to determine if a contract exists, the Court must find, inter alia, that the contract is definite in its terms. Bau v. Sobut, 50 Ill.App.3d 732, 8 Ill. Dec. 486, 365 N.E.2d 724 (1st Dist.1977). The Court is unable to make such a finding in this case. There is no express contract in evidence that PCA entered into with the Trustee. Under the facts and evidence discussed at length above, the Court will not find an implied contract with the Trustee or the estate.
The Seventh Circuit has discouraged courts from supplying missing contract terms. In National Tea Co. v. Weiss, 341 F.2d 331 (7th Cir.1965), the court noted: "[u]ntil the parties agree on the fundamental and material items basic to the agreement, there was no enforceable contract. . . . Under the guise of construction, the district court could not itself write a contract for the parties covering the missing essential elements." Id. at 334. Where an agreement is not sufficiently definite to enable a court to give it exact meaning or where an essential element is reserved for future agreement of both parties, a legal obligation cannot result. Pearson Bros. Co. v. Pearson, 113 B.R. 469, 475 (C.D.Ill.1990). Hence, the Court finds that neither an express or implied contract exists as all essential terms do not exist. PCA has failed to demonstrate that any type of agreement existed between it and the Trustee.
4. PCA IS NOT ENTITLED TO AN ADMINISTRATIVE CLAIM PURSUANT TO 11 U.S.C. § 503(b)(1)(A) UNDER IT ARGUMENTS OF UNJUST ENRICHMENT OR QUANTUM MERUIT
PCA has failed to demonstrate that it provided an actual and necessary benefit to the estate. Furthermore, PCA failed to cite any controlling authority under the Bankruptcy Code for recovery under its theories of unjust enrichment or quantum meruit. The Court will not authorize payment of the sum claimed, as the estate has already paid to The Devon Group a large sum, namely $59,700.00, for service including the storage, maintenance and retrieval of the Debtor's medical records. PCA or Mattenson's oral agreement for payment was with Berlin, and therefore, perhaps Berlin's company, The Devon Group. Assuming, arguendo, that PCA's storage of the microfilm and records conferred some benefit upon the estate, same was not a necessary expense in light of the fact that the estate had previously *363 paid The Devon Group to perform those very services. The estate will not be unjustly enriched if it does not pay another $21,479.00 to PCA as claimed. On the contrary, the estate would be unjustly depleted if it was forced to pay the claimed sum for services it has already paid The Devon Group to perform and some of which the Society further agreed to do for no additional compensation from the estate.
It is inequitable for the estate to be surcharged for services for which it has previously paid. PCA's claims and bills should be presented to either The Devon Group or the Society from whom it can recover in another forum of competent jurisdiction, if it desires to collect. The Debtor's estate should not bear the burden of the dispute among Mattenson, PCA, The Devon Group and Berlin's probate estate. The Court will not allow PCA to bootstrap its unsecured claim against Berlin and perhaps The Devon Group and the Society, into an administrative priority claim against the Debtor's estate.
VI. CONCLUSION
For the foregoing reasons, the Court hereby denies the motion of Photographic Conservation Associates Ltd. for allowance of an administrative claim.
This Opinion is to serve as findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.
NOTES
[1] PCA resolved the issue of the possessory lien claim, pursuant to the Court's suggestion, at the May 24, 1990 hearing. The parties agreed to a release of PCA's statutory lien claim on the Debtor's medical records in exchange for the Trustee opening a special account for the amounts sought by PCA, as amended, to reflect storage charges and access or record charges for the months of May and June, 1990. At the hearing on June 21, 1990, the parties agreed that a segregated account was unnecessary due to the fact that the Trustee currently holds approximately $1,000,000.00 in estate funds, which is substantially in excess of the contested claim. Accordingly, the Court need not rule on the merits of whether PCA has a valid enforceable statutory lien pursuant to Ill.Rev.Stat. ch. 82, para. 40 et. seq. (1989). Thus, the Trustee's contention that PCA's possessory lien claim violates 11 U.S.C. § 362(a)(4) need not be decided herein. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2571082/ | 177 F. Supp. 2d 1238 (2001)
Ann K. THOMPSON, Plaintiff,
v.
KN ENERGY, INC., Defendant.
No. 99-4115-DES.
United States District Court, D. Kansas.
December 13, 2001.
*1239 *1240 *1241 *1242 *1243 *1244 James E. Benfer, David O. Alegria, McCullough, Wareheim & LaBunker, P.A., Topeka, KS, for Plaintiff.
Eric B. Metz, Jerald W. Rogers, Triplett, Woolf & Garretson, LLC, Wichita, KS, for Defendant.
MEMORANDUM AND ORDER
SAFFELS, District Judge.
This matter is before the court on defendant's Motion for Summary Judgment (Doc. 87). Plaintiff has filed a Response (Doc. 98), and defendant has filed a Reply (Doc. 100). In this employment discrimination/termination case, plaintiff brings multiple claims under federal and state law. For the reasons discussed below, defendant's motion is granted in part and denied in part.
I. BACKGROUND
A. Factual History
The following facts concerning plaintiff's claims are either uncontroverted or, if controverted, are construed in a light most favorable to plaintiff.
On April 1, 1997, defendant acquired the Bushton, Kansas, Gas Gathering and Processing Plant ("Bushton") from the previous owner/operator, Enron Corporation ("Enron"). Bushton is one of the largest natural gas processing facilities in North America. The facility contains both extraction and natural gas liquids ("NGL") fractionation units as well as a large underground NGL storage facility. Relevant to this matter, Bushton's physical assets include a building known as RTU-8. The structure houses temperature-sensitive electronic monitoring equipment.
Plaintiff was hired by Enron in November of 1990, and she continued to work at Bushton after the facility was acquired by defendant. The record before the court is unclear as to exactly where plaintiff worked in Bushton while the facility was owned by Enron. It appears that during this time plaintiff worked in multiple areas of the facility, including the NGL storage field and hydrocarbon extraction plant. It is uncontroverted, however, that in August of 1997, plaintiff was transferred to work exclusively in the storage field. Throughout her tenure at Bushton, plaintiff's job title was "plant operator."[1] As an operator, plaintiff was responsible for the operation of compressors, engines, auxiliary units, turbines, motors, cooling equipment, pumps, and related processing equipment. The job also required plaintiff to take samples and perform tests to monitor Bushton's on-going operations.
1. Plaintiff's Work Related Injury
On July 5, 1996, while still employed by Enron, plaintiff sustained an on-the-job injury to her left elbow. Plaintiff was apparently using a wrench to adjust a pipe when the wrench swung and contacted plaintiff's left elbow. The submitted medical evidence shows plaintiff suffered a radial head fracture and an ulnar nerve injury. The accident, however, did not require plaintiff to miss any work. Plaintiff subsequently filed a workers' compensation *1245 claim with respect to the July 5, 1996, injury. This workers' compensation claim is the only claim plaintiff filed, which is relevant to the presently pending action. The workers' compensation claim was subsequently settled in July of 1997.
2. Events Preceding Plaintiff's Termination
On October 26, 1997, plaintiff was scheduled to work the 5:30 a.m. to 5:30 p.m. "daylight" shift. The weather conditions were poor; some sleet or snow was falling. Plaintiff was joined by her coworkers Chris Montoya ("Montoya") and Bill Wilder ("Wilder") on the daylight shift.
Shortly after arriving for work, Montoya started a Ford pick-up truck in order to warm it up and thaw the ice off the windshield so it could be used by plaintiff. It is unknown whether any other employees had driven the truck during the preceding night shift. It is also uncontroverted that additional employees had access to the truck during the daylight shift. In any event, plaintiff began operating the truck at 5:45 a.m.
According to Wilder's deposition, between approximately 6:20 a.m. and 7:00 a.m., he witnessed plaintiff drive the truck near the RTU-8 building and enter the building. After exiting and reentering the truck, the truck pulled forward and then stopped. Plaintiff walked to the front of the truck, then got back into the truck, backed-up, and drove away. At some point in the day, Montoya observed damage to the front bumper of the truck and asked plaintiff and Wilder what had happened to the truck. At approximately 5:00 p.m., Wilder was walking in the vicinity of building RTU-8. He heard something that sounded like a gas leak, and upon investigation, discovered a two-inch gas riser was cracked and blowing fuel gas. Temporary measures were immediately undertaken to stop the leak and secure the area. It is uncontroverted that the fuel leak represented a serious danger to property and human life.
3. Defendant's Investigation
Defendant's "Incident Investigation Team" began its investigation of the gas riser leak the following day. The investigation revealed that tire tracks led up to the cracked gas riser and the marks on the bumper of the truck matched the impact damage on the fuel line and pipe guard. Plaintiff, Montoya, and Wilder were interviewed regarding the incident. During these interviews, plaintiff denied any knowledge of the leak. Plaintiff did indicate she had some trouble with her original gloves, and upon returning to the truck to gather a pair of lighter gloves she may have "bumped" the gear shifter and accidently slipped the truck into neutral. In this position, according to plaintiff, it was possible for the wind to blow the truck forward.
On November 3, 1997, plaintiff was suspended with pay pending the remainder of the investigation. Plaintiff was later discharged on November 13, 1997. According to defendant, plaintiff was discharged because it was determined she was responsible for the gas riser leak and failed to report the incident. It is uncontroverted plaintiff was aware company policy required reporting of accidents and a failure to report, where safety was at issue, could lead to termination of employment. Plaintiff was informed she could appeal her discharge.
Plaintiff subsequently completed and filed a "Complaint of Involuntary Termination" with defendant on December 5, 1997. In response to plaintiff's complaint and request for second-level review, a new fact-finding investigation was overseen by defendant's General Operations Manager, Pierce Norton. The second investigation *1246 found plaintiff's discharge was appropriate. Plaintiff opted to pursue the third step of the internal appeals process. During this phase, Christine Arthun from defendant's Environmental and Safety Department conducted a safety investigation with respect to the gas riser incident. This third investigation occurred at Bushton in April of 1998. At the end of the third level of review, it was determined by Michael Crisman, Vice President of Operations, that plaintiff's dismissal was appropriate.
B. Plaintiff's Claims
The Pretrial Order (Doc. 85) reveals plaintiff brings five claims against defendant: (1) failure to accommodate claim pursuant to the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12101 et seq.; (2) retaliation claim also pursuant to the ADA; (3) sexual harassment/hostile work environment claim pursuant to Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. § 2000e et seq.; (4) disparate treatment/discriminatory discharge claim also pursuant to Title VII; and (5) state law workers' compensation retaliation claim.
II. STANDARD OF REVIEW
Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The rule provides that "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The substantive law identifies which facts are material. Id. at 248, 106 S. Ct. 2505. A dispute over a material fact is genuine when the evidence is such that a reasonable jury could find for the nonmovant. Id. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id.
The movant has the initial burden of showing the absence of a genuine issue of material fact. Shapolia v. Los Alamos Nat'l Lab., 992 F.2d 1033, 1036 (10th Cir. 1993). The movant may discharge its burden "by `showing'-that is, pointing out to the district court-that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The movant need not negate the nonmovant's claim. Id. at 323, 106 S. Ct. 2548. Once the movant makes a properly supported motion, the nonmovant must do more than merely show 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 nonmovant must go beyond the pleadings and, by affidavits or depositions, answers to interrogatories, and admissions on file, designate specific facts showing there is a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S. Ct. 2548 (interpreting Fed. R.Civ.P. 56(e)). Rule 56(c) requires the court to enter summary judgment against a nonmovant who fails to make a showing sufficient to establish the existence of an essential element to that party's case, and on which that party will bear the burden of proof. Id. at 322, 106 S. Ct. 2548. Such a complete failure of proof on an essential element of the nonmovant's case renders all other facts immaterial. Id. at 323, 106 S. Ct. 2548.
A court must view the facts in the light most favorable to the nonmovant and allow the nonmovant the benefit of all reasonable inferences to be drawn from the evidence. See, e.g., United States v. O'Block, 788 F.2d 1433, 1435 (10th Cir.1986) ("The *1247 court must consider factual inferences tending to show triable issues in the light most favorable to the existence of those issues."). The court's function is not to weigh the evidence, but merely to determine whether there is sufficient evidence favoring the nonmovant for a finder of fact to return a verdict in that party's favor. Anderson, 477 U.S. at 249, 106 S. Ct. 2505. Essentially, the court performs the threshold inquiry of determining whether a trial is necessary. Id. at 250, 106 S. Ct. 2505.
III. DISCUSSION
A. ADA Claims
Plaintiff brings two claims under the ADA. First, plaintiff alleges defendant intentionally discriminated against her by failing to provide reasonable accommodation for her work restrictions as necessitated by her disability. Second, plaintiff alleges defendant terminated her in retaliation for her requests for accommodation of her work restrictions.
1. Discrimination-Failure to Accommodate
The ADA prohibits a covered entity form discriminating against a "qualified individual with a disability" because of the individual's disability with respect to terms, conditions, and privileges of employment. 42 U.S.C. § 12112(a). The ADA defines the term "discriminate" to include "not making reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual ...." 42 U.S.C. § 12112(b)(5)(A) (emphasis added). A "qualified individual with a disability" is "an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires." 42 U.S.C. § 12111(8). See, e.g., Sutton v. United Air Lines, Inc., 130 F.3d 893, 897 (10th Cir.1997); Milton v. Scrivner, Inc., 53 F.3d 1118, 1123 (10th Cir.1995).
Although somewhat convoluted, it appears plaintiff claims defendant should have transferred plaintiff from her position as plant operator in the storage field to a position consisting of only "office work." (Pretrial Order at 4). It is uncontroverted that plaintiff's work duties in the storage field were not analogous with "office work." Plaintiff does not, however, suggest any accommodations, which could have been taken to alter her duties in the storage field so that her work was in compliance with an "office work" only restriction. The court, therefore, interprets plaintiff's claim as falling under the ADA's reassignment analytical framework.
a. Summary Judgment Framework
In Smith v. Midland Brake, Inc., 180 F.3d 1154 (10th Cir.1999) (en banc), the Tenth Circuit specifically outlined the burdens a putative ADA plaintiff seeking reassignment must satisfy to survive summary judgment. The circuit court advocated the use of a modified burden-shifting paradigm based on the traditional framework established in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). Smith, 180 F.3d at 1178-79. Under this approach, the plaintiff must first make an initial showing of a prima facie case. In the reassignment context, a prima facie case consists of the following five elements:
(1) The employee is a disabled person within the meaning of the ADA and has made any resulting limitations from his or her disability known to the employer;
(2) The preferred option of accommodation within the employee's existing job cannot reasonably be accomplished;
*1248 (3) The employee requested the employer reasonably to accommodate his or her disability by reassignment to a vacant position, which the employee may identify at the outset or which the employee may request the employer identify through an interactive process, in which the employee in good faith was willing to, or did, cooperate;
(4) The employee was qualified, with or without reasonable accommodation, to perform one or more appropriate vacant jobs within the company that the employee must, at the time of the summary judgment proceeding, specifically identify and show were available within the company at or about the time the request for reassignment was made; and
(5) The employee suffered injury because the employer did not offer to reassign the employee to any appropriate vacant position.
Id. at 1179.
Once the plaintiff produces sufficient evidence to establish a prima facie case, the burden of production shifts to the defendant-employer to produce evidence either "(1) conclusively rebutting one or more elements of plaintiff's prima facie case or (2) establishing an affirmative defense ...." Id. If the defendant-employer is successful, summary judgment will be granted in its favor unless the plaintiff can establish a genuine dispute regarding either the prima facie elements or the defendant-employer's affirmative defense. Id. In the present case, defendant argues plaintiff has failed to demonstrate several elements of her prima facie case.
b. Element One: Plaintiff's Disability
Under the ADA, a person is considered to have a disability if that individual either (A) has a physical or mental impairment that substantially limits one or more of the major life activities of such individual, (B) has a record of such an impairment, or (C) is regarded by the employer as having such an impairment. 42 U.S.C. § 12102(2). Plaintiff presents arguments under all three subsections, so the court will address each in turn.
i. Limitation of Major Life Activities
There exists a three-step process for determining whether a plaintiff has a disability under the major life activities subsection of the ADA's disability definition. See Bragdon v. Abbott, 524 U.S. 624, 631-41, 118 S. Ct. 2196, 141 L. Ed. 2d 540 (1998). First, the court must determine if plaintiff suffers from a physical or mental impairment. Id. Plaintiff's elbow injury is clearly a physical impairment affecting her musculoskeletal system. See 29 C.F.R. § 1630.2(h)(1). Defendant concedes this point. The second step in the analysis is to identify those life activities affected by the impairment and determine whether they are "major" life activities under the ADA. Bragdon, 524 U.S. at 631-41, 118 S. Ct. 2196. Plaintiff claims she is limited in the life activities of lifting, working, and performing manual activities. Defendant does not contest that these life activities are "major" life activities under the ADA.[2] The third and final step in the process inquires into whether plaintiff's impairment "substantially limits" the major life activities identified in step two. Id. Defendant claims plaintiff has failed to demonstrate *1249 that her impairment substantially limits any of her identified major life activities.
The Equal Employment Opportunity Commission's ("EEOC") regulations implementing the ADA define the term "substantially limits" to mean:
(i) Unable to perform a major life activity that the average person in the general population can perform; or (ii) Significantly restricted as to the condition, manner or duration under which an individual can perform a particular major life activity as compared to the condition, manner, or duration under which the average person in the general population can perform that same major life activity.
29 C.F.R. § 1630.2(j)(1). The regulations recommend that the following factors be considered in determining whether an individual is substantially limited in a major life activity: "(i) the nature and severity of the impairment; (ii) the duration or expected duration of the impairment; and (iii) the permanent or long term impact, or the expected permanent or long term impact of or resulting from the impairment." 29 C.F.R. § 1630.2(j)(2).
aa. Lifting
As to plaintiff's claim of significantly restricted lifting ability, there exists a large body of case law suggesting plaintiff would not be disabled under the ADA. The medical evidence before the court concerning plaintiff's lifting restriction is limited. In fact, plaintiff has offered no medical evidence detailing her ability to lift. On the other hand, defendant provides the court with records of plaintiff's medical examinations as performed by J. Mark Melhorn, M.D. Dr. Melhorn opines plaintiff has a thirty-five pound maximum lifting restriction due to her left elbow injury.[3] (Melhorn Aff. Ex. B). Several circuits, including the Tenth Circuit, have found more severe lifting restrictions to be insufficient for inclusion under the ADA. See, e.g., Huckans v. United States Postal Serv., 201 F.3d 448 (10th Cir.1999) (table) (finding thirty-five pound lifting restriction not substantially limiting); Thompson v. Holy Family Hosp., 121 F.3d 537, 539-40 (9th Cir.1997) (finding restriction from lifting more than twenty-five pounds not substantially limiting); Williams v. Channel Master Satellite Sys., Inc., 101 F.3d 346, 349 (4th Cir.1996) (same), cert. denied, 520 U.S. 1240, 117 S. Ct. 1844, 137 L. Ed. 2d 1048 (1997), abrogated on other grounds by Baird v. Rose, 192 F.3d 462, 469 n. 8 (4th Cir.1999); Aucutt v. Six Flags Over Mid-America, Inc., 85 F.3d 1311, 1319 (8th Cir.1996) (same); Dutcher v. Ingalls Shipbuilding, 53 F.3d 723, 726 (5th Cir. 1995) (individual with impaired arm who could not do heavy lifting or repetitive rotational movements and who had difficulty picking things up from the floor and holding things up high was not disabled); Barnard v. ADM Milling Co., 987 F. Supp. 1337, 1342 (D.Kan.1997) (finding a forty-two pound restriction not substantially limiting). Cf. Lowe v. Angelo's Italian Foods, Inc., 87 F.3d 1170, 1174 (10th Cir. 1996) (finding plaintiff with multiple sclerosis who could not lift items over fifteen pounds and only could lift items weighing less than fifteen pounds occasionally presented genuine issue of material fact concerning her lifting ability).
Plaintiff offers no response to this suggestive case law. Instead, plaintiff only directs the court to plaintiff's limitation in her ability to work. The court will address the work issue in its subsequent *1250 discussion, yet to the issue of lifting, plaintiff's argument is unpersuasive. In light of plaintiff's relatively high lifting restriction, the court is convinced plaintiff has not sufficiently demonstrated she is disabled under the ADA in regards to her limited lifting ability.
bb. Working
When evaluating whether a plaintiff's impairment significantly restricts his/her life activity of working, the EEOC regulations include three additional factors that may be considered:
(A) [t]he geographical area to which the individual has reasonable access;
(B) [t]he job from which the individual has been disqualified because of an impairment, and the number and types of jobs utilizing similar training, knowledge, skills or abilities, within that geographical area, from which the individual is also disqualified because of the impairment (class of jobs); and/or
(C) [t]he job from which the individual has been disqualified because of an impairment, and the number and types of other jobs not utilizing similar training, knowledge, skills or abilities, within that geographical area, from which the individual is also disqualified because of the impairment (broad range of jobs in various classes).
29 C.F.R. § 1630.2(j)(3)(ii).
In Bolton v. Scrivner, Inc., 36 F.3d 939 (10th Cir.1994), cert. denied, 513 U.S. 1152, 115 S. Ct. 1104, 130 L. Ed. 2d 1071 (1995), the Tenth Circuit noted that the mere existence of physical restrictions, particularly those relating to manual labor, do not necessarily by themselves establish that an individual is substantially limited in the major life activity of working. Instead, an ADA plaintiff must "produce evidence showing a significant restriction in his `ability to perform either a class of jobs or a broad range of jobs in various classes ....'" Bolton, 36 F.3d at 943 (quoting 29 C.F.R. § 1630.2(j)(3)(i)).
In an attempt to satisfy this burden, plaintiff directs the court's attention to an Enron document attached to defendant's memorandum. (Def. Mem. in Supp. Ex. 3). The document, dated December 4, 1996, is entitled "Certification of Physician." The two-page, fill in the blank form, was completed by Dr. Jeryl G. Fullen.[4] The relationship between plaintiff and Dr. Fullen is left unexplained by the parties. It appears, however, Dr. Fullen was plaintiff's primary physician immediately following her elbow injury.
The form asks multiple questions of the completing physician regarding the health and work restrictions of the employee in question. Relevant to the current inquiry, Dr. Fullen indicates: (1) plaintiff is unable to perform the essential functions of her job; (2) plaintiff should not pull or push with her left arm; and (3) plaintiff may return to "office work" without physical restrictions. The document is somewhat confusing in that Dr. Fullen opines plaintiff will be able to return to work on November 21, 1996, approximately a week and a half before the doctor completed the form.
Apparently referring to this document, plaintiff makes the following argument: "From a period of December 4, 1996 until she was fired, [plaintiff] was restricted to office work. Therefore, plaintiff submits that such restriction was a substantial limitation in her ability to work." (Pl. Mem. in Opp'n at 74). As interpreted by the court, plaintiff supposes that because the form indicates she could not work her present job, or in the ADA vernacular, she was disqualified from the storage field job, she is substantially limited *1251 in her ability to work. The court rejects plaintiff's assertion.
First, without question, plaintiff's elbow injury did not disqualify plaintiff from her position with defendant. (Pl. Dep. at 18-19). In fact, plaintiff worked for over a year, without missing a single day of work, in both the hydrocarbon facility and storage field after her injury. The fact plaintiff continued to perform the same work duties after her injury seriously compromises her position that she is substantially limited in her ability to work.[5]See Selenke v. Medical Imaging, 248 F.3d 1249, 1257 (10th Cir.2001) (finding plaintiff not significantly restricted in her ability to work either a class of jobs or a broad range of jobs in various classes in part because plaintiff acknowledged her ability to perform her work duties prior to termination). In reaching this conclusion, the court has looked beyond the classification of plaintiff's impairment and examined the effect the impairment had on her ability to function. See 29 C.F.R. Pt. 1630, App. 1630.2(j) ("The determination of whether an individual has a disability is not necessarily based on the name or diagnosis of the impairment the person has, but rather on the effect of that impairment on the life of the individual.").
In the alternative, assuming, arguendo, plaintiff was indeed disqualified from her work as a plant operator in the storage field, such a showing, standing alone, does not necessitate a finding of disability. See Welsh v. City of Tulsa, 977 F.2d 1415, 1417 (10th Cir.1992) (while working is a major life activity, it does not include necessarily "working at the job of one's choice"). Instead, plaintiff must demonstrate she is significantly restricted from working either a class of jobs or a broad range of jobs in various classes. Plaintiff has failed to make the necessary showing. See Bolton, 36 F.3d at 943-44. Plaintiff could have met this burden by addressing her "vocational training, the geographical area to which [s]he has access, or the number and type of jobs demanding similar training from which [plaintiff] would also be disqualified." Id. at 944. One district court stated the burden as follows:
Thus, the imposition of a lifting restriction, ... or even a designation such as light or medium duty, is not sufficient to establish the existence of a disability ... a plaintiff must go further, offering evidence that these restrictions, in light of his training, skills, vocational opportunities, geographic limitations and the like, significantly impede his ability to find a job.
Matthews v. TCI of Illinois, No. 95 C 4096, 1996 WL 332693, at *3 (N.D. Ill. June 14, 1996) (emphasis added).
Plaintiff, however, has presented no evidence whatsoever indicating her inability to secure employment. The only evidence before the court indicates plaintiff successfully secured employment as an administrative assistant after her termination. (Pl. Dep. at 211). Plaintiff's impairment *1252 appears, at best, to only restrict her from a narrow range of jobs that require repetitive lifting over thirty-five pounds. See, e.g., Schneider v. Chas Seligman Distrib. Co., 995 F. Supp. 756, 760 (E.D.Ky.1998) (finding plaintiff with thirty pound lifting restriction and a ten percent whole body impairment restricted only from a narrow range of jobs).
In sum, plaintiff's impairment has not substantially limited her ability to work. She maintained her employment with defendant and has been employed after her termination. Without hesitation, the court finds she is not disabled due to any limitation of her life activity of working.
cc. Manual Tasks
The insufficiency of plaintiff's evidence reaches its crescendo when she asserts she is significantly restricted in her ability to perform manual tasks. When asked in her deposition what physical activities she can not now perform due to her elbow injury, plaintiff responded: "Waterskiing ... [s]now skiing, mowing the lawn, carrying laundry baskets with wet clothes, picking up my grandchildren. And, and a lot of things I do are, you know, I can feel aggravation in it. It doesn't prevent me from doing them, but they are aggravated by it." (Pl. Dep. at 198). Plaintiff went on to clarify that she can still mow the lawn and water-ski, but she has to push the mower primarily with her right hand and while water-skiing she tires more quickly. (Id. at 198-99). As for picking up her grandchildren, she states that before her injury she was able to pick up two children at once. (Id. at 200). The court finds such adaptive behavior falls woefully short of demonstrating plaintiff is disabled due to her limitations in performing manual tasks. The court is bewildered by plaintiff's assertion that shortened ski runs qualifies as a limitation, which places her under the protective umbrella of the ADA. In any event, the court finds plaintiff has failed to sufficiently demonstrate she is substantially limited in her ability to perform manual tasks.
ii. Record of Impairment
Even though plaintiff has failed to show that any of her identified major life activities are substantially limited, the ADA's definition of "disability" may be satisfied by "a record" of an impairment that substantially limits one or more life activities. 42 U.S.C. § 12102(2)(B). "The intent of this provision, in part, is to ensure that people are not discriminated against because of a history of disability." 29 C.F.R. Pt. 1630, App. 1630.2(k). To satisfy this section, plaintiff must establish that at some point in time her impairment actually did substantially limit one of her identified major life activities. McKenzie v. Dovala, 242 F.3d 967, 972 (10th Cir.2001).
Plaintiff has presented the court with no evidence or argument regarding her historical ability to lift or perform manual tasks. Plaintiff does insist, relying once again on the Enron document, that her ability to work was substantially limited from December 4, 1996, till her termination in November of 1997. However, in light of plaintiff's direct testimony indicating she was able to perform her work duties throughout her tenure with defendant (and was indeed performing said duties up to the date of her termination), the court rejects plaintiff's assertion that she possesses a record of disability. See Sorensen v. University of Utah Hosp., 194 F.3d 1084, 1087 (10th Cir.1999) (requiring plaintiff under the "record of impairment" prong to demonstrate that at some point her impairment substantially limited a major life activity).
iii. Regarded As Disabled
In the alternative, plaintiff contends she is disabled under the ADA because defendant regarded her as having an *1253 impairment that substantially limits one or more of her major life activities. 42 U.S.C. § 12102(2)(C). The Supreme Court has held that to be "regarded as disabled," a plaintiff must show "(1) a covered entity mistakenly believes that a person has a physical impairment that substantially limits one or more major life activities, or (2) a covered entity mistakenly believes that the person's actual, nonlimiting impairment substantially limits one or more major life activities." Sutton v. United Air Lines, Inc., 527 U.S. 471, 489, 119 S. Ct. 2139, 144 L. Ed. 2d 450 (1999). In other words, even if plaintiff is not actually disabled, she is "disabled" under the ADA if defendant perceived her as such.
The court finds plaintiff has offered no evidence sufficiently demonstrating any mistake on the part of defendant in regards to plaintiff's impairment. At best, plaintiff offers the following in her memorandum: "Throughout their testimony, defendant's management refers to [plaintiff]'s disability. There is also substantial evidence of defendant's view of [plaintiff]'s disability, to the extent that defendant considered removing her completely from work." (Pl. Mem. in Opp'n at 76). Unfortunately, plaintiff fails to cite to any specific testimony within the record. Without question, such unsubstantiated conclusory allegations fail to raise a genuine issue as to whether defendant mistakenly believed plaintiff suffered from a disability. On the other hand, defendant asserts it always considered plaintiff capable of fulfilling her work responsibilities. In light of plaintiff's admission that she was capable and did indeed fulfill such responsibilities, it is difficult to envision how defendant mistakenly believed plaintiff was disabled. In any event, in the absence of proffered evidence, the court is persuaded plaintiff has not shown she was regarded as disabled.
In conclusion, plaintiff has failed to establish that she is disabled under the ADA's definition of disability. Without such a showing, the first element of plaintiff's prima facie case is lacking. Although this single failure will justify the imposition of summary judgment, the court will briefly discuss a second inadequacy in plaintiff's prima facie case.
c. Element Two: Identified Vacant Position
A defendant-employer's duty to reassign a qualified employee is circumscribed by several limiting factors. Relevant to this element, the ADA neither requires a defendant-employer to create a new position within its company or bump another employee to make room for the qualified employee. Smith, 180 F.3d at 1174-75 (citing White v. York Int'l Corp., 45 F.3d 357, 362 (10th Cir.1995)). Therefore, the position for which reassignment is sought must be both presently in existence and vacant.[6]
Plaintiff's papers to the court do not identify the position or positions within defendant's operation, which would be an appropriate accommodation to her "office work" only restriction.[7] Neither does plaintiff assert she requested reassignment to an appropriate position or attempted to enter into an interactive process to aid in identifying an appropriate position. Instead, *1254 the totality of plaintiff's argument on this issue consists of the following four sentences:
Plaintiff's undisputed facts show that plaintiff was restricted to office work, defendant knew of plaintiff's restriction, and refused to accommodate her restrictions. In fact, various managers completely ignored her restrictions.
The evidence shows that management claimed that it would check about [plaintiff]'s restrictions with her doctor. However, the evidence also shows that no one ever checked on such restrictions.
(Pl. Mem. in Opp'n at 76).
Plaintiff's failure denies the court the opportunity to discern whether the hypothetically identified jobs were in fact appropriate to her work restrictions so making them a reasonable accommodation, nor is the court able to consider whether these positions were even vacant. Therefore, the court also finds plaintiff has presented insufficient evidence to carry her burden as to the second element of her prima facie case. In light of the court's findings, summary judgment shall be granted on plaintiff's ADA discrimination claim.
2. Retaliation Claim
a. Exhaustion of Administrative Remedies
Plaintiff alleges defendant unlawfully retaliated against her in response to plaintiff's requests for accommodation. Defendant argues it is entitled to summary judgment because plaintiff failed to properly exhaust her administrative remedies.
Similar to cases of discrimination brought pursuant to Title VII, exhaustion of administrative remedies is a jurisdictional prerequisite to bringing suit under the ADA. 42 U.S.C. § 12117(a). See generally Seymore v. Shawver & Sons, Inc., 111 F.3d 794, 799 (10th Cir. 1997) (considering analogous exhaustion under Title VII). To exhaust, a putative plaintiff must present his claim first to the EEOC as part of his timely filed EEOC "charge" for which he receives a right-to-sue letter. Simms v. Oklahoma ex. rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir.), cert. denied, 528 U.S. 815, 120 S. Ct. 53, 145 L. Ed. 2d 46 (1999). The purpose of the exhaustion requirement is two-fold: to give notice of the alleged violation to the charged party and to give the EEOC an opportunity to conciliate the claim. Ingels v. Thiokol Corp., 42 F.3d 616, 625 (10th Cir.1994).
In the case at bar, plaintiff's EEOC charge, filed on February 31, 1998, identified claims of "sex" and "disability" discrimination. (Arthun Aff. Ex. A). While there is a box available for "retaliation," plaintiff chose to leave it blank. While this is not dispositive, "it certainly creates a presumption that [she] was not asserting claims represented by boxes not checked." Schroder v. Runyon, No. 98-3128, 1998 WL 694518, at *2 (10th Cir. Oct.6, 1998) (internal citation and quotation marks omitted). The "particulars" section of plaintiff's charge is also devoid of any retaliation claim.[8]
*1255 In response to this apparent lack of exhaustion, plaintiff offers the following two sentences: "Procedurally, defendant has not presented any admissible evidence, at summary judgment stage that indicates that plaintiff failed to exhaust administrative remedies. Certainly, the retaliation claim is a[sic] integral part of the case as evidenced by the Pretrial Order." (Pl. Mem. in Opp'n at 77). According to plaintiff's response to defendant's statement of uncontroverted facts, plaintiff's counsel believes the EEOC charge is inadmissible hearsay. (Id. at 13). The court summarily rejects this meritless position.
Although plaintiff fails to assert the argument, the Tenth Circuit routinely recognizes an exception to the exhaustion rule. Even if a plaintiff fails to raise a claim to the EEOC, the additional claim may be included in the judicial complaint if the discrimination/retaliation is "reasonably related" to the allegations in the EEOC charge. Simms, 165 F.3d at 1327. The Tenth Circuit has held that when retaliation occurs after the filing of an EEOC charge, the subsequent retaliation is reasonably related to the previous charge. Seymore, 111 F.3d at 799. However, if the retaliation occurred prior to the filing of the charge and the employee did not include a retaliation claim in the filed charge, then the retaliatory act is ordinarily not reasonably related. Id. Plaintiff was terminated on November 13, 1997-approximately three months before she filed her charge of discrimination. Regardless of what action or actions plaintiff may attempt to construe as being taken in retaliation for her assertion of rights under the ADA, they conclusively occurred before her filing with the EEOC. Therefore, plaintiff's retaliation claim may not be considered reasonably related to her allegations included in the EEOC charge, and the court cannot excuse plaintiff's failure to include her retaliation claim in her EEOC charge.[9]
In sum, the court finds plaintiff failed to properly exhaust her administrative remedies in regards to her ADA retaliation claim, so the court is compelled to grant summary judgment as to this claim.
B. Title VII Claims
1. Sexual Harassment-Hostile Work Environment
Plaintiff may establish actionable sexual harassment under Title VII if she demonstrates she was subjected to a hostile work environment so severe or pervasive that it constructively altered the terms or conditions of her employment. See Harris v. Forklift Sys., Inc., 510 U.S. 17, 20, 114 S. Ct. 367, 126 L. Ed. 2d 295 (1993); Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57, 67, 106 S. Ct. 2399, 91 L. Ed. 2d 49 (1986); Penry v. Federal Home Loan Bank, 155 F.3d 1257, 1261 (10th Cir.1998) (quoting Davis v. United States Postal Serv., 142 F.3d 1334, 1341 (10th Cir.1998)). "While the plaintiff must make a showing that the environment was both objectively and subjectively hostile, she need not demonstrate psychological harm, nor is she required to show her work suffered as a result of the harassment." Penry, 155 F.3d at 1261 (citing Davis, 142 F.3d at 1341).
*1256 Title VII, however, does not provide redress for a working environment "merely tinged with offensive sexual connotations." Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 81, 118 S. Ct. 998, 140 L. Ed. 2d 201 (1998). The court is charged with the duty of filtering "out complaints attacking the ordinary tribulations of the workplace, such as the sporadic use of abusive language, gender-related jokes, and occasional teasing." Faragher v. City of Boca Raton, 524 U.S. 775, 788, 118 S. Ct. 2275, 141 L. Ed. 2d 662 (1998). The Tenth Circuit has cautioned district courts that "the existence of sexual harassment must be determined `in light of the record as a whole,' and the trier of fact must examine the totality of the circumstances, including `the context in which the alleged incidents occurred.'" Penry, 155 F.3d at 1262 (quoting Meritor, 477 U.S. at 69, 106 S. Ct. 2399). Finally, a plaintiff must produce evidence that she was the object of harassment because of her gender. Conduct that is overtly sexual may be presumed to be motivated by a gender animus. See id. at 1261.
Defendant asserts summary judgment is appropriate on this claim because plaintiff has failed to allege sufficient facts demonstrating a hostile work environment. Plaintiff's rebuttal to defendant's position is embodied in the following single sentence: "In addition, women are subjected to derogatory comment, all of which also created a hostile work environment." (Pl. Mem. in Opp'n at 78). How plaintiff's counsel believes such sparse argument is adequate is simply beyond the court. In any event, after reviewing plaintiff's 382 paragraphs of uncontroverted facts and plaintiff's own deposition testimony, the court agrees with defendant and finds plaintiff has presented insufficient facts to sustain a claim of sexual harassment.
When asked in her deposition what acts of her coworkers substantiated her claim, plaintiff offered the following allegations: (1) Montoya used profanity in front of male and female coworkers, (Pl. Dep. at 93); (2) Montoya made sure plaintiff was busy every minute (Id. at 97); (3) Montoya's body language indicated he did not like working with plaintiff (Id. at 100); and (4) Wilder "wouldn't cross [Montoya] and he would go along," (Id. at 105). Without question these nonspecific allegations fall woefully short of creating a triable issue as to whether plaintiff endured a hostile work environment. "For a hostile environment claim to survive a summary judgment motion, `a plaintiff must show that a rational jury could find that the workplace is permeated with discriminatory intimidation, ridicule, and insult, that is sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment.'" Penry, 155 F.3d at 1261 (quoting Davis, 142 F.3d at 1341).
Having found plaintiff's allegations insufficient, the court need not continue its analysis into defendant's liability. Summary judgment will, therefore, be granted on this claim.
2. Disparate Treatment/Discriminatory Discharge
Plaintiff next brings, pursuant to Title VII, a disparate treatment/discriminatory discharge claim against defendant. The Pretrial Order makes clear plaintiff is asserting she was terminated because of her gender.[10] The now familiar burdenshifting *1257 paradigm established in McDonnell Douglas v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973), controls the court's analysis.[11]See Bullington v. United Air Lines, Inc., 186 F.3d 1301, 1315 (10th Cir.1999).
Under McDonnell Douglas, the plaintiff must first present a prima facie case of discrimination. Then, the burden of production shifts to the defendant to produce a legitimate, non-discriminatory justification for taking the action in question. Finally, the burden is redirected at the plaintiff to show the defendant's reason for its actions was merely a pretext for discrimination. McDonnell Douglas, 411 U.S. at 802-05, 93 S. Ct. 1817.
To establish a prima facie case of disparate treatment in this context, plaintiff must demonstrate: "(1) [s]he belongs to a protected class; (2)[s]he was qualified for her job; (3) despite [her] qualifications, [s]he was discharged; and (4) the job was not eliminated after [her] discharge." Kendrick v. Penske Transp. Servs., Inc., 220 F.3d 1220, 1229 (10th Cir.2000) (citing Perry v. Woodward, 199 F.3d 1126, 1138 (10th Cir.1999)).[12]
It is uncontroverted that plaintiff is female, she was discharged, and her job was not eliminated. A review of plaintiff's supervisor's deposition reveals plaintiff completed her job duties satisfactorily and was never disciplined. (Batchman Dep. at 11). Taken in conjunction with plaintiff's seven year tenure at Bushton, the court finds sufficient evidence demonstrating plaintiff's qualification to hold the plant operator position. Therefore, plaintiff has presented a prima facie case, and the burden now shifts to defendant to present a facially non-discriminatory justification for plaintiff's termination.
Defendant contends plaintiff was terminated because she failed to report a serious and life threatening accident to her superiors in violation of known company policy. The court finds this justification satisfies defendant's burden of production.
a. Pretext
Plaintiff must now come forward with evidence sufficient to demonstrate defendant's justification is pretextual, for if a plaintiff "presents evidence that the defendant's proffered reason for the employment decision was pretextual-i.e., unworthy of belief, the plaintiff can withstand a summary judgment motion and is entitled to go to trial." Randle v. City of Aurora, 69 F.3d 441, 451 (10th Cir.1995). See also Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 148, 120 S. Ct. 2097, 147 L. Ed. 2d 105 (2000) (holding a prima facie case and sufficient evidence to reject the employer's explanation may permit a finding of liability) (construing the ADEA). "To establish pretext a plaintiff *1258 must show either that `a discriminatory reason more likely motivated the employer or ... that the employer's proffered explanation is unworthy of credence."' Bullington, 186 F.3d at 1317 (quoting Texas Dep't of Cmty. Affairs v. Burdine, 450 U.S. 248, 256, 101 S. Ct. 1089, 67 L. Ed. 2d 207 (1981)) (alteration in original). If a plaintiff chooses to demonstrate pretext by arguing the defendant's proffered justification is false, then she may accomplish this by demonstrating "such weaknesses, implausibilities, inconsistencies, incoherencies, or contradictions in the employer's proffered legitimate reasons for its action that a reasonable fact finder could rationally find them unworthy of credence ...." Morgan v. Hilti, Inc., 108 F.3d 1319, 1323 (10th Cir.1997) (internal citation and quotation marks omitted).
Although once again hamstrung by extremely limited briefing, plaintiff appears to be forwarding two arguments in favor of pretext. First, plaintiff asserts defendant's justification is false, i.e., she did not cause the gas riser leak, and second, plaintiff argues that similarly-situated male employees were not discharged for comparable violations.
i. False Justification
Without question, plaintiff disputes defendant's position that she was responsible for the gas riser leak. Standing alone, however, this factual disagreement does not establish pretext.[13]Kendrick, 220 F.3d at 1230-31 (opining disagreement over factual occurrences facilitating termination are insufficient to establish pretext). Instead, "a challenge of pretext requires [the court] to look at the facts as they appear to the person making the decision to terminate plaintiff." Id. at 1231. As long as the decision to terminate was grounded on the legitimate justification, the correctness, wiseness, or fairness of the decision is irrelevant. See Bullington, 186 F.3d at 1318 ("The relevant inquiry is not whether [defendant]'s proffered reasons were wise, fair or correct, but whether [defendant] honestly believed those reasons and acted in good faith upon those beliefs."); McKnight v. Kimberly Clark Corp., 149 F.3d 1125, 1129 (10th Cir.1998) (finding plaintiff failed to establish pretext where the defendant discharged plaintiff after conducting an investigation into a subordinate employee's allegations of sexual misconduct on the part of plaintiff and believed them to be true, even though plaintiff presented evidence to the district court that the allegations may have been false); Sanchez v. Philip Morris Inc., 992 F.2d 244, 247 (10th Cir.1993) ("Title VII is not violated by the exercise of erroneous or even illogical business judgment.").
Arguing that the gas riser incident justification is unworthy of belief, plaintiff offers the following:
In this case, plaintiff has shown extreme contradictions in the statements of [plaintiff]'s accusers, improper motives and most importantly, evidence from the only individual with first hand knowledge of what caused the leak. That individual opined that the leak was caused by stress. The evidence also shows that defendant was not interested in his opinion. Therefore, there is substantial question about defendant's pretext for firing [plaintiff].
*1259 (Pl. Mem. in Opp'n at 74). The court rejects plaintiff's assertion. First, although plaintiff fails to identify who her "accusers" were, the court assumes this statement is in reference to her coworkers Montoya and Wilder. Even if one or both of these individuals acted with a discriminatory intent in fabricating plaintiff's participation in the accident, plaintiff has offered absolutely no evidence indicating those members of the management team responsible for making the decision to terminate her acted as a "rubber stamp" for their subordinate employees' prejudice. See Kendrick, 220 F.3d at 1231 (identifying how other circuits have held employer's liable if management acts as a conduit for an employee's prejudice). In fact, plaintiff's allegations regarding her coworkers' discriminatory beliefs are irrelevant when judging whether defendant acted upon a good-faith belief that plaintiff drove the pick-up truck into the gas riser. All the evidence before the court indicates defendant, acting through multiple investigations conducted by management-level employees, gathered information and made a decision. Plaintiff offers no evidence that the multiple investigations were a sham, or that they were conducted in collusion with individuals at Bushton harboring prejudice towards females. See id. (finding plaintiff failed to demonstrate pretext because no evidence existed calling the veracity of the employer's investigation into question).
Second, as to the allegation that pressure may have caused the leak, the court finds such a position pure speculation and irrelevant. The allegation again fails to impact or call into question the actions of defendant's managers responsible for making the crucial decision. In fact, as alluded to by plaintiff and confirmed in deposition testimony, no one on the investigation team was ever informed that one of Bushton's employees may have assumed the crack was caused by stress rather than an impact. (Wilkinson Dep. at 159). Therefore, even though plaintiff alleges she was not responsible for the gas riser accident, the court finds plaintiff has failed to demonstrate defendant's proffered justification was pretextual. See Aramburu v. The Boeing Co., 112 F.3d 1398, 1408 n. 7 (10th Cir.1997) ("[S]ubjective belief of discrimination is not sufficient to preclude summary judgment.").
ii. Disparate Treatment
A plaintiff may attempt to show pretext by presenting evidence the defendant-employer acted contrary to established policy on a theory of disparate treatment, i.e., plaintiff "was treated differently from other similarly-situated, non-protected employees who violated work rules of comparable seriousness." Kendrick, 220 F.3d at 1232. "An employee is similarly situated to the plaintiff if the employee deals with the same supervisor and is subject to the `same standards governing performance evaluation and discipline.'" Id. (quoting Aramburu, 112 F.3d at 1404).
Although strangely not referenced within the argument section of plaintiff's memorandum, within plaintiff's statement of uncontroverted facts there is mention of an incident involving a Bushton employee named Robert Mitchell ("Mitchell"). (Pl. Mem. in Opp'n ¶¶ 91, 252-54). According to the deposition testimony, Mitchell struck some equipment while driving a company truck. There is also some indication Mitchell may have failed to promptly report the accident, but it appears he received little to no disciplinary reprimand.[14] To the extent plaintiff is attempting to argue this incident represents disparate *1260 treatment, the court rejects such an assertion. First, there is absolutely no evidence describing Mitchell's position within defendant's operation. Without such evidence, the court is unable to determine whether Mitchell was a similarly situated employee. Second, there is absolutely no evidence regarding the egregiousness of Mitchell's supposed rule violation. Again, without such evidence the court is unable to determine whether Mitchell's accident was of comparable seriousness.[15] These evidentiary shortcomings compel the court to give the incident no weight in demonstrating disparate treatment for purposes of establishing pretext.
In sum, the court finds plaintiff has presented insufficient evidence demonstrating either the falsity of defendant's proffered justification or disparate treatment for work rule violations. Therefore, plaintiff has failed to carry her burden of establishing pretext, and the court will grant summary judgment on the plaintiff's disparate treatment/discriminatory discharge claim.
C. State Law Claim
Having granted summary judgment on plaintiff's federal claims, the court declines to exercise supplemental jurisdiction over plaintiff's claim arising under state law. See 28 U.S.C. § 1367(c)(3) (granting district courts the discretion to dismiss state law claims once federal claims are dismissed). See also United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966) ("[I]f the federal claims are dismissed before trial, ... the state claims should be dismissed as well."); Tonkovich v. Kansas Bd. of Regents, 254 F.3d 941, 945 (10th Cir.2001); Roe v. Cheyenne Mountain Conference Resort, Inc., 124 F.3d 1221, 1237 (10th Cir.1997). The parties do not argue any unique circumstances, and the court finds none, that would justify exercising supplemental jurisdiction over plaintiff's state law claim against defendant.
IV. CONCLUSION
As to plaintiff's ADA claims, the court finds plaintiff failed to present a prima facie case of discrimination, and the court finds plaintiff failed to properly exhaust her administrative remedies. Summary judgment will be granted on both ADA claims. As to plaintiff's Title VII claims, the court finds plaintiff failed to present evidence of a hostile work environment, and the court finds plaintiff failed to demonstrate defendant's justification for termination was pretextual. Summary judgment will be granted on both Title VII claims. Summary judgment will not be granted on plaintiff's state law claim. Instead, the claim will be dismissed without prejudice.
IT IS THEREFORE BY THIS COURT ORDERED that defendant's Motion for Summary Judgment (Doc. 87) is granted in part and denied in part, in accordance with the terms of this memorandum.
IT IS FURTHER BY THIS COURT ORDERED that plaintiff's state law claim is dismissed without prejudice.
IT IS FURTHER BY THIS COURT ORDERED that defendant's Motion for Determination of Place of Trial (Doc. 68) is denied as moot.
NOTES
[1] The evidence before the court reveals plaintiff was seeking or had achieved a promotion to "operator II" status. The parties' filings are unclear as to the differentiation between the two positions.
[2] Major life activities include caring for one's self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, working, sitting, standing, lifting, and reaching. See 29 C.F.R. Pt. 1630, App. 1630.2(i). See also Lowe v. Angelo's Italian Foods, Inc., 87 F.3d 1170, 1173 (10th Cir.1996) (identifying working and lifting as major life activities under the ADA).
[3] Dr. Melhorn also opines plaintiff is generally restricted to "light medium" work and suffers from a twelve percent permanent partial impairment of the left arm. (Melhorn Aff. Ex. B).
[4] No indication is given as to which medical degree Dr. Fullen holds.
[5] Plaintiff's deposition does reveal she endured increased pain in her left elbow while working in the storage field: "Just that when I'd go home at night it would, it would swell on many occasions and it had not been doing that in the hydrocarbon plant. I had lots more pain, took lots more Alleve." (Pl. Dep. at 29). There is, however, no indication plaintiff was physically unable to perform her work duties. To this end, plaintiff testified as follows:
Question: Do you believe that you could perform the job of the storage field?
Answer: Yes, because I was doing it.
(Id. at 102). While plaintiff may contend her work duties in the hydrocarbon were less physically demanding, a point controverted by defendant, she never asserts the work was synonymous with "office work."
[6] The vacant requirement is slightly modified, for "vacant" is defined as also including positions that while presently filled are reasonably anticipated by the defendant-employer to become vacant in the near future. Smith, 180 F.3d at 1175 (citing Monette v. Electronic Data Sys. Corp., 90 F.3d 1173, 1187 (6th Cir.1996)).
[7] Granting plaintiff all reasonable inferences, the court assumes, without deciding, that Dr. Fullen's form does indeed limit plaintiff to "office work" only.
[8] The "particulars" section of the charge states:
I was falsely accused of driving a truck and hitting a line, then not reporting the incident. I did not hit the line and therefore could not report something I did not do. I believe this to be pretext for unlawful sex and disability discrimination.
I believe that I have been discriminated against because of my sex, female, in violation of Title VII of the Civil Rights Act of 1964, as amended, and because of my disability in violation of the Americans with Disabilities Act by being discharged.
Similarly situated, non-disabled male plant operators have been accused and admitted hitting a line with a truck and they were not discharged.
(Arthun Aff. Ex. A).
[9] The Tenth Circuit has also identified a second possible exception to the exhaustion requirement. Consideration of claims "not expressly included in an EEOC charge is appropriate where the conduct alleged would fall within the scope of an EEOC investigation which would reasonably grow out of the charges actually made." Martin v. Nannie & the Newborns, Inc., 3 F.3d 1410, 1416 n. 7 (10th Cir.1993). Again, plaintiff fails to assert this exception, and the court summarily finds the exception in-applicable.
[10] The Pretrial Order states: "As a direct result of defendant's unlawful employment practices and attitudes toward women, [plaintiff] was fired from her employment with defendant." (Pretrial Order at 6). Plaintiff's memorandum also echoes this argument: "In other words, [plaintiff] needs to show that defendant would not have fired her bot [sic] for the sex discrimination." (Pl. Mem. in Opp'n at 77).
[11] The McDonnell Douglas analysis is generally employed when no direct evidence of discrimination is presented. Because both parties urge the court to consider the claim under McDonnell Douglas, the court adopts the analysis without deciding the circumstantial versus direct nature of plaintiff's proffered evidence.
[12] In Kendrick, the Tenth Circuit acknowledged some of its earlier opinions had created a certain measure of confusion over the correct prima facie burden for disparate treatment/discriminatory discharge cases. Kendrick, 220 F.3d at 1228. Defendant filed its motion without the guidance of Kendrick, and not surprisingly, defendant has listed a now errant prima facie burden. The former prima facie burden required a plaintiff to show: (1) she is a member of a protected class; (2) she was discharged for violating a work rule; and (3) similarly situated non-protected employees who violated rules of comparable seriousness were treated differently. See Wood v. City of Topeka, 90 F. Supp. 2d 1173, 1184 (D.Kan. 2000) (Saffels, J.) (considering discrimination charge prior to Kendrick).
[13] Plaintiff's counsel characterizes the issue as follows: "Since [plaintiff] did not hit the riser, the stated reason that she was fired isn't the real reason. The real reasons that [plaintiff] was fired is because she is a woman, she filed a workers' compensation claim and because of her limitations with her elbow injury." (Pl. Mem. in Opp'n ¶ 323). As will be shown, plaintiff's sole reliance on her subjective belief is inadequate to demonstrate pre-text.
[14] Although unexplained by plaintiff, it would appear Mitchell's accident is the incident described by plaintiff in her EEOC charge. See supra note 8.
[15] In deposition testimony, Mitchell's accident is described as "non-serious." (Wilkinson Dep. at 73). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1385729/ | 344 S.E.2d 835 (1986)
J.I.C. ELECTRIC, INC., A Michigan Corporation
v.
Romallus MURPHY.
No. 8518SC1126.
Court of Appeals of North Carolina.
July 1, 1986.
*836 McNairy, Clifford & Clendenin by Michael R. Nash, Greensboro, for plaintiff-appellee.
BECTON, Judge.
Defendant Romallus Murphy was President of Shaw College at Detroit, Michigan in June, 1981 when he was sued in that capacity by J.I.C. Electric, Inc. for specific performance of a lease-purchase agreement and for damages, costs, interest and attorney's fees in Wayne County, Michigan. Murphy resigned his position at Shaw College in March 1983 and moved to Greensboro, North Carolina in April 1983. He left his forwarding address with Shaw College officials and the attorneys who were representing the college in the lawsuit.
On 21 July 1983, judgment was entered pursuant to a "mediation evaluation" in the Wayne County, Michigan Circuit Court against Shaw College and Romallus Murphy in the amount of $13,000. According to Murphy, he was first notified of this judgment in August 1984, when local attorneys in Greensboro informed him that they had been retained to collect it.
On 6 September 1984, J.I.C. Electric filed the action which is the subject of this appeal in the Guilford County Superior Court, seeking that the Michigan judgment be given full faith and credit in North Carolina and that judgment be entered against Murphy in this State. Murphy answered and alleged that the mediation judgment was made without his knowledge and consent and was therefore void as to him; that the attorneys representing Shaw College in the Michigan court had misled the court about (1) their authority to represent Murphy; (2) their failure to give notice to Murphy; and (3) an alleged conflict of interest between their representation of both the college and Murphy; and that the Michigan judgment should therefore not be given full faith and credit in North Carolina.
On 17 May 1985, Murphy filed a motion to vacate the mediation judgment in the Wayne County, Michigan Court on grounds similar to his answer in this case, which was denied after oral argument on 25 June 1985. Murphy then gave notice of appeal to the Michigan Court of Appeals. The status of that appeal is not clear, but it appears that it is still pending.
From an entry of summary judgment by the Guilford County Superior Court in this action against Murphy for $13,000 plus interest at the rate of thirteen percent per annum (pursuant to Michigan law), Murphy appeals, and we affirm.
I
Murphy contends that the superior court erred in granting J.I.C. Electric's motion for summary judgment because triable issues of fact concerning fraud and public policy exist. Defendant is essentially contending that the Michigan judgment is subject *837 to collateral attack because it was obtained fraudulently and/or is against public policy. It is true that the final judgment of another jurisdiction may be collaterally attacked on three grounds: (1) lack of jurisdiction, (2) fraud in the procurement; or (3) that it is against public policy. Fungaroli v. Fungaroli, 53 N.C.App. 270, 278, 280 S.E.2d 787, 792 (1981); see also Courtney v. Courtney, 40 N.C.App. 291, 253 S.E.2d 2 (1979).
However, to make a successful attack upon a foreign judgment on the basis of fraud, it is necessary that extrinsic fraud be alleged. Id. Extrinsic fraud is that which is collateral to the foreign proceeding, and not that which arises within the proceedings itself and concerns some matter necessarily under the consideration of the foreign court upon the merits. See Horne v. Edwards, 215 N.C. 622, 624, 3 S.E.2d 1, 3 (1939).
The fraud Murphy alleges here is clearly intrinsic in nature. He contends that the Michigan court was misled to believe that the attorneys representing Shaw College were also representing him, and that absent such a misrepresentation, the judgment would not have been entered against him. Even assuming this allegation to be true, Murphy's remedy is in the Michigan courts.
There is a presumption, in North Carolina as well as in Michigan, in favor of an attorney's authority to act for the client he or she professes to represent. See In re Certain Tobacco, 52 N.C.App. 299, 278 S.E.2d 575 (1981); Jackson v. Wayne Circuit Judge, 341 Mich. 55, 67 N.W.2d 471 (1954). One who challenges the actions of an attorney as being unauthorized has the burden of rebutting this presumption. Id.
In any event, when a party to an action denies that he gave his consent to the judgment as entered, the proper procedure is by motion in that cause. Howard v. Boyce, 254 N.C. 255, 118 S.E.2d 897 (1961) (emphasis added). Thus, even if the Michigan judgment is void on grounds of attorney fraud or misrepresentation, that question is to be decided by the Michigan courts, and the Wayne County, Michigan Circuit Court has already denied Murphy's motion to vacate on those grounds. The attempt to collaterally attack the Michigan judgment in the North Carolina courts on the basis of intrinsic fraud is therefore improper.
Because a consent judgment is valid only if all parties give their unqualified consent at the time the court sanctions the agreement and promulgates it as a judgment, Overton v. Overton, 259 N.C. 31, 129 S.E.2d 593 (1963), Murphy argues that the Michigan judgment is void since, according to him, he did not consent to the judgment, nor was he informed of it by the attorneys purporting to represent him. Therefore, he contends, it would be against the public policy of North Carolina to give full faith and credit to the judgment of another jurisdiction which was both void and obtained in violation of a party's due process rights. We are not persuaded.
Again, the question whether the Michigan judgment is void because Murphy did not consent is properly addressed to the Michigan courts. In addition, there is no question that Murphy had proper notice of the Michigan court proceedings and that he had an opportunity to be heard there. He was personally served with process and he filed pleadings and affidavits in the Michigan court before moving to North Carolina. His motion for summary judgment in that case, on grounds that he should not be held personally liable for the acts of the college, was denied.
We hold that Murphy has not raised a material factual issue which goes to extrinsic fraud or contravention of public policy, and that J.I.C. Electric's motion for summary judgment was properly granted. Even though the status of Murphy's appeal to the Michigan Court of Appeals is unclear, the full faith and credit clause of the United States Constitution applies as soon as the foreign judgment becomes enforceable, and does not depend upon the exhaustion of all appeals or the expiration of the *838 time allowed for appeal. See Annot., 2 A.L.R. 3d 1384 (1965).
We therefore
Affirm.
JOHNSON and MARTIN, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1480616/ | 63 F.2d 296 (1933)
SHELL PETROLEUM CORPORATION
v.
CAUDLE et al.
No. 6675.
Circuit Court of Appeals, Fifth Circuit.
February 8, 1933.
Rehearing Denied March 8, 1933.
*297 Pinckney G. McElwee, of St. Louis, Mo., for appellant.
Dallas Scarborough, of Abilene, Tex., for appellees.
Before BRYAN, FOSTER, and SIBLEY, Circuit Judges.
SIBLEY, Circuit Judge.
The appellees, Caudle and Childs, sued McClanahan and Shell Petroleum Company for labor, for rental of oil well casing returned, and for the value of casing retained in connection with the drilling by Caudle and Childs of an oil well on property of Shell, but under a contract made with McClanahan, who was alleged to be in a mining partnership with Shell. We follow the witnesses in thus referring to the Shell Petroleum Company. A mechanic's lien for the improvement was claimed, but for want of compliance with the statutes it concededly failed. It was shown that McClanahan contracted with Caudle and Childs to drill a well upon a footage basis, and that they were to rent him the piping to be used for casing at stated rates; the casing to be pulled out and returned if the well was abandoned. There was no agreement proven as to what should be done if the well was a producer. The well was put down, and produced but slightly. The largest size of casing at the top was pulled out and returned, for which rental only was claimed. Shell refused to let Caudle and Childs take out the remaining casing, and its value is claimed. The contract of association between McClanahan and Shell is discussed below. There was only substituted service on McClanahan, so that when the lien failed he went out of the case for lack of jurisdiction over his person. Caudle and Childs and Shell moved for an instruction as to Shell's liability. The court held Shell to be liable. The jury under further instructions fixed amounts of $2,557 as due for the drilling, $240 for rental of the pulled casing, and $3,630 for the casing retained. Judgment thereupon was entered against Shell for all these items, and Shell appeals.
The only basis alleged for holding Shell liable for the labor and rentals due under McClanahan's contract was the mining partnership. Shell's answer denying the partnership should have been under oath. Texas Rev. St. 1925, art. 2010. The jurat thereon appears not to have been signed by an officer. Had exception been taken, it should have been sustained; but no objection to the pleading or the evidence offered under it was made. It is too late after judgment to claim that the partnership was not in issue. Berry v. Thomason (Tex. Civ. App.) 261 S.W. 154, 155; Farris v. U. S. Fidelity & Guaranty Co. (Tex. Civ. App.) 251 S.W. 612.
On that issue there is no proof of any holding out by Shell of McClanahan as its partner, or any statement or representation misleading to Caudle and Childs. They had the burden of proving a partnership in fact in order to bind Shell. Oil production from the earth is to be classed as mining. "A mining partnership arises by operation of law where co-owners work a mine." Munsey v. Mills & Garitty, 115 Tex. at page 483, 283 S.W. 754, 759; Wagner Supply Co. v. Bateman, 118 Tex. at page 505, 18 S.W.(2d) 1052. But co-operation in prospecting is not working a mine. Where property to be prospected is not jointly owned, the actual agreement controls. Hartney v. Gosling, 10 Wyo. 346, 68 P. 1118, 98 Am. St. Rep. 1005. A proposal to share by royalty or otherwise in the results of a well-drilling venture on the property of one coadventurer does not make a partnership, where the intention is otherwise. Gardner v. Wesner (Tex. Civ. App.) 55 S.W.(2d) 1104; Lowry Oil Corp. v. Bennett (Tex. Civ. App.) 16 S.W.(2d) 947; Wammack v. Jones, 103 Okl. 1, 229 P. 159. See also Transcontinental Oil Co. v. MidKansas Oil & Gas Co. (C. C. A.) 29 F.(2d) 323. And where an agreement is made for a future partnership, but the partnership is to go into effect only after stipulated things are done, no partnership exists until the conditions are fulfilled. Buzard v. McAnulty, 77 Tex. at page 443, 444, 14 S.W. 138; Ash v. Mickleson, 118 Okl. 163, 247 P. 680, 681. In the present case McClanahan owned no interest in the 80-acre oil and gas lease to be explored. It belonged wholly to Shell. On September 28, 1928, they made an elaborate written agreement, briefly stated as follows: "Whereas the parties hereto are desirous of exploring and developing the 80 acre tract * * * for their mutual benefit under the terms and conditions hereinafter set forth," McClanahan agreed at his sole cost and expense to drill a test well to the depth of 1,950 feet unless a satisfactory production was sooner reached, and to carry $10,000 of insurance to save Shell harmless against liability *298 for injury or death in connection with McClanahan's operations. On proof that all bills had been paid by McClanahan, and irrespective of the well's proving a producer or dry, Shell agreed to execute to McClanahan an assignment of a one-half interest in the 80-acre lease. If McClanahan failed to complete the well, he was to release all his right, title, and interest to Shell, and forfeit to Shell any equipment on the premises. On completion of the well and on assignment of the one-half interest, Shell was to have management of the whole lease, of the drilling of other wells, and of the sale of oil; keeping the records and making divisions. If either desired to sell out the other was to have the preference as purchaser. We think this agreement contemplated a mining partnership with Shell as the managing partner; but it was to arise only after McClanahan had delivered the test well, with all bills therefor paid, as the price of his share in the partnership. There was to be no joint ownership or sharing either of profits or liabilities before that time. The reference to liability insurance is not to be considered an admission that Shell would be liable for negligence in McClanahan's operations, either as a partner or as a principal for an agent, but rather as an effort to guard against contention by others that such liability existed. The stipulation as to McClanahan's releasing his right, interest, and title if he failed to perform his contract to complete the well referred only to his inchoate rights under the agreement and in the partially completed well. McClanahan's contract made with others in getting the well was not business done for the future partnership, but done on his own account in order to become a partner. Shell is no more responsible for the debts he thereby made than it would be if McClanahan was due to pay money for his half-interest, and had borrowed it from a bank. He delivered the well, made the affidavit that all debts had been paid, and got his assignment; but before that time he was no partner. Caudle and Childs dealt with him alone, and, failing to prove any authority in him at the time to bind Shell, they cannot hold Shell for McClanahan's obligations to them. Ash v. Mickleson, 118 Okl. 163, 247 P. 680; Wammack v. Jones, 103 Okl. 1, 229 P. 159. In the case last cited, the driller had in fact got the assignment of his interest in advance of the drilling. The same thing was true in Wagner Supply Co. v. Bateman, 118 Tex. at page 504, 505, 18 S.W.(2d) 1052. For that reason Bateman was said to be a partner. Not, however, so as to charge his co-owners with Bateman's debts, but so as to postpone Bateman's claim to be a creditor for the drilling to valid partnership debts, and liens. Bateman indeed had already gotten what he was to get for the drilling, to wit, his one-fourth interest in the venture. He had not contracted to be paid money for his work. The case is not in conflict with our holding.
But Caudle and Childs are entitled to have their casing or its value. They did not sell, but only rented it to McClanahan, to be returned with compensation for its use if the well should prove dry. Nothing was said as to what should be done if the well proved a producer; but an option to buy the casing at its reasonable value may be implied. Unless such option was exercised and payment made, the casing remained the property of Caudle and Childs, and Shell could not rightly detain it from them. By so doing Shell became liable to pay its value. Against this conclusion it is argued that the casing was like material furnished to a contractor to be built into a building, for which the furnisher might by statute have a lien on the building but the title to which he could not, without the knowledge of the owner of the building, retain. The analogy does not hold, for a building is not put up tentatively, as an oil well is put down. That the casing does not become necessarily a part of the realty when it is agreed otherwise has been often recognized. In Wagner Supply Co. v. Bateman, supra, at page 501 of 118 Tex., 18 S.W.(2d) 1052, it appears that Wagner Supply Company delivered the casing, retaining a mortgage lien on it which stipulated: "Which property is to be placed upon the hereinabove described tract of land, but subject to our exclusive control and not to become attached to or affixed to the realty." At page 502 of 118 Tex., 18 S.W.(2d) 1052, 1054, the court says: "It is clear from the mortgage itself that the contracting parties intended that it should remain personalty and be subject at all times to the mortgage lien. It is true that the casing was placed in an oil well, a use no doubt in the contemplation of the parties at the time the mortgage was given, but one not inconsistent with the right at all times to consider the casing as personal property, and to agree that it should not, by such use, become a part of the realty. In fact, the action of the parties in this instance is a very fair illustration of the use which may be made of casing, and of the interpretation which ought to be put upon this mortgage and the rights thereunder. *299 As a matter of fact, some of the casing was drawn from the well, sold by Mr. Bateman, and the proceeds therefrom paid to the Wagner Supply Company in partial satisfaction of its note and mortgage. Under elementary authorities the parties had the undoubted right to agree that the property covered by the mortgage should continue to be personalty, although attached in the manner shown to the realty."
In Ash v. Mickleson, 118 Okl. 163, 247 P. 680, Mickleson loaned the casing to go into a test well, to be returned if the well was dry, but to be kept and compensated by a part of the oil if the well produced. The well was dry, and Mickleson's title to the casing was upheld against debts and liens for drilling the well. Gardner v. Wesner, supra, also involved loaned casing. Shell's contract with McClanahan provided that if the well proved dry McClanahan might salvage the casing unless Shell should buy it at its reasonable value; thus showing that they did not regard the casing as becoming a part of Shell's realty by its mere use. Caudle and Childs did not lose their title to the casing by its being placed in the well under a contract of rental.
But it is further said that by Tex. Rev. St. 1925, art. 5489, reservations of title as security for purchase money when possession is delivered to the vendee must be in writing and recorded to be effective against third persons. The statute does not apply, because when the pipe was delivered and used there was no sale and no purchase money to be secured. There is no statute requiring a contract of rental of personal property to be recorded. The statute cited applies only to sales. Milburn Mfg. Co. v. Peak, 89 Tex. 209, 34 S.W. 102; Chase-Hackley Piano Co. v. Clymer (Tex. Civ. App.) 202 S.W. 214; Renfroe v. Hall (Tex. Civ. App.) 202 S.W. 218.
The recitals of the judgment show that by motion of both parties the law question of Shell's liability was left as resting on uncontradicted evidence to the judge, and that questions as to amounts due were submitted to the jury. No one complains of the findings of the jury. We sustain the action of the judge on such findings in adjudging Shell liable for the value of the casing, but we hold that for labor and for rental of the returned casing Shell is not liable. We reverse the cause, with direction to enter judgment accordingly.
Reversed and rendered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1514997/ | 601 S.W.2d 943 (1980)
Charles EVANS, Appellant,
v.
The STATE of Texas, Appellee.
No. 63859.
Court of Criminal Appeals of Texas, En Banc.
July 16, 1980.
*944 Robert A. Scardino, Jr., James T. Stafford, Houston, for appellant.
John B. Holmes, Jr., Dist. Atty., Larry P. Urquhart and Keno Henderson, Asst. Dist. Attys., Houston, Robert Huttash, State's Atty., Austin, for the State.
Before the court en banc.
OPINION
PHILLIPS, Judge.
This is an appeal from a conviction for capital murder. The jury affirmatively answered the first and second punishment issues. See Article 37.071(b)(1) and (2), V.A. C.C.P. Punishment was assessed at death.
Appellant urges that the trial court erred in refusing to submit the third punishment issue to the jury. Article 37.071(b)(3), V.A. C.C.P., provides as follows:
(b) On conclusion of the presentation of the evidence, the court shall submit the following issues to the jury:
(3) if raised by the evidence, whether the conduct of the defendant in killing the deceased was unreasonable in response to the provocation, if any, by the deceased.
Appellant contends that this issue was raised by the evidence and that he timely requested the court to submit the issue to the jury. We agree with appellant's contention and reverse.
The record reflects that appellant entered a jewelry store armed with a pistol to commit a robbery. The manager of the store also had a pistol, and in an exchange of gunfire with appellant he was killed. At the guilt-or-innocence phase of appellant's trial, the State introduced into evidence parts of appellant's written confession. See Harrington v. State, 547 S.W.2d 616 (Tex. Cr.App.1977); Otts v. State, 116 S.W.2d 1084 (Tex.Cr.App.1938). The pertinent parts are as follows:
... I headed toward the back counter, an old man stepped toward the counter like he was going to help me, there was another old woman sitting back behind *945 him. When I got to the counter I came up with the pistol, and jumped over it. The old man took a step back and then he came up with a pistol, I don't know where it came from. I started shooting and he shot. It all happened real fast ... I didn't realize until after I got in the car that I had been hit. I was shot in the right thigh, it was a through and through shot.
On cross-examination of the police officer through whom the State had introduced parts of the confession, appellant introduced into evidence other parts of the confession. See Harrington, supra; Otts, supra. When the parts introduced by the State and appellant are combined, the pertinent parts read as follows (parts introduced by appellant are italicized):
... I headed toward the back counter, an old man, stepped toward the counter like he was going to help me, there was another old woman sitting back behind him. When I got to the counter I came up with the pistol, and jumped over it. The old man took a step back and then he came up with a pistol, I don't know where it came from. He had it pointed at me and he shot. I started shooting and he shot some more. It all happened real fast ... I didn't realize until after I got in the car that I had been hit. I was shot in the right thigh, it was a through and through shot.
* * * * * *
I want to say that shooting that man was the fartherest (sic) thing in my mind, things just happened so fast.
In urging that the third punishment issue was raised by the evidence, appellant relies primarily upon his confession. Appellant maintains that the confession "by its very language raises the issue of provocation."
In Jurek v. State, 522 S.W.2d 934 (Tex.Cr. App.1975), this Court held the death penalty statutes constitutional because they limited the standardless imposition of capital punishment. The Court assigned great weight to the role that the three punishment issues would play in limiting standardless jury discretion:
... These questions direct and guide their deliberations. They channel the jury's consideration on punishment and effectively insure against the arbitrary and wanton imposition of the death penalty.
In Jurek v. Texas, 428 U.S. 262, 96 S. Ct. 2950, 49 L. Ed. 2d 929 (1976), the Supreme Court agreed that the death penalty statutes were constitutional. The Court emphasized the critical role of the three punishment issues:
... The Texas statute does not explicitly speak of mitigating circumstances; it directs only that the jury answer three questions. Thus, the constitutionality of the Texas procedures turns on whether the enumerated questions allow consideration of particularized mitigating factors.
* * * * * *
The Texas Court of Criminal Appeals has not yet construed the first and third questions ...; thus it is as yet undetermined whether or not the jury's consideration of those questions would properly include consideration of mitigating circumstances. In at least some situations the questions could, however, comprehend such an inquiry. For example, the third question asks whether the conduct of the defendant was unreasonable in response to any provocation by the deceased. This might be construed to allow the jury to consider circumstances which, though not sufficient as a defense to the crime itself, might nevertheless have enough mitigating force to avoid the death penalty ... We cannot, however, construe the statute; that power is reserved to the Texas courts. [Emphasis added]
Jurek v. Texas, supra, at 272, 96 S.Ct. at 2956, and id. at note 7.
In Brown v. State, 554 S.W.2d 677 (Tex. Cr.App.1977), the defendant contended that *946 the third punishment issue merely requires the same finding as the finding of guilt on the capital murder charge. In essence, the defendant's argument was that the provocation issue asks no more than that the jury reconsider its earlier decision that the killing was murder rather than voluntary manslaughter or self-defense. Contrary to this contention, the Court in Brown adopted a broader view of the third punishment issue. Relying on its language in Jurek v. State, which is quoted above, the Court rejected appellant's claim that the third punishment issue requires no more than a reaffirmation of the guilty verdict.
This broader interpretation of the provocation issue is in accord with the views of at least one commentator. See Crump, Capital Murder: The Issues in Texas, 14 Hous.L. Rev. 531, 560 (1977). This commentator made the following comments concerning the kind of evidence required to raise the provocation issue:
If read literally, the issue would apply only in situations wherein the offense is really voluntary manslaughter rather than capital murder. Indeed, the requirement that the killing be reasonable is a more difficult requirement to meet than that for reduction to manslaughter. It would appear, therefore, that the question ought to be submitted even in circumstances where the conduct is marginal in its reasonableness. Thus, an imperfect self-defense issue, even if so imperfect that it would not justify reduction to manslaughter, should be considered sufficient to raise the issue and require the provocation question to be submitted.
For example, the slight self-defense issue in Smith v. State, [540 S.W.2d 693 (Tex.Crim.App.1976)] which involved a prototypical claim of "hip-pocket motion" by the deceased, was sufficient to raise the provocation issue, and it was wisely submitted to the jury by the trial court. [Emphasis added]
Id.
We reaffirm our holding in Brown, supra, and construe the third punishment issue to permit the jury to consider particularized mitigating circumstances. We specifically construe this issue to include the situation where the evidence raises an imperfect self-defense claim. We think the Legislature intended this type of situation to fall within the ambit of the third issue. A more restrictive interpretation would render this issue a virtual nullity, and we presume the Legislature did not intend such a result. We merely pause to observe that the construction we adopt today is similar to the possible construction mentioned by the Supreme Court in Jurek v. Texas.
When we apply our construction of the third punishment issue to the facts in the present case, it is clear beyond doubt that appellant was entitled to have this issue submitted to the jury. According to appellant's confession, before he fired any shots the manager of the jewelry store pointed a pistol at him and fired it. Because appellant entered the store with a pistol to commit a robbery, he had no legal right of self-defense against the manager. See Davis v. State, 597 S.W.2d 358 (1980); Dickson v. State, 463 S.W.2d 20 (Tex.Cr. App.1971). Appellant therefore was not entitled to have the self-defense issue submitted to the jury at the guilt-or-innocence phase of his trial. Nevertheless, his imperfect self-defense claim warranted submission of the provocation issue at the penalty phase.
Firing his pistol only after being fired upon rendered appellant less culpable than an armed robber who kills without provocation. The jury should have been allowed to consider this mitigating circumstance in the context of the third punishment issue. Appellant's imperfect self-defense claim may have been sufficiently mitigating to warrant a sentence of life imprisonment.
The sole purpose of the punishment issues is to aid the jury in determining whether the proper punishment is life imprisonment or death. Because the provocation issue was not submitted, the jury failed *947 to receive adequate guidance in its punishment deliberations, and its consideration of mitigating circumstances was limited. Such a result is contrary to this Court's decision in Jurek v. State and the Supreme Court's decision in Jurek v. Texas. We hold that the trial court erred in overruling appellant's request to have the third punishment issue submitted to the jury.
The State argues that failure to submit the provocation issue did not constitute reversible error for three reasons. First, the State contends that appellant's request for submission of the issue did not comply with Article 36.15, V.A.C.C.P. The record reflects the following oral request for submission of the provocation issue and the trial court's adverse ruling:
MR. STAFFORD [Defense Counsel]: May I state the objection to the Court's charge.
We respectfully request the Court at this time, in response to the Court's charge as to the punishment phase of the trial, that the Court submit special issue Number 3, under Article 37.071, because I think there is sufficient evidence before the Court, before the jury, to answer this question and we would respectfully ask the Court include such issue in this charge.
THE COURT: Request is denied.
Article 36.15, supra, applies where either side presents special charges. Article 36.14, V.A.C.C.P., provides that "in no event shall it be necessary for the defendant or his counsel to present special requested charges to preserve or maintain any error assigned to the charge." Appellant's objection to the charge was sufficient to preserve error under Article 36.14, supra. Dirck v. State, 579 S.W.2d 198, 199 (Tex.Cr.App.1979, on appellant's motion for rehearing).
The State next contends that the parts of the confession that appellant introduced into evidence did not constitute substantive evidence and therefore could not raise the provocation issue. The State relies on 7 Wigmore, Evidence § 2113 (3d ed. 1940). This reliance is misplaced. A recent revision of this treatise shows that numerous courts, including this Court, have rejected the contention that the State advances. 7 Wigmore, Evidence § 2113 n. 7 (Chadbourn rev. 1978); see Rivera v. State, 406 S.W.2d 466 (Tex.Cr.App.1966); Trammell v. State, 167 S.W.2d 171 (Tex.Cr.App. 1942).
Finally, the State contends that the parts of the confession that appellant introduced into evidence did not raise the provocation issue, but merely showed that the deceased attempted to defend himself lawfully. The State further contends that the deceased's response was reasonably foreseeable, and therefore appellant was not entitled to have the provocation issue submitted.
The State's argument ignores the purpose of the punishment issues. They cannot relieve a defendant of criminal liability; they serve only to guide the jury's deliberations on punishment. That the deceased acted lawfully or that his conduct was reasonably foreseeable does not deprive appellant of his right to have the jury consider mitigating circumstances. The evidence raised the provocation issue, and it should have been submitted to the jury.
We also note an additional ground of error that requires us to reverse this judgment. Appellant contends that the trial court erred in overruling his motion to quash the indictment because it failed to state the name of the alleged robbery victim. We recently have held that overruling such a motion constitutes reversible error. Brasfield v. State, 600 S.W.2d 288 (opinion on State's motion for rehearing, decided 1980); see King v. State, 594 S.W.2d 425 (Tex.Cr.App.1980).
The judgment is reversed and the cause remanded.
ONION, Presiding Judge, concurring. This appeal is from a conviction for capital murder committed during the course of *948 robbery. See V.T.C.A., Penal Code Sec. 19.03. Punishment was assessed at death in view of the jury's affirmative answers to special issues nos. 1 and 2 submitted under Article 37.071(b)(1) and (2), V.A.C.C.P.
At the outset we are confronted with appellant's contention that the trial court erred in overruling his timely presented motion to quash the indictment because it failed to allege the name of the robbery victim which was essential as part of the aggravation and to elevate the charged offense from murder (V.T.C.A., Penal Code Sec. 19.02) to capital murder (V.T.C.A., Penal Code Sec. 19.03). We have only recently held that overruling a timely presented motion to quash a capital murder indictment where the robbery victim was not alleged therein was reversible error. Brasfield v. State, 600 S.W.2d 288 (Opinion on State's Motion for Rehearing, 1980). See also King v. State, 594 S.W.2d 425 (Tex.Cr. App.1980).
I would adhere to Brasfield and reverse this conviction on that ground alone. I would not reach the question of whether the trial court also erred in not submitting the third special issue under Article 37.071(b)(3), V.A.C.C.P., or whether the appellant properly preserved such error under Articles 36.14 and 36.15, V.A.C.C.P. in effect at the time of appellant's trial.
For the reasons stated, I concur.
ODOM, J., joins in this concurrence.
DOUGLAS, Judge, dissenting.
The conviction should not be reversed. The indictment should be held to be sufficient. See the dissenting opinion in Brasfield v. State, 600 S.W.2d 288 (Opinion on State's Motion for Rehearing, 1980). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1604287/ | 810 So. 2d 1203 (2002)
Diana Marlyne STETT, Gregory J. Stett, individually and as the administrators of their minor child, Lauren Diane Stett, and Carrie Allison Stett and Chad Alan Stett, individually, Plaintiffs-Appellants,
v.
Carol B. GREVE, B.C.S.W, Defendant-Appellee.
No. 35,140-CA.
Court of Appeal of Louisiana, Second Circuit.
February 27, 2002.
*1205 Donald L. Kneipp, Monroe, for Appellants.
Davenport, Files & Kelly, L.L.P., by M. Shane Craighead, Monroe, for Appellee.
Before BROWN, WILLIAMS, CARAWAY, KOSTELKA and DREW, JJ.
CARAWAY, Judge.
Trial on the exception of prescription occurred in this case to determine whether the alleged malpractice of the defendant/therapist prescribed before the institution of suit on August 19, 1996. The therapy rendered by the defendant began in 1989, and the last conversation between the parties was on August 23, 1995, the only time within the year preceding the suit that therapy might have been given. The defendant presented evidence that the parties terminated the therapeutic relationship in June 1995, and the trial court agreed, dismissing plaintiffs' suit on the exception of prescription. Finding that no continuing tort occurred and that the doctrine of contra non valentem was not proven by plaintiff, we affirm the trial court's ruling.
Facts
In this malpractice case, Diana Stett ("Stett") and her family sued Stett's therapist, Carol Greve ("Greve"), a Board Certified Social Worker. Stett started therapy with Greve in November, 1989, while Stett's suit against a prior therapist was underway. Greve was the treating therapist for the duration of that suit, wherein Stett alleged that she was a victim of therapist abuse. Stett purportedly received a large settlement for the first suit. When Stett began therapy with Greve, her treating psychiatrist was Dr. Douglas Greve, who was also Greve's husband.
The therapy was initially conducted in Shreveport. When Greve moved to New Orleans in January, 1991, therapy was terminated briefly. After four months, and at Stett's request, therapy resumed by telephone. The therapy sessions were conducted on the condition that Stett continue to see a local therapist in Shreveport and remain under the care of her psychiatrist. Ultimately, Stett's relationship with Greve grew contentious. At the hearing on the exception, Greve described Stett as:
[a] very difficult patient to manage. She was unstable, oppositional, argumentative, very unpredictable, frequently non-compliant especially when it came to taking her medication.
The weekly telephone therapy sessions continued between May, 1991, and November, 1994, except when punctuated by Stett's in-patient psychiatric hospitalizations. Greve testified that she treated Stett only as an outpatient. During Stett's *1206 hospitalizations, the psychiatric staff would care for her. Stett would frequently complain to Greve that Greve "wouldn't talk to her enough times, that [Greve] would refuse sessions with her [and] that she couldn't have enough access to [Greve] when she would call." Greve reported that generally, Stett requested extremely frequent and long therapy sessions outside of their scheduled weekly sessions. Stett wrote letters and telephoned Greve frequently. At the hearing, Greve estimated that Stett sent her as many as 100 letters during the course of therapy. Some letters accuse Greve of treating Stett worse than other patients because of Stett's suit against her former therapist. One letter dated July 22, 1994 accuses Greve of being "paranoid." According to Greve, Stett's conduct placed intolerable stress on their therapeutic relationship, and therapy could not occur in that context. When Greve terminated therapy in June, 1995, she described their relationship as having become "more of an argument."
On November 23, 1994, Stett telephoned Greve at her New Orleans office 381 times. In response, Greve sent Stett a termination letter dated November 26, 1994, by certified mail. Greve terminated therapy because Stett had "adamantly refused to follow [Greve's] therapeutic advice, direction or treatment plan." The letter also stated that Greve would no longer accept telephone calls or respond to Stett's written messages. However, Greve said that Stett refused delivery of the letter, and indeed the certified mail receipt does not bear Stett's signature.
Greve explained that in spite of the termination letter, Stett altered her behavior with regard to the telephone calls and therapy continued for another 5 or 6 months. However, on June 21, 1995, Stett telephoned Greve's home at 9:30 p.m., in spite of having agreed not to call Greve at home. Greve talked with her for a few minutes and ended the phone call. Thereafter, Stett "started calling repeatedly, one call after the other." The next morning, Greve notified Stett by phone that, because of the persistent calls, their therapeutic relationship would terminate within 30 days. Greve offered Stett four weekly sessions during the 30-day interval in which to deal with termination and find a new therapist. This was Greve's customary practice regarding terminations, but Stett refused this offer. According to Greve, this conversation was the last time that she provided advice or therapy to Stett. During that day and the next, Stett faxed a total of four letters to Greve, begging her not to terminate therapy. The last letter was signed, "goodbye, Diana." Thereafter, Stett's husband called Greve on Sunday evening, June 25. When Greve returned his call the next day, Greve gave Stett's husband the same information concerning referrals that she had given Stett and offered to set up one of the four termination sessions with Stett.
On June 29, 1995, Stett wrote Greve a letter in which she repeatedly asked Greve to reconsider termination. In a handwritten addendum to this letter, Stett stated that her condition worsened and it was partly Greve's fault. In another letter to Greve dated June 29, 1995, Stett advised that she had seen a new therapist, Mary Beth Stage. She also wrote:
Will you reconsider terminating? If you decide no, may I have a last phone call? Will you give me some kind of response that you will think about it, yes, maybe, no, by this week or end of next week, July 7? Please don't let this end like (sic) Linda situation. One issue that comes up when you ignore or avoid is that you are in fact doing just what I am suspicious of you and you don't want me to ask questions. It turned out with Linda, that I was not wrong. I do not want this to be the same.
*1207 The "Linda situation" was shown at trial to be the prior suit by Stett against another therapist, Linda Watts, which Stett successfully settled in 1994. The June 29 letter also refers to "the Paul Ware legal stuff going on." According to Greve, this was a reference to yet another lawsuit. The record reveals that in addition to the instant suit, and the lawsuit against her former therapist, Stett was suing two former psychiatrists and the attorney who settled the Watts lawsuit.
Stett called Greve again on July 30, 1995, from River Oaks Hospital but neglected to inform Greve that she was hospitalized. Greve reiterated that she could not treat Stett any longer because of Stett's unreasonable demands for contact and her "bombarding" of Greve's office, answering service and home with telephone calls. Greve testified that she did not provide any therapy to Stett during this telephone call. Once Greve realized Stett was an inpatient, Greve told her to talk to her therapist there and if they needed to contact Greve, the hospital staff would do so.
Stett's next and final phone call to Greve occurred on August 23, 1995, after Stett received Greve's final bill. At trial, Greve described Stett as being "in a rage" over the bill because Greve charged Stett differently from other patients. Greve testified at the hearing that Stett's condition was not discussed and that no therapy was provided during the August 23 call. Stett taped this phone conversation unbeknownst to Greve. The existence of the taped conversation was not revealed to Greve or her counsel prior to Greve's testimony despite Greve's previous discovery requests which should have revealed the tape's existence. The trial court refused to allow the tape into evidence, since plaintiffs' counsel failed to disclose its existence to the defendant and since Stett was not present at the hearing to authenticate it.
Finally, Stett wrote Greve on September 18, 1995, requesting her medical records. On September 22, 1995, Greve wrote Stett another termination letter, and again cited Stett's refusal to follow Greve's advice, direction and treatment plan as the reason for termination. Also on September 22, Greve wrote a letter to Stett's attorney and enclosed a copy of her letter to Stett. Greve testified regarding these September 22 letters, as follows:
I think it was clear that these letters were sent to Mr. Hammons [Stett's counsel] as a result of Mrs. Stett writing me and asking for her records. She had refused the letters that I had sent to her before. I knew I had no intention of sending her a letter of termination. I terminated Diana Stett by the telephone.
The Stetts filed suit on August 19, 1996, urging inter alia that Greve was negligent for misdiagnosing Stett, failing to develop and follow a consistent treatment plan, creating an unstable environment, failing to establish and maintain consistent boundaries and terminating and reestablishing the therapeutic relationship. On January 11, 1999, Greve filed an exception of prescription. The hearing on the exception, initially scheduled for February 1, 1999, was continued and reset four times by agreement of counsel. On November 13, 2000, Greve was present with counsel. Stett's third enrolled counsel of record was present, but neither Stett nor her husband appeared. According to Stett's attorney, she had informed him the day before the hearing that she was ill; she was purportedly at a doctor's office while the hearing took place. The Stetts now live in Dallas.
Stett's attorney repeatedly asked the court to "leave the record open" to permit his client to submit her testimony. The trial court denied the request, citing the number of continuances and the lack of a *1208 doctor's excuse for Stett's absence. No medical report verifying Stett's illness on the day of trial is contained in the record.
The trial court granted the exception of prescription and dismissed Stett's suit with prejudice. In oral reasons for judgment, the trial court found that Stett was an "accomplished litigator," particularly with regard to therapists, and that she had been represented by counsel during the entire time she underwent therapy with Greve. The court cited Stett's letters, particularly the letter of June 29, 1995, as evidence that Stett knew of and acknowledged Greve's termination of their therapeutic relationship. The trial court also observed that the August 23, 1995 telephone call was initiated by Stett, not Greve, and that Stett's taping of the conversation was consistent with the defense counsel's argument that Stett was "trying to create or trying to build a lawsuit because she understood what had happened, she knew the relationship had been terminated." It is from this ruling that Stett appeals.
Discussion
I.
At the outset, we note that this malpractice case against a social worker was filed in 1996, long before the addition of social workers to the definition of health care provider in the medical malpractice statute. See Acts 1999, No. 1309 § 8, effective January 1, 2000. Accordingly, there was no need to present the matter in this case to a medical review panel before plaintiffs filed suit in district court. Likewise, the special prescription statute for medical malpractice suits, La. R.S. 9:5628, is inapplicable, and the one-year prescription for tort claims applies.
Generally, the burden of proving that a suit has prescribed rests upon the party pleading prescription as an affirmative defense. Dixon v. Louisiana State Univ. Medical Ctr., 33,036 (La.App.2d Cir.1/26/00), 750 So. 2d 408, writ denied, XXXX-XXXX (La.4/20/00), 760 So. 2d 350; Cruse v. Louisiana State Univ. Medical Ctr., 34,779 (La.App.2d Cir.6/20/01), 792 So. 2d 798. When it is not obvious from the face of the petition that the claim is prescribed, the burden rests on the defendant or party pleading prescription. Strata v. Patin, 545 So. 2d 1180 (La.App. 4th Cir.), writ denied, 550 So. 2d 618 (La.1989). However, once it is shown at the trial of the exception that more than one year has elapsed between the time the tort occurred and the filing of suit, the burden shifts to the plaintiff to prove an interruption or suspension of prescription, due to his lack of knowledge of the tortious act. In re Moses, 2000-2643 (La.5/25/01), 788 So. 2d 1173; Dixon, supra; Strata, supra. The shifting of the burden means that the plaintiff must allege and prove facts indicating that the injury and its causal relationship to the alleged misconduct were not apparent or discoverable until within one year before the suit was filed. Cruse, supra.
When tortious conduct and resulting damages are of a continuing nature, prescription does not begin until the conduct causing the damages is abated. Bustamento v. Tucker, 607 So. 2d 532 (La. 1992); Doe v. Doe, 95-0006 (La.App. 1st Cir.10/6/95), 671 So. 2d 466, writ denied, 95-2671 (La.1/12/96), 667 So. 2d 523. The principle of a continuing tort applies only when continuous conduct causes continuing damages. Doe, supra. The continuous nature of the conduct complained of has the dual effect of rendering such conduct tortious and of delaying the commencement of prescription. Bustamento, supra. The conduct becomes tortious and actionable because of its continuous, cumulative, synergistic nature and prescription does not commence until the last act occurs or the conduct is abated. Id.
*1209 To soften the occasional harshness of prescriptive statutes, our courts have recognized a jurisprudential exception to prescription: contra non valentem non currit praescriptio, which means that prescription does not run against a person who could not bring his suit. Harvey v. Dixie Graphics, Inc., 593 So. 2d 351 (La. 1992); Lima v. Schmidt, 595 So. 2d 624 (La.1992). The doctrine is based on the equitable principle that prescription should be suspended when a plaintiff is effectually prevented from enforcing his rights for reasons external to his own will. Wimberly v. Gatch, 635 So. 2d 206 (La.4/11/94); Steele v. Steele, 98-693 (La.App. 5th Cir.3/10/99), 732 So. 2d 546, writ denied, 99-0995 (La.5/28/99), 743 So. 2d 674. Generally, contra non valentem suspends the running of prescription in the following four situations: (1) where there was some legal cause which prevented the courts or their officers from taking cognizance of or acting on the plaintiff's action; (2) where there was some condition coupled with a contract or connected with the proceedings which prevented the creditor from suing or acting; (3) where the defendant himself has done some act effectually to prevent the plaintiff from availing himself of his cause of action; and (4) where some cause of action is not known or reasonably knowable by the plaintiff, even though his ignorance is not induced by the defendant. Steele, supra. The last two categories of contra non valentem arguably apply in the instant case.
For example, the principle known as the "continuous representation rule," based on the third application of contra non valentem, has been held to suspend prescription during an attorney's continuous representation of a client regarding the specific subject matter in which the alleged wrongful act or omission occurred. Hendrick v. ABC Ins. Co., 2000-2349, 2000-2403 (La.5/15/01), 787 So. 2d 283. However, contra non valentem does not suspend prescription when a litigant is perfectly able to bring his claim, but fails to do so. Hendrick, supra.
The fourth category, commonly called the "discovery rule," provides that prescription begins when the injured party discovers or should have discovered the facts upon which her cause of action is based. Hence, prescription does not run against one who is ignorant of the facts upon which her cause of action is based as long as such ignorance is not willful, negligent or unreasonable. See Senn v. Bd. of Supervisors of Louisiana State Univ. Agric. & Mechanical College, 28,599 (La. App.2d Cir.8/21/96), 679 So. 2d 575, writ denied, 96-2344 (La.10/25/96), 681 So. 2d 379. This does not mean that a lack of actual notice of a cause of action will suspend prescription, as constructive notice is sufficient to commence the running of prescription. Strata, supra.
In this court's decision in Senn, supra, we rejected a claim that the plaintiff's prior relationship with her college professor had caused the psychological impairment of the plaintiff which prevented her from bringing the action and barred the running of prescription under contra non valentem. Likewise, in Strata, supra, the court did not find that the plaintiff/husband's emotional trauma caused by his discovery of an affair between his wife and his priest was sufficient to invoke the doctrine of contra non valentem. In both of these cases, the courts' rulings considered the expert testimony given by psychiatrists attempting to establish the plaintiffs' impaired conditions.
When a special relationship, such as patient-physician or attorney-client, exists between the parties, the continuation of the special relationship offers the possibility of correcting any injury and thus may postpone the running of prescription. See In re Moses, supra. Continued *1210 treatment combined with a continued professional relationship may result in a suspension of prescription if the continuing relationship is likely to hinder the patient's inclination to sue. Id. This type of tolling of prescription is not based on the continuing tort concept, rather it is based on the third category of contra non valentem and the above premise that a professional relationship may hinder a patient's inclination to sue; thus, prescription is tolled until the relationship terminates. See Kavanaugh v. Edwards, 32,413 (La. App.2d Cir.12/8/99), 749 So. 2d 824, writ denied, XXXX-XXXX (La.5/5/00), 761 So. 2d 543; In re Brown, 97-2803 (La.App. 4th Cir.7/1/98), 715 So. 2d 1249, writ denied, 98-2020 (La.11/6/98), 728 So. 2d 390, cert. denied, 526 U.S. 1050, 119 S. Ct. 1356, 143 L. Ed. 2d 518 (1999). The "termination rule" is a particularized application of the discovery rule. In re Moses, supra.
Stett's petition alleges the history of the counseling given by Greve and states that the professional relationship did not terminate until September 22, 1995. Two paragraphs of the petition which best describe Greve's allegedly negligent conduct, assert:
"10.
The defendant's failure to develop and follow a consistent treatment plan for Diana Stett created and perpetuated an unstable environment for plaintiff, further exacerbating the trauma and mental distress plaintiff was suffering from. Adding to the unstable environment was defendant's termination of the professional relationship based on plaintiff's lack of medical backup."
"13.
During the course of treatment defendant knew that plaintiff Diana Stett had been severely traumatized by prior abusive therapeutic relationships and that she had a history of developing psychotic transference to her therapist. Despite this knowledge, and knowing that Diana Stett had developed a dependency on herself (the defendant), defendant subjected Diana Stett to severe mental torture by at times limiting access to desperately needed therapy and counseling from defendant, terminating the relationship, and then reestablishing the relationship, all without setting proper boundaries and without an accurate diagnosis and treatment plan."
The face of the petition did not clearly indicate that all of the acts of Greve's alleged malpractice inflicted upon Stett had prescribed. Stett arguably claimed a continuing tortious relationship that only ended in September 1995, which was within one year of the filing of this suit. Thus, at the trial of the exception, Greve undertook the burden of proving that she terminated her relationship with Stett on June 22, 1995 and that Stett thereafter acknowledged the termination. Greve's proof regarding her termination of counseling was established by her testimony, her notes of her June 22 telephone call to Stett and Stett's six written responses acknowledging the termination. Stett's written responses were sent to Greve on June 22, 23, and 29. The last letter dated June 29 indicates that Stett attempted to begin a new counseling relationship with another person, yet pleaded with Greve to "reconsider" the termination of their relationship.
Upon Greve's proof that the break in the parties' relationship clearly occurred at the end of June, 1995, Greve established that the alleged malpractice would have occurred well over one year from the time of the filing of suit on August 19, 1996, and had prescribed. Stett therefore had the burden of establishing facts for either of the two potential theories now suggested to overcome prescription.
*1211 First, while Stett urges that her June 29 letter to Greve was not the final communication between them, the significant break between the parties reflected by that communication required Stett to explain and establish why Greve's prior negligent acts of counseling before June should be considered as one continuing tort. If there had been a "continuous, cumulative, synergistic" pattern of deficient counseling by Greve, analogous to the continuing tort addressed in Bustamento, Stett had to reveal this continuing tortious conduct so that a determination could be made that those actions before the June correspondence did not prescribe and did not abate, but instead were perpetuated by the relatively few communications between the parties after June. Second, if Stett could not prove that Greve's negligent counseling constituted a continuing tort extending beyond August 19, 1995, she was required to establish facts demonstrating that, under the doctrine of contra non valentem, she was prevented from reporting or having knowledge that Greve's actions harmed her.
The "mental distress" and "severe mental torture" alleged in Stett's petition are not merely critical elements of Stett's cause of action that need only be proven at trial on the merits. These allegations required proof at the trial of the exception of prescription to establish either a continuing tort or contra non valentem that extended beyond August 19, 1995. Nevertheless, Stett's defense strategy for the trial of the exception was to have consisted only of her own testimony, as discussed further below, and the documentation concerning Greve's correspondence to Stett and her attorney from May, 1994, until September, 1995. Absent expert testimony, Stett failed to identify the standard of care which the defendant/therapist allegedly breached, both initially and continuously, so as to establish a continuing tort. Stett simply may not rest upon the allegations of her petition. Likewise, without psychiatric testimony to establish Stett's psychological impairment, we must accept Stett's letters to Greve at the end of June as acknowledgments of the termination of Greve's services and as indications that Stett was displeased with those services.
We therefore agree with the trial court that the therapist/patient relationship terminated at the end of June, 1995 and that Stett did not prove why she could not have known of or acted upon her cause of action against Greve at that time. In reaching this conclusion, we do not agree with Stett's assertion that Greve's September 22 letters to Stett and her counsel somehow reestablished the therapist/patient relationship. The letters were further notice that the relationship had ended, and were clearly not acts of negligent therapy that might have somehow extended the alleged, but unproven, continuing tort or caused Stett to be unable to assert her cause of action.
II.
When the trial court announced the hearing on the exception of prescription the morning of trial, Stett's counsel informed the court that Stett had notified him the previous evening that she could not attend because she was ill. When counsel requested that the record of the trial proceedings remain open for Stett's deposition to be taken at a later time, Greve's counsel objected. The trial court then proceeded to move the case to its afternoon docket. At the afternoon setting, plaintiffs' counsel informed the court that he had communicated with Mr. Stett at noon and that Mrs. Stett was at her doctor's office. He asserted that Stett's testimony would be necessary to establish the substance of the parties' telephone conversation occurring on August 23, 1995, and again asked that the record remain *1212 open for her deposition testimony. The court denied that request. Additionally, at the close of the trial, the trial court again denied counsel's request to leave the record open. Stett now urges that the trial court erred in making these rulings.
The trial court is granted broad discretion in conducting a trial and in determining whether to receive or refuse testimony. Turner v. Stassi, 33,022 (La.App.2d Cir.5/10/00), 759 So. 2d 299, 307; Ware v. Medical Protective Ins. Co., 621 So. 2d 54 (La.App. 2d Cir.), writ denied, 629 So. 2d 354 (La.1993). Likewise, the trial court's discretion in granting or denying a continuance under La. C.C.P. art. 1601 must be based upon consideration of the facts of each case and factors such as diligence, good faith, and reasonable grounds. Our Lady of the Lake Hosp. v. Vanner, 95-0754 (La.App. 1st Cir.3/27/97), 692 So. 2d 40, writ denied, 97-1567 (La.9/26/97), 701 So. 2d 992, cert. denied, 525 U.S. 818, 119 S. Ct. 57, 142 L. Ed. 2d 45 (1998). Equally important is the exceptor's corollary right to have his case heard as soon as practicable. Id.
The decision to reopen a case for additional evidence rests within the discretion of the trial judge, whose discretion will not be disturbed on appeal unless manifestly erroneous. Brown v. Hobson, 30,131 (La.App.2d Cir.1/21/98), 706 So. 2d 1030, 1032-1033, writ denied, 98-0479 (La.4/3/98), 717 So. 2d 1132, citing La. C.C.P. art. 1632; Krolick v. State, through Dep't. of Health and Human Resources, 99-2622 (La.App. 1st Cir.9/22/00), 790 So. 2d 21, writ denied, XXXX-XXXX (La.2/9/01), 785 So. 2d 829. In Antley v. Brantly, 28,049 (La.App.2d Cir.2/28/96), 669 So. 2d 685, 688, this court said:
On the other hand, in order to prevent a miscarriage of justice, a trial court should not hesitate to reopen a case for the taking of additional evidence, or to grant a new trial when properly requested, and an appellate court should not hesitate to set aside the ruling of a trial court on such matters in a case of manifest abuse of discretion. See Lamb v. Lamb, 430 So. 2d 51 (La.1983).
In refusing to allow Stett's testimony by post-trial deposition, the trial court noted the many prior continuances for the hearing on the exception. Likewise, the trial court noted that no proof in the form of a doctor's examination was provided as evidence of Stett's sudden illness. Mr. Stett, also a plaintiff in this action, and who had discussed with Greve the June 1995 termination of counseling, also chose not to attend.
Most significantly, Stett's counsel suggested to the trial court that Stett's testimony was required to dispute Greve's version of the parties' last telephone conversation of August 23, 1995. Stett asserts that conversation is the last "therapy" session between the parties. It is the only conversation which occurred within the one-year prescriptive period prior to the filing of this suit. On cross-examination, Greve was asked questions concerning various portions of the August 23 conversation in which she and Stett purportedly discussed Stett's prior treatment and her condition. Stett's counsel revealed to the court that his cross-examination was based upon an actual transcript of the conversation which Stett had secretly taped. Although Greve did not remember those specifics of her conversation with Stett upon which she was cross-examined, she did not deny that those matters may have been brought up in the conversation. Greve denied however that she gave therapy to Stett and testified that the phone call to her home was made by Stett to dispute Greve's final bill for services which Stett had received.
From our review of the cross-examination questions posed to Greve, we do not *1213 find that a therapy session occurred under those circumstances, even if we assume that the matters regarding Stett's condition were alluded to in the conversation. Moreover, Stett offered no evidence at trial nor in argument to the trial court or this court to establish why the August 23, 1995, conversation constituted malpractice by Greve and how that single act of alleged malpractice related to all of the prior therapy given by Greve outside of the one-year prescriptive period. Under these circumstances, the trial court's discretionary refusal to allow Stett's post-trial testimony regarding the August 23 telephone conversation is justified on the basis that Stett's testimony alone could not fulfill her burden of proving either a continuing tort or the defense of contra non valentem. Accordingly, we find no abuse of the trial court's discretion in refusing to receive Stett's testimony after the trial.
Conclusion
For the reasons discussed above, the trial court correctly determined that prescription ran against plaintiffs. The grant of defendant's exception of prescription is affirmed. Costs of appeal are assessed to appellants.
AFFIRMED.
WILLIAMS, J., dissents with written reasons.
DREW, J., dissents for the reasons assigned by J. WILLIAMS.
WILLIAMS, Judge.
I respectfully dissent.
The trial court is granted broad discretion in conducting a trial and in determining whether to receive or refuse testimony. Turner v. Stassi, 33,022 (La.App.2d Cir.5/10/00), 759 So. 2d 299; Ware v. Medical Protective Ins. Co., 621 So. 2d 54 (La. App. 2d Cir.1993), writ denied, 629 So. 2d 354 (La.1993). This discretion includes the decision of whether to reopen a case for additional evidence and the trial court's determination will not be disturbed on appeal absent an abuse of discretion. Brown v. Hobson, 30,131 (La.App.2d Cir.1/21/98), 706 So. 2d 1030, writ denied, 98-479 (La.4/3/98), 717 So. 2d 1132, citing LSA C.C.P. art. 1632.
The decision to hold the record open for additional evidence is akin to the decision to reopen a case for the taking of additional evidence. Further, although the Stetts' counsel did not seek a continuance, the decision to hold the record open involves many of the same concerns that apply to the decision to grant a continuance. In Gilbert v. Visone, 32,303 (La.App.2d Cir.10/27/99), 743 So. 2d 909, we explained the review of a trial court ruling on a motion for continuance:
Under the provisions of La. C.C.P. art. 1601, a continuance may be granted in any case if there is good ground therefor. The trial court has great discretion in granting or denying a motion for a continuance under this provision; that discretion will not be disturbed on appeal in the absence of a clear abuse of discretion. However, an abuse of discretion occurs when such discretion is exercised in a way that deprives a litigant of his day in court. Whether a trial court should grant or deny a continuance depends on the particular facts of each case. Some factors to consider are diligence, good faith and reasonable grounds. Of equal importance is the other litigants' corresponding right to have the case heard as soon as practicable.
The evidence in the record does not show that the Stetts were in bad faith when they requested that the court hold the case open, that their request was calculated to obtain a strategic advantage or that Greve would be prejudiced if the case was held open. Thus, on appellate review, *1214 the sole question is whether the court's refusal to hold the case open to obtain Stett's testimony was an abuse of discretion ultimately denying the appellants their day in court.
As factors in denying the request to hold open the record, the district court stated that Stett failed to provide a doctor's report as proof of sudden illness and noted that there had been a number of prior continuances. However, the record indicates that Stett was being treated at the time of the hearing and plaintiffs should have been given a reasonable opportunity to obtain a medical report. In addition, the plaintiffs should not have been penalized for the four prior continuances, which were arranged by mutual consent of counsel.
Although Greve asserted that she had terminated the therapy in June 1995, her testimony reflects a pattern of treatment which was interrupted and then resumed on more than one occasion. After a thorough review of the record, I cannot say that the evidence as it stands conclusively demonstrates prescription. Stett's letters are general in nature expressing her discontent with the status of the therapeutic relationship and her concern about the possible termination of therapy. The correspondence must be considered in the context of the history of the therapy relationship. In January 1991 and again in November 1994, treatment was purportedly "terminated" by Greve, only to be resumed at a later time.
Thus, contrary to the findings of the trial court and the majority, the letters do not show that Stett was aware that the therapy relationship was finally "terminated" on June 22, 1995. In fact, Greve acknowledged that on the same date she offered additional therapy to Stett over the next 30 days. Greve also stated that she did not send a "final" bill to Stett until August 21, 1995. Up until this point, Stett could have maintained an expectation that her therapy with Greve would resume as had happened in the past.
Furthermore, Greve's letter to Stett on September 22, 1995 regarding the termination of the treatment raises the issue of the exact date when the patient-therapist relationship was terminated. Thus, Stett's testimony is essential to a determination of whether the action had prescribed and the record should have been held open for receipt of this evidence. Such an outcome would not have surprised or unduly prejudiced the defendant and is consistent with prior cases in which this court has stated that a court should not hesitate to reopen or leave open a case for additional evidence when no injustice would be done. See Brown v. Hobson, 30,131 (La.App.2d Cir.1/21/98), 706 So. 2d 1030, writ denied, 98-479 (La.4/3/98), 717 So. 2d 1132; Antley v. Brantly, 28,049 (La.App.2d Cir.2/28/96), 669 So. 2d 685.
Consequently, I must conclude that the district court abused its discretion in refusing to hold open the case to allow Stett to testify, essentially depriving the plaintiffs of their day in court. Accordingly, I would reverse the judgment and remand for receipt of Stett's testimony. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1662286/ | 403 So. 2d 49 (1981)
STATE of Louisiana, Through the DEPARTMENT OF HIGHWAYS
v.
CITY OF PINEVILLE.
No. 81-C-0017.
Supreme Court of Louisiana.
July 2, 1981.
Rehearing Denied September 18, 1981.
*50 Dan E. Melichar, Gravel, Robertson & Brady, Alexandria, for plaintiff-applicant.
John C. Young, Baton Rouge, for defendant-respondent.
DIXON, Chief Justice.
The source of this litigation developed in 1969, when the Department of Highways began to widen and improve Louisiana Highway 28. In order to make the improvements it was necessary to relocate certain water lines, maintained by the City of Pineville, which were located on the highway right of way. The estimated cost of the relocation was $82,000, which the city was allegedly unable to afford at the time. To speed the project along, the Department of Highways offered to advance the costs for the city's share of the project, if those sums would be reimbursed at a later date.
On April 1, 1969 the Council of the City of Pineville passed a resolution authorizing the mayor to execute an agreement with the Department of Highways regarding repayment of the money to be advanced; the council also committed the city to include in its budget the sums necessary to make repayment.
On May 12, 1969 the Mayor of Pineville affixed his signature to an instrument styled an "Agreement," in which the Department of Highways obligated itself to advance "the sums necessary to accomplish the relocation of the City's water lines to accommodate the construction of the Pineville-Libuse Highway ..." The agreement went on to state:
"The City of Pineville agrees that commencing on April 1, 1970, it will repay to the Department of Highways one-third of the amount advanced for the relocation of the water lines, and that it will repay, to the Department of Highways, one-third of the amount, on the First day of April, 1971, and the final one-third on the First day of April, 1972, with interest at 6 *51 per cent from maturity date, all such payments to be made to the Department of Highways at its office in Baton Rouge, Louisiana, and the Council of the City of Pineville agrees that it will include such sums in its annual budget for the next three fiscal years."
Pursuant to this agreement, the Department of Highways began to advance payments to the city. The first payment was made in June, 1969, and the final payment occurred in February, 1970. More than $92,000 was advanced, $88,864.86 of which was allegedly the city's share of the cost.
The city has never repaid any part of the sums advanced to it by the Department of Highways.
In February, 1971 the Department of Highways filed a petition, captioned "Suit on Contract," alleging that the city had not made its first installment, due on April 1, 1970 as called for in the agreement. More than two years later, after several preliminary matters were resolved, the city filed an exception to the district court's jurisdiction, claiming that the obligation incurred by the city was not valid because prior approval from the State Bond and Tax Board had not been obtained. Perhaps in response to this exception, the Department of Highways filed a motion to dismiss the suit without prejudice in June, 1973. An order of dismissal was signed by the district judge.[1]
In August, 1976 the Department of Highways filed another petition, incorporating allegations in the original petition, and claiming that full reimbursement was due under the terms of the agreement. Alternatively, the Department of Highways prayed for recovery even in the event that the contract with the city was not valid.
The city again filed an exception to the court's jurisdiction, which was overruled. It then filed a motion for summary judgment and peremptory exceptions of no cause of action and prescription. The motion for summary judgment was denied, but the court sustained the exception of prescription, pretermitting judgment on the exception of no cause of action. No testimony was taken at the hearing on the exception; the record consists entirely of pleadings and documents.
The trial court held that, even though the agreement had been reduced to writing, the obligation sued upon was a loan, prescriptable in three years. C.C. 3538. The Court of Appeal ruled that, although the department's action sought to recover the money that it had loaned the city, the written agreement constituted an acknowledgement of the debt, converting the applicable period of prescription to ten years under C.C. 3544. The judgment of the district court was reversed. 390 So. 2d 228 (La.App. 3d Cir. 1980). This court granted writs primarily to determine which period of prescription was applicable. 396 So. 2d 1326. First, however, it must be decided whether and to what extent prescription is applicable.
Immunity from Prescription
Article 19, § 16 of the 1921 Constitution, in effect at the time the department's cause of action arose, states:
"Prescription shall not run against the State in any civil matter, unless otherwise provided in this Constitution or expressly by law."
An identical provision can be found in Article 12, § 13 of the 1974 Constitution, as well as in Article 193 of the 1913 Constitution and Article 193 of the 1898 Constitution.
In order to apply this constitutional immunity from prescription, it would be necessary to characterize the Department of Highways, a state agency, as the "State" itself. The matter is not free from doubt. In two early decisions, for example, it was held that levee districts could not claim immunity from liberative prescription because they were political corporations with a legal existence distinct from the "state." Board of Commissioners v. Earle, 169 La. 565, 125 So. 619 (1929); Board of Commissioners v. Pure Oil Co., 167 La. 801, 120 So. 373 (1929). The rationale of those decisions was that levee districts, by virtue of the *52 fact that they were authorized to sue and be sued in their own names, were legal entities separate from the state. The same rationale was upheld in Haas v. Board of Commissioners, 206 La. 378, 19 So. 2d 173 (1944), where a claim of acquisitive prescription was made against a levee district. More recently, however, this court has held that claims of acquisitive prescription against mineral rights held by levee districts were barred by virtue of the constitutional prohibition against the divestiture of mineral rights in property "sold by the State," contained in Article 4, § 2 of the 1921 Constitution. Dynamic Exploration, Inc. v. LeBlanc, 362 So. 2d 734 (La.1978).[2] It thus appears that, insofar as levee districts are concerned, the definition of the "State" depends upon what is involved: acquisitive and liberative prescription may run against a levee district, but acquisitive prescription of mineral rights may not.[3] No decision has ever held that a levee district could be characterized as the "State" for purposes of the immunity from prescription contained in the Constitution.
In terms of the present case, the foregoing decisions dealing with levee districts are not inapposite. It has been repeatedly explained that levee districts have the right to sue and be sued in their own names as entities separate from the state. See Board of Levee Commissioners v. Whitney Trust & Savings Bank, 171 La. 28, 129 So. 658 (1930). Other decisions have stressed the fact that levee districts were political corporations which, once possessed of a cause of action, were the sole parties capable of bringing suit to enforce their rights. It was declared that the State Attorney General could not bring suit in the name of the state on a cause of action vested in a levee board. See State v. Standard Oil Co., 164 La. 334, 113 So. 867 (1927); State v. Tensas Delta Land Co., 126 La. 59, 52 So. 216 (1910). Consistent with this view, it has also been held that, when the state holds title to property, prescription cannot run, notwithstanding the fact that the property is administered by a state agency. State v. F. B. Williams Cypress Co., 131 La. 62, 58 So. 1033 (1912). The principle that the state is immune from claims of prescription has been explained as being confined to actions brought by and in the name of the state itself. Board of Commissioners v. Toyo Kisen Kaisha, 163 La. 865, 113 So. 127 (1927). See also Opinions of the Attorney General, March 1, 1962 to March 1, 1964, pp. 237-38; April 1, 1934 to April 1, 1936, pp. 873-76.
We subscribe to the following reasoning, advanced in the cases cited above: the "State," for the purposes of the constitutional immunity from prescription, does not include a state agency which is a body corporate with the power to sue and be sued and which, when vested with a cause of action, is the sole party capable of asserting it. Regardless of its status as an instrumentality of the state, such an agency remains a distinct legal entity subject to claims of prescription except where the law provides otherwise.
It should be noted that the Department of Highways, the party plaintiff in this suit, was abolished in 1976; its powers, functions and duties were transferred to the Department of Transportation and Development. R.S. 36:509(F). However, the legislature provided that the department would continue to exercise its responsibilities as provided by law. R.S. 36:802. Specifically, the law governing the transfer of powers provided that all lawsuits pending before the effective *53 date of the transfer "shall be continued in the name of the agency so transferred. R.S. 36:854(C).
The Department of Highways, like the Department of Transportation and Development, was established as a "body politic and corporate." R.S. 48:13. It was given the power to "sue and be sued." R.S. 48:22. Because of this authority, the Department of Highways has been held to be a legal entity separate from the state itself:
"The commission, in our opinion, is a distinct legal entity from the state. [The law] makes it a body corporate, with power as such to sue and be sued. It is an agency of the state, and not the state itself, created for the purpose of executing certain duties, devolving primarily upon the state. In a general sense, in its relations to the state, it is not dissimilar to levee districts, which are bodies corporate, created for the purpose of constructing and maintaining levees, which are duties, devolving primarily upon the state...." Saint v. Allen, 172 La. 350, 360, 134 So. 246, 249 (1931).
See also Department of Highways v. Lykes Bros. Steamship Co., 209 La. 381, 25 So. 2d 623 (1945).
Accordingly, we hold that the Department of Highways cannot claim the constitutional immunity from prescription, since it cannot be characterized as the "State" for that purpose.[4]
Prescription and the Cause of Action
The Civil Code establishes the general rule that all personal actions are prescribed by ten years, unless the specific action is governed by some other term of prescription. C.C. 3544. Only two other prescriptive periods might have application to this case: the prescription of three years, C.C. 3538, and the prescription of five years, C.C. 3540.
Before determining the applicable period of prescription, however, another issue must be considered. In various pleadings, the City of Pineville has consistently maintained that the obligation underlying the agreement is unenforceable, and that no cause of action exists for the collection of the debt. Reliance is placed upon two statutes involving the State Bond and Tax Board. One of these, R.S. 47:1803, states in part:
"Hereafter, no ... municipality, ... shall have authority to borrow money, incur debt, or to issue bonds, or other evidences of debt, or to levy taxes, or to pledge uncollected taxes or revenues for the payment thereof, where [it is] authorized by the constitution or laws of the state so to do, without the consent and approval of the board."
Failure to comply with this provision is a misdemeanor offense; in addition, R.S. 47:1806 provides in part:
"Any contract, debt, obligation, bond, or other evidence of indebtedness whatsoever, incurred or issued in violation of this Part, and without the consent and approval of the board, shall be null and void, and no court of this state shall have jurisdiction to enforce the payment thereof, or of any suit or other proceeding affecting or involving the same."
The city contends that no approval or consent was obtained from the board prior to the execution of its agreement with the department. An affidavit supporting this contention appears in the record, signed by an associate director of the State Bond Commission (which became the successor to the State Bond and Tax Board pursuant to R.S. 39:1408). The affidavit states that, after a thorough search of the commission's records, no evidence can be found indicating that the city had obtained approval to incur *54 the debt. The department itself made a written admission that it did not attempt to obtain such approval on the city's behalf, and disclaimed knowledge of whether such approval had in fact been obtained.
The failure of either court below to address the issue of the invalidity of the agreement between the city and the department was error. The nature of a cause of action must be determined before it can be decided which prescriptive term is applicable. In the present case, there is no doubt that the department alleges that the city is obligated to it for the repayment of the sums it had advanced. The classification of the source of that obligation is essential: if, as the city has alleged, the agreement is an absolute nullity, it is self-evident that no cause of action would lie for the enforcement of the written obligation. Under the terms of R.S. 47:1806, such obligations, when incurred without approval of the state agency, are void ab initio. Despite the city's well pleaded allegations to the contrary, both courts below simply assumed that the contract was valid, and proceeded to determine which period of prescription applied to the action. The assumption was not warranted.
The city's motion for summary judgment was premised on the invalidity of the written agreement under R.S. 47:1806. The city alleged that it did not obtain the necessary approval from the State Bond and Tax Board. The department did not deny this allegation. The motion for summary judgment was also accompanied by a supporting affidavit in the record, which clearly states that no record can be found indicating that the city obtained the requisite approval.
Summary judgment is proper where there is no genuine issue of material fact, and where judgment may be entered as a matter of law. C.C.P. 966; Cates v. Beauregard Electric Coop., 328 So. 2d 367 (La.1976). Since the department failed to dispute the city's allegation that no approval of the agreement had been obtained under the terms of R.S. 47:1803, it appears that there is no genuine issue on this score. The city's factual allegation is supported by the accompanying affidavit. And, as a matter of law, R.S. 47:1806 dictates that the agreement cannot be enforced. It is a nullity, confected in contravention of a prohibitory law. C.C. 12. The city's motion for summary judgment therefore should have been granted: the written obligation is unenforceable. Since the department is without a cause of action to enforce the written contract, it follows that the written contract is irrelevant for the purposes of determining the applicable period of prescription. The cause of action cannot be characterized as seeking enforcement of a written obligation, which was the notion upon which the Court of Appeal rested its opinion. That opinion must be vacated.[5]
*55 The determination that the department cannot enforce its agreement with the city does not mean that the department is without a remedy. This court has held that, when a city incurs an obligation in violation of a prohibitory law, the city's obligees may nevertheless recover the sums owed them under the theory of unjust enrichment established in C.C. 1965. Coleman v. Bossier City, 305 So. 2d 444 (La.1974). See also West Baton Rouge School Board v. T. R. Ray, Inc., 367 So. 2d 332 (La.1979). In the Coleman case, one of the statutes which rendered the city's contract a nullity was the same one which is implicated here, R.S. 47:1806. It should be noted that the department's second petition was not filed until after the Coleman decision was rendered, and the petition itself recognized that the claim could be characterized in more than one way. In fact, the petition made an alternative prayer for recovery even in the event that the contractual obligation was held to be null; the issue of unjust enrichment was also raised in brief.
The department's action plausibly can be founded upon the theory of unjust enrichment[6] or some other form of quasi-contract. Actions on quasi-contracts are governed by the general ten year prescriptive term of C.C. 3544. See, e. g., Minyard v. Curtis Products, Inc., 251 La. 624, 205 So. 2d 422 (1967) (unjust enrichment); Gaude v. Gaude, 28 La.Ann. 181 (1876) (negotiorum gestio); Smith v. Phillips, 175 La. 198, 143 So. 47 (1932) (payment of a thing not due). Given this characterization of the cause of action, the department's suit was timely.
The posture in which this case has been presented is similar to the situation in Lagarde v. Dabon, 155 La. 25, 98 So. 744 (1923). The plaintiff in that action alleged that she and the defendants' decedent had made an agreement to form a partnership, with each of them to share equally in the property which the partnership acquired. Her suit to recover half of the partnership assets was successfully defended by way of an exception of no cause of action, based on the fact that the partnership agreement had not been reduced to writing. C.C. 2834. While this court recognized that an unwritten partnership agreement was invalid and unenforceable, it also observed that the plaintiff had made an alternative demand, for the recovery of all sums that she had invested in the enterprise. Such a claim, it was determined, stated a cause of action in quasi-contract, for the recovery of a payment not due. The ten year prescriptive term was held to apply to such an action, and the case was remanded to the trial court to determine whether a partnership agreement had in fact been made.
We make the same disposition here. The department's action is for the recovery of sums in advance to the city. Although the agreement binding the city to fulfill this obligation is unenforceable, the formal source of the city's obligation may nevertheless be based upon a quasi-contract. The department's petition sets forth a cause of action on that basis, and this suit was filed within ten years from the time the cause of action arose. For reasons different from those of the Court of Appeal (which we find incorrect), the judgment of the Court of Appeal is affirmed, and the case is remanded to the district court for further proceedings consistent with this opinion. The costs of this proceeding are taxed to the defendant.
DENNIS, J., dissents with reasons.
WATSON and MARCUS, JJ., dissent.
NOTES
[1] A suit that is voluntarily dismissed has no effect upon prescription. C.C. 3519.
[2] The origin of this rule can be traced to a decision by a Court of Appeal in Shell Oil Co. v. Board of Commissioners of Pontchartrain Dist., 336 So. 2d 248 (La.App. 1st Cir. 1976), writ denied 338 So. 2d 1156 (La.1976) ("No error of law"), which was cited approvingly in a footnote to a decision by this court. Board of Commissioners of the Caddo Levee Dist. v. S. D. Hunter Foundation, 354 So. 2d 156 (La.1977).
[3] That is to say, acquisitive prescription of mineral rights cannot occur on claims governed by the 1921 Constitution. We also note that Act 76 of 1938 declared that no prescription could run against levee districts. This act was repealed in 1944, but in 1964 the legislature enacted R.S. 38:295, which provided that acquisitive prescription could not run against levee districts.
[4] This holding is not inconsistent with the decision in Scorsune v. State, 230 La. 254, 88 So. 2d 211 (1956), which involved a claim of liberative prescription relating to a servitude of right of way. In that case, it appears that the right of way had been granted to the state itself, and the court ruled that the property was immune from the prescription of nonuse. We also note that the legislature has specifically provided that acquisitive prescription cannot run against immovable property or rights acquired by the Department of Highways for use as rights of way. R.S. 48:226.
[5] We note in passing that the Court of Appeal's opinion is incorrect, even assuming that the contract is valid. The court stated that, when an obligation "is acknowledged in writing, the character of the action is changed and it becomes a personal action under the general article (3544)." 390 So.2d at 232. This is true only if the acknowledgement is made after the obligation is incurred: one cannot acknowledge a debt that does not yet exist. The decision in Jones v. Butler, 346 So. 2d 790 (La.App. 1st Cir. 1977), relied upon by the court below, is consistent with this. There, a written acknowledgement of a loan was made after the loan itself had been received, evidencing a specific debt. In the present case, the agreement was confected before any sums were advanced. The Court of Appeal, in characterizing the written agreement as an acknowledgement of the city's preexisting obligation to relocate the water lines, attempted to satisfy the logical requirement that an acknowledgement must occur after the obligation is perfected, but, in doing so, ignored the fact that the cause of action involved in this suit is one for repayment of a loan, not for the enforcement of the city's obligation to relocate its water lines.
In the present case, for example, the agreement merely sets forth the terms of the city's obligation; it is not evidence of how much money the department actually advanced the city. To prove the amount of the debt, the department apparently must rely upon other evidence, such as its cancelled checks. Many of the obligations enumerated in C.C. 3538 are often accompanied by written instruments, such as judgments of alimony, lease agreements and contracts for the professional services of lawyers and physicians. The mere fact that these obligations may be evidenced in writing does not mean that they are subject to a ten year prescriptive term.
[6] "[N]o one ought to enrich himself at the expense of another." C.C. 1965. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1749826/ | 545 So. 2d 1180 (1989)
William W. STRATA
v.
Robert PATIN and the Roman Catholic Church, Archdiocese of New Orleans.
No. 88-CA-1636.
Court of Appeal of Louisiana, Fourth Circuit.
June 8, 1989.
*1181 Wayne M. LeBlanc, Metairie, for plaintiff/appellee.
Lemle, Kelleher, Kohlmeyer, Dennery, Hunley, Moss & Frilot, Michael T. Cali, Bryan C. Misshore, Francis B. Mulhall, New Orleans, for defendants/appellants.
Before GARRISON, KLEES and WILLIAMS, JJ.
WILLIAMS, Judge.
Defendants, Robert Patin and the Roman Catholic Church, Archdiocese of New Orleans, appeal from a jury award in favor of plaintiff, William Strata, in the amount of $100,000.00 for his suffering the loss of the chance to have a happy marriage; the loss of the love and companionship of his two children; the emotional and mental pain and anxiety caused by the loss of his family and by the doubts he now harbors towards the Catholic religion, caused by the alleged breach of fiduciary duty/clergy malpractice that occurred when Patin had an adulterous affair with Strata's wife when Patin was one of the Stratas' Parish priests.
Defendants contend that plaintiff's cause of action has prescribed as it is undisputed that plaintiff had knowledge of the romance between Patin and Mrs. Strata and of her resultant pregnancy, more than a year prior to filing suit.[1] Conversely, plaintiff claims, and the jury found, that plaintiff did not have sufficient knowledge of Patin's affair with Mrs. Strata more than a year prior to the filing of this suit and that prescription was suspended because plaintiff incurred a mental incapacity, caused by defendants, so that plaintiff did not understand that Patin had an affair with his wife until less than a year prior to filing this suit. After reviewing the law and evidence, however, we find the jury's findings are erroneous, reverse the judgment of the trial court and dismiss plaintiff's suit. Without doubt, plaintiff's cause of action had prescribed when suit was filed on August 23, 1985. Plaintiff had actual knowledge of the facts supporting his cause of action by August 12, 1984 and, as a matter of law, he did not suffer a mental incapacity sufficient to invoke the exceptional doctrine of contra non valentem.
FACTUAL AND PROCEDURAL HISTORY
Jill and Bill Strata's eleven year marriage was characterized by shouting matches and semi-violence. Bill claimed that throughout their marriage Jill suffered from hysterical rages. To make her snap out of these rages, he would occasionally strike her and/or force her out of the house with her arm twisted behind her back. Jill denied ever having hysterical rages, but claimed to suffer from migranes as a result of the occasion when Bill knocked her head into the car window. With marital problems such as these, the Stratas' sexual relationship had ceased by mid-1983 and by October, 1983 Jill had moved into a separate bedroom[2] within the Strata house.
*1182 By Fall of 1983, Jill had decided to leave Bill and in furtherance of that goal, she had begun saving money so that she and the children would be financially able to leave. At the same time, however, Bill was trying to make the marriage work by having "counseling sessions" with Father Michael Fraser. These counseling sessions occurred on Sunday evenings following dinner, when Father Fraser would attempt to improve the Strata's communication skills.
During this time period, Bill worked as a fireman with shifts of twenty-four hours on and forty-eight hours off, with part-time jobs during his off-time. Both he and Jill were active in organizing the St. Raphael's Parish fair and Jill was president of the Co-op Club. It was through these activities that she became involved with Father Robert Patin in December of 1983.
Jill initiated her affair with Patin in December and within a few months, the romance had not only been noticed by others but had also been publicized. A school newsletter, sent to the teachers and parish priests at St. Raphael's in February, 1984, even stated that it was obvious that Jill was fooling around with both Father Patin and Father Fraser. When Jill received this newsletter, she telephoned Bill at the station house and said, "You're going to find out about this anyway, so I'll read it to you." She then read him the newsletter and he replied, "Don't let that worry you, don't bother with it."[3] To compound this incident, in late January or early February, Bill's mother, Yvonne Strata, warned her son about Father Patin because she had heard rumors about Jill and because when she:
... went to the house to bring some carnival things [she] had made for [her] grandchildren and Jill came down and she stood in the doorway so [Yvonne] couldn't go in the house and [they] talked for a few minutes. Then [Yvonne] asked [Jill] whose car that was parked in front of the house and she said it was Father Patin's car. That just made, [Yvonne's] woman's intuition again [sic], just added to what [she] suspected in the beginning.
(tr. transcript March 9, 1988; pp. 116-117)
Yvonne Strata claimed she intuitively knew that something was going on between her daughter-in-law and Father Patin. So when Bill came over to her house on the weekend following this incident, she told him to forbid Father Patin from coming to his house. Bill, however, refused and his mother concluded that he did not believe the rumors.
On Easter weekend, April 20, 1984, Bill came home to an emptied house. Jill had cleared the house of its contents and moved in with her mother on Good Friday. Bill's reaction was to become very depressed and quite intoxicated. He then telephoned the priets, requesting that Father Fraser visit him. As Father Fraser describes the incident:
"... I wasn't too anxious to go to the home of anyone by myself knowing that *1183 that individual was inebriated and Bob [Patin] went with me. When we arrived there, Bill Strata had had plenty to drink. He was very depressed. The house was empty of furniture. Jill, when she moved out, had taken everything with her. So what was left in the house was basically Bill and the liquor and most of that was gone. We talked for a good while and Bill cried and then he said, pointing at Bob Patin, "They say my wife is fooling around with another man." He pointed at Bob specifically, "And they say it is you."
Q. This was Easter, 1984?
A. Yes, in April, 1984.
Q. Did Bob denydid he say anything at all?
A. Didn't say anything.
(tr. transcript, March 10, 1988; pp. 29-30)
About a week after she moved in with her mother, Jill learned she was pregnant with Bob Patin's child. When the Stratas' went to court to get their legal separation on June 20, 1984, Jill was three months pregnant. Bill described her as looking "heavy", but the evidence was inconclusive as to whether Bill realized she was enceinte.
Although Fathers Patin and Fraser were very close friends, Father Fraser had never suspected that Patin and Jill were having an affair. But then in late July, Patin was hospitalized for a week to ten days with severe depression. While hospitalized, Patin asked to speak to Father Fraser in confidence and he divulged to Fraser the reality of his liaison with Jill Strata.[4]
At trial, Bill admitted that after Jill left him, he began to hear "rumors about Jill". But Bill also claimed that in July, Jill began to harass him by telephoning him about an affair she was allegedly having with a fellow in Chalmette. When questioned about these harrassing phone calls, Jill denied making such calls and testified that she telephoned Bill only once, because:
A. On August 11th, it was a Saturday, I got a phone call from his mother, Bob's [Patin's] mother, and it was around 2:30 in the afternoon. She had asked me, she said, "Can you please come over?"
What happened was, Friday Bob took sick again, he was having
Mr. Cali: Q. Let me stop you there a second. What do you mean, took sick again?
A. In June when Bob had found out I was pregnant and that he would have to leave the priesthood, he was quite upset because he didn't want to have to leave the priesthood, when he found out I was pregnant he kind of had like a mental breakdown.
Q. Like a nervous breakdown?
A. Yes, that's what I mean.
Q. He was having sickness again, that kind of sickness again?
A. Yes.
Q. Around what, August 11th, did you say?
A. That Friday and Father Michael [Fraser] had picked him up and brought him to a doctor. I hadn't heard from Bob until that day, hadn't heard from his mother, but I did hear from Father Michael that night. That's how I found out they were treating him, gave him medication and stuff like that. Saturday I got a phone call from his mother and his mother had asked me to please come to her *1184 house but to see if my mother could watch my two kids.
I went over to his house and he saw me and I saw him, we hugged each other and she told me that she had sat down with him and talked to him and asked him what was going to behad to make a decision was he going to be with the church or me and he said, "It's going to be Jill."
Sunday I got a phone call at my mother's house from Monsignor Aleman.
Q. August 12th?
A. Right.
* * * * * *
Q. Go ahead.
A. Monsignor had told me Billy was in the office at the time and he wanted to know if Robert Patin was the father of my baby, and I told him no.
Q. Why did you tell him no?
A. Well, because with everything that was going on at the time with Bob, I didn't want anymore on his shoulders than what he could carry at the time.
Q. You were trying to protect him being the state he was in?
A. Yes. Then I called up my lawyer.
* * * * * *
I told her about Bob's sickness because she was aware of it happening the first time and I told her I received a phone call from Monsignor Aleman and what the conversation was about and I told her I told him no, that Bob was not the father and she said that was a mistake, should have told him yes, that he was.
Q. So she gave you legal advice to tell him?
THE COURT: Let her testify.
MR. CALL Excuse me.
THE WITNESS: So I hung up with her and called Father Aleman back and I admitted to Monsignor Aleman that it was.
After I hung up the phone with Monsignor Aleman, I called up Billy. I told Billy, I'm calling you up to let you know, yes, I'm pregnant....
* * * * * *
Q. Did you tell him who the father of the baby was?
A. Yes, I told him Bob Patin was the father of the baby. He said, "If I had known that I would have killed that bastard." I said, "that would make a lot of sense, he'd be dead and you'd be in jail, that makes a lot of sense."
Q. Did you speak to Bill again at any time on the telephone?
A. Between Tuesday and Thursday of the next week or the same week, if Sunday is considered the first day of the week. He called me up at my mother's house and he was telling me he was sorry for everything that happened and he knew it was all his wife and everything and that he would take me and the baby back and I said, "No, thank you."
Q. You weren't interested?
A. No.
Q. Did you ever tell Bill, aside from the telephone conversation with Monsignor Aleman, did you ever tell Bill you were not having an affair with Bob or the baby was not Bob's?
A. No.
Q. Did you ever deny it to anybody after August 12th, the date of the telephone conversation.
A. No.
(emphasis added; tr. transcript, March 9, 1988; pp. 224-230)
Thereafter, on Monday,
Father Fraser: August 13th, Bill rang the doorbell of the rectory, Monday night. There was a meeting going on down there. He was very angry and he told me I was going to be an uncle.
Mr. Cali: Q. What did you understand that to mean?
A. I asked him, "What do you mean?" He said, "Your buddy impregnated my wife."
Q. Who was he talking about, "your buddy"?
A. Bob Patin.
*1185 Q. Did you speak about it further?
A. I took him upstairs, there was a meeting going on downstairs and I didn't want this to spread. acted shocked, as if I didn't know anything about it. Of course, I already did because Bob had confided in me. Bill and I talked and I tried to calm him down a little bit and we had a long discussion. After Bill and I discussed the matter we went downstairs and we discussed it with Monsignor Vernon Aleman, the Pastor of the parish at that time.
* * * * * *
Mr. Cali: Q. When Bill came to speak to you about this, did he make a statement to you that this was going on, did he ask you questions, Father, is this going on?
Mr. LeBlanc: I think it's still a leading question.
The Court: You can answer it.
The Witness: He told me emphatically I was going to be an uncle, my friend had impregnated his wife.
Mr. Cali: Q. Again you acted surprised, why?
A. Because it was in confidence that Bob Patin told me he was the father of this child, that he had impregnated Jill Strata. I kept that confidentiality strictly, that was my duty as a priest.
Q. You didn't deny it to him, did you, you didn't tell him, no, Bob's not?
A. No. I received his words, that's what he knew.[5]
(emphasis added; tr. transcript, March 10, 1988; pp. 33-35)
Afterwards, Bill and Father Fraser spoke with Monsignor Aleman. When Bill departed, the Monsignor requested a conference with Patin at which time he pointedly inquired of Patin whether Jill's child was his. Patin denied paternity. The following day, however, after speaking with Monsignor Munsch, Patin publicly accepted paternity of Jill's child. He also wrote Monsignor Aleman a letter, acknowledging that Jill Strata was carrying his child.[6]
At the trial on the prescription issue, Bill testified that he did not believe the rumors about Jill and Patin circulating the parish in February, because rumors and jealousies were always floating around St. Raphael's Parish. Moreover, he never suspected the romance because it was his impression that Father Patin was too interested in being a priest. Consequently, despite all the circumstances described above, the event that first caused him to suspect that Jill and Patin were personally involved occurred on Labor Day weekend, 1984:
BY MR. LeBLANC: Q. ... when did you suspect it was Father Patin?
Bill Strata: A. Right around the beginning of school, right around Labor Day and I went and picked the kids up.
*1186 Q. And what happened?
A. He [Patin] pulled up, this is 9:30 in the morning and he has jeans, regular casual clothes on, which is something he doesn't wear. His normal outfit, black pants, red shirt, red socks and black loafers. His hair was sloppy, he never combed it, but his hair was combed. His general appearance was up a lot.
Q. What time of the morning was this?
A. 9:30.
Q. Besides his change in dress, how did you see him, what were those circumstances?
A. Excuse me?
Q. What were the circumstances of your seeing him that morning.
A. I was picking the kid up and he pulled up right afterwards and getting out the car heading into the house.
Q. Anything unusual about the car?
A. No, I wouldn't say anything unusual about the car, just found itwhy would he be there at 9:30 in the morning and dressed the way he was.
Q. Had you ever seen him dressed like that prior to this incident?
A. Never. Always wore the red socks, black pants, red shirt and loafers.
Q. Was that his usual wear?
A. Constant wear, except when on the altar.[7]
(tr. transcript March 9, 1988, pp. 167-168).
This event caused him to realize that Patin was the father of Jill's child and he announced this realization to his family at their Labor Day weekend picnic. He also told his fire captain, Clifford Wattingly, and his co-worker, Eugene Poirrier, that he found out on Labor Day weekend about Jill's affair with Father Patin.
To reinforce both this Labor Day time reference and Bill's new found realization, Yvonne Strata, Wattingly and Poirrier testified concerning Bill's depression and weight loss that followed Labor Day weekend. Even though his depression, crying spells and weight loss began April 20, 1984, these witnesses testified that his condition worsened in September. Bill's tears became more frequent and he started pacing at the firehouse. All total, he lost approximately forty to sixty pounds.[8] Wattingly also testified that Bill was sluggish, and hesitant at work. However, Bill's condition was not job threatening. Wattingly testified that Bill would not have been able to keep his job if he had ever become irrational or lost touch with reality.
On December 28, 1984, Jill delivered a daughter named Elizabeth. Thereafter she married Patin in March, 1985, when her divorce from Bill became final. Then on August 23, 1985, Bill filed the present lawsuit against Patin and the Catholic Church. Defendants initially filed a peremptory exception of no right and/or cause of action, contending that the petition should be dismissed as plaintiff was seeking civil damages for the alienation of his wife's affections, citing Moulin v. Monteleone, 165 La. 169, 115 So. 447 (1927). Plaintiff opposed the exceptions by maintaining that Patin and the Church, as marriage counselors, breached the duty they owed to him not to further harm his ailing marriage. After the trial court denied defendants' exceptions, on February 14, 1986, and declined to rehear the exceptions on April 13, 1987, defendants sought writ of certiorari from this Court, which was denied.[9]
Thereafter, a two-day trial commenced on October 12, 1987. Following the presentation *1187 of evidence, the jury found that Robert Patin did provide marriage counseling to Jill and/or William Strata; Robert Patin was at fault in breaching a legal duty to William Strata; the conduct of Robert Patin was a cause in fact of the injury suffered by William Strata; the plaintiff is entitled to recover $100,000.00 as a result of Robert Patin's conduct; and Robert Patin acted in the course and scope of his employment as an employee of the Archdiocese of New Orleans. The jury, however, did not reach a decision as to whether William Strata did "know, or have good reason to believe that Jill Strata has [sic] an affair with Robert Patin on or before August 23, 1984". Consequently, on December 3, 1987, the trial court granted a mistrial on the prescription issue only ordering that, as an exception of prescription was included in the answer, but not brought to the court's or the jury's attention during opening statements, the issue of "when did the plaintiff have knowledge of the relationship between his wife and the defendant Robert Patin" would be tried before a second jury. See LSA-C.C.P. arts. 1813(D)(E), 1971.
Subsequent to this ruling that ordered the second trial, plaintiff's counsel arranged for plaintiff to meet Dr. Scrignar, a forensic psychiatrist, so that the psychiatrist could "piec[e] together the history to try and construct some sort of estimate [of] what Mr. Strata's emotional health was during the time period of about one year...", from April 1984 to April 1985. (tr. transcript, March 9, 1988; p. 63). In order to make his evaluation, Dr. Scrignar met with Bill Strata on two occasions, once for forty-five minutes on February 24, 1988 and a second time for an hour and one-half on March 1, 1988. As part of Dr. Scrignar's evaluation, he gave Strata a symptoms inventory checklist form, listing fifty symptoms, which allowed Strata to check the intensity of his symptoms. Dr. Scrignar also read Bill Strata's deposition and his trial testimony from the first trial, as well as the trial testimony of Father Fraser, Clifford Wattingly, Eugene Poirrier and Catherine Squires.[10] At the second trial, Dr. Scrignar testified on a hypothetical basis, assuming that the testimony of Strata, Wattingly, Poirrier and Squires would establish that Strata suffered from insomnia, night pacing, fatigue, weight loss, anti-socialness and crying spells after Jill left him in April of 1984, with increased intensity after Labor Day Weekend of 1984. He also testified that Strata was depressed and under a great deal of stress which made him indecisive:
Mr. LeBlanc:
Q. Does this affect someone'swould this affect his ability to make decisions?
Dr. Scrignar:
A. I don't think there's any question about that, certainly would.
Q. What is that called?
A. Well, what happens is that when an individual is depressed and under a lot of stress, makes them indecisive, difficult to make a decision and interferes with one's cognition to comprehend, understand what's going on around them, interferes totally, they just can't do it or halfway. They don't appreciate what's happening to them because when a person is depressed they think bad things are happening to them, they don't problem solve, not very relaxed and I have a problem and I get a pencil and draw. If I'm upset with something that's happening to me, that's all in my mind. The depression, one of the key symptoms is what is called the person runs into a lot of cognition related to self worth, they're not worth very much, things are bad, sad, lots of negative thoughts. While you're under that situation it's difficult to appreciate what is going on around you.
(tr. transcript, March 9, 1981; pp. 73-75).
Thus, Dr. Scrignar concluded that Strata's severe depression "interfered with his ability to make decisions and to completely *1188 comprehend his current situation". (Id., p. 76). However, Strata's mental state was not constant during the year; there were fluctuations in his "mental competence":
Dr. Scrignar:
Obviously we are looking at a period of a year, his mental state wasn't exactly the same during that entire year. I think there are fluctuations at times, worse at time, better. This is not a concrete thing. You don't become mentally incompetent and remain there the rest of your life, you can fluctuate. You have to ask the question, what period of time are we talking about. I would say at the beginning when the wife left, that probably wasn't completely appreciated at that particular time period, talking about the circumstances of the pregnancy, these are the high points, when the man thinks his wife is pregnant by another person. That is a highly stressful thing. You wouldn't think clearly, and possible to do so. The various points that I mentioned I think a few moments ago, I can repeat them if you want. I think those are highly stress points and that stress and depression were present and this interfered with his mental competency psychiatrically, cognitive processes of his mind.
(emphasis added; tr. transcript, March 9, 1988; pp. 78-79).
Prior to the prescription issue jury trial, defendants urged the trial court to allow the jury to decide only the factual portions of the prescription issue, while the court applied the law to the jury's findings of fact. The trial court, however, declined to follow this request. At the conclusion of the second trial, held on March 9 and 10, 1988, the jury decided ten to two that plaintiffs did not "have sufficient knowledge by August 23, 1984 that Robert Patin had an affair with his wife" and decided eleven to one that the plaintiff did "incur such mental incapacity, which was caused by defendant, so as to be unable to understand that Robert Patin has an affair with his wife by August 23, 1984". Consequently, on March 14, 1988, the trial court rendered judgment in favor of plaintiff and against defendants, Robert Patin and the Roman Catholic Church, Archdiocese of New Orleans, in the amount of One Hundred Thousand ($100,000.00), plus interest from date of judicial demand until paid, and for all costs.
Defendants responded by filing motions for judgment notwithstanding the verdict, for new trial and/or for remittur, which the trial court denied. Being aggrieved, defendants filed this suspensive appeal. Plaintiff answered the appeal, requesting the jury award be increased to three hundred fifty thousand ($350,000.00).
PRESCRIPTION
Defendants contend that plaintiff's cause of action, filed August 23, 1985, has prescribed because plaintiff had actual knowledge several months prior to August 23, 1984 that there was a romance between Father Patin and Jill Strata. Alternatively, defendants contend that even if plaintiff did not have actual knowledge, plaintiff had constructive knowledge of his cause of action and plaintiff had a duty to make a reasonable inquiry as to the cause of and who had responsibility for his injuries, especially as his wife had left him and he knew of the rumors of her having an affair or affairs. Plaintiff counters these claims by asserting that the jury properly found both the discovery rule and the mental incapacity rule of the doctrine of contra non valentem applicable to his cause of action so that prescription was suspended until sometime after August 23, 1984. For the reasons set forth below, however, we find the jury manifestly erred by finding plaintiff's cause of action had not prescribed. Plaintiff had actual knowledge of the facts supporting his cause of action by August 12, 1984 and, as a matter of law, plaintiff did not suffer a mental incapacity sufficient to invoke the exceptional doctrine of contra non valentem.
Delictual actions in Louisiana are subject to a liberative prescription of one year, which commences to run from the day injury or damage is sustained. LSA-C.C. art. 3492. Jurisprudence has interpreted this rule to mean that prescription commences on the date the injured party *1189 discovers or should have discovered the facts upon which his cause of action is based. Griffin v. Kinberger, 507 So. 2d 821 (La.1987); Lott v. Haley, 370 So. 2d 521 (La.1979). When it is not obvious from the face of the petition, the burden of proving a tort action has prescribed rests upon the defendant or party pleading prescription. Pearson v. Hartford Accident & Indemnity Company, 281 So. 2d 724 (La.1973); Dixon v. Houck, 466 So. 2d 57 (La.App. 2d Cir.1985). Once it is proved that more than one year has elapsed between the time the tort occurred and the filing of suit, however, the burden shifts to the plaintiff to prove an interruption or suspension of prescription. Dixon v. Houck, 466 So.2d at 60. One such vehicle available to plaintiff, is the doctrine of contra non valentem.
In Corsey v. State, Through Dept. of Corrections, 375 So. 2d 1319, 1321-1322 (La.1979), the Louisiana Supreme Court described the four categories of situations in which the principle of contra non valentem agere nulla currit praesciptio is applied to prevent the running of liberative prescription: 1) where there was some legal cause which prevented the courts or their officers from taking cognizance of or acting upon the plaintiff's action; 2) where there was some conditions coupled with the contract or connected with the proceedings which prevented the creditor from suing or acting; 3) where the debtor himself has done some act effectively to prevent the creditor from availing himself of his cause of action; and 4) where the cause of action is not known or reasonably knowable by plaintiff, even though his ignorance was not induced by defendant. In this suit, the interrogatories given to the (prescription issue) jury, asked the jury to decide whether Corsey's third and/or fourth contra non valentem exceptions suspended the running of prescription on Strata's behalf. The jury found both exceptions applied; but for the reasons provided below, the jury erred.
The Fourth Exception: Where the Cause of Action is Not Known or Reasonably Knowable by Plaintiff, Even Though His Ignorance is not Induced by Defendant
One of the defenses available to a plaintiff who files suit tardily is the discovery rule embodied in the doctrine of contra non valentem, which suspends the running of prescription during the period in which his cause of action was not known or reasonably knowable to him. Griffin v. Kinberger, 507 So.2d at 823, citing Corsey v. State, Through Department of Corrections, 375 So. 2d 1319 (La.1979). The rule provides that prescription does not run against one who is ignorant of the existence of facts that would entitle him to bring suit, as long as such ignorance is not willful and does not result from his own neglect. Henson v. St. Paul Fire & Marine Ins. Co., 363 So. 2d 711, 713 (La.1978), rehearing den.; Griffin v. Kinberger, 507 So.2d at 823 [as long as such ignorance is not willful, negligent or unreasonable]; Cartwright v. Chrysler Corp., 232 So. 2d 285 (La.1970). This does not mean that a lack of actual notice of a cause of action will suspend prescription, cf. Henderson v. Todd Shipyards, 462 So. 2d 242, 243 (La. 4th Cir.1984), writ den., 462 So. 2d 1266 (La.1985), as constructive notice is sufficient to commence the running of prescription. Griffin v. Kinberger, 507 So.2d at 823.
Constructive knowledge or notice sufficient to commence the running of prescription, however, requires more than a mere apprehension that something might be wrong. Griffin v. Kinberger, 507 So.2d at 823; Cordova v. Hartford Accident & Indemnity Co., 387 So. 2d 574 (La.1980); Chandarlis v. Shah, 535 So. 2d 895 (La. App. 2d Cir.1988). Prescription will commence only when plaintiff knew or should have known by exercising reasonable dilligence that tortious conduct occurred and that certain parties are responsible. As the Supreme Court explained in Jordan v. Employee Transfer Corp., 509 So. 2d 420, 423 (La.1987), the language in Cartwright v. Chrysler Corp., that "... whatever is notice enough to excite attention and put the owner on his guard and call for inquiry is tantamount to knowledge or notice of everything to which inquiry may lead and such information or knowlege as ought to reasonably put the owner on inquiry is *1190 sufficient to start the running of prescription", is an incomplete definition of the kind of notice that will start the running of prescription. As,
[p]rescription will not begin to run at the earliest possible indication that a plaintiff may have suffered some wrong. Prescription should not be used to force a person who believes he may have been damaged in some way to rush to file suit against all parties who might have caused that damage. On the other hand, a plaintiff will be responsible to seek out those whom he believes may be responsible for a specific injury.
When prescription begins to run depends on the reasonableness of a plaintiff's action or inaction....
Applying these principles to the present case, we find that defendants met their initial burden of showing more than a year elapsed between the time of their alleged tortious acts and the plaintiff's filing of this suit, as the evidence presented at trial[11] indicated that defendants' alleged tortious conduct began in December of 1983 when Jill Strata Patin initiated her extramarital affair with Father Patin. Thus, the burden shifted to plaintiff to prove an interruption or suspension of prescription. Dixon v. Houck, 466 So.2d at 60. To meet this shifted burden, plaintiff claims due to the discovery rule, prescription was suspended until Labor Day Weekend of 1984, so that his lawsuit filed on August 23, 1985 was filed timely.
To support his claim that the fourth contra non valentem exception applies, plaintiff postulates that his first evidence of the affair was on Saturday, September 1, 1984, when he observed Father Patin drive up to Jill's mother's house at 9:30 a.m., in Jill's car and wearing jeans and tennis shoes instead of his usual red and black clothing. Plaintiff claims that at that point in time, all of his perceptions "clicked" and he realized Jill was having an affair with Patin. Accordingly, he then announced to his family that Jill was having an affair with Patin. He claims that afterwards, his physical and mental health degenerated even more than it had after April 20th when Jill left him. This position, however, is contrary to all the evidence showing plaintiff's possession of constructive knowledge from February through August, 1984 and/or actual knowledge from August 12, 1984.
In the context of the facts that the Strata's marriage was troubled and Jill no longer occupied the same bedroom as plaintiff, defendants have a colorable argument that when rumors began to circulate through St. Raphael's Parish in early 1984 about Jill having an affair with Father Patin, plaintiff either knew or should have known by exercising reasonable dilligence, that the rumors were true. In fact, the rumors were so rampant that the February, 1984 teacher's newsletter declared that it was obvious that Jill was fooling around with both Fathers Patin and Fraser. Plaintiff had actual knowledge of this newsletter and its contents as it is uncontested that, without denying its veracity, Jill read the newsletter to plaintiff over the telephone as soon as she received it. Moreover, plaintiff's own mother warned him of her suspicions about Jill and Patin, especially after Jill would not let her into the house on an occasion when Patin's car was parked in front of the Strata home.
By the time Jill left plaintiff on Good Friday, plaintiff's actions indicated that he knew the (newsletter) rumors of the affair related solely to Father Patin and not to both priests. For on Easter Sunday, when both priests were at the Strata home consoling plaintiff, plaintiff pointed to Father Patin specifically and exclaimed, "They say my wife is fooling around with another man. And, they say it is you."[12] Furthermore, although plaintiff denies having knowledge of Jill's pregnancy prior to August *1191 12th[13], he admitted that he thought Jill looked heavy when he saw her in May, in front of the school, and in June, at the separation hearing. Consequently, in light of their non-existent sex life and the other facts discussed supra, plaintiff should reasonably have been alerted to the fact that Jill was having an affair and, if that fact caused him injury, he should have sought out those whom he believed were responsible for his injury.[14]
Nevertheless, when Jill telephoned plaintiff on August 12, 1984 and informed him that she was having an affair with Patin, was pregnant by him and was going to marry him,[15] constructive knowledge of what plaintiff reasonably knew or should have known by exercising reasonable dilligence transformed into actual knowledge because plaintiff was no longer ignorant of the facts on which his cause of action is based. Moreover, plaintiff's actual knowledge of Patin's involvement with Jill was reaffirmed by the remarks plaintiff made to Father Fraser at the rectory on August 13, 1984, in regard to Fraser being "an uncle" because Patin "impregnated" Jill. The remark went uncommented upon by the priest(s) and its truth was not denied by any of the defendants.
It is important to note that on the occasions when plaintiff's statements alluded to rumors of the affair or accused Father Patin of fathering Jill's child, neither Father Patin nor Father Fraser denied the accuracy of the statements. For a defendant to conceal his identity "by silence alone is not enough to toll the running of prescription ... he must be guilty of some trick or contrivance tending to exclude suspicion and prevent the plaintiff from bringing his action." Patin v. Stockstill, 315 So. 2d 868, 873 (La.App. 1st Cir.1975); Bill Nolan Livestock, Inc. v. Simpson, 402 So. 2d 214 (La.App. 1st Cir.1981), writ den., 404 So. 2d 1260 (La.1981); Reed v. General Motors Corp., 400 So. 2d 919 (La.App. 1st Cir.1981), writ den., 406 So. 2d 625 (La. 1981); Gover v. Bridges, 497 So. 2d 1364 (La.1976), [the defendant/physician's letter to plaintiff that contained misstatements of fact concerning what occurred during decedent's hospitalization did not approach the level of concealment, fraud or misrepresentation that prevented the timely filing of suit so as to interrupt or suspend prescription]. Consequently, the silences or non-responsiveness of Fathers Patin or Fraser to plaintiff's remarks, did not affect the running of prescription.
Without doubt, after considering all the evidence and accepting it in plaintiff's favor, we find plaintiff's ignorance of the existence of the facts upon which he filed suit ceased on August 12, 1984. Thus, the determination of the point in time when prescription began to run because plaintiff had constructive knowledge of the existence of facts that would have entitled him to bring this clergy malpractice/breach of fiduciary duty cause of action is moot. The evidence showing plaintiff had actual knowledge of the existence of the pertinent facts by August 12, 1984 is so overwhelming, that no reasonable person applying the *1192 discovery rule could have found that this lawsuit filed on August 23, 1985 was filed timely. Therefore, the jury manifestly erred when it found to the contrary.
The Third Exception: Where the Debtor Himself has Done Some Act Effectively to Prevent the Creditor From Availing Himself of His Cause of Action
The jury also found that plaintiff incurred such a mental incapacity caused by the defendants, that prior to August 23, 1984, he was unable to understand that Patin had an affair with Jill. In support of this finding, plaintiff claims that the third contra non valentem exception suspended prescription until after August 23, 1984 because he had a mental incapacity characterized by severe emotional distress, anguish and depression that caused him to fall into a state of confusion and detachment from April 1984 to April 1985. Alternatively, plaintiff claims this state of confusion prevented him from assimilating Jill's August 12th confession as well as all other facts of the affair until September 1, 1984 when he saw Father Patin wearing jeans and tennis shoes at 9:30 a.m. at Jill's mother's house. We find as a matter of law, however, that the psychological trauma experienced by plaintiff did not rise to the requisite level of incapacity needed to invoke contra non valentem.
Plaintiff's claims of an incapacitating psychological trauma relate to the third contra non valentem exception which suspends prescription during the time when a defendant's tortious conduct produces a mental and/or physical incapacity in a plaintiff, rendering him unable to file suit. The hallmark case applying this exception, Corsey v. State, Through Dept. of Corrections, supra, extended the application of the doctrine to those instances where the same wrongdoing that gave rise to the cause of action also made it impossible for the plaintiff to avail himself of his legal remedy because of the tort caused incapacity. Corsey, applied this contra non valentem exception to facts where the plaintiff's tortious injuries were sustained as a result of the Department of Correction's negligence and those injuries (organic brain damage: plaintiff could not speak, hear well or make himself understood) so mentally incapacitated the plaintiff that he lacked any understanding of what had happened to him until less than one year prior to filing suit when he recovered his awareness of both the events and his condition.
Since Corsey, other plaintiffs have unsuccessfully attempted to apply this exception to the Battered Woman's Syndrome, Laughlin v. Breaux, 515 So. 2d 480 (La. App. 1st Cir.1987) [claimed her condition was characterized by a learned helplessness that prevented her from filing suit]; to sexually abused children who had attained majority, Bock v. Harmon, 526 So. 2d 292 (La.App. 3d Cir.1988), writ den., 531 So. 2d 275 (La.1988) [held: the pychological block that the plaintiff/son may have had about bringing a civil action against his father is not comparable to the organic brain damage suffered by the Corsey plaintiff. Although plaintiff must have employed conscious and subconscious avoidance and suppression measures in order to function with his psychological trauma, it is not sufficient for the application of the "exceptional" doctrine on contra non valentem.]; and to sexually molested minor church members who had attained majority, Doe v. Reverend H. Doug Ainsworth, 540 So. 2d 425 (La.App. 1st Cir.1989) [the plaintiff alleged that he was homosexually molested by the defendant/Reverend when he was a minor and a member of defendant's church and that defendant psychologically dominated him, which caused him to suppress his realization of the defendant's conduct; nevertheless, contra non valentem did not apply as plaintiff had visited a psychiatrist three years before filing suit so that he had constructive knowledge of the defendant's actions]. In these cases, there was credible evidence that the plaintiffs had been traumatized by the conduct they allegedly suffered at the hands of their respective defendants. But as the plaintiffs were not mentally and physically incapacitated like the Corsey plaintiff[16], it was found that their psychological *1193 traumas, as a matter of law, did not rise to the requisite level of incapacity needed to invoke the "exceptional" doctrine of contra non valentem. See Bock v. Harmon, 526 So.2d at 297.
Likewise, the emotional trauma that Strata experienced[17] is not an incapacity sufficient to invoke the third exception of contra non valentem. Throughout the relevant time period, plaintiff remained employed and continued to function in society. His alleged depression and emotional distress, characterized by weight loss, insomnia, night pacing and crying spells may be a psychological trauma, but it is not a mental incapacity which prevented plaintiff from timely instituting this suit. Any mental confusion or detachment that plaintiff may have had is not comparable to the Corsey plaintiff's mental incapacity. And unlike the Corsey plaintiff, plaintiff was not under the physical control of the defendants[18], and the defendants did nothing to cause this plaintiff to refrain from timely filing suit. Thus, the trial court erred by refusing defendants' request to strike jury interrogatory number 2, which asked whether plaintiff incurred such a mental incapacity, caused by defendants, so as to render him unable to understand that Robert Patin had an affair with his wife prior to August 23, 1984, and erred by placing the issue of plaintiff's mental incapacity before the jury.
For the reasons assigned, after considering all the evidence and accepting it in plaintiff's favor, we find the law and the evidence presented to the jury on the issue of prescription was so overwhemingly in favor of defendants that reasonable persons could not have found that plaintiff did not have sufficient knowledge of Patin and Jill's affair after August 12, 1984 or that plaintiff suffered a mental incapacity so that prior to August 23, 1984 plaintiff was unable to understand that Jill and Patin had an affair. Accordingly, the findings of the jury are annulled, the judgment of the trial court is reversed and the plaintiff's claims are dismissed. All costs are assessed against the plaintiff/appellee.
REVERSED.
NOTES
[1] Defendants' appeal raises fourteen assignments of error, including no right of action, no cause of action, no evidence, no causal connection and prescription. As we find the prescription defense definitive, defendants' remaining contentions are pretermitted.
[2] After October, 1983 the Stratas had sexual intercourse on only one occasion, when Jill became intoxicated.
[3] Mr. LeBlanc: Q. Did you try to calm him, did you deny it to him, did you deny the fact [sic] of that letter to him?
Jill Strata Patin: A. I didn't say anything except let me read this to you because you're going to find out about it anyway and that was it.
Q. He tried to console you?
A. No, he didn't console me. I read it to him and he said, "Don't worry about it."
Q. But he wouldn't worry about it?
A. No.
Q. You-all were still living in the same house at that time?
A. Same house, separate rooms.
Q. At that same time you had already started your sexual affair with Father Patin in the same house also?
A. Yes.
Q. You didn't admit to him at that time the contents of the letter was true, did you?
A. No.
Q. Why not?
A. Well, to be perfectly honest with you, I feel I had moved into a separate room in October, this so-called marriage that was supposed to be able to be savednot once did he ever try and come to try to coax me into another room or say we can make things work out if we really try. Nothing was ever mentioned about saving the marriage. I just wanted him to be aware of the letter I had gotten. I didn't really feel like I had to tell him what I was doing. He wasn't interested. So I certainly wasn't interest in him anymore.
(tr. transcript, March 10, 1988; pp. 6-8)
[4] At trial, Father Fraser expanded upon the circumstances of this confidence:
Father Fraser: A. Bob Patin was hospitalized with, I guess, lack of a better expression, severe depression. I went to the hospital at his request to speak with him. When I arrived there he asked that we speak in confidence. He told me that he had had a relationship with Jill Strata.
Mr. Cali: Q. Did you immediately go out and tell anybody about this relationship?
A. No, it was in confidence, I couldn't.
Q. Is a priest bound by ethical contraints not to say anything like that?
A. Absolutely.
Q. You were not even at liberty to tell anyone?
A. I didn't even discuss it with Jill.
Q. Did you discuss it with anybody after that time?
A. No.
(Tr. transcript, March 10, 1988; p. 32)
[5] The following two excerpts provide Bill's version of this incident:
Bill Strata: She [Jill] called me up and told me the guy she was having an affair with was Father Patin. I couldn't get in touch with anybody else. I said, I'll go talk to Father Fraser. I walked in and saw Fraser and I saw they had people in the rectory. I didn't know how I was going to get him by himself. So I guess I just said, "Congratulations, you're going to be an uncle," and he just looked at me like what are you talking about? And he pulled me into his office and we sat down. We talked a little bit. Like I told him, now she's blaming Patin.
(tr. transcript, March 9, 1988; pp. 163-164)
Mr. Leblanc: Q. When you told Father Fraser about the uncle what was his reaction?
Bill Strata: A. Surprise, like what is this, like he never heard about it.
Q. What is the relationshipdo you know if there's any relationship between Father Fraser and Father Patin?
A. They were best friends.
Q. What did you expect Father Fraser [to do] when you confronted him with this information?
A. Really I just thought he would laugh.
Q. Why?
A. Well, because what's going on, I just figured now it is your best friend, I just figured he would just laugh.
(tr. transcript, March 9, 1988; pp. 165-166).
[6] When questioned by plaintiff's counsel whether he had concealed the affair after receiving Patin's letter, Monsignor Aleman replied that he did not remember discussing the matter with Strata as Strata discussed the affair/paternity matter with Father Fraser directly. Monsignor Aleman testified that he did not interfere because he did not feel it was his business.
[7] The defendants' witnesses placed this event as occurring in July for the reason that Jill moved out of her mother's house on August 17th and it is uncontested that the incident occurred at Jill's mother's house. Moreover, Jill and her mother did not speak from August 17th till the baby was born December 29, 1984, because her mother did not approve of the Patin affair.
[8] Bill Strata had weighed approximately 220 lbs. prior to April 20, 1984. Strata also admitted that he sold and used Herbalife during the Fall of 1984.
[9] On April 28, 1987, this court denied defendants' application for certiorari stating, "The application and response considered, we decline to exercise supervisory jurisdiction or to interfere with the orderly process of the trial court".
[10] Squires is a friend of both Jill Strata Patin and Bill Strata. She testified about how surprised she was over Bill's weight loss, depression, etc. when she saw him around Christmas of 1984.
[11] All references to evidence and testimony presented at trial indicates the second trial, held March 9 and 10, 1988, which solely addressed the issue of prescription.
[12] It is important to note that neither priest denied the truth of plaintiff's remark. Instead, Fathers Fraser and Patin merely did not respond to plaintiff's remark.
[13] Jill testified that Bill admitted to her that he knew she was pregnant at the separation hearing.
[14] Plaintiff claims that in July, Jill began harrassing him with the telephone calls about an affair with a man in Chalmette. If this allegation is true, it is no reflection on the defendants and it does not effect plaintiff's duty to reasonably investigate the possibility of its truth.
The doctrine of contra non valentem agere nulla currit praescriptio applies where the defendant conceals information or misleads plaintiff and lulls plaintiff into inaction. Gover v. Bridges, 497 So. 2d 1364 (La.1986); Richards v. LaCour, 515 So. 2d 813 (La.App. 3d Cir.1987); writ den., 519 So. 2d 133 (La.1988); Reed v. General Motors Corp., 400 So. 2d 919 (La.App. 1st Cir.1981) writ den., 406 So. 2d 625 (La.1981). Jill is not a defendant; consequently, her actions are those of a third party.
[15] Chronologically, on August 24, 1984 Jill received the telephone call from Monsignor Aleman. In the presence of plaintiff, Monsignor Aleman inquired whether Jill and Patin were having an affair. At that time, she denied her romance with Patin. Subsequently, she telephoned plaintiff and told him that she was having an affair with Patin and was pregnant by Patin and was going to marry him. Plaintiff asserts that within a few days of this call, she telephoned him again and recanted these statements. However, evidence of that phone call is dubious.
[16] In Corsey, the Supreme Court reasoned that to permit prescription to run under the facts presented, would permit a defendant with custody and control over a person he had tortiously injured to profit by his subsequent laxity in medical treatment, when (as the parties had stipulated) the injured person's recovery of his mental faculties was retarded beyond the prescriptive period. The plaintiff in such circumstances is doubly helpless to file suit by virtue both of his mental incapacity and also of his removal from the solicitous attention of relatives and friends who might act in his stead. 375 So.2d at 1324; Accord Kozlowski v. State, Through Department of HHR, 534 So. 2d 1260 (La.App. 5th Cir.1988), writ den., 538 So. 2d 592 (La.1989).
[17] There is a viable issue of causation as to whether Strata's alleged psychological trauma was a result of the Strata's separation and divorce or of the priest/church's involvement in the matter.
[18] Cf. Kozlowski v. State, Through Dept. of HHR, 534 So. 2d 1260 (La.App. 5th Cir.1988), writ den., 538 So. 2d 592 (La.1989) [contra non valentem prevented the running of prescription against the minor plaintiff during the period he was in the legal and physical custody of the defendant DHHR when, allegedly due to the defendant's negligent failure to investigate the plaintiff's original complaints of the child's abuse, the injury which gave rise of the cause of action occurred. The minor under these circumstances is doubly helpless to have suit filed on his behalf by virtue of both his age incapacity and also his doubtless dependency for protection of such rights on the same entity whose alleged negligence has allowed the child to come into its custody so severely injured.]. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1736731/ | 802 So. 2d 566 (2001)
Donna LaBOVE, et vir.
v.
Roy RAFTERY, Jr., et al.
Nos. 2000-C-1394, 2000-C-1423.
Supreme Court of Louisiana.
November 28, 2001.
Rehearing Denied January 11, 2002.
*568 Glenn W. Alexander, Jerry G. Jones, Jack C. Watson, Jones & Alexander; Joan M. Canny, Eliska M. Plunkett, Ernst F. Preis, Jr., McGlinchey Stafford; Counsel for Applicant (No. 2000-C-1394).
Robert B. MacMurdo, Steffes & MacMurdo; Byrlyne Van Duke, Vandyke-Dowers Law Firm; Counsel for Respondent (No. 2000-C-1394.)
Robert B. MacMurdo, Steffes & MacMurdo; Byrlyne Van Duke, Vandyke-Dowers Law Firm; Counsel for Applicant (No. 2000-C-1423.)
Glenn W. Alexander, Jerry G. Jones, Jack C. Watson, Jones & Alexander; Joan M. Canny, Eliska M. Plunkett, Ernst F. Preis, Jr., McGlinchey Stafford; Counsel for Respondent (No. 2000-C-1423).
JOHNSON, Justice.[*]
This action was brought by plaintiff to recover damages for age discrimination *569 and intentional infliction of emotional distress against her employer, Cameron State Bank. We granted this writ of certiorari to determine whether the jury's determination that Cameron State Bank is liable to plaintiff for age discrimination and intentional infliction of emotional distress was manifestly erroneous. After reviewing all of the evidence and testimony in a light most favorable to plaintiff, we hold that the evidence was insufficient to support the jury's verdict in favor of plaintiff. Accordingly, we reverse the decisions of the lower courts and dismiss plaintiff's action.
FACTS AND PROCEDURAL HISTORY
In 1978, at the age of thirty-two, Donna LaBove ("plaintiff") began working for Cameron State Bank ("CSB") as a teller. She worked at the bank for approximately one month, then quit because she thought her supervisor was "abusive" and "belittled employees." She returned to the bank three months later and went to work in the bookkeeping department. Over the years, she rose through the ranks to become head bookkeeper and assistant cashier, a position which required her to maintain all bank records, help customers open accounts, and supervise bank deposits, including the issuance of certificates of deposit. In the course of her employment, she received training in marketing and public relations, and in March of 1984, she became Assistant Vice-President for Public Relations and Marketing. As Assistant Vice-President, plaintiff was required to perform duties for CSB at its headquarters in the Town of Cameron, as well as at several branch facilities in rural Cameron Parish. She served in that position during the tenures of three bank Presidents.
CSB began to experience financial hardships, primarily from its poor portfolio of farm loans and poor policies, procedures, and management. In 1991, the bank only made $14,000 in profits. In 1992, it suffered a 2.3 million dollar loss. On April 1, 1992, because of the bank's precarious financial position, the bank's board of directors hired Roy Raftery, a man with twenty-seven years of banking experience, as Executive Vice-President. Raftery's role was to give direction to the bank's President. When the bank continued to deteriorate, the president was asked to resign. On August 20, 1992. Raftery became CSB's new President. Immediately upon his installation, in an effort to save the bank, Raftery began to change policies, procedures, and personnel assignments.
At the time Raftery assumed the presidency, plaintiff headed CSB's marketing and public relations in Cameron Parish. She also headed marketing and advertisement in Lake Charles and Sulphur. Her duties included opening the Cameron branch daily, testing job applicants, and training new employees, and making customer calls, during which she would visit customers and pass out trinkets from the bank. She also represented the bank at various community functions.
In January, 1993, Raftery promoted plaintiff from Assistant Vice-President to Vice President. At that time, according to plaintiff's testimony, her duties included assisting lobby traffic, giving assistance and directions to customers, serving as backup person for new accounts, public relations (attending local functions, meetings, banquets, seminars), keeping track of all advertisements run by CSB's competitors, reviewing ads, planning and chairing monthly new account seminars, training employees, assisting the purchasing clerk, ordering supplies, assisting and compiling data for incentive programs, and planning new services programs for bank assistants.
In February, 1993 bank regulators completed an audit of the bank. On March 15, *570 1993, the Federal Deposit Insurance Corporation (hereinafter "FDIC") placed CSB under a "cease and desist" order.
To avert bank closure, CSB's management immediately changed bank operations. Raftery assumed responsibility for CSB's major marketing. Plaintiff continued to do minor marketing tasks, such as placing advertisements for the bank in school and church programs. In addition to her current duties, plaintiff assumed the role of supervising tellers at the Cameron, Creole, Grand Chenier, and Johnson Bayou branches of the bank. Supervising the janitors in Cameron also became part of her duties. Greg Wicke was hired as branch manager, and Evelyn Landry was hired as assistant branch manager. Another new policy altered the chain of command so that all CSB employees at the Cameron branch, including plaintiff, were required to report to Wicke and Landry.
In May, 1994, the CSB employee who handled purchasing and ordering supplies resigned. Consequently, plaintiff assumed sole responsibility for those duties. On March 6, 1995, Raftery hired Leslie Harless as the director of marketing and public relations. He also relieved plaintiff of her new employee training responsibilities and reassigned that duty to Tonya Goss, the bank's new accounts clerk.
In late 1995, plaintiff communicated to bank management that her job had become too stressful and was adversely affecting her health.[1] In an attempt to accommodate her, Raftery offered plaintiff a less stressful position as branch coordinator/head teller at the CSB branch in Creole, Louisiana, which is located approximately 14 miles from Cameron, with no reduction in pay. Plaintiff declined that offer because she preferred to continue working at the main branch in Cameron.
Thereafter, CSB created a new position for plaintiff at the Cameron branch, which significantly reduced her responsibilities. Her new responsibilities were opening new accounts and serving as a backup teller. The bank also removed her responsibility for approval of checks and handling insufficient funds. Plaintiff was also informed that she would no longer represent the bank at community functions. Furthermore, because of her complaints that she had trouble lifting boxes, ordering supplies was removed from her job description. CSB also offered to provide a private counselor for six months to assist plaintiff with stress management. The bank expressed a willingness to provide the counseling at its expense and during bank hours if no after-hours appointments were available. Due to the significant decrease in her responsibilities, CSB reduced plaintiff's salary by approximately thirty percent.
On January 5, 1996, plaintiff sent a memorandum to Mary Robbins, the Senior Vice President of Operations, in which she detailed all of the duties she had been required to perform since 1993. While she thanked management for relieving her of the stressful responsibilities, she closed by requesting that her salary "remain at the 1995 salary level."
In mid-January, 1996, members of the bank's management team had a meeting with plaintiff and explained to her the new management decisions affecting her. She was informed that her new position was a dual one (new accounts and backup teller) because the number of new accounts opened in Cameron was insufficient to justify a full-time position. On the average, *571 only two accounts were opened per day at the Cameron branch. Plaintiff was also told that if she was unable to perform the duties of a backup teller, the bank would need to hire someone else, and her job and salary would be re-evaluated. Additionally, she was informed that the bank no longer needed a Public Relations person and that the duties she performed in the community on behalf of the bank would be executed by the branch manager and assistant branch manager. The branch manager and assistant branch manager were also assigned the duties of handling insufficient funds, approving service charges, and approving checks.
Soon thereafter, plaintiff expressed an interest in the head teller position previously offered to her at the Creole branch, but stated that she would need to be retrained as a teller.[2] CSB informed plaintiff that no other options would be discussed with her until she provided a written response as to whether or not she was able to perform her current job as backup teller and if she would participate in the Stress Management Program offered to her.
On April 29, 1996, plaintiff received an employee warning report for repeated errors in her new accounts duties. The complaint specifically stated that plaintiff placed the incorrect rates on certificates of deposit, one of which she never corrected. She was also cited for issuing a Trust certificate of deposit without obtaining management approval, entering incorrect maturity dates on certificates of deposit, placing incorrect addresses on documents, failure to secure approval for ledger tickets, and signing her brother's name to a transfer authorization between his account and his wife's account.
On June 28, 1996, plaintiff received the following employee warning report for poor performance concerning the following conduct:
1. Repeated certificate of deposit errors:
a. Wrong maturity dates
b. No social security numbers
c. Names not matching the computer
d. Incorrect phone numbers
e. Incorrect interest paid on certificates of deposit
f. Incorrect addresses
g. Incorrect social security numbers
2. Leaving teller keys overnight in desk drawer
3. Paying bills and balancing the checkbook for the Chamber of Commerce on bank time
4. Calling in sick without talking to the branch manager or assistant branch manager despite repeated warnings
5. Discarding bank property in the trash can
6. Putting customer funds in jeopardy by discarding returned customer checks with incorrect addresses in the trash can without shredding
7. Purposefully causing conflict and disrespect among bank employees toward management
Plaintiff was warned that she would be terminated if she continued to commit these violations.
As of July 1, 1996, plaintiff stopped reporting to work. She filed suit against CSB, Raftery, Wicke, and Landry, alleging that she was constructively discharged on February 27, 1997. She sought damages for age discrimination and intentional infliction of emotional distress. Raftery, *572 Wicke, and Landry were subsequently dismissed from the suit.
The case was tried by jury on September 14-18, 1998. The jury found that CSB, through its agents, employees, or officers, unlawfully discriminated against plaintiff because of her age. The jury also found that the bank, through its agents, employees, or officers, intentionally inflicted mental distress on plaintiff. The jury awarded $100,000 in general damages, $79,406 in loss of past earnings, and $489,340 in loss of future earnings. On December 3, 1998, the trial court ratified the jury's verdict by signing the judgment. On that same date, the trial court denied plaintiffs motion to assess attorney fees against CSB. Additionally, on May 15, 1999, CSB's motion for judgment notwithstanding the verdict and/or new trial or remittitur of damages was denied.
CSB appealed the trial court's judgment. Finding no manifest error, the court of appeal affirmed the jury's award. However, it denied plaintiffs cross-appeal for an increase in general damages and attorney's fees. LaBove v. Raftery, 99-1414 (La.App. 3 Cir. 4/19/00), 759 So. 2d 240. Both plaintiff and CSB filed applications for certiorari with this court, and by orders dated September 15, 2000, we granted both applications. Labove v. Raftery, 00-1394 (La.9/15/00), 767 So. 2d 698; 00-1423 (La.9/15/00), 767 So. 2d 699.
DISCUSSION
Standard of Review
A trial court's findings of fact may not be reversed absent manifest error or unless they are clearly wrong. Stobart v. State of Louisiana, through Dep't of Transp. and Dev., 92-1328 (La.4/12/93), 617 So. 2d 880. This court has a constitutional duty to review facts. Ambrose v. New Orleans Police Dep't Ambulance Serv., 93-3099, 93-3110, 93-3112 (La.7/5/94), 639 So. 2d 216. Because we have this duty, we must determine whether the verdict was clearly wrong based on the evidence, or clearly without evidentiary support. Id. The reviewing court must do more than simply review the record for some evidence which supports or controverts the trial court's findings; it must instead review the record in its entirety to determine whether the trial court's finding was clearly wrong or manifestly erroneous. Id. at 882. The issue to be resolved by a reviewing court is not whether the trier of fact was right or wrong, but whether the factfinder's conclusion was a reasonable one. Id. The reviewing court must always keep in mind that "if the trial court's or jury's findings are reasonable in light of the record reviewed in its entirety, the court of appeal may not reverse, even if convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently." Id. at 882-83 (citing Housley v. Cerise, 579 So. 2d 973 (La.1991)) (quoting Sistler v. Liberty Mutual Ins. Co., 558 So. 2d 1106, 1112 (La.1990)).
Age Discrimination
CSB contends that there is no evidence to support plaintiffs age discrimination claim. Plaintiffs age discrimination allegation was based on the Louisiana Commission on Human Rights Act ("LCHRA")[3] and the Louisiana Age *573 Discrimination in Employment Act ("LADEA") which prohibits employers from discriminating against individuals because of age.[4] Because Louisiana's prohibition against age discrimination is identical to the federal statute prohibiting age discrimination,[5] Louisiana courts have traditionally looked to federal case law for guidance. See, e.g., King v. Phelps Dunbar, L.L.P., 98-1805 (La.6/4/99), 743 So. 2d 181, 187; see also Barbe v. A.A. Harmon & Co., 94-2423 (La.App. 4 Cir. 1/7/98), 705 So. 2d 1210, writ denied, 98-0526 (La.5/15/98), 719 So. 2d 462. Disparate treatment cases are analyzed under the test developed for Title VII plaintiffs in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668, 678 (1973). A prima facie case of employment discrimination based on age requires a showing that (1) the plaintiff is between forty and seventy years of age; (2) the plaintiff was qualified for the job at issue; and (3) an employee outside the protected class was treated more favorably. Deloach v. Delchamps, Inc., 897 F.2d 815, 818 (5th Cir.1990); McDonnell Douglas, 411 U.S. at 802, 93 S. Ct. 1817. The theory of the McDonnell Douglas prima facie case is that the plaintiff must provide sufficient evidence to create an inference of unlawful intent, and the defendant, at the close of the plaintiffs evidence, generally challenges the prima facie case by a motion for directed verdict.
After the plaintiff satisfies the criteria to make a prima facie case, the burden shifts to the employer to produce evidence that the plaintiff was rejected, or someone else was preferred, for a legitimate non-discriminatory reason. Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 252-53, 101 S. Ct. 1089, 67 L. Ed. 2d 207 (1981). The defendant's burden, in rebutting a prima facie case, is one *574 of production, not persuasion. See id. at 254, 101 S. Ct. 1089.
Thereafter, when all of the evidence has been presented, the overall evidence ultimately must be sufficient for the jury to conclude that age discrimination was the true reason for the employment decision. To prevail in a disparate treatment case, a plaintiff must show that the protected trait (under the ADEA, age) actually motivated the employer's decision. Hazen Paper Co. v. Biggins, 507 U.S. 604, 610, 113 S. Ct. 1701, 123 L. Ed. 2d 338 (1993). Thus, age must actually have played a role in the employer's decision making process and had a determinative influence on the outcome. Id.
In Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 120 S. Ct. 2097, 147 L. Ed. 2d 105 (2000), the United States Supreme Court addressed the "burden shifting" associated with age discrimination claims. The Court stated:
Although intermediate evidentiary burdens shift back and forth ..., "[t]he ultimate burden of persuading the trier of fact that the defendant intentionally discriminated against the plaintiff remains at all times with the plaintiff." Burdine, 450 U.S. at 253 [101 S. Ct. 1089]. And in attempting to satisfy this burden, the plaintiffonce the employer produces sufficient evidence to support a nondiscriminatory explanation for its decisionmust be afforded the "opportunity to prove by a preponderance of the evidence that the legitimate reasons offered by the defendant were not its true reasons, but were pretext for discrimination." Id.; see also St. Mary's Honor Center v. Hicks, 509 U.S. 502, at 507-508 [113 S. Ct. 2742, 125 L. Ed. 2d 407 (1993)]. That is that the plaintiff may attempt to establish that he was the victim of intentional discrimination "by showing that the employer's proffered explanation is unworthy of credence." Burdine, supra, at 256 [101 S. Ct. 1089]. Moreover, although the presumption of discrimination "drops out of the picture" once the defendant meets its burden of production, St. Mary's Honor Center, supra, at 511 [113 S. Ct. 2742], the trier of fact may still consider the evidence establishing the plaintiff's prima facie case "and inferences properly drawn therefrom... on the issue of whether the defendant's explanation is pretextual." Burdine, supra, at 255 [101 S. Ct. 1089], n. 10.
Reeves at 143, 120 S. Ct. 2097. (Emphasis added).
In this case, plaintiff established a prima facie case of age discrimination under McDonnell Douglas. The record shows that plaintiff was forty-nine years old at the time of her resignation. As such, she was clearly within the age parameters set forth in McDonnell Douglas.
Secondly, the record establishes that from 1965-1971, plaintiff worked part-time at Calcasieu Marine as a teller, bookkeeper and proof operator. She completed a four week course entitled "The Essentials of Bank Marketing" in Boulder, Colorado. She also attended week-long marketing seminars in Atlanta, Georgia, Chicago, Illinois, and Washington, D.C. Additionally, plaintiff took bank marketing classes at Banking Institute at McNeese State University. She worked at CSB for several years before being promoted to Assistant Vice-President in charge of marketing and public relations. She remained in that position for nine years prior to being promoted to Vice-President. Also, Raftery testified that plaintiff "was and could have been and still could be an asset to the bank." Thus, because of her experience and training, it appears that plaintiff was qualified for the job.
*575 Additionally, the record indicates that many of plaintiff's duties were removed and reassigned to women outside of the protected age class. Although Raftery, who is older than plaintiff, initially undertook the marketing and public relations duties, two years later, he hired Leslie Harless, a thirty-eight year old woman, for that job. Subsequently, he hired Tonya Goss, who was then twenty-six years old, to take over new employment training. Raftery also hired Mary Mhire and Sonya Lalonde, both more than twenty years younger than plaintiff, to handle the opening of new accounts.
However, CSB produced an abundance of evidence to show that plaintiff's duties were changed for non-discriminatory reasons. The FDIC order in this case required CSB to cease and desist from, inter alia: unsound banking practices; operating with management whose policies and practices were detrimental to the bank and jeopardized the safety of its depositors or deposits, and operating with inadequate internal routine and control policies. The bank was also ordered to have management qualified to restore the bank to a "sound condition," develop a written management policy that contained evaluations, and develop a plan to recruit or replace personnel with the needed ability and experience.
CSB produced evidence that it removed plaintiff's responsibility for marketing and advertising because someone with more marketing expertise was needed to help the bank improve its poor financial condition. At the time the cease and desist order was given, the bank's major marketing endeavor was the customer call program in which a bank employee would visit bank customers, greet them, and give them trinkets from the bank. The bank also ran advertisements in high school football programs and church bulletins.
The bank's management determined that the customer call program plaintiff headed was an inefficient marketing tool to develop more business for the bank. Raftery gave unrefuted testimony that marketing has changed, becoming more computer oriented and more technical in nature, and the bank needed someone to head its marketing department who had the technical ability to handle marketing in a way which was more in tune with current trends. The bank's management also decided that it wanted someone who was computer literate to handle marketing. Plaintiff was admittedly unable to program a computer or perform data searches.
Raftery himself undertook marketing and public relations, and as a result, the bank rapidly recovered from the multimillion dollar loss it had experienced the previous year. Two years later, he hired Ms. Harless, who had nineteen years of banking experience. Raftery testified that he hired Ms. Harless because she was "very computer literate." Before coming to work at CSB, she worked in Retail Administration at First National Bank, a position which required her to work closely with the marketing department. When Ms. Harless was hired, CSB did not offer a debit card program like other banks, so one of her first projects involved developing a debit card program to provide the bank's customers with that service. Ms. Harless also developed other new products for the bank such as the "step-up" certificate of deposit and the "Maxell system." She testified that much of her job entailed researching new products or services, contacting other banks in the market to see if they offered a particular product or service, and if so, how it worked, checking CSB's data processing system to see whether it could handle the design of the new product or service, training employees on the new product or service, and marketing *576 or selling the product or service to the public.
CSB also presented evidence to the jury that Tonya Goss assumed plaintiffs employee training responsibility because plaintiffs techniques were ineffective. Ms. Goss gave unrefuted testimony that although plaintiffs training sessions were entertaining, they were ineffective, primarily because plaintiff was often unable to answer questions presented to her by employees. Plaintiffs method of training consisted of giving prizes to employees who opened the most accounts, training personnel in telephone etiquette, and cross selling. Employees' questions about accounts for minors and calculating interest on certificates of deposit went unanswered. Once Ms. Goss took over the employee training, she was able to pinpoint the most common errors made and trained employees accordingly. She initiated a system to track errors made on new accounts and certificates of deposit. She also re-trained plaintiff in opening new accounts because of plaintiffs frequent errors in that area.
Ms. Goss' testimony was corroborated by John Guilbeaux, the Senior Vice President and Chief Lending Officer. Guilbeaux testified that he attended one of plaintiffs training sessions after his administrative assistant complained that plaintiffs training sessions were "a waste of time." He stated that plaintiff played a game which was similar to "musical chairs" and gave prizes. According to him, the meeting was not productive concerning opening new accounts. Guilbeaux further testified that plaintiff was unable to answer questions from the trainees regarding opening and closing accounts. Based on his observations, Guilbeaux attested that he concluded that plaintiff was unable to conduct informative sessions, and he shared his conclusion with Raftery.
CSB further presented evidence to the jury that its actions toward plaintiff were justified because of the series of reprimands and warning reports she received due to poor job performance. She made repeated errors in calculating interest rates for certificates of deposit; she keyed in incorrect maturity dates for certificates of deposit, which resulted in penalties; she transferred funds from her brother's account to his wife's account by signing his name for him. Moreover, in January, 1994, plaintiff was placed on probation for using profanity in the lobby of the bank during business hours. Further, the bank showed that plaintiff used bank time to balance the Chamber of Commerce's checkbook and that she disposed of incorrectly addressed customer checks in the trash, rather than having them shredded.
Finally, the record shows that after plaintiff complained of stress-related injuries, CSB offered to provide her with professional stress management counseling for a six month period at the bank's expense. However, plaintiff declined the offer for fear of being stigmatized as mentally unstable.
Plaintiff admitted to making repeated errors regarding certificates of deposit. She explained that when she worked the teller window, if a customer came in to purchase a certificate of deposit, she was required to leave the window, go to her desk, type the certificate of deposit, and "put it on" before two o'clock. She also had to balance her teller drawer by two o'clock.
Plaintiff also admitted to transferring the funds for her brother "all the time" because he is a fisherman who is only home on the weekends. She stated that she had always done it, and never had problems because she was an officer. It was only when the bank took away her *577 officer's duties that she could no longer handle transfers.
Plaintiff further admitted to leaving the teller keys in the drawer. However, she seemed to attach no significance to her actions because the key "does not open the main vault." Nevertheless, she stated that she left the keys in the drawer because she had no intentions of returning to work.
As for the accusation that she balanced the Chamber of Commerce's checkbook on bank time, plaintiff testified that it only took about five minutes. She also stated that other bank officers often did similar things.
Plaintiff also indicated that many of her duties were removed at her own request because of her high blood pressure. Her job of ordering supplies was assigned to someone else after she complained that ordering and lifting the supplies was too much for her.
Moreover, the only evidence submitted to support plaintiffs claim of age discrimination was the testimony of Don Fruge, Sandra DeShields, and Belinda Miltenburger. Fruge, a long-time colleague of Raftery's and a former CSB employee, testified that Raftery had once revealed to him that he liked young, attractive women. However, the record reveals that Raftery made that comment around 1973 when he was thirty-two years old. DeShields stated that she tried to help plaintiff with supplies because "she's an older person" and was straining to pick up heavy boxes. Miltenburger also testified that she tried to help plaintiff with supplies, but Evelyn Landry told her not to help because it was not her job to do so.
Accordingly, we find that the jury's finding that CSB discriminated against plaintiff because of her age is unreasonable in light of the record reviewed in its entirety. There was no showing that plaintiffs age actually played a role in CSB's decision making process or that it had a determinative influence on the outcome. See Reeves, 530 U.S. at 141, 120 S. Ct. 2097. Thus, we reverse the lower courts' determination that plaintiff is entitled to recover based upon discriminatory practices based upon her age.[6]
Intentional Infliction of Emotional Distress
CSB asserts that the conduct plaintiff complains of failed to meet the standard for intentional infliction of emotional distress established by this court in White v. Monsanto, 585 So. 2d 1205 (La.1991). In White, the plaintiffs supervisor "launched a profane tirade" at the plaintiff (who was described as "a church-going woman in her late forties with grown children") and other workers who were sitting idly in the workplace. Amidst the vulgar tirade, the supervisor threatened them with dismissal. This court found that the supervisor's conduct did not constitute the tort of intentional infliction of emotional distress. We stated:
[In] order to recover for intentional infliction of emotional distress, a plaintiff must establish (1) that the conduct of the defendant was extreme and outrageous; (2) that the emotional distress suffered by the plaintiff was severe; and (3) that the defendant desired to inflict severe emotional distress or knew that severe emotional distress would be certain or substantially certain to result from his conduct.
*578 The conduct must be 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. Liability does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities. Persons must necessarily be expected to be hardened to a certain amount of rough language, and to occasional acts that are definitely inconsiderate and unkind. Not every verbal encounter may be converted into a tort; on the contrary, "some safety valve must be left through which irascible tempers may blow off relatively harmless steam." [Second] Restatement [of Torts], comment d, § 46 Prosser and Keaton, The Law of Torts, § 12, p. 59 (5th ed.1984).
White at 1209.
Louisiana's courts of appeal have staunchly adhered to the standard established in White. In Stewart v. Parish of Jefferson, 95-407 (La.App. 5 Cir. 1/30/96), 668 So. 2d 1292, writ denied, 96-0526 (La.4/8/96), 671 So. 2d 340, the plaintiff asserted that a supervisor harassed him for two years by questioning his personal life, increasing his workload, and pressuring him to accept a demotion which ultimately led to his termination. The court held that intentional infliction of emotional distress was not shown. The plaintiff in Beaudoin v. Hartford Acc. & Indem. Co., 594 So. 2d 1049 (La.App. 3 Cir.), writ denied, 598 So. 2d 356 (La.1992), alleged that she was singled out for abuse when a supervisor shouted at her, cursed her, called her names (dumb, stupid, and fat), commented about the inferiority of women, and falsely accused her of making mistakes. The court found that the supervisor's conduct did not constitute extreme and outrageous conduct.
In Smith v. Ouachita Parish Sch. Bd., 29,873 (La.App. 2 Cir. 9/24/97), 702 So. 2d 727, writ denied, 97-2721 (La.1/16/98), 706 So. 2d 978, the plaintiff had been employed in the school system since 1969. She was a tenured school teacher of business courses and had a master's degree and 30 graduate hours in secondary guidance and counseling. In 1990, she was transferred within the school system and assigned to teach in special education, an area in which she was not trained. She was later assigned to the Professional Development Center, where she was assigned to help physically disabled students adapt to a workplace environment. Her duties included supervising a student with cerebral palsy who performed menial tasks for State Farm Insurance and a cricket farm. She filed suit against the school board, alleging that she was wrongfully demoted and transferred within the school system, and as a result, she suffered emotional and psychological distress. The court noted that, while the plaintiff may have felt humiliated and unproductive, a reasonable person would have complained about being placed in special education, or at least sought more meaningful or additional assignments. The court stated:
[The school board's personnel director] acknowledged that [the plaintiff] was placed in jobs that were not the best situation for her. While we agree that the Board may have taken better advantage of [plaintiffs] education and experience, this does not mean that the Board's conduct was extreme and outrageous.
More recently, this court reviewed another claim of intentional infliction of emotional distress. In Nicholas v. Allstate, 99-2522 (La.8/31/00), 765 So. 2d 1017, the plaintiffs supervisor had warned him on numerous occasions that his production figures were not up to expectation. According to a company policy, the plaintiff *579 was placed on corrective review of poor performance. When the plaintiff failed to meet the goals set, he was placed on personal review and received a written warning that his job was in jeopardy. After failing to achieve goals placed by a supervisory panel, the plaintiff was terminated. The jury found the employer liable for intentional infliction of emotional distress, and the court of appeal affirmed that decision. This court, however, reversed, finding the evidence insufficient to "reach the high threshold for intentional infliction of emotional distress established in White," stating:
[A]lthough we might question [the supervisor's] motives, we recognize that disciplinary action and conflict in a pressure-packed workplace environment, though calculated to cause some degree of mental anguish, are not ordinarily actionable.
Nicholas 765 So.2d at 1030 (citing White at 1210). In Nicholas, we also recognized that Louisiana's jurisprudence is in conformity with federal jurisprudence.[7]
Finally, in Deus v. Allstate Ins. Co., 15 F.3d 506 (5th Cir.), cert. denied, 513 U.S. 1014, 115 S. Ct. 573, 130 L. Ed. 2d 490 (1994), a case more analogous to the instant case, the employee was displeased with his employer's new program which affected his office's operations. The employee complained that his employer required him to do more than others, used a special review on him, but not others, to downgrade his performance, and instituted a long term plan to move younger persons into sales and management positions. The employee alleged that he suffered a "mental breakdown" as a result of the employer's actions. The court, citing White v. Monsanto, supra, stated that the employer's "alleged mistreatment of [the employee] was not sufficiently thoughtless to rise to the level of outrageousness necessary to impose liability under Louisiana law."
In the case sub judice, plaintiff complains that the bank's overall treatment of her constitutes extreme and outrageous conduct. Plaintiff testified that she was repeatedly harassed by Wicke and Landry. She stated, "[Ms. Landry] got a type of enjoyment out of making you little belittle you in front of people or suffer." She also testified, "Ms. Landry hollered at you all the time, all the time. She always talking to you in a raised voice," sometimes in the presence of the tellers and customers.
Belinda Miltenburger testified that Landry belittled plaintiff in front of customers. She stated that she felt sorry for plaintiff and described plaintiffs demotion as "degrading." She also testified that she assisted plaintiff with supply orders until Landry told her that it was not her job to help plaintiff. However, other bank employees indicated that Landry's tirades were not reserved for plaintiff. Sandra DeShields testified that Landry yelled "at everybody." Tina Savoie testified that Landry made it a point to know everything *580 that was happening in the bank, and she scrutinized everything.
Plaintiff also testified that during her performance evaluation in February, 1994, Raftery referred to the people of Cameron Parish as "gee-gees" and stated that he had to put pictures in the ads in the Cameron newspaper because the people were "too dumb to read." She stated that she became so upset by Raftery's comments that she felt ill. Raftery categorically denied making any such comments. Further, the testimony revealed the evaluation was conducted in the presence of two other bank employees, John Guilbeaux and Greg Wicke. Guilbeaux testified unequivocably that Raftery never made such comments. Wicke did not testify at trial.
Plaintiff further alleged that during that same evaluation, Raftery told her that he had taken a notebook that belonged to her and had read it. She testified that she kept the notebook at her desk as a journal to detail her work and business activities. She also kept a record of her participation in various community events on behalf of the bank, mileage, and any expenditures for reimbursement purposes and made notations regarding other bank employees, including any unauthorized vacation time taken by some of the bank's officers. Plaintiff testified that Raftery informed her that the information she had recorded about other employees was "none of [her] business" because "he ran the bank."
Raftery admitted that he saw the notebook lying on the floor under plaintiff's desk, and he took it and read it. He testified that he had heard rumors around the bank that plaintiff kept the notebook as an "insurance policy" and to keep tabs on her superior officers. He expressed a concern that the contents of the notebook could possibly cause "morale problems" within the bank. Plaintiff testified that she saw the notebook on Raftery's desk when he confronted her about its contents. Plaintiff left the meeting without taking the notebook with her. Not once did she allege that she demanded that her notebook be returned to her.
Next, plaintiff testified that she was required to "do teller work." She stated that, while she had no problems assisting the tellers, she "lost it one day" when she had to handle a large deposit. She maintained that she did not know how to use the new computerized teller machine. She described the machine as a "foreign animal" and expressed that she had only had one training session which lasted one hour.
DeShields testified that plaintiff "had a lot of teary days." According to DeShields, plaintiff was upset because her desk had been moved around and that she no longer had as much contact with the customers because the bank's public relations policies had been changed. She testified that plaintiff's feelings were hurt when customers questioned her about working as a teller. She stated that working as a teller was stressful for plaintiff because it required taking deposits and cashing checks. She stated that plaintiff had difficulties and that plaintiff had to be retrained on the machine and it took plaintiff a "long time to balance." She stated that Landry and Wicke told her not to associate with plaintiff.
Further, plaintiff complained that when the bank's locks were changed, she did not receive a key. She stated that she had always had a key to the bank and that she would open the bank every day and make coffee. Plaintiff testified that the bank's former practice was to give employees a key to the bank. She stated, "I had a key from day one. When you become an employee, you get a key to the branch." She averred that once the bank's locks were changed, only three people got keys: *581 the branch manager, the assistant branch manager, and the head teller.
Raftery confirmed that he decided not to give plaintiff a key to the bank because she had been observed moving boxes from the building. Plaintiff admitted to moving boxes from the building; however, she denied moving bank documents, claiming that the boxes contained records from an community organization that she was involved in.
To further bolster her claim of intentional infliction of emotional distress, plaintiff contends that requiring her, a Vice President, to report to the branch manager and assistant branch manager, constitutes outrageous conduct. Prior to Raftery's tenure, plaintiff had always reported to the bank's President. However, when Raftery took over, he worked primarily from the Lake Charles office, and according to plaintiffs testimony, he seldom even visited the Cameron branch. Moreover, Raftery explained that when the bank was required to restructure its management, it made sense to require all employees, including plaintiff, who was in charge of new accounts, to report to the managers of the bank.
Plaintiff also complains that her salary was cut by approximately thirty percent. However, the bank explained that the cut in salary was a result of the significant decrease in her duties. Plaintiff was no longer over marketing, public relations, employee training, supplies. In fact, to prevent plaintiffs salary from being reduced, the bank offered her a position at a different branch. Plaintiff declined that position, and settled for a position opening new accounts and serving as backup teller.
Finally, we also note Raftery's testimony regarding some of plaintiffs conduct which was discussed in plaintiffs performance evaluation which was conducted in February, 1994, which evaluated plaintiffs job performance from January 1, 1993 through January 2, 1994. Raftery testified as follows:
A. Well, that she made inappropriate statements pertaining to management stating that she was not going to adhere to management's directions unless she was told even though management had had officers that attended the Officers' Meeting to report back the information that was not inthat they were not in attendance. It further went on to counsel her about these inappropriate statements, particularly where she used the words, "F___ them."
Q. Do you remember specifically this portion of the meeting you had where you reviewed these inappropriate statements with Ms. LaBove?
A. I certainly do. That was the very first thing before we got into the evaluation.
Q. What do you remember saying to her and what do you recall her saying to you about inappropriate statements from Ms. LaBove?
A. I simply asked her if she used that word in the lobby of the bank and she looked me straight in the eyes, which kind of surprised me, and then she just said, "Yes, I did," and then I said, "Well, did you say that you could make or break me in Cameron Parish and if you went down, I was going with you?" She looked at me directly in the face and said, "Yes, I did," and at that time I said, "Donna, you know, I really have a problem with a Vice President of the bank, particularly since I made you a Vice President of Cameron State Bank nine months ago and gave you your first raise in about four years, that you would act that way. Particularly since you're supposed to be P.R. or Public Relations and if you're going to do that in the bank, what are you going to do out of *582 the bank," and then we went into her evaluation.
Raftery's testimony was corroborated by Guilbeaux and Wicke. At that time, plaintiff was placed on probation for ninety days for her behavior, and it appears the above conduct set off the bad feelings between plaintiff and Raftery.
After reviewing all of the evidence in a light most favorable to plaintiff, the conduct of which plaintiff complains can in no way be said to rise to the level of "extreme and outrageous." According to Raftery's testimony, as well as plaintiffs own testimony, and various documentary evidence submitted by both parties, plaintiffs duties were diminished and replaced with lower level tasks because of her frequent complaints that her combined duties were causing her stress and were affecting her health. The evidence also shows that plaintiffs demotion was caused by her poor job performance and her behavior as well. Thus, it is evident that plaintiffs job duties were changed as a result of her job performance and behavior at the bank, rather than any attempt to inflict severe emotional distress on plaintiff.
While we are always loathe to reverse a jury's determination, we cannot ignore the overwhelming evidence that plaintiff was demoted for just cause. As this court observed in White, employers must be given "reasonable latitude" when making employment decisions. It is unrefuted that CSB suffered a 2.3 million dollar loss in 1992 and was in jeopardy of going under. Thus, it was necessary for the bank to make some progressive reconstructive changes to restore the bank's profitability. The evidence is overwhelming that plaintiff was not a productive employee for CSB. Her marketing techniques were no longer effective in an increasingly technology-geared banking industry, and her method of training employees was ineffective. In fact, plaintiff had to be retrained due to frequent errors in opening new accounts and in handling certificates of deposit. Even more telling are plaintiffs poor performance evaluations due to her errors, handling personal matters on bank time, and her disregard of the bank's policies regarding transfer of funds between customers' accounts.
We acknowledge that some of plaintiffs contributions to the bank were laudable. However, based on plaintiffs evaluations, her performance was grossly deficient in some major areas. Employers cannot be required to continue to employ workers who are under-productive and/or ineffective. It was a simple management strategy to reassign plaintiffs duties to others who obtained better results.
Accordingly, we find that the evidence submitted by plaintiff was insufficient to support her claim of intentional infliction of emotional distress. Thus, we hold that the jury's determination that CSB is liable to plaintiff for intentional infliction of emotional distress was manifestly erroneous as it was unsupported by the evidence.
CONCLUSION
For the foregoing reasons, we hold that the jury was manifestly erroneous in finding CSB liable for age discrimination and intentional infliction of emotional distress. Accordingly, we reverse the judgments of the lower courts and dismiss plaintiffs action.
REVERSED AND RENDERED.
KNOLL, J., dissents in part, concurs in part and assigns reasons.
KNOLL, Justice, concurring in part and dissenting in part.
I am in agreement with the majority's determination that LaBove's age discrimination *583 claim must fall because the evidence failed to preponderate that age discrimination was the motivation for CSB's actions. However, I disagree with the reversal of the jury verdict that found for LaBove on her claim against CSB for the intentional infliction of emotional distress. I find the record evidence fully supports the jury verdict on this issue. CSB could have simply terminated LaBove without subjecting LaBove, a bank vice-president, to menial tasks, and embarrassing and humiliating events. I find it particularly egregious on CSB's part that while it required LaBove to perform duties beneath the rank of a bank vice-president, it never lowered her titled position.
The majority opinion today does grave injustice to our manifest error doctrine so well established in our uniqueness as a civil law state and our review of fact.[1] We are not following the very jurisprudence we made in cautioning the appellate courts to affirm a trial court's findings of fact unless such factual determinations are manifestly erroneous or clearly wrong. Ambrose v. New Orleans Police Dep't Ambulance Serv., 93-3099, 93-3110, 93-3112 (La.7/5/94), 639 So. 2d 216; Stobart v. State of Louisiana, through Dep't of Transp. & Dev., 617 So. 2d 880 (La.1993); Housley v. Cerise, 579 So. 2d 973 (La.1991); Sistler v. Liberty Mutual Ins. Co., 558 So. 2d 1106 (La.1990). In the present case, a jury of twelve members rendered a verdict for the plaintiff on this purely factual issue; the trial judge denied defendant's motion for judgment notwithstanding the verdict and a three-member panel of the court of appeal affirmed the jury verdict. It behooves us now to remind ourselves of the roots of manifest error review so that we might respect the role of our three-tiered court system[2] which forms the basis for this standard of review and that there is a need for us to temper our tendency to substitute our opinion for those of the fact-finders. Without such a perspective, the trial court's quintessential fact-finding role will be compromised.
The evidence presented in this case supports that the issue of intentional inflection of emotional distress presented a close case. A trier of fact virtually cannot commit manifest error in circumstances where the evidence supports a close issue, i.e., when the evidence can reasonably support the verdict or judgment either way. Under these circumstances the trier of fact makes the decision which should be affirmed by the upper courts. A reversal of a close decision is not correcting a manifest error, but is upending the doctrine of manifest error.
In Syndics of Brooks v. Weyman, 3 Mart. (o.s.) 9, 1813 WL 749 (La.1813), this Court recognized that manifest error review was necessitated because of the inherent weaknesses in the jury trial, "if it must depend on the caprice, ignorance, or information of a jury." Id. at 13. However, as well stated in Trimble's Syndics v. New Orleans Ins. Co., 3 Mart. (o.s.) 394, 1814 WL 920 (La.1814), this Court astutely *584 observed that "we must presume that [the jury] weighed and discussed [the case] as they ought to have done; ... this verdict... ought not to be disturbed. Trimble's Syndics, 3 Mart. (o.s.)" at 396. Consequently, in Walton v. Grant, 2 Mart. (n.s.) 494, 1824 WL 1655 (La.1824), we stated:
The question is one of fact alone and the rule established in this court is, that the decision in the inferior tribunal always governs here, unless it clearly appears to be erroneous.
Walton, 2 Mart. (n.s.) at 494. (emphasis added).
What we said permeates the jurisprudence of this Court to this day and serves as the bedrock upon which our manifest error doctrine is firmly planted. Notwithstanding this well established doctrine acknowledged by the majority, the commencement of the majority opinion states that the evidence and testimony has been viewed "in a light most favorable to plaintiff." Labove at 569. In this case, the jury neither acted capriciously or ignorantly, nor was it misinformed.[3] With total disregard to the reasonableness of the jury's verdict, the majority re-weighs the evidence and substitutes its opinion for that of the jury even though this case is highly fact intensive and presented a close issue.
As observed in Nicholas v. Allstate, 99-2522 (La.8/31/00), 765 So. 2d 1017, those facts which constitute outrageous conduct are based upon the perceptions of the "average member of the community." Nicholas, 765 So.2d at 1022. CSB argues that the facts of this case are no more than petty incidents which occurred over more than two years that would not cause an average member of the community to exclaim "outrageous!" A recitation of record evidence shows clearly that the jury did not commit manifest error.
The record shows that in the early days of Raftery's presidency, he let it be known to Fruge that he did not like LaBove and that he wanted to replace her with someone else who could perform her marketing and advertising duties. Although he admitted this to Fruge, he also testified that the bank "couldn't stand any more bad publicity." Despite promoting LaBove to vice-president, the record shows that Raftery contemporaneously realigned the chain of command, making LaBove, a superior bank officer, report to persons of lesser rank, and assumed her marketing and advertising duties.
During LaBove's annual evaluation in early 1994, Raftery told her that he had taken her personal diary, read it, and threw it away. In the course of this evaluation, LaBove stated that Raftery referred derogatorily to Cameron Parish residents as "gee-gees" and explained that he utilized pictorial advertisement in the local newspapers because the local residents were too dumb to read. LaBove, the only bank officer from Cameron Parish, detailed that these comments personally offended her; she said that these comments reduced her to tears and nauseated her. Shortly after, when Raftery reaffirmed that LaBove was to report to junior corporate personnel, Wicke, the head cashier, and Landry, the assistant cashier, LaBove testified that her telephone calls to Raftery *585 to discuss this corporate anomaly went unreturned.
Sandra DeShields, a fellow employee of LaBove, described Landry as a very loud, aggressive, ornery type. She stated that Landry boasted that she was LaBove's boss and that, like it or not, LaBove had to do whatever she said. According to DeShields, Landry quickly had LaBove performing tasks that would not have been expected of a bank vice-president. She further testified that this treatment adversely affected LaBove.
One of the tasks assigned to LaBove was that of ordering and filling supply orders for the bank branches. Even though LaBove had difficulty lifting the boxes, DeShields was told by Paula Pool and Landry that she was not to provide assistance. DeShields described this treatment as belittling to LaBove and that the performance of these menial tasks caused LaBove to often cry.
Tina Savoie, a co-worker who was employed at CSB before Raftery's presidency and who became re-employed after his presidency, graphically contrasted LaBove's tasks during these periods. Whereas LaBove was a major player in the bank's day-to-day operations during Savoie's first period of employment, she found in her second period of employment that LaBove's duties had significantly diminished. She further explained that Landry constantly watched everything that LaBove did. Like DeShields, Savoie was told by Wicke and Landry that she was not to associate with LaBove because she was a bad influence. In essence, she testified that she found LaBove's treatment degrading.
Like Savoie, Belinda Miltenburger was employed at various times at CSB. She mirrored Savoie's observation of LaBove's duties at the bank. She stated that she was embarrassed for LaBove and felt that her treatment was degrading. She, too, was told by Landry not to assist LaBove with the supply orders.
The record further shows that the lessening of LaBove's duties and prominence was noticeable to Jennifer Bercier, a bank stockholder and a person in Cameron whose banking needs LaBove serviced. Ms. Bercier was so moved that she wrote a letter of concern to CSB. After some delay, Raftery assured Bercier that LaBove was still a vice-president and that he was not attempting to get rid of her.
In a January 17, 1996 meeting, LaBove's supervisors told her that she was no longer allowed to perform public relations or outside meeting work because of financial constraints and the need to standardize managerial functions. In a memorandum issued that same day, LaBove's authority to approve NSF checks, service charges and check approvals was removed. The memo stated, "so these functions have been reassigned and are gone forever from your job description ... whether those things were or were not stressful to you." (P 21). At that same time, Pool informed LaBove that if she was unable to work as a teller, a job that LaBove had informed her supervisors in writing caused her stress, CSB would be forced to hire someone else and re-evaluate whether LaBove would still be considered a full-time employee.
At approximately this same time, Raftery had the locks to the Cameron bank changed because he thought that LaBove was stealing bank property. Although La-Bove had traditionally opened the bank and made the morning coffee for staff, she was not provided with a new key. Raftery had learned that Landry saw LaBove moving boxes from the bank. Both Landry and Raftery testified that they did not speak to LaBove about her (LaBove's) suspected nefarious activity. In actuality, the *586 evidence shows that the boxes LaBove removed contained Chamber of Commerce material that she was returning to the community organization. Had either Raftery or Landry spoken to her about this activity, not only would they have learned the nature of her actions, but would also have learned that Wicke, the branch manager, held the bank door open for her and further helped her carry the boxes to her automobile.
Finally, after a string of reprimands (LaBove's transference of $50 between her brother's bank accounts, the fur festival poster incident mentioned in the majority opinion, her balancing of the checkbook for the Cameron Chamber of Commerce), LaBove chose to stop coming to work at CSB.
After examining this evidence, taking into mind the work place setting of this conduct and CSB's asserted perspective that its actions resulted in a series of petty incidents, I find that the jury was presented with two permissible views of the evidence. In its instructions to the jury, the trial court stated that CSB could only be liable if it was guilty of "atrocious conduct which exceeds all bounds usually tolerated by a decent society; ... so outrageous in character and extreme in degree as to go beyond all possible bounds of decency." The trial court further tempered the jury determination by further instructing them that "mere insults, indignities, threats, annoyances" were insufficient and that "disciplinary action and conflict in a pressure packed workplace environment, although calculated to cause some degree of mental anguish is not ordinarily actionable." Speaking as "average member[s] of the community" who were well instructed by the trial court, I find that the jury determination that CSB's conduct was outrageous is a finding that can be well supported by the record.
As an additional criterion for recovery, it was necessary for LaBove to establish by a preponderance of the evidence that CSB's conduct produced severe emotional distress. It was well established that CSB's handling of LaBove caused her to cry and become nauseated at her evaluation, and that employees found her crying several times at the bank. The evidence also shows that Sandra DeShields found LaBove shaking and non-responsive at her teller window and that she had to be taken to her physician for treatment. Moreover, all of the expert medical testimony showed that LaBove was suffering from severe depression in the months leading to her removal from CSB. Accordingly, I find that the jury did not abuse its discretion in finding that the evidence preponderated that the emotional stress that LaBove suffered was severe.
The final criterion that LaBove had to prove was that CSB desired to inflict severe emotional distress or that it was at least substantially certain that such would follow from its conduct. As sketched below, I find no manifest error in the jury's determination of this issue.
The oral statements that Fruge attributed to Raftery about his desire to remove LaBove indicate an animus from the upper level of CSB management as to the treatment she received. That this hostile treatment came from above was affirmed in the comments that Wicke made to Burl LaBove when he complained about the treatment his wife was receiving. Moreover, the oral reprimands that La-Bove publicly received from a lower ranking bank official are highly indicative of an attack directed to LaBove and fully show the outrageous treatment that CSB leveled against LaBove, a bank vice-president. Furthermore, the gradual stripping of LaBove's functions which she had mastered through the years and the replacement *587 of those duties with menial tasks usually performed by younger, less experienced employees, highlight the desire of CSB's upper management to inflict severe emotional distress or at least shows that severe emotional distress was substantially certain to follow from its conduct. When I view CSB's actions within the context of Louisiana's well accepted at-will employment doctrine, I find that CSB's demeaning treatment of LaBove is further exacerbated because it is clear that her employment could simply have been discontinued.
It is well accepted that whether an injured person's medical condition was caused by tortious conduct is a question of fact which should not be reversed on appellate review absent manifest error. Housley v. Cerise, 579 So.2d at 973, 979; Mart v. Hill, 505 So. 2d 1120, 1127-28 (La. 1987). Both Dr. Aretta J. Rathmell and Dr. David Post, a psychiatrist and psychologist, respectively, who appeared on LaBove's behalf, testified that job stress, more likely than not, caused LaBove's depression. In addition, Dr. Sheldon Hersh, defendant's medical expert, admitted that work related stress was a significant causative factor in LaBove's depression.
Throughout the course of the trial, the issues of LaBove's use of diet pills and the temporal onset of her hypertensive condition were debated. Dr. Hersh, a "medical detective" who testified on behalf of CSB, advanced the point that his interpretation of LaBove's medical history as recorded in the notes of doctors and nurses showed that LaBove had taken diet pills for two years.[4] He opined that it was common pharmaceutical knowledge that diet pills can cause high blood pressure, depression, and emotional instability. LaBove's treating family physician, Dr. Richard Sanders, testified that he had prescribed diet pills for LaBove for a total of six weeks during the ten years that he had treated her. Ultimately, I note, however, that even Dr. Hersh admitted that LaBove was still depressed when he saw her in 1998, approximately three years after LaBove had taken diet pills.
Dr. Hersh also attempted to suggest that his reading of the medical records indicated to him that LaBove suffered from high blood pressure before the period of her emotional turmoil at CSB. To rebut this contention, LaBove presented Dr. Sanders's, the physician who had treated her through the years, who unequivocally stated that LaBove did not suffer from a pre-existing high blood pressure condition.
A reviewing court must constantly be mindful that "if the trial court or jury's findings are reasonable in light of the record reviewed in its entirety, the court of appeal may not reverse, even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently." Stobart v. State of Louisiana, through Dep't of Transp. & Dev., 617 So. 2d 880, 882-83. Consequently, when there are two permissible views of the evidence, the fact finder's choice between them cannot be manifestly erroneous or clearly wrong. Id. Applying the well accepted jurisprudential framework that I have outlined regarding appellate review through the years, I believe the appellate court correctly determined that the jury was not manifestly erroneous in its determination that CSB's actions caused LaBove's medical condition.
*588 Today a majority of this Court ignores the findings of a jury composed of average members of the Cameron community, substitutes its appreciation of the facts, and strips LaBove of a judgment which I find is fully supported by a reasonable reading of the record. For these reasons, I respectfully dissent from that portion of the majority opinion which denies LaBove recovery from CSB for the intentional infliction of emotional distress.
NOTES
[*] Justice Harry T. Lemmon, retired, participated in the decision in this case which was argued prior to his retirement.
[1] The evidence reveals that plaintiff was hospitalized for high blood pressure while on vacation in October, 1995.
[2] Plaintiff had worked as a backup teller the previous week and had to leave work early because she had difficulty using the teller machine and handling transactions.
[3] LSA-R.S. 51:2231 provides:
A. It is the purpose and intent of the legislature by this enactment to provide for execution within Louisiana of the policies embodied in the Federal Civil Rights Act of 1964, 1968, and 1972 and the Age Discrimination in Employment Act of 1967, as amended; and to assure that Louisiana has appropriate legislation prohibiting discrimination in public accommodations sufficient to justify the deferral of cases by the federal Equal Employment Opportunity Commission, the secretary of labor, and the Department of Justice under those statutes; to safeguard all individuals within the state from discrimination because of race, creed, color, religion, sex, age, disability, or national origin in connection with employment and in connection with public accommodations; to protect their interest in personal dignity and freedom from humiliation; to make available to the state their full productive capacities in employment; to secure the state against domestic strife and unrest which would menace its democratic institutions; to preserve the public safety, health, and general welfare; and to further the interest, rights, and privileges within the state.
B. The prohibitions in this Chapter against discrimination because of age in connection with public accommodations shall be limited to individuals who are at least forty years of age.
C. The Louisiana Commission on Human Rights shall have enforcement powers including adjudication of claims of discrimination prohibited by R.S. 23:312, 323, and 332, sickle cell trait discrimination prohibited by R.S. 23:352, and discrimination because of pregnancy prohibited by R.S. 23:341 et seq.
[4] LSA-R.S. 23:971-75 (repealed by Acts 1997, No. 1409 § 4, eff. Aug. 1, 1997). Prior to its repeal, LSA-R.S. 23:972 provided in pertinent part:
It is unlawful for an employer to:
(1) fail or refuse to hire, or to discharge, any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment because of the individual's age;
(2) limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee because of the individual's age; or
(3) reduce the wage rate of any employee in order to comply with this Part.
When LSA-R.S. 23:971-75 was repealed, it was replaced by the Louisiana Employment Discrimination Law, LSA-R.S. 23:301 et seq.
[5] Age discrimination is defined in the Age Discrimination in Employment Act of 1967 ("ADEA"), codified as 29 U.S.C. § 621 et seq.
[6] Plaintiff filed a separate writ application, arguing that she is entitled to attorney's fees under the age discrimination statute. Because we hold that plaintiff failed to meet her burden of proving that CSB's actions were motivated by her age, the issue of attorney's fees is moot.
[7] In Glenn v. Boy Scouts of America, 977 F. Supp. 786 (W.D.La.1997), the court held that telling an employee that she was rumored to have had a sexual affair with a prior scout executive, being told that her placement next to a financial donor who liked her was because she might get more money from him, communication to her that he did not want a woman in her position, being called a "total disgrace" in a staffing meeting, and being told that she would be terminated on an undisclosed volunteer complaint unless she voluntarily resigned, did not constitute extreme and outrageous conduct. In Trahan v. Bellsouth Tel., Inc., 881 F. Supp. 1080 (W.D.La.), aff'd, 71 F.3d 876 (5th Cir.1995), the employer used a security team to ridicule, tease, and taunt the plaintiff for seven and one-half hours of questioning. The court held that the employer's conduct was not outrageous conduct.
[1] The term "manifest error" first appeared in Louisiana jurisprudence in Moore v. Angiolette, 12 Mart (o.s.) 532, 533, 1823 WL 1455 (La.1823). See also GEORGE W. PUGH, THE MANIFEST ERROR RULE, 21 La. Law Rev. 740 (1961). See also WILLIAM E. CRAWFORD, SHOULD LOUISIANA RETAIN CIVIL APPELLATE REVIEW OF FACTS?, 35 La. B.J. 244 (1987).
[2] "Louisiana's three-tiered court system allocates the fact finding function to the trial courts. Virgil v. American Guarantee and Liability Ins. Co., 507 So. 2d 825 (La.1987). Due to that allocation and the trial court's opportunity to evaluate live witnesses or to evaluate a mixture of deposition and live testimony, great deference is accorded to the trial court's factual findings. Id." Sistler v. Liberty Mut. Ins. Co., 558 So. 2d 1106, 1111 (La.1990).
[3] It is on this fact that Nicholas v. Allstate, 99-2522 (La.8/31/00), 765 So. 2d 1017, a cased that I authored, is clearly distinguishable. In Nicholas, the trial judge's failure to properly instruct the jury on the essence of the tort of intentional infliction of emotional distress interdicted the jury's decision. In the present case, the record shows that unlike Nicholas, the trial judge properly instructed the jury. Thus, the jury decision in the present case was fully informed and based upon close examination of the demeanor and credibility of the various witnesses.
[4] It is unclear in the record what specific medical evidence Dr. Hersh relied upon to reach this conclusion. One possible explanation was a notation in Dr. Carlos Choucino's medical charts that LaBove had taken diet pills approximately two years before when Dr. Sanders treated her. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2424992/ | 125 F. Supp. 2d 730 (2001)
Avis E. BUCHANAN, et al.
v.
CONSOLIDATED STORES CORP.
No. CIV.A. 99-3736.
United States District Court, D. Maryland.
January 4, 2001.
*731 *732 Edward J. Reed, Baach, Robinson & Lewis, Washington, DC, for Avis E. Buchanan, Carolyn Kornegay-Belton.
John P. Relman, Relman & Associates, Washington, DC, Christine Robitscher Ladd, Relman & Associates, Washington, DC, Edward J. Reed, Baach, Robinson & Lewis, Washington, DC, Elizabeth S. Westfall, Relman & Associates, Washington, DC, for Equal Rights Center.
R. Michael Smith, Dechert, Price & Rhoads, Washington, DC, for Consolidated Stores Corp.
John P. Relman, Relman & Associates, Washington, DC, Christine Robitscher Ladd, Relman & Associates, Washington, DC, Edward J. Reed, Baach, Robinson & Lewis, Washington, DC, for Albert R. Conley, Ardelia Crawford, Yvette D. Tate.
MEMORANDUM OPINION
CHASANOW, District Judge.
Pending before the court and ready for resolution is the motion to dismiss of Defendant Consolidated Stores Corp. ("Consolidated" or "KB Toys"). No hearing is deemed necessary, and the court now rules pursuant to Local Rule 105.6. For the reasons that follow, the court shall grant the motion in part and deny it in part.
I. Background
Plaintiffs are five individuals, Avis E. Buchanan, Albert R. Conley, Ardelia Crawford, Carolyn Kornegay-Belton and Yvette D. Tate, and a non-profit organization, the Equal Rights Center ("ERC")[1]. Defendant Consolidated Stores Corp. is a Delaware corporation that controls or owns several hundred KB Toys stores across the country. Plaintiffs allege that KB Toys discriminated against the five individual plaintiffs when several stores owned by Defendant and located in predominately African-American neighborhoods in Maryland refused to accept Plaintiffs' checks to pay for merchandise. The individual Plaintiffs recount similar stories.
On separate occasions, Crawford, Kornegay-Belton and Tate attempted to purchase by check gifts at the KB Toys at Iverson Mall in Temple Hills, but were told that the store did not accept checks. In July 1999, Crawford asked to see the *733 manager about the no-check policy as she previously had paid for items by check at KB Toys in Waldorf, Maryland and Falls Church, Virginia. In response to her inquiry concerning the no-check policy, the manager, an African-American, told her "you know how we are; we write bad checks." Upset, Crawford left without buying the items.
In December 1997, Kornegay-Belton was similarly told by the cashier that the store did not accept checks. She bought the items she wanted anyway. In December 1999 while working with ERC, Kornegay-Belton learned that ERC was investigating KB Toys no-check policy and told her supervisor that she had earlier been a victim of the policy.
In November 1998, Tate also was told by a cashier at the Temple Hills store that she could not pay for her merchandise by check. Tate, who nevertheless completed her purchase, claims that she previously had paid by check at KB Toys in Bowie, Maryland and Arlington, Virginia. Moreover, a day after Tate's incident at the Temple Hills store, she purchased items by check at the KB Toys at Pentagon City in Virginia.
Dr. Conley attempted to purchase a video game for his sons in July 1999 at KB Toys in Prince George's Plaza and was told by a cashier that the store did not accept checks. Concerned about the matter, he asked to see the manager, who explained to him that because the store had been receiving bad checks, his superiors decided that checks would no longer be accepted there. The manager also told him that stores in Landover and Silver Spring did not accept checks either. Dr. Conley purchased the video game by credit card.
In November 1999, Buchanan attempted to make a purchase by check at the KB Toys in Forest Village Park Mall in Forestville, Maryland and was told by the cashier that that particular store did not accept checks. Buchanan used her credit card to buy the items she wanted. Suspecting that she had been the victim of unlawful discrimination, Buchanan called ERC the next day and asked the center to investigate KB Toys no-checks policy.
Following Buchanan's call, ERC conducted tests by telephone and in person and claims it uncovered "a pattern and practice of discrimination against African Americans ...." Paper no. 5, ¶ 47. ERC asked members of its staff to shop at various KB Toys. According to ERC, the tests uncovered that KB Toys located in areas with a predominately African American population did not accept checks from any of its customers while stores located in predominantly white areas would accept checks.[2] Plaintiffs claim that Defendant "knows the racial composition of the geographic areas in which its stores are located and has determined the race of the customers most likely to frequent each of its stores ... and intentionally instituted a `no-checks' policy in those stores ... where the customers are most likely to be African-Americans." Id. at 13. Plaintiffs also assert that Defendant "instituted its no-check policy" with the "intent to discriminate against African-Americans." Id. The individual plaintiffs claim that as a result of the no-check policy they have suffered economic loss, humiliation, embarrassment, and mental and emotional distress. ERC claims that it has suffered injury, among other things, by "expending significant resources," in terms of both money and staff time to investigate the discrimination claims and because the no-check policy has frustrated its mission of ridding the Washington-Baltimore metropolitan area of discrimination based on race. Paper no. 10 at 12-13.
*734 Plaintiffs filed this action alleging discrimination under 42 U.S.C. § 1981. Plaintiffs also seek class action status, pursuant to Fed.R.Civ.P. 23(a), (b)(2), (b)(3). Defendant's motion asserts that the individual Plaintiffs fail to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6), and that, because ERC lacks standing, this court lacks subject matter jurisdiction over its claim, Fed.R.Civ.P. 12(b)(1).
II. Analysis
A. Individual Plaintiffs' § 1981 claim
A Rule 12(b)(6) challenge requires a court to accept all well-pled allegations of the complaint as true and to construe the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff. Ibarra v. United States, 120 F.3d 472, 473 (4th Cir.1997). Such a motion ought not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957). The court, however, need not accept unsupported legal allegations, Revene v. Charles County Comm'rs, 882 F.2d 870, 873 (4th Cir.1989), or conclusory factual allegations devoid of any reference to actual events. United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir.1979). Nevertheless, neither vagueness nor lack of detail is a sufficient ground on which to grant a motion to dismiss. Hill v. Shell Oil Co., 78 F. Supp. 2d 764, 775 (N.D.Ill.1999) (quoting Strauss v. City of Chicago, 760 F.2d 765, 767 (7th Cir.1985)).
Section 1981, in pertinent part, states:
All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, ... as is enjoyed by white citizens ....
(b) ... the term "make and enforce contracts" includes the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.
Most § 1981 actions involve employment discrimination claims, and courts analyze such cases employing the same statutory scheme used in cases brought under Title VII. Hawkins v. Pepsico, Inc., 203 F.3d 274, 278 (4th Cir.2000); Gairola v. Commonwealth of Virginia Dept. of Gen. Serv., 753 F.2d 1281, 1285-86 (4th Cir.1985) (citations omitted). Discrimination claims involving retail transactions have been far more rare. Morris v. Office Max, Inc., 89 F.3d 411, 413 (7th Cir.1996). However, when faced with such claims, courts generally employ a three-prong test to analyze them. To state a cause of action in a § 1981 action like the one presently before the court, a plaintiff must show: (1) he or she is a member of a racial minority; (2) the defendant intended to discriminate on the basis of race; and (3) the discrimination concerned one or more of the activities protected by the statute. Hill, 78 F.Supp.2d at 776; Bobbitt v. Rage Inc., 19 F. Supp. 2d 512, 517 (W.D.N.C.1998) (citing cases using this standard from the Second, Fifth, Seventh and Eleventh circuits).
All individual plaintiffs are African American and thus satisfy prong one of the prima facie case. Defendant's primary argument concerns prong two. Defendant argues that Plaintiffs cannot show intentional discrimination, and at most allege facts sufficient to show only disproportionate impact. Paper no. 7 at 11. The court disagrees. Plaintiffs allege that Defendant knew the racial composition of its stores, determined the race of customers most likely to patronize particular stores, and based on the race of the predominant clientele at those stores, African American, instituted the no-check policy. Paper no. 5, ¶¶ 50-51. Under the standard applicable to a motion to dismiss, Plaintiffs have alleged sufficient facts to support a claim of intentional discrimination. See Hill, 78 F.Supp.2d at 775 ("[M]ere vagueness or *735 lack of detail does not constitute sufficient grounds for a motion dismiss.") (citation omitted). Proof, of course, must follow if Plaintiffs are to succeed ultimately.[3]
With respect to the third prong, Defendant argues that because all patrons had the opportunity to make their purchases, there was no interference with the right to contract. Paper no. 7 at 13 ("[A]ll of the individual Plaintiffs had the opportunity to complete their purchases in a timely manner despite the no-check policy."). Indeed, despite their protests, all of the individual plaintiffs, except Crawford, bought the items they intended to buy. Moreover, Crawford has not alleged that she did not have the opportunity to make her purchases; she chose not to do so. To that end, Defendant claims that Plaintiffs assert no more than a "minor inconvenience" because of the no-check policy at select stores. Id. at 14. The court again disagrees.
The fact that purchases were made is not dispositive of the third prong. Courts have allowed § 1981 claims to proceed even though a plaintiff was allowed to complete his or her sales transaction or contract with the defendant. Hill, 78 F.Supp.2d at 776-77 (holding that black plaintiffs who purchased gasoline stated a cause of action under § 1981, where defendants forced them but not white patrons to prepay); Bobbitt, 19 F.Supp.2d at 519 (denying motion to dismiss in a § 1981 action, where plaintiffs were allowed to purchase a pizza but, unlike other customers, were forced to prepay for it); McCaleb v. Pizza Hut of America, Inc., 28 F. Supp. 2d 1043, 1047-48 (N.D.Ill.1998) (refusing to dismiss § 1981 claim, where although plaintiffs were allowed to purchase pizza, defendants failed to provide them with the full benefits of the contractual relationship by neglecting to furnish utensils and creating a disturbing atmosphere in which to eat).
In Morris, two African American men brought claims against Defendant retailer after a manager called police and reported that the men were acting suspiciously. 89 F.3d at 411. Holding that the men failed to state a claim under § 1981, the Seventh Circuit noted that they were deprived of no rights under the statute. Id. at 414 ("They were denied neither admittance nor service, nor were they asked to leave the store.").
As the district court in Hill makes clear, however, the manager in Morris placed no "special condition on the plaintiffs' contractual relations or right to make purchases." Hill, 78 F.Supp.2d at 777. In contrast, the black plaintiffs in Hill were made to do something different than white customers to purchase gasoline prepay and that alone implicated § 1981. The court found that the plaintiffs stated a cause of action by alleging that the "racially discriminatory prepay requirement adversely affected the basic terms and conditions of their contract to purchase gasoline." Id. "The discrimination took place at the point of sale, directly implicating plaintiffs' right to contract and to enjoy `all benefits, privileges, terms and conditions of the contractual relationship.'" Id. (quoting 42 U.S.C. § 1981(b)).
There is no discernable difference between this case and Hill with respect to the third prong of Plaintiffs' prima facie case. In both, the African-American plaintiffs were allowed to purchase the item(s) they wanted. In both, and unlike in Morris, the defendants placed a special condition on Plaintiffs' right to contract. Cf. Bobbitt, 19 F.Supp.2d at 519 (§ 1981 contract right implicated when, based on race, plaintiff was asked to do something different than other customers, i.e., prepay, *736 to complete a purchase). Further, both sets of plaintiffs alleged that the respective defendants' discriminatory policies adversely affected the basic terms and conditions of their contract to purchase merchandise. Id.; see Paper no. 5, ¶ 56 (Defendant's no-check policy prevents African-American customers from making and enforcing contracts on the same basis as whites); see also § 1981(b) (make and enforce contract "includes the ... enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship."). The alleged discriminatory special condition imposed by Defendant in this case the no-check policy is not significantly different from those imposed by other defendants, such as a prepay requirement.[4] Accordingly, Plaintiffs state a cause of action for discrimination under § 1981, and Defendant's Rule 12(b)(6) motion is denied.
B. ERC standing
There are two ways to present a 12(b)(1) motion to dismiss. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). A defendant may either contend (1) that the complaint fails to allege facts upon which subject matter can be based, or (2) that the jurisdictional facts alleged in the complaint are untrue. Id. If, as in the case now before the court, a defendant raises the first argument, then the allegations in the complaint are assumed to be true, and the court will view the motion as it would one brought under 12(b)(6). Id.; Higgins v. United States, 894 F. Supp. 232, 234 (M.D.N.C.1995).
Defendant moves to dismiss ERC as a plaintiff for lack of standing. ERC argues that its injuries are indistinguishable from those sustained by non-profit organizations in fair housing cases, in which courts have held that such organizations have standing to bring suit. Thus, ERC argues that it satisfies Article III standing requirements. The court disagrees.
To assert standing successfully under Article III, a plaintiff must show (1) actual or threatened injury that is both concrete and particularized, and not conjectural or hypothetical; (2) injury fairly traceable to the defendant's challenged action; and (3) injury likely redressable by a favorable court decision. Burke v. City of Charleston, 139 F.3d 401, 405 (4th Cir. 1998) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992)). An organization may show standing to bring a suit under two theories: standing in its own right or representational standing, based on the fact that members it represents have been harmed. Maryland Highways Contractors Ass'n., Inc. v. State of Maryland, 933 F.2d 1246, 1250 (4th Cir.1991) (citations omitted). ERC asserts that it has standing in its own right to bring this suit and thus must satisfy the three-prong test discussed above.
Havens Realty Corporation v. Coleman, 455 U.S. 363, 102 S. Ct. 1114, 71 L. Ed. 2d 214 (1982), is the seminal case regarding organizational standing, at least under the Fair Housing Act ("FHA"). In that case, the Court stated:
*737 If, as broadly alleged, petitioner's steering practices have perceptibly impaired HOME's ability to provide counseling and referral services for low-and moderate-income homeseekers, there can be no question that the organization has suffered injury in fact. Such concrete and demonstrable injury to the organization's activities with the consequent drain on the organization's resources constitutes far more than simply a setback to the organization's abstract social interests ....
Id. at 379, 102 S. Ct. 1114.
ERC claims that it has been injured because it spent money investigating the Defendant's alleged discriminatory practices and because in doing so it diverted resources from its "usual testing, education, counseling, and referral services." Paper no. 5, ¶ 60; paper no. 10 at 27. ERC appears to allege that it suffered injury as a result of having to divert its resources from its other programs to investigate Defendant's alleged discrimination. At least one court of appeals has questioned whether such self-inflicted injury is sufficient to constitute injury in fact for purposes of Article III standing. Fair Employment Council of Greater Washington, Inc. v. BMC Marketing Corp., 28 F.3d 1268 (D.C.Cir.1994). In BMC, the plaintiff's goal included promoting equal opportunity in employment. To accomplish its goals, the plaintiff provided outreach, counseling and education services. Id. at 409. The court found that, to the extent the Council's programs were harmed because of the defendant's discrimination, the Council had alleged sufficient injury. Providing examples of the types of injuries the Council could have sustained because of BMC's discrimination, the court noted that more people in the area might need counseling or BMC's discrimination might increase the number of unemployed minorities in the area, hampering the Council's outreach programs. Id. at 409. The court was clear, however, that simply alleging that it spent money to test or challenge alleged discrimination did not support standing. "One can hardly say that BMC has injured the Council merely because the Council has decided that its money would be better spent testing [the discriminatory practices of] BMC than by counseling or researching."[5]Id. at 410. The court finds this reasoning persuasive. It does not appear from the papers that KB Toys' no-check policy had any concrete effect on any of ERC's programs. Further, ERC chose to investigate Defendant's policy and in some cases did so by simply calling the stores. ERC cannot now claim that because it chose to channel its funds this way, Defendant's no-check policy has caused it injury in fact sufficient to satisfy Article III standing requirements.
Aside from diverting its resources from some programs to investigate Defendant's alleged discrimination, ERC also claims that its mission to eliminate discrimination in the Washington-Baltimore metropolitan area was frustrated. ERC asserts that its mission has been harmed by KB Toys' policy of denying "a basic and fundamental economic freedom to scores of people who attempted to pay by check in KB Toys stores with predominantly African-American clientele." Paper no. 10 at 28. Such an injury falls far short of that asserted in either Havens or BMC, where not only were the organizations' programs themselves allegedly harmed by the defendants' actions but also the defendants' alleged illegal actions were "at loggerheads with the plaintiffs' stated mission." National Treasury Employees Union v. United States, 101 F.3d 1423, 1429-30 (D.C.Cir.1996). As the court in National Treasury held "conflict between a defendant's conduct and organization's mission *738 is alone insufficient to establish Article III standing." Id.
The injury ERC asserts seems nothing more than a set back to an "abstract social interest," i.e., eliminating societal racial discrimination, which is insufficient to support Article III standing. Havens, 455 U.S. at 379, 102 S. Ct. 1114 (citing Sierra Club v. Morton, 405 U.S. 727, 739, 92 S. Ct. 1361, 31 L. Ed. 2d 636 (1972)). Cases cited by ERC to support its assertion to the contrary are unavailing. In Spann v. Colonial Village, Inc., 899 F.2d 24 (D.C.Cir. 1990), for example, the court noted that in their complaint, plaintiffs "crucially alleged" that the defendants' actions "`interfered with plaintiff FHC and MWPHA's efforts and programs intended to bring about equality of opportunity for minorities and others in housing' and required plaintiffs `to devote scarce resources to identify and counteract defendants' advertising practices.'" Id. at 28. By contrast, ERC does not claim specific harm to its programs or efforts but rather that KB Toys' no check policy has frustrated its mission "to eliminate discrimination on the basis of race or color in the Washington-Baltimore Metropolitan Area and injured ... the right of the Center's constituents to enjoy the benefits of living in a society where people are treated equally and without regard to their race or color." Paper no. 5, ¶ 60. Such an injury is simply too abstract to support Article III standing.
Moreover, were the court to find sufficient injury for purposes of Article III, prudential limits would bar standing in this case. Courts impose prudential standing requirements to "add to the constitutional minima a healthy concern that if the claim is brought by someone other than one at whom the constitutional protection is aimed, the claim not be an abstract, generalized grievance that the courts are neither well equipped nor well advised to adjudicate." Burke, 139 F.3d at 405 (quoting Secretary of State of Maryland v. Joseph H. Munson, Inc., 467 U.S. 947, 955 n. 5, 104 S. Ct. 2839, 81 L. Ed. 2d 786 (1984)). Prudential considerations preclude a court from deciding "questions of broad social import in cases in which no individual rights will be vindicated, and access to the federal courts should be limited to those litigants best suited to assert the claims." Mackey v. Nationwide Insurance Co., 724 F.2d 419, 422 (4th Cir. 1984) (quoting Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 99-100, 99 S. Ct. 1601, 60 L. Ed. 2d 66 (1979)). Moreover, prudential safeguards should be imposed against a litigant, whether person or organization, asserting the rights of another, unless the litigant is the only "effective adversary of the unlawful discrimination." Id. at 422 (citing cases in which white plaintiffs were allowed to assert § 1981 actions as blacks were denied access to the housing or areas in question, and thus the chance that a black plaintiff would have the opportunity to assert a claim on his or her behalf was tenuous).
It is now well-settled that the prudential barriers do not apply to discrimination claims brought under the FHA. Havens, 455 U.S. at 372, 102 S. Ct. 1114. Unlike Havens, which dealt with the FHA, this case deals with a discriminatory claim brought under § 1981, which, despite ERC's lengthy arguments to the contrary, is subject to prudential limitations. BMC, 28 F.3d at 1277-79 (holding that while a non-profit organization had standing under Article III to bring a § 1981 claim, prudential standing limitations barred the suit); Maryland Minority Contractor's Assn., Inc. v. Maryland Stadium Authority, 70 F. Supp. 2d 580, 588 (D.Md.1998) (citations omitted).
The Fourth Circuit addressed prudential considerations to standing in Mackey. In that case, an insurance agent brought a § 1981 action against an insurer, alleging he suffered harm because the insurer practiced redlining in neighborhoods in which Mackey wanted to sell or renew insurance to black homeowners. Id., 724 F.2d at 420. Determining that the plaintiff lacked standing, the court held that *739 while homeowners in those neighborhoods in which the insurer refused to insure houses may have had standing to sue, prudential limitations prevented standing with respect to the agent. Id. at 421. The court found that "no impediment [existed] to actions by those blacks who were denied property insurance because of the alleged discriminatory practice." Id. In short, Mackey was not the only means by which the proper plaintiffs could have their rights vindicated. Thus, granting standing to Mackey was unwarranted.
ERC argues that this court should decline to apply prudential limits to it because its testing and investigative program brought Defendant's alleged discrimination to light and even caused some of the individual Plaintiffs to come forward. Further, it argues that the individual Plaintiffs would have been ill-equipped to conduct such an investigation without its help. These arguments do not support ERC's position because, as Defendant notes, helping a plaintiff to acquire information to bring a lawsuit does not confer standing. Nothing bars the individual plaintiffs or anyone else directly harmed by Defendant's policy from proceeding with this action. ERC also asserts that it must be a party to this action because, whether or not the court certifies the class, only ERC is in a position to oversee and administer any award. The court disagrees and finds that if necessary, a proper remedy may be afforded to any plaintiffs actually injured by Defendant's practices without ERC as a party.
III. Conclusion
For the foregoing reasons, Defendant's motion is denied in part as to the individual Plaintiffs, for failure to state a claim, and granted in part as to ERC, for lack of standing.
A separate Order will be entered.
NOTES
[1] According to Plaintiffs' Amended Complaint, ERC's mission is to promote civil rights issues and encourage a society where equal opportunity is available for all of society. The group's mission is to further "fair housing, fair employment, public accommodations and other civil rights issues." To do so, ERC offers such programs as education and outreach, diversity training, research, and planning initiatives. Paper no. 5, ¶ 12.
[2] Plaintiffs allege that checks are not accepted at the following KB Toys: (1) Forest Village Park Mall in Forestville; (2) Prince George's Plaza in Hyattsville; (3) Laurel Center in Laurel; (4) Iverson Mall in Temple Hills; (5) Beltway Center in Greenbelt; (6) Mondawmin Mall in Baltimore; (7) Reisterstown Road Plaza in Baltimore; and (8) City Place in Silver Spring. Paper no. 5, ¶ 48.
[3] See e.g., Stevens v. Steak n Shake, Inc., 35 F. Supp. 2d 882, 890-91 (M.D.Fla.1998) (granting summary judgment in favor of defendant restaurant, where waitress requested that all customers, black and white, prepay for meals; African-American plaintiffs presented no evidence of intent to discriminate or that race was the reason for the prepayment request).
[4] Defendant points to cases that suggest that offering different services in different communities of disparate racial composition is insufficient to state a claim under § 1981. The case most analogous to the one now before the court is Bailey v. Jewel Companies, Inc., 1979 U.S. Dist. Lexis, 9193 (N.D.Ill. Oct. 12, 1979). In Bailey, the court granted the defendant's motion to dismiss, holding that a retailer offering different check cashing services in different communities did not violate § 1981. On a preliminary note, Bailey is a 22-year old unpublished decision. Moreover, Bailey predates the statutory changes to § 1981, which added subsection (b) and expanded the scope of the statute's protections. Further, as Plaintiffs indicate, that case is silent as to the nature of Bailey's claim. While he apparently argued that the defendant's check cashing policies differed according to neighborhood, it is unclear whether he alleged that no checks at all were accepted in parts of the city that were primarily African American. Thus, there is no way to tell whether the defendant in that case infringed upon Bailey's right to make or enforce a contract.
[5] But see City of Chicago v. Matchmaker Real Estate Sales Ctr., Inc., 982 F.2d 1086, 1095 (7th Cir.1992) ("[T]he only injury which need be shown to confer standing on a fair-housing agency is deflection of the agency's time and money from counseling to legal efforts directed against discrimination.") (citations omitted). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1376202/ | 848 P.2d 1086 (1993)
115 N.M.App. 159
Ross Sterling HYDEN, Plaintiff-Appellant,
v.
The LAW FIRM OF McCORMICK, FORBES, CARAWAY & TABOR, a New Mexico partnership; J.W. Forbes, individually; and Cas Tabor, individually, Defendants-Appellees.
No. 12916.
Court of Appeals of New Mexico.
January 12, 1993.
Certiorari Denied February 16, 1993.
*1088 Perry C. Abernethy, Marek & Yarbro, P.A., Carlsbad, for plaintiff-appellant.
Robert E. Sabin, Jeffery D. Tatum, Atwood, Malone, Mann & Turner, P.A., Roswell, for defendants-appellees.
OPINION
PICKARD, Judge.
Plaintiff sued defendants for legal malpractice. The trial court granted summary judgment to defendants, and plaintiff has appealed. The issue before us is whether summary judgment was improperly granted. In making this decision, we are also called on to decide the subsidiary issues of whether the trial court correctly applied collateral estoppel against plaintiff based on proceedings in an earlier lawsuit, and whether in doing so the trial court erroneously considered two affidavits from the presiding judge in the underlying case. We reverse.
The genesis of the case before us lies in an earlier suit for breach of contract, fraud, and negligent misrepresentation. The parties to the earlier suit were plaintiff, who owned an automobile dealership, and Scott Tubb, who contracted to buy the dealership. Tubb and his father initiated discussions with plaintiff for the purchase of the dealership in March 1985. The elder Tubb had previously approached plaintiff on several occasions in 1982-83 about selling the dealership, but no sale agreement resulted during that time. In 1985, when sale discussions resumed, the Tubbs asked for financial data, which plaintiff provided. The parties reached a general understanding and agreement on the sale of the business. The Tubbs asked defendant Cas Tabor, an attorney with the defendant law firm, to draft the written contract for purchase and sale of the dealership. At the time, plaintiff had had a fifteen-year attorney-client relationship with the law firm, which regularly represented him primarily through the person of its senior partner, defendant J.W. Forbes.
Tabor recognized the potential conflict of interest involved in drafting the contract for the Tubbs in light of the firm's prior relationship with plaintiff, and he consulted briefly with Forbes on the propriety of taking on the work at the request of the Tubbs. Forbes encouraged Tabor to undertake the representation in order to enhance the likelihood that the firm could maintain the automobile dealership as a client after Tubb purchased it. Tabor proceeded to represent the Tubbs in the purchase of the dealership.
After Tabor had prepared the first two drafts of the contract, Scott Tubb asked Tabor to include language imposing warranty obligations on plaintiff with respect to the financial statements provided to Tubb. When Forbes discovered the warranty language in a draft of the agreement, he contacted plaintiff and asked whether plaintiff could in fact warrant the financial information. Plaintiff communicated his uncertainty to Forbes about doing so, and Forbes told plaintiff that he was going to change "that language." However, other warranty language was retained in the final agreement, and, according to plaintiff, defendants failed to advise him of the risks involved in their dual representation of him and Tubb. Plaintiff also contends that defendants failed to explain what misrepresentation entails or the extent of his exposure for any misrepresentations he might have made. Cf. First Nat'l Bank v. Diane, Inc., 102 N.M. 548, 553, 698 P.2d 5, 10 (Ct.App. 1985) (recognizing attorney's duty to warn client of potential liability and exposure under existing law).
The purchase price for the dealership was $920,000. Under the final agreement, Tubb made a partial payment, which purchased 49% of the stock in the business, and obtained an option to purchase the remaining 51% at a later date. After the final agreement but before exercising that option, Tubb discovered that some of the financial records provided by plaintiff during sale negotiations were inaccurate. Tubb sued plaintiff based on the warranty language. That language required plaintiff to warrant the accuracy of financial information and held him liable for any inaccuracies discovered within two years of the sale. Tubb sought either rescission or damages.
*1089 The matter of Tubb versus plaintiff was tried in the district court of Eddy County by Judge Harvey W. Fort without a jury. The defendant law firm represented plaintiff throughout pretrial proceedings and on the first day of trial. After that, Forbes and the firm were disqualified as counsel in order to become witnesses in the case, and new counsel assumed plaintiff's representation. After hearing evidence and argument of counsel, Judge Fort orally denied Tubb's demand for rescission, noting that Tubb had allowed the business to deteriorate during the tenure of his management. Judge Fort similarly found fault with plaintiff, indicating his intent to find that plaintiff knew or should have known about the inaccuracy of the financial documents and that he negligently failed to divulge the information to Tubb. No findings of fact or conclusions of law were ever requested by the parties or entered. Reduced to its essential terms, the written judgment filed after trial on January 31, 1987, provides that (1) "[t]he * * * total consideration of Nine Hundred Twenty Thousand Dollars ($920,000.00) should be reduced to Six Hundred Twenty-One Thousand Dollars ($621,000.00)"; (2) the reduced sum constitutes a complete resolution of all the disputes between the parties arising out of the contract; and (3) Tubb owed plaintiff a total of $621,000 for 100% of the stock in the dealership. No punitive damages were assessed against plaintiff, and each party was ordered to pay his own costs, expenses, and attorney fees. Plaintiff accepted payment from Tubb, and neither party appealed in that case.
Judge Fort retired from the bench on December 31, 1988. After plaintiff filed his complaint in this case, defendants obtained two affidavits from Judge Fort. In the first affidavit, dated April 25, 1989, Judge Fort stated that his decision in the underlying case was not based on the terms of the contractual provisions between the parties, but rather upon his conclusion that plaintiff had defrauded Tubb, and that Judge Fort was prepared to make such a finding based upon clear and convincing evidence. In the second affidavit, dated July 9, 1990, Judge Fort asserted that after a full trial on the merits, he made an oral finding of fact that "[t]he purchase price that a willing buyer would have paid a willing seller if the true facts about the dealership's finances had been disclosed was $621,000.00." He also concluded in the affidavit, based on his oral findings, that plaintiff was liable to Tubb for misrepresenting the finances of the dealership in the amount of the difference between the contractual price of the dealership and the actual value, i.e., "the amount that a willing buyer would have paid a willing seller if the true facts about the dealership's finances had been disclosed."
These affidavits; two affidavits from plaintiff's expert, attorney Barry H. Barnett; and other deposition and documentary evidence were before Judge Ralph W. Gallini, who entered summary judgment for defendants and dismissed plaintiff's complaint with prejudice. Judge Gallini based his ruling primarily upon a determination that the fair market value of the business was ascertained by Judge Fort and that plaintiff was not entitled to relitigate that determination. The briefs do not reveal why Judge Gallini granted summary judgment as to plaintiff's other claims for damages. In fact, defendants have informed us that they do not oppose a remand for trial to determine whether their services fell below the standard of competence and loyalty, and if so, whether that was the proximate cause of expenses incurred by plaintiff in the prior suit or of plaintiff's increased allergies due to stress. Furthermore, in order to avoid a factual dispute on this point, defendants have disclaimed, both below and on appeal, any reliance on Judge Fort's statement in his first affidavit that he was prepared to make a finding that plaintiff defrauded Tubb. Defendants have stated that they are only relying on Judge Fort's oral "finding" that plaintiff was guilty of negligent misrepresentation.
To recover on a claim of legal malpractice based on negligence, a plaintiff must prove three essential elements: (1) the employment of the defendant attorney; (2) the defendant attorney's neglect of a reasonable duty; and (3) the negligence *1090 resulted in and was the proximate cause of loss to the plaintiff. George v. Caton, 93 N.M. 370, 373, 600 P.2d 822, 825 (Ct.App. 1979); see also Sanders v. Smith, 83 N.M. 706, 709, 496 P.2d 1102, 1105 (Ct.App. 1972). As to the second element, a plaintiff must show, usually through expert testimony, that his or her attorney failed to use the skill, prudence, and diligence of an attorney of ordinary skill and capacity. Collins ex rel. Collins v. Perrine, 108 N.M. 714, 717, 778 P.2d 912, 915 (Ct.App. 1989); Diane, Inc., 102 N.M. at 552, 553, 698 P.2d at 9, 10; Rodriguez v. Horton, 95 N.M. 356, 359, 622 P.2d 261, 264 (Ct.App. 1980). Plaintiff does not deny that a misrepresentation occurred in the sale of the dealership. Rather, the crux of plaintiff's claim is that it was defendants' malpractice in representing him that proximately caused plaintiff to be sued by Tubb, and that as a result he incurred an unfavorable judgment on the contract, attorney fees, interest, loss of profits, earnings, business opportunities, and an option on a home, as well as personal injuries, mental distress and anxiety, and tax liabilities.
The principles guiding the determination of whether summary judgment was properly granted in any case are well settled in this state. "Summary judgment is a drastic remedy to be used with great caution." Pharmaseal Lab., Inc. v. Goffe, 90 N.M. 753, 756, 568 P.2d 589, 592 (1977). It is proper only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law, Paca v. K-Mart Corp., 108 N.M. 479, 480, 775 P.2d 245, 246 (1989); Koenig v. Perez, 104 N.M. 664, 665, 726 P.2d 341, 342 (1986), or when the material facts are not in dispute and the only question to be resolved is the legal effect of the facts. Savinsky v. Bromley Group, Ltd., 106 N.M. 175, 176, 740 P.2d 1159, 1160 (Ct.App. 1987). Thus, whether summary judgment was proper depends upon the peculiar facts of each case. See Goodman v. Brock, 83 N.M. 789, 793, 498 P.2d 676, 680 (1972). The party moving for summary judgment bears the burden of making a prima facie showing that no genuine issue of material fact exists. Savinsky, 106 N.M. at 176, 740 P.2d at 1160. Upon review, this court looks to the whole record and takes note of any evidence that puts a material fact in issue, and it views the matters presented in the light most favorable to support the right to trial on the issues. C & H Constr. & Paving Co. v. Citizens Bank, 93 N.M. 150, 156, 597 P.2d 1190, 1196 (Ct.App. 1979). Thus, we review all pleadings, depositions, and affidavits, and the inferences drawn therefrom, in support of the arguments of the party opposing summary judgment. See Wisehart v. Mountain States Tel. & Tel. Co., 80 N.M. 251, 453 P.2d 771 (Ct.App. 1969).
We first address the claims for damages other than the reduction in contract price. The elements of damages other than the reduction in contract price and investment opportunities based thereon are attorney fees; interest; lost profits, earnings, and business opportunities; personal injuries, including mental distress and anxiety; tax liabilities; and a lost option on a home. Plaintiff claims that these damages resulted from defendants' deficient representation of him. Based on the record before us and defendants' partial concession, we find that defendants failed to make a prima facie showing that there are no genuine issues of material fact as to these items.
The New Mexico Supreme Court has defined a prima facie showing as "such evidence as is sufficient in law to raise a presumption of fact or establish the fact in question unless rebutted." Goodman, 83 N.M. at 792-93, 498 P.2d at 679-80. Defendants have abandoned reliance on references to fraud in the first affidavit of Judge Fort, and therefore we do not consider such findings. However, for reasons set forth more fully in our discussion of collateral estoppel, we do not think it is appropriate to consider either of Judge Fort's affidavits in any case. Even were we to consider the second affidavit, neither it nor the other documents attached to the amended motion for summary judgment counter plaintiff's claims as to the non-reduction-in-contract-price damages with sufficient evidence to raise a presumption of fact or to establish his non-entitlement to recovery. If anything, the portion of plaintiff's deposition *1091 attached to defendants' amended motion for summary judgment supports plaintiff's claims with some specificity.
We recognize that further factual development of the claims may be warranted, but sparsity in the factual development of the claims is not a reason to uphold the grant of summary judgment as to these matters. See National Excess Ins. Co. v. Bingham, 106 N.M. 325, 328, 742 P.2d 537, 540 (Ct.App. 1987) (summary judgment should not be granted when the facts before the court are insufficiently developed to appropriately determine the legal issues). Furthermore, the affidavits of plaintiff's expert are sufficient rebuttal, if needed, to create a question of fact with regard to defendants' liability for these items of damage. The trial court's order granting summary judgment is reversed as to these claims, and this cause is remanded for further proceedings, including trial on the merits if necessary, on these or some of these matters. We couch our grant of relief in these terms because it is not clear to us that plaintiff can recover all of his requested elements of damages. We do not want to be misunderstood as holding that he can. These matters were not decided below in view of the trial court's grant of summary judgment on collateral estoppel grounds. Being a court of review, we do not express opinions on questions not decided below. See Miller v. Smith, 59 N.M. 235, 241, 282 P.2d 715, 719 (1955).
The remaining issue is whether, on the element of damages representing the reduction in contract price, Judge Gallini correctly applied the principle of collateral estoppel against plaintiff, based on the judgment in Tubb v. Hyden, Eddy County No. CV-86-234-F. "Collateral estoppel bars relitigation of ultimate facts or issues actually and necessarily decided in a prior suit. Under collateral estoppel, or `issue preclusion,' the cause of action in the second suit need not be identical with the first suit." Silva v. State, 106 N.M. 472, 474, 745 P.2d 380, 382 (1987). In addition to the requirement that the issue have been actually and necessarily decided, fundamental fairness requires that the party against whom estoppel is asserted had a full and fair opportunity to litigate the issue in the prior proceeding. Id. To invoke collateral estoppel, then, the moving party must show that (1) the subject matter or causes of action in the two suits are different; (2) the ultimate fact or issue was actually litigated; (3) the ultimate fact or issue was necessarily determined; and (4) the party to be bound by collateral estoppel had a full and fair opportunity to litigate the issue in the prior suit. Reeves v. Wimberly, 107 N.M. 231, 233, 755 P.2d 75, 77 (Ct.App. 1988). Even when these elements are present, the trial court must consider whether countervailing equities such as lack of prior incentive for vigorous defense, inconsistencies, lack of procedural opportunities, and inconvenience of forum militate against application of the doctrine. Id. at 235, 755 P.2d at 79; Silva, 106 N.M. at 476, 745 P.2d at 384.
New Mexico recognizes both defensive and offensive collateral estoppel. Id. Defendants here seek application of defensive collateral estoppel, which may be applied to preclude a plaintiff from relitigating an issue the plaintiff has previously litigated and lost, regardless of whether the defendant was privy to the prior suit. Id.; see also Edwards v. First Fed. Sav. & Loan Ass'n, 102 N.M. 396, 404-05, 696 P.2d 484, 492-93 (Ct.App. 1985). Defendants bear the burden of establishing the applicability of the doctrine by introducing sufficient evidence to support it. See Silva, 106 N.M. at 476, 745 P.2d at 384. Neither defensive nor offensive collateral estoppel is to be applied when the record is insufficient to determine what issues were actually and necessarily determined by prior litigation. Id.; Howell v. Anaya, 102 N.M. 583, 585, 698 P.2d 453, 455 (Ct.App. 1985).
Defendants do not deny their relationship with plaintiff, nor do they contend that their representation of both Tubb and plaintiff was free from conflict. They argue only that defensive collateral estoppel is appropriate with regard to the third prong of plaintiff's case, in which he must show that their negligence resulted in and was the proximate cause of his losses. See George, 93 N.M. at 373, 378, 600 P.2d at *1092 825, 830. Defendants argue that plaintiff is seeking to relitigate the value of the dealership and that this issue was actually and necessarily determined in Tubb v. Hyden because Judge Fort determined the fair market value of the dealership to be $621,000 if the dealership's financial condition had been properly disclosed. They argue that because plaintiff received payment equal to the fair market value, plaintiff is not entitled to recover damages for Judge Fort's reduction in the price below the original contract figure. Defendants rely in part on Judge Fort's affidavits to substantiate their claim that the fair market value was decided in the first trial.
Plaintiff argues that such reliance is erroneous because (1) the first affidavit is contradictory to the record in Tubb v. Hyden; (2) the two affidavits are inconsistent with one another, thereby raising factual questions rather than resolving them; and (3) the after-the-fact affidavit of a trial judge is not admissible in a subsequent proceeding to contradict or explain the judgment entered in a prior case. See Rodriguez v. State, 86 N.M. 535, 537, 525 P.2d 895, 897 (Ct.App. 1974) ("[w]here the testimony of a single witness conflicts on a material fact summary judgment is improper"); see also Silva, 106 N.M. at 476, 745 P.2d at 384 (collateral estoppel is not to be applied when the record is insufficient to determine what issues were actually and necessarily determined by prior litigation). Although plaintiff makes these arguments primarily to show that Judge Fort did not determine any fraud issues, we do not understand plaintiff's briefs to concede that the fair market value of the business was necessarily determined.
We agree with plaintiff's third rationale. We recognize that the supreme court has indicated that post-trial testimony or affidavits of trial judges may be appropriate in some instances. See, e.g., Collins ex rel. Collins v. Tabet, 111 N.M. 391, 405, 806 P.2d 40, 54 (1991) (recognizing policy considerations militating against calling judge as witness but indicating, under facts of case, that testimony might be appropriate to explain judge's intent and expectations in appointing defendant lawyer as guardian ad litem); Eoff v. Forrest, 109 N.M. 695, 700, 789 P.2d 1262, 1267 (1990) (considering probate judge's affidavit in suit for fraud); State v. Pothier, 104 N.M. 363, 366-67, 721 P.2d 1294, 1297-98 (1986) (when transcript of original contempt occurrence was of record, testimony of district judge before whom contempt occurred was not necessary, but "nothing prevented" defendants from calling judge as witness in later proceeding). We do not think this is such a case, however.
In Glenn v. Aiken, 409 Mass. 699, 569 N.E.2d 783, 786 (1991), the Supreme Judicial Court of Massachusetts reviewed the admission of a trial judge's affidavit in a legal malpractice case to explain how the judge would have ruled if the defendant attorney had objected to a certain instruction at trial. The court discussed "the inappropriateness of turning to such extra-record, subjective views and of summoning judges to testify on such matters," and cited the following authorities for the proposition that "[p]robing the mental processes of a trial judge, that are not apparent on the record of the trial proceeding, is not permissible." Id. (citing Day v. Crowley, 341 Mass. 666, 172 N.E.2d 251, 253 (1961); Washington v. Strickland, 693 F.2d 1243, 1263 (5th Cir.1982), rev'd on other grounds, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984); Fayerweather v. Ritch, 195 U.S. 276, 307, 25 S. Ct. 58, 68, 49 L. Ed. 193 (1904) (record ought never to be overthrown or limited by the oral testimony of a judge or juror regarding what he or she had in mind at the time of the decision); United States v. Crouch, 566 F.2d 1311, 1316 (5th Cir.1978); Morrison v. Kimmelman, 650 F. Supp. 801, 806-07 (D.N.J. 1986)). Respect for the finality of judgments makes resort to judicial affidavits particularly inappropriate when the purpose is to "`state the secret and unexpressed reasons which actuated'" a judgment. Day, 172 N.E.2d at 253 (quoting 2 Abraham C. Freeman, A Treatise of the Law of Judgments § 771 (5th ed. 1925)). In light of these authorities, consideration of Judge Fort's affidavits was error.
Defendants also contend that, even apart from Judge Fort's affidavits, the record *1093 shows that the fair market value of the dealership was litigated and decided in the first trial and therefore cannot be relitigated here. We disagree, both by consideration of the transcript of proceedings in the prior trial and by consideration of a comparison of the issues in the prior trial and the issues in this trial.
Nowhere in the portion of trial proceedings we have before us from Tubb v. Hyden does Judge Fort mention fair market value or use the terms "willing buyer" and "willing seller." Nor do the excerpts of testimony of the witnesses, for that matter. What is clear from Judge Fort's remarks is that he was seeking to find an equitable remedy which would take into account the fact that plaintiff had negligently failed to disclose an inaccuracy in the financial data and the Tubbs had allowed the business to deteriorate. In doing so, he recognized that the business was perhaps uniquely attractive to the Tubbs, that their unquestioning reliance on all the financial records they received was less than reasonable, that they had caused the business to decline, and that they should pay a price that the court determined to be fair, in light of the equities in the case. Judge Fort specifically talked about determining what the business was worth to the parties, and not simply what the calculation of its fair market value might be. The fact that Judge Fort avoided the term "fair market value" at the time of trial and when he entered the written judgment leads us to conclude that his decision was premised upon a balancing of the equities in the case, and not simply upon the fair market value of the dealership.
Additionally, the issue litigated and determined in Tubb v. Hyden involved more than whether the Tubbs were entitled to a reduction in the contract price because of the inaccurate financial data they received. It is true that the measure of damages in a case of misrepresentation is the difference between the value received and the purchase price. First Interstate Bank v. Foutz, 107 N.M. 749, 751, 764 P.2d 1307, 1309 (1988). However, in this case, Judge Fort also made adjustments in the judgment for repossession losses, costs, expenses, and attorney fees. Even if the only issue, however, had been the reduction in contract price because of the misrepresentation, the issue presented by this case is, instead, whether defendants' malpractice proximately caused plaintiff to receive less than the contract price for the dealership, and to suffer other losses, as well. These issues are not synonymous. Cf. Perrine, 108 N.M. at 719, 778 P.2d at 917 ("Malpractice actions are not attempts to set aside the prior settlement, but are entirely separate actions to recover compensation for the negligent performance of duties."); accord Bucci v. Rustin, 227 Ill. App. 3d 779, 169 Ill. Dec. 810, 813, 592 N.E.2d 297, 300 (1992) (when the plaintiff's complaint alleged that plaintiff would not have been found guilty of fraud except for the attorneys' negligent representation, the defendant attorneys could not use finding of fraud to establish that their legal representation was not proximate cause of result in case, and this issue is not whether the plaintiff was fraudulent, but whether the attorneys' negligence was proximate cause of bankruptcy court's finding); Virsen v. Rosso, Beutel, Johnson, Rosso & Ebersold, 356 N.W.2d 333, 335 (Minn. Ct. App. 1984) (legal malpractice action is not an action to vacate or set aside settlement in underlying case, but an independent action sounding in negligence).
While the amount of the judgment in Tubb v. Hyden may be relevant in determining plaintiff's damages in this case, it does not necessarily represent the value of the business or the outer limit of what plaintiff might be entitled to recover for the loss of the contract price. For instance, plaintiff has averred that he would never have willingly sold the business for $621,000, even had the error in data been pointed out to him prior to execution of the contract. There was evidence to show that the Tubbs were eager to purchase the dealership, and that they had inquired about it more than once. It may be that plaintiff will be able to show that the dealership had particular value to them and that they or some other buyer would have paid something less than $920,000, but more than $621,000, notwithstanding the accounting discrepancy.
*1094 The measure of damages in a malpractice case is the amount a plaintiff would have received but for the attorneys' negligence. Cf. Perrine, 108 N.M. at 719, 778 P.2d at 917 (measure of damages in legal malpractice suit is amount of the judgment that could have been recovered but for the attorney's negligence in settlement of claim); George, 93 N.M. at 378, 600 P.2d at 830 (measure of damages in case charging the attorney's negligence in failure to timely prosecute claim is amount that would have been recovered by the client absent the attorney's negligence). Of course, the defendants in such a case are also entitled to show that the amount the plaintiff actually received was due to reasons other than their malpractice. Thus, both plaintiff and defendants in this case are entitled to have a jury determine whether plaintiff was deprived of the contract price of the dealership and suffered damages as a result of his own negligence, his attorneys' malpractice, or as a result of the combination of these two factors. See Trujillo v. Treat, 107 N.M. 58, 60, 752 P.2d 250, 252 (Ct.App. 1988) (generally, proximate cause questions are issues of fact to be decided by the jury); see also Scott v. Rizzo, 96 N.M. 682, 687, 634 P.2d 1234, 1239 (1981) (adopting the doctrine of comparative negligence in New Mexico).
For the foregoing reasons, the order granting summary judgment and dismissing plaintiff's complaint is reversed, and this cause is remanded for trial on the merits as to all issues.
IT IS SO ORDERED.
CHAVEZ, J., concurs.
HARTZ, J., specially concurs.
HARTZ, Judge (specially concurring).
I concur in the reversal of the summary judgment. I regret that I cannot join in the able opinion of Judge Pickard. I have no particular quarrel with the legal analysis in the opinion and fully agree with the discussion of the inappropriateness of the judicial affidavits in this case. Nevertheless, the parties' briefs on appeal have made concessions on the principal matters discussed in the opinion. We should honor those concessions.
First, as I read Plaintiff's briefs, he does not contest that the value of the business was actually and necessarily determined in the first trial. He contends, rather, that in the first trial the value issue was not "actually litigated" and he did not have a "full and fair opportunity" to litigate the issue.
Plaintiff's argument that the value issue was not "actually litigated" focuses on the dearth of evidence on the matter presented at the first trial. But how active the parties were in presenting evidence is not the test of whether a matter was "actually litigated." As stated in Restatement (Second) of Judgments Section 27 cmt. d (1980): "When an issue is properly raised, by the pleadings or otherwise, and is submitted for determination, and is determined, the issue is actually litigated within the meaning of this Section." By that test Plaintiff's contention fails. Although the parties may have concentrated their efforts on whether rescission was proper, the pleadings ask for damages for misrepresentation, one element of which is the difference between the contract price and the fair market value. This is not a matter that was stipulated to by the parties or conceded by one of the parties. See id. cmt. e.
I am persuaded, however, by Plaintiff's other argument. Plaintiff raises an appropriate ground for denying collateral estoppel in the discussion of his claim that he was denied a "full and fair opportunity" to litigate the value issue in the first trial. His deposition testimony indicates that it was through the fault of Defendants that he failed to put on expert testimony regarding the value of the business. If Defendants were responsible for a substandard presentation of Plaintiff's case with respect to value at the first trial, Plaintiff should not be collaterally estopped in this malpractice action against Defendants by a finding on the value issue at the first trial. Collateral estoppel should not be a weapon to protect one against his or her own wrongdoing. See id. § 29(8) (collateral estoppel should not be permitted when "compelling circumstances make it appropriate" to permit relitigation); Bucci v. Rustin, 227 Ill. App. 3d 779, 169 Ill. Dec. 810, 592 N.E.2d 297 (1992). Although there may be *1095 doubt whether (1) conduct by Defendants could have caused the attorney who represented Plaintiff in the first trial to fail to put on expert testimony regarding value or (2) competent counsel would necessarily have called an expert witness on value, Defendants' brief does not claim the absence of a factual dispute on these matters. Thus, summary judgment was inappropriate with respect to collateral estoppel.
Because Defendants offer no ground in support of any portion of the summary judgment other than the collateral-estoppel ground, there is no need for this court to determine whether there is an independent ground supporting any portion of the summary judgment. Therefore, I concur in reversal of the entire summary judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2419883/ | 997 S.W.2d 908 (1999)
BROOKSHIRE BROTHERS, INC., Appellant,
v.
Carl Dean LEWIS, Appellee.
No. 09-97-295CV.
Court of Appeals of Texas, Beaumont.
August 26, 1999.
Submitted February 18, 1999.
Decided August 26, 1999.
*910 Curtis W. Fenley, III, Fenley & Bate, LLP, Lufkin, for appellant.
Margaret Alexander, Conroe, David E. Keltner, Karen S. Precella, Jose, Henry, Brantley & Keltner, Fort Worth, Steve Young, John Tavormina, Helm, Pletcher, Bowen & Saunders, for appellee.
Before WALKER, C.J., BURGESS, and STOVER, JJ.
*911 OPINION
STOVER, Justice.
Carl Dean Lewis ("Lewis") sued his employer, Brookshire Brothers, Inc. ("Brookshire"), for injuries he sustained while working in the meat department of one of Brookshire's grocery stores. Trial was to a jury, and damages in the sum of $300,000 were awarded. Judgment was rendered by the trial court in favor of Lewis. Brookshire brings ten points of error on appeal. We will affirm.
Lewis began working for Brookshire in 1984. He was initially hired as a meat cutter and was later promoted to the position of head meat cutter and meat market manager. On July 9, 1990, while at work, he injured his back by lifting a sausage case. The injury consisted of a herniated disc requiring back surgery. On October 8, 1990, following his recovery from surgery, Lewis returned to work on light duty status. On June 10, 1991, he was given a release to return to full duty.
Shortly after being released to full duty, Lewis suffered a second back injury while putting meat into a meat grinder.[1] Lewis testified that on that day, Brookshire was having a sale on ground beef. The meat department was short on staff, and Lewis testified the employees had "picked up an enormous amount of lugs because [the store] sold a lot of ground beef, a tremendous amount."[2] Because of the second injury, Lewis suffered from a herniated disc and had to have a second surgery on September 24, 1991.
In January of 1992, Lewis returned to work on a "pencil and paper" light duty restriction. In February of 1993, thirteen months after he had returned to work, Lewis was experiencing severe pain. He was told by his doctors that he would need a third surgery. After the surgery, following his doctor's advice, he did not return to work.
PROXIMATE CAUSE
We first consider points of error three, four, and five wherein Brookshire argues the evidence is legally and factually insufficient to support proximate causation.
Standard of Review
"In reviewing the evidence under a noevidence point, we consider all the evidence in the light most favorable to the prevailing party, indulging every reasonable inference in that party's favor." Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 285-86 (Tex.1998). The reviewing court is to determine whether the evidence as a whole rises to a level that would enable reasonable and fair-minded people to differ in their conclusions. See id. at 286; Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 922 (Tex.1998). The evidence presented, viewed in the light most favorable to the prevailing party, must permit the logical inference that the jury must reach. See CAT Contracting, 964 S.W.2d at 286.
In conducting a factual sufficiency review, an appeals court "must consider and weigh all of the evidence, not just that evidence which supports the verdict." Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex.1998), cert. denied, ___ U.S. ___, 119 S. Ct. 541, 142 L. Ed. 2d 450 (1998) (citing Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex.1996)). The verdict can be set aside only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. See id.; Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). The court of appeals is not a fact finder. Accordingly, it may not pass upon the witnesses' credibility or substitute its judgment for that of the jury, even if the evidence clearly supports a different result. See Maritime Overseas, 971 S.W.2d at 407; Pool v. Ford Motor Co., 715 S.W.2d 629, 634 (Tex.1986).
*912 Analysis
Brookshire is a nonsubscriber under the Texas workers' compensation law. See TEX. LAB.CODE ANN. § 406.001-406.165 (Vernon 1996 & Supp.1999). Thus, it is responsible for work-related injuries under common law principles of negligence. See Werner v. Colwell, 909 S.W.2d 866, 868 (Tex.1995). To establish negligence, a plaintiff must produce evidence to establish a duty, a breach of that duty, and damages proximately caused by the breach. See id. at 869.
Although an employer is not an insurer of its employees' safety, the employer does have a duty to use ordinary care in providing a safe work place. See Leitch v. Hornsby, 935 S.W.2d 114, 117 (Tex.1996); Werner, 909 S.W.2d at 869. This duty is non-delegable and encompasses a duty to provide rules and regulations for the safety of employees, to furnish safe machinery and instrumentalities, and to select careful and competent fellow servants. See Burk Royalty Co. v. Walls, 616 S.W.2d 911, 923-24 (Tex.1981); Kroger Co. v. Keng, 976 S.W.2d 882, 885 (Tex. App.Tyler 1998, pet. filed); Woodlawn Mfg., Inc. v. Robinson, 937 S.W.2d 544, 548 (Tex.App.Texarkana 1996, writ denied).
"Proximate cause consists of cause in fact and foreseeability." Leitch, 935 S.W.2d at 118 (citing Farley v. M M Cattle Co., 529 S.W.2d 751, 755 (Tex.1975)). The test for cause in fact is whether the negligent act or omission was a substantial factor in bringing about the injury, without which the harm would not have occurred. See Prudential Ins. Co. of America v. Jefferson Assoc., Ltd., 896 S.W.2d 156, 161 (Tex.1995); Havner v. E-Z Mart Stores, Inc., 825 S.W.2d 456, 458-59 (Tex.1992). Cause in fact is not shown if the party's negligence did no more than furnish a condition that made the injury possible. Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 477 (Tex.1995) (citing Bell v. Campbell, 434 S.W.2d 117, 120 (Tex. 1968)). "The evidence must go further, and show that such negligence was the proximate, and not the remote, cause of resulting injuries ... [and] justify the conclusion that such injury was the natural and probable result thereof." Id. (quoting Carey v. Pure Distrib. Corp., 133 Tex. 31, 124 S.W.2d 847, 849 (Tex.1939)). "In other words, even if the injury would not have happened but for the defendant's conduct, the connection between the defendant and the plaintiff's injuries simply may be too attenuated to constitute legal cause." Id.
"Foreseeability requires only that the general danger, not the exact sequence of events that produced the harm, be foreseeable." Walker v. Harris, 924 S.W.2d 375, 377 (Tex.1996). The danger of injury is foreseeable if its "general character ... might reasonably have been anticipated." See Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 551 (Tex.1985). "The foreseeability of a back injury in connection with regular lifting of heavy objects is judged by a reasonable person standard." Leitch, 935 S.W.2d at 119.
Causation
Brookshire argues there was no evidence to establish causation. Lewis testified he injured his back at work while he was dumping a lug of meat into a grinder. Dr. Arthur Evans, the surgeon who performed all three of Lewis' surgeries, testified that the history of heavy lifting was sufficient to make the correlation that Lewis injured his back at work. Timothy Kellerman, a meat cutter who worked with Lewis on a daily basis, was working with Lewis on the day of the second injury. He testified he was ten or fifteen feet away, "actually standing there watching [Lewis]." After lifting the lug, Lewis said to Kellerman, "Well, I blew my back out again...." From Lewis' expression, Kellerman could tell Lewis was in pain.
An accident report, made after the second injury, shows that Lewis injured his back while at work. The report, which was signed by store manager Jerald Johnson, states the "[m]arket was short handed *913 on accident date due to one man on vacation & one man quit that day without notice. [Lewis] had to work harder than usual & back became sore." The report additionally indicates the accident occurred by "lifting a lug of hamburger meat." In deposition testimony, Johnson again reported that Lewis was injured while grinding hamburger meat. Brookshire, in admissions read into the record at trial, admitted that Lewis' "back started hurting after picking up lugs of meat for the grinder."
Foreseeability
Adequate Staffing
As part of his negligence claim, Lewis alleged Brookshire did not have sufficient staffing in the meat departmentan inadequacy which, Lewis claimed, was a cause of his injury and which made the injury foreseeable. In contrast, Brookshire contends Lewis' injury was not foreseeable because sufficient help was available, yet Lewis proceeded to do the work without asking for assistance. It additionally argues that it cannot be held liable for Lewis' injuries because Lewis was the manager of the meat department and held the responsibility of staffing and scheduling. See, e.g., Allsup's Convenience Stores, Inc. v. Warren, 934 S.W.2d 433 (Tex.App. Amarillo 1996, writ denied) (where manager of store injured her back unloading packages from delivery truck, after worker who was scheduled to unload truck had failed to report to work, employer was not negligent because manager was solely responsible for scheduling).
An employer has "an obligation to provide adequate help under the circumstances for the performance of required work." Werner, 909 S.W.2d at 869. The employer is not liable, however, when help has been provided and an injury results from the actions of the employee who voluntarily proceeds to do the work without assistance. Western Union Tel. Co. v. Coker, 146 Tex. 190, 204 S.W.2d 977, 979 (Tex.1947). See, e.g. Fields v. Burlison Packing Co., 405 S.W.2d 105 (Tex.Civ. App.Fort Worth 1966, writ ref'd n.r.e.) (employer not liable where worker voluntarily lifted tub of hamburger meat when help was available). Likewise, there can be no recovery on the theory that the number of employees was temporarily inadequate, unless it is shown that the inadequacy was known, actually or constructively, to the employer. Western Union, 204 S.W.2d at 979.
During the time period of Lewis' injury, the meat department had four employees who worked as meat cutters: Lewis, Kellerman, Quentin Northrup, and Alvis Bryant. In addition, the department was staffed with an apprentice and a meat wrapper. Randy Deal, Brookshire's meat merchandiser, had the responsibility of traveling to the various stores to consult with the meat market supervisors on scheduling. However, it was Lewis' responsibility, as the meat market manager, to determine the meat market's staff schedule. Lewis testified, however, that his manager determined the number of hours the employees worked.
If a situation arose where the meat department was short on help, Lewis would be required to ask for assistance. He would contact Deal who would make arrangements to find a replacement. Bryant testified that there were times when they were shorthanded and they would just do what they had to do to get the work done. Kellerman testified that if the department was short on help, "you [had] to do the work of another person." Store manager Johnson testified there were enough employees to handle the work load, and that employees would work overtime "if the sales were ... great."
On the day of Lewis' second injury, the meat department was inadequately staffed with less than the normal crew. Bryant was on vacation, and Northrup, without warning, quit his job and failed to show up for work on that particular day. As a result, the only meat cutters present at work were Lewis and Kellerman. Johnson testified that when Northrup failed to report to work, the meat department was *914 left shorthanded with no employees available to work in his place.
Although there is no evidence that Northrup's action in failing to report to work was foreseeable, there was evidence that the meat department was inadequately staffed prior to that particular day. Lewis testified the department was shorthanded prior to that day, and Bryant testified that Lewis had made requests for extra help. Deal testified he did not remember if Lewis complained to him that they were short of staff, and Johnson testified he did not remember discussing staffing with Lewis' supervisors until after the date that Northrup quit.
Following the second surgery, while on light duty status with doctor mandated restrictions, Lewis again made requests for additional help because his back was bothering him. The staff was not increased. Lewis testified he had to work in excess of his restricted forty hours per week and was sometimes required to lift in excess of the thirty-five pound weight restriction because of the lack of help. Lewis testified that he had spoken with Robert Gilmer, Brookshire's risk manager, about how they were putting too much work on him, and Gilmer told Lewis "he did not want to hear it." Lewis recalled a conversation he had with Johnson, in which Johnson told him he had spoken with supervisors about Lewis' need for more help and had informed them that Lewis "shouldn't [be] in the position because [he] had had a previous back surgery."
Usual and Customary Duties
Brookshire also argues the injury was not foreseeable because Lewis "was performing functions and activities specifically within his job description and as a part of the normal duties of his position at the time of his injury." The activity of grinding meat, one of Lewis' job functions, was one that occurred numerous times a day, every day of the market's operation.
Brookshire cites Great Atlantic & Pacific Tea Co. v. Evans, 142 Tex. 1, 175 S.W.2d 249, 251 (Tex.1943) to support its argument that "[r]equiring an employee to perform customary work for a grocery store that the employee was accustomed to doing without injury is not negligence." In Great Atlantic, the Texas Supreme Court found that requiring a stock boy to carry sacks of potatoes weighing 100 pounds without assistance was not negligence where the employee was a "strong, robust, young man" and was merely required to perform work he had done for several months before this occasion. Id. The case at bar is distinguishable. The evidence reflects that the day of Lewis' second injury was not a typical, normal day. The store was having a sale on hamburger meat. One employee had failed to show up for work, leaving the meat department with only two meat cutters to supply the meat department with ground meat. Bryant testified that three people were adequate to run the market safely, but when they would have a hamburger sale, they would be "more busy than ever." Lewis testified they sold "an incredibly large amount of ground beef." He stated it was a "constant battle all day long."
Safe Equipment
Brookshire additionally argues there was no evidence that the work required of Lewis was dangerous or that Brookshire should have anticipated any injury from the task assigned. An employer has a duty to provide its employees with a reasonably safe place to work and to furnish the necessary appliances or equipment to enable the employees to perform the work requested with reasonable safety. See Harrison v. Harrison, 597 S.W.2d 477, 482 (Tex.Civ.App.Tyler 1980, writ ref'd n.r.e.); J. Weingarten, Inc. v. Sandefer, 490 S.W.2d 941, 944 (Tex.Civ.App.Beaumont 1973, writ ref'd n.r.e.).
On the day of his second injury, Lewis was grinding hamburger meat. He stated he picked up a full lug, raised it up to the grinder, flipped it, and dropped the meat into the grinder. The lug was at face level when he flipped it. He immediately felt a sharp pain in his back.
*915 The grinder in Brookshire's meat market was a Hobart mixer-grinder. Although Brookshire had never conducted an evaluation of the job activity of meat grinding, Gilmer testified the task did not pose an unreasonable risk, and the equipment was designed by the manufacturer with safety features built in. Deal testified this particular grinder is in every Brookshire market.
The process of grinding the meat, a one person task, begins with placing the meat trimmings into a plastic pan called a lug. The employee lifts the lug, leans over the grinder, and then flips the lug to drop the meat into the grinder. After going through the grinder, the ground meat falls into a second lug, which is placed on crates next to the grinder. The same batch of meat is usually ground twice. After the meat goes through the first time, the lug gets filled to the top, and the worker repeats the process of dumping the meat into the grinder.
William Purcell, a professional safety engineering consultant and certified safety professional, gave an additional description of the grinding process. He stated the actions in getting the meat into the grinder require repetitive movements. The worker bends down, reaches away from the body, grabs the lug, moving it horizontally to pick it up, stands up, raises the pan up as far as possible with his shoulders, changes the grip, and then raises the lug higher to dump the meat into the grinder.
The evidence varied as to how much a lug of meat would weigh. Although he was unsure of the exact weight, Lewis testified the lug he lifted when his back was injured was a full lug, weighing approximately sixty to seventy pounds. The accident report stated it weighed forty to sixty pounds. Kellerman testified a lug would hold forty to sixty pounds depending on the type of meat, but if the lug were full, it might weigh as much as seventy to seventy-five pounds. Johnson testified it would weight forty to sixty pounds when full. Deal testified it was a common procedure to dump a fuller lug into the grinder. Bryant also stated lugs were usually filled to the top. Purcell testified that the maximum load for a safe lift, based on Lewis' size, would be twenty-seven pounds. He stated a full lug would weigh approximately sixty to seventy-five pounds, which would be approximately three times over a safe lifting limit.
Deal testified that in an average store, one and a half to two hours a day would be spent grinding. Johnson testified that twelve to sixteen lugs would be ground per day; the same person, however, does not necessarily do all the grinding. Johnson also stated that with a sale going on, an employee might lift a lug fourteen to sixteen times.
Purcell further testified the work Lewis was performing was unsafe. He stated that by reducing the size and volume of the lug, the risk would be reduced. He suggested a solution would be to "simply reduce the pan size ... so that the weight is controlled." Purcell recommended Brookshire could also make a platform for the worker to stand on so that he does not have to lift so high.
Although Purcell stated he did not have knowledge of a grocery industry standard for these particular lifting requirements, he was familiar with Kroger's 1991 standards. Kroger had a maximum lift limit of forty pounds, with the load being lifted between mid-thigh and the shoulders. Purcell stated it would have been very simple for Brookshire to reduce the risks associated with this task to a "nominal risk." He concluded that a prudent grocery store would have taken action to control the hazards associated with lifting above the shoulders.
Conversely, Brookshire's expert witness, Michael Frenzel, a board certified safety professional, testified the job site was a reasonably safe work place with "an acceptable level of risk." He testified that although the meat cutter position had an acceptable level of risk, it is not possible to engineer out every conceivable risk that is part of the job. He stated Brookshire had *916 identified and controlled the hazards associated with lifting the lug and grinding the meat with the application of engineering and administrative controls. Frenzel stated that one such engineering control was to reduce the weight of the lug. He testified the lugs used at Brookshire's have good handles, are a convenient size, and are not overly large. He estimated that a full lug would weigh approximately fiftythree pounds. He disagreed with Purcell's weight lifting limit of twenty-seven pounds, recommending instead a weight restriction of sixty-two pounds. However, with engineering and administrative controls, he opined that a maximum permissible weight limit of eighty-two pounds would be acceptable. In Frenzel's opinion, assuming Lewis was on full duty, "what [Lewis] was assigned to do was perfectly safe and in his capability to do."
Frenzel also testified that the method involved was not unsafe. He stated the activity of lifting a lug and putting the meat into the grinder, if done correctly, is not an unsafe activity. He explained how placing the lugs on top of crates to raise the lug higher resulted in less stress on the lifter. Although he admitted that Lewis hurt his back while "flipping" the lug, he stated that in doing so, Lewis did not breach common safety practices. He stated that flipping the lug poses minimal risk to the lower back. In his opinion, the greater risk is associated with bending to pick things up. Frenzel testified that from a safety standpoint it would be better to lower the top of the grinder; however, it would not necessarily reduce the risk because the worker would then have to stoop lower to collect the meat when it came out of the grinder.
Frenzel additionally testified that it was Lewis' responsibility to use judgment in assessing the weight of the lug and matching that weight to his lifting capabilities. In Frenzel's opinion, assuming full functional capacity, Lewis followed safe lifting practices; however, either he violated his restrictions or "he didn't assess his physical ability to handle the load based on his knowledge of his back on that day...."
Safety Rules and Regulations
Brookshire further asserts that Lewis' injury was not foreseeable because Brookshire had provided training to its employees, including proper instructions on lifting techniques, and had maintained a system of safety meetings to discuss and implement safety issues. An employer has a duty to establish and enforce safety rules so that an employee may perform assigned duties with reasonable safety. See Sandefer, 490 S.W.2d at 944. This duty includes a requirement to instruct employees in the safe use and handling of products and equipment used in and around an employer's premises or facilities. See Cabrera v. Delta Brands, Inc., 538 S.W.2d 795, 797 (Tex.Civ.App.-Texarkana 1976, writ ref'd n.r.e.).
Brookshire's safety program was implemented in 1990, prior to Lewis' first injury. This program consisted of a policy and procedure manual, an employee handbook, a safety poster program, safety videos, and weekly safety meetings. One video in particular gave instructions on proper lifting techniques. It pertained to store-wide safety, however, and did not specifically address the meat department.
Lewis testified he had attended Brookshire's safety meetings. He stated that although he had received training on proper lifting in general, the safety classes did not provide instructions on how to load meat into a meat grinder. Bryant also testified that the safety films did not have instructions or safety requirements for lifting a lug of meat and putting it into the grinder, nor had he seen any written safety rules specifically regarding lifting the meat.
Deal testified that employees were given general instructions on using back supports and "lifting with your legs." Gilmer testified the written safety rules were general safety warnings instructing the employees to stay alert to any situation that might become a safety hazard. He testified there were no written safety rules regarding lifting. He stated the safety *917 video the employees were required to watch dealt with lifting in general. It did not address lifting meat into a meat grinder. Gilmer stated that although he had conducted a review of the meat department, the company had never conducted an analysis of the risks associated with lifting meat to a grinder.
Purcell testified that Brookshire's safety manuals, rules, and program did not address how an employee is to lift at or above the shoulder level. He stated that Brookshire should have provided its employees with warnings or instructions on how to lift the meat, and he did not find any evidence that they had done so. In Purcell's opinion, this was a hazard that should have been addressed by the store. Frenzel stated that the supervisors are responsible for safety, but "we have to trust and rely on the employee to do what he has been told to do and trained to do." Frenzel acknowledged, however, that Brookshire had no written instructions on lifting meat.
Restrictions placed upon Lewis
Brookshire additionally complains that Lewis undertook the activities of the job despite the restrictions placed on him. After his first surgery, Lewis returned to work in October of 1990, on a light duty work restriction. In June of 1991, his doctor released him to return to full duty. Deal testified that a full duty release means an employee can do everything, including lifting a full lug. In July or August of 1991, shortly after Lewis received a full release, his second injury occurred.
Gilmer testified that Lewis failed to follow the restrictions placed upon him by Brookshire, which were more restrictive than those of the doctors. Although Gilmer could not remember exactly what those restrictions were, he did recall that he had given Lewis general instructions "to be careful." He testified it was difficult to keep Lewis within the restrictions and that Lewis did not exercise judgment based on the instructions he had. Deal testified that he "constantly" had discussions with Lewis about whether he was following the restrictions, that he notified Gilmer of the problem, and that he had given Lewis a warning to follow his doctor's restrictions.
Lewis testified that prior to the second injury, he tried to stay within the guidelines of the restrictions; however when the work had to be done, there were times he exceeded the restrictions because he had to complete tasks when no one else was available to do them. Gilmer testified Lewis was a hard worker. Deal testified Lewis was respected for producing good products. He stated Lewis was "going to do the things ... that he needed to do." Johnson also testified that Lewis was conscientious and sometimes when he was on light duty he would "try to do more than he should."
In January 1992, following the second surgery, Gilmer informed Lewis that he was to report to work. Lewis testified that, at that time, he had not been released by his doctors, and did not feel he was ready to return to work. Placed on a "pencil and paper" light duty restriction, Lewis was told to manage the meat market, working only the hours he could tolerate. Following his return to work, his doctor released him for light duty on January 21, 1992. He was not to lift more than thirty-five pounds, not to work more than forty hours per week, and not to do any repetitive bending or stooping. Lewis testified these light duty restrictions were exceeded because of inadequate staffing.
Summary and Conclusion
The evidence supports Lewis' theory that one of the causes of his injury was the result of an inadequate support staff. Furthermore, the evidence reveals the danger created by the inadequacy in staffing was foreseeable. Although the evidence of whether Lewis made requests for additional help is conflicting, the record reveals testimony from which a jury could determine that Brookshire had actual or constructive knowledge of an inadequate staff. Additionally, although Brookshire *918 contends the injury was not foreseeable because Lewis was responsible for scheduling, the evidence indicates his authority in that area had limitations. Lewis' ability to schedule employees was restricted by the oversight of Deal. Although Lewis had the responsibility of determining the employees' work schedule, he had no authority to increase their hours. In addition, he had no authority to hire new employees. If the department was short staffed, his only recourse was to contact Deal who would hire a new employee or borrow an employee from the meat department of another store.
The record contains conflicting evidence pertaining to the safety of the activity of grinding meat. There was ample evidence, however, from which the jury could infer that the activity was unsafe. The weight of a full lug, the height of the grinder, and the effect of "flipping" the lug, were all associated with an increased risk of injury. The lack of specific lifting instructions pertaining to the meat department, and grinding of meat in particular, further increased the risk of injury and made that risk foreseeable. See, e.g., Truco Properties, Inc. v. Charlton, 749 S.W.2d 893, 895-96 (Tex.App.Texarkana 1988, writ denied) (where housekeeper was given only general lifting instructions, it was foreseeable that she might improperly lift a bucket used in performing her duties); Cabrera, 538 S.W.2d at 799 (employer was negligent in failing to specifically instruct employee of the manner in which to move sheet of metal).
Although the evidence regarding Lewis' restrictions was conflicting, there was ample evidence from which the jury could infer that Lewis was forced to exceed the restrictions imposed upon him because of the lack of an adequate support staff. Indeed, the testimony of Brookshire's supervisors, that Brookshire had placed restrictions on Lewis that were more restrictive than those of his doctor's, supports the inference that Brookshire was aware of the possibility of a subsequent injury.
The case of Brookshire Brothers, Inc. v. Wagnon, 979 S.W.2d 343 (Tex.App.Tyler 1998, pet. filed), is factually similar to the case at bar. In that case, an employee of Brookshire's meat department injured his back while moving boxes of meat from a pallet to a cart. The employee claimed Brookshire failed to provide him with a safe workplace. Id. at 347. Brookshire asserted the injury was not foreseeable because the employee was performing his regular duties at the time of the injury. Id. at 349. Among the evidence that the Wagnon court concluded was sufficient to find a foreseeable injury was the following: expert testimony revealed the maximum permissible lift by the "strongest, best-trained worker" was 64.7 pounds; the combination of the weight of the box and the method of lifting posed a threat of injury; Brookshire should have reduced the weight of the boxes; a "team lifting procedure" should have been required; simple instructions would have reduced the risk of injury; the employee had not been trained with specific instructions on lifting; and the employee asked for additional help that was not provided. Id. at 349-50.
In Werner, 909 S.W.2d at 869, the Texas Supreme Court made it clear that even when an employee is performing regular duties, an act or omission by an employer may be actionable if the job itself is unusual or poses a threat of injury. The present case is a prime example. Although Lewis was performing a job function that was included in his normal, routine duties, the evidence supports an inference that the job posed a threat of injury. The following evidence supports an inference that a possible injury was reasonably foreseeable: the department was inadequately staffed; there was a sale on ground beef making the department extremely busy on the particular day of Lewis' injury; Lewis was never given specific instructions pertaining to lifting activities involved with the meat department; and the equipment Lewis used to perform his duties was not reasonably safe, specifically the lug weight and grinder height.
*919 We find the evidence is legally and factually sufficient to support proximate causation. Viewing the evidence in a light most favorable to Lewis, the evidence supports the inference that a general danger was reasonably foreseeable to Brookshire. As the trier of fact, the jury is the sole judge of the credibility of witnesses and the weight attached to their testimony. See Maritime Overseas, 971 S.W.2d at 407; Pool, 715 S.W.2d at 634. Although there is conflicting evidence in this case, we cannot substitute our judgment for that of the jury. Id. Therefore, considering and weighing all the evidence, the verdict is not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Brookshire's third, fourth, and fifth points of error are overruled.
COMPARATIVE NEGLIGENCE
In its first point of error, Brookshire argues "the trial court erred in denying Brookshire's request to reduce the judgment by Lewis' portion of negligence." The trial court submitted a charge that asked the jury to determine the negligence, if any, of each party, and then instructed the jury to apportion the parties' respective fault. Fifty percent negligence was allocated to Brookshire and fifty percent to Lewis. The jury awarded $200,000.00 for past and future physical pain and mental anguish, and $100,000.00 for past and future physical impairment. Brookshire submitted a motion for judgment arguing that under Texas' comparative responsibility statute,[3] the damages assessed must be reduced by Lewis' portion of negligence. In its final judgment, the court did not reduce the $300,000.00 damage award. On appeal, Brookshire contends the trial court erred in not applying the jury's findings of comparative causation to reduce the award by Lewis' portion of negligence.
The Tyler Court of Appeals has recently addressed this specific issue:
In an action against a nonsubscriber, it is not a defense 1) that the employee was guilty of contributory negligence; 2) that the employee assumed the risk of injury or death; or 3) that the injury or death was caused by the negligence of a fellow employee. TEX. LAB.CODE ANN. § 406.033 (Vernon 1996). The employer may only defend the action on the ground that the injury was caused by an act of the employee intended to bring about the injury or while the employee was in a state of intoxication. Id. In other words, the employer's only defense may be that it was not negligent in causing the injury or that its employee was the sole proximate cause of the injury. Holiday Hills Retirement and Nursing Center, Inc. v. Yeldell, 686 S.W.2d 770, 775 (Tex.App.Fort Worth 1985), rev'd on other grounds, 701 S.W.2d 243 (Tex.1985). The Worker's Compensation Act clearly seeks to exclude from jury consideration any issue submitting an employee's fault, negligence, or responsibility, other than sole proximate cause. We hold that in an employee's suit against a nonsubscribing employer, comparative negligence is not applicable and should not be submitted to the jury. See Id.
Wagnon, 979 S.W.2d at 347 (emphasis added). See also Keng, 976 S.W.2d at 892; Torres v. Caterpillar, Inc., 928 S.W.2d 233, 237 n. 3 (Tex.App.San Antonio 1996, writ denied) ("Since [appellee] was a non-subscribing employer, contributory negligence was not a defense, and, therefore, the trial court properly disregarded the percentage causation the jury attributed to [appellant's] negligence in awarding damages against [appellee]."); Holiday Hills Retirement and Nursing Center, Inc. v. Yeldell, 686 S.W.2d 770, 774-75 (Tex.App.Fort Worth 1985), rev'd on other grounds, 701 S.W.2d 243 (Tex.1985) ("[I]n employees' suits against a non-subscribing employer to the Compensation law, comparative *920 negligence is not applicable and should not be submitted to the jury."). But see Byrd v. Central Freight Lines, Inc., 976 S.W.2d 257 (Tex.App.Amarillo 1998), pet. denied, 992 S.W.2d 447 (Tex.1999) (holding comparative negligence is an element of an employee's action against an employer who is not a subscriber to Workers' Compensation).[4]
We agree that in suits against an employer who is a non-subscriber to Workers' Compensation, comparative negligence is not applicable.[5] The trial court did not err in failing to reduce the award by Lewis' proportion of negligence. Brookshire's first point of error is overruled.
OFFSET
Prior to the court's final judgment, Brookshire submitted a motion for judgment arguing it was entitled to an offset for funds paid to medical providers on Lewis' behalf and for payments paid directly to Lewis for lost wage indemnity.[6] In its second point of error, Brookshire argues the trial court erred in denying its request.
An offset against damages "applies to prevent a plaintiff from obtaining more than one recovery for the same injury." Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex.1991). The jury awarded zero dollars for lost wages and was not asked to award damages for medical expenses. Therefore, Lewis did not receive a double recovery. As such, Brookshire is not entitled to an offset.[7] Point of error two is overruled.
EXPLANATORY INSTRUCTIONS
In its sixth point of error, Brookshire contends the trial court erred in refusing to submit certain explanatory instructions.[8] We review a trial court's refusal to submit a jury instruction under *921 an abuse of discretion standard. See Thomas v. Oldham, 895 S.W.2d 352, 360 (Tex.1995). The Texas Rules of Civil Procedure require a trial court to "submit such instructions and definitions as shall be proper to enable the jury to render a verdict." TEX.R. CIV. P. 277. "The trial court is given wide latitude to determine the propriety of explanatory instructions and definitions." H.E. Butt Grocery Co. v. Bilotto, 985 S.W.2d 22, 23 (Tex.1998) (citing Mobil Chem. Co. v. Bell, 517 S.W.2d 245, 256 (Tex.1974)).
When the trial court refuses to submit a requested instruction or definition, our review is focused upon the issue of whether the request was reasonably necessary to enable the jury to render a proper verdict. See TEX.R. CIV. P. 277; Vinson & Elkins v. Moran, 946 S.W.2d 381, 405 (Tex.App.Houston [14th Dist.] 1997, writ dism'd by agr.). Brookshire contends the following refused instructions were necessary:
Once an employer has furnished a safe way for an employee to do a job, the employer has no duty to provide a second safe way.
An employee cannot complain if an employer merely requires an employee to do the usual and customary work required of persons in his line of employment, or required by the character of the business in which he was employed. Where an employer has provided a safe means of accomplishing a task, it is unreasonable to foresee that an employee will choose to perform the task in an unsafe manner.
An employer is not liable when it has provided help and injury results from the act of the employee in voluntarily proceeding to do the work without assistance. The same is true when sufficient help is nearby and available and the employee does the work alone without seeking or asking for assistance.
Brookshire argues that by permitting a broad form instruction of negligence without the above listed explanations regarding the respective duties of the employer and employee, the trial court improperly shifted the burden of proof to the employer. We disagree. The trial court's charge need not and should not burden the jury with surplus instructions. See Acord v. General Motors Corp., 669 S.W.2d 111, 116 (Tex.1984). "The only function of an explanatory instruction in the charge is to aid and assist the jury in answering issues submitted." Union Oil Co. of Cal. v. Richard, 536 S.W.2d 955, 957 (Tex.Civ.App.Beaumont 1975, writ ref'd n.r.e.). The trial court is required to give definitions of legal and technical terms. Id. at 958. Anything else, however interesting or relevant to the case in general, that does not aid the jury in answering the issues, must be excluded. Id; see also Depriter v. Tom Thumb Stores, Inc., 931 S.W.2d 627, 629-30 (Tex.App.Dallas 1996, writ denied).
The jury was properly instructed on the terms of "negligence," "ordinary care," and "proximate cause." The instructions proposed by Brookshire were surplus instructions and, as such, were properly excluded. We conclude that the trial court's refusal to instruct the jury with the above listed explanatory instructions was not an abuse of discretion. The instructions were not necessary for the jury to render a proper verdict. Point of error six is overruled.
DAMAGES
Mental Anguish
In its seventh point of error, Brookshire argues the evidence was factually insufficient to support the jury's damage award for mental anguish. Under a broad form submission, the jury awarded $200,000 for past and future physical pain and mental anguish. However, Brookshire's point of error attacks the mental anguish element only. It offers no supporting argument with regard to past and future physical pain.
When a damage issue is submitted in broad form, it is difficult to ascertain the amount the jury awarded for each element *922 of damages. See Greater Houston Transp. Co., Inc. v. Zrubeck, 850 S.W.2d 579, 589 (Tex.App.Corpus Christi 1993, writ denied). Consequently, to successfully challenge a multi-element damage award on appeal, an appellant must address all of the elements and show the evidence is insufficient to support the entire damage award. See Price v. Short, 931 S.W.2d 677, 688 (Tex.App.Dallas 1996, no writ); Zrubeck, 850 S.W.2d at 589. A failure to address an element of damages results in waiver of the sufficiency challenge. See Price, 931 S.W.2d at 688; Haryanto v. Saeed, 860 S.W.2d 913, 922 (Tex.App.Houston [14th Dist.] 1993, writ denied); Zrubeck, 850 S.W.2d at 589. Therefore, by failing to address each element of the damage award, Brookshire has failed to preserve error. Point of error seven is overruled.
Past and Future Physical Impairment
In its eighth and ninth points of error, Brookshire attacks the legal and factual sufficiency of the evidence to support the jury's damage award for past and future physical impairment.
Dr. Evans testified regarding Lewis' surgeries and resulting impairment. Lewis' first surgery, performed in August 1990, was for a partial laminectomy of a large disc herniation at the L4-5 segment on the right side. In August of 1991, following the second injury, an MRI revealed a new herniation at the same segment level, this time on the left side, along with a new small disc herniation at the L5-S1 segment on the left side. By September 1991, Lewis was experiencing pain in both legs and a second surgery was performed. In March 1993, Lewis was diagnosed with nerve root compression on the left side. He was found to have a recurrent extrusion of a disc fragment on the left side at the L5-S1 level which was the same disc herniation operated on in the second surgery. He also had new abnormalities at segments L2-3 and L3-4. A third surgery was performed to remove the extruded disc fragment.
At the request of Brookshire, Dr. Robert Fulford examined Lewis to determine limitations related to his back injuries. Dr. Fulford's description of Lewis' back condition contained the following comments:
Prior to his third surgery, I saw the patient and we established he had multiple-level degenerative lumbar disc disease. It was thought because of this a fusion was not indicated because of disease above and below the area where he had his herniated discs.... The patient has persisted in having a lot of pain. He describes this as being constant pain which is worse with movements, such as standing, stooping, bending, or lifting. Even sitting after a period of time causes him to have increased pain. The pain is mainly in the back and into the left leg. It is really very severe when he first gets up in the morning. He has trouble mobilizing, but once he starts to move around he seems to have less discomfort. The patient currently is using [pain medication] which helps alleviate the pain but certainly does not take it away completely.... On occasion, his legs give out, and, on one of these occasions, he actually fell....
Dr. Fulford's notes also indicated that Lewis had a 14% lumbar range of motion impairment. Based upon the American Medical Association's Guides to the Evaluation of Permanent Impairment, Dr. Fulford concluded that Lewis had a "27% impairment of the whole person." Dr. Fulford also advised a weight lifting restriction of 20 pounds.
Dr. Evans offered the following addition to Dr. Fulford's impairment rating:
[T]his patient has multilevel degenerative disc pathology on the lumbar spine which has been minimally improved with two lumbar operations. He is not a candidate for lumbar fusion because of the number of levels involved. He tried to go back to work after his first surgery, but developed progressive problems and was unable to continue. He *923 further developed an additional disc herniation which required additional surgery. This patient will have continued problems with his back. He has undergone an Impairment Rating evaluation through Dr. Fulford. His data on his range of motion indicates that he has significant impairment of range of motion of his back. This is, in part, what accounts for his relatively high impairment rating. I understand that Dr. Fulford, the orthopedist on the case, had indicated that the patient could function in an employment position where he was not required to lift anything heavier than 20 pounds. I am in agreement with this with the following addition. This patient has limited range of motion of the low back and any effort to stress his back with regard to range of motion will only increase his symptoms.
Dr. Evans acknowledged that Lewis' back will never be the same as before, and further stated that there was nothing further that could be done to improve Lewis' condition.
Using the sufficiency standards of review as set forth earlier in this opinion, we find the evidence was legally and factually sufficient to support past and future physical impairment. Viewing the evidence in the light most favorable to Lewis, the testimony of Drs. Evans and Fulford adequately establishes past and future physical impairment. In addition, considering and weighing all the evidence, the damage award is not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Points of error eight and nine are overruled.
Remittitur
In its tenth point of error, Brookshire argues the trial court erred in denying its request for remittitur made in its motion for new trial. A point in a motion for new trial is a prerequisite to a complaint of inadequate or excessive damages. Tex.R. Civ. P. 324(b)(4); Hawthorne v. Guenther, 917 S.W.2d 924, 937 (Tex.App. Beaumont 1996, writ denied). In its motion for new trial, Brookshire argued the damages awarded should be reduced by the percentage attributable to Lewis' comparative negligence. On appeal, Brookshire now argues it is entitled to a remittitur because Lewis failed to prove his claim for future physical pain, mental anguish, and physical impairment. Thus, the request at trial and argument on appeal are dissimilar.
Brookshire's objection at trial does not comport with its complaint on appeal. See Tex.R.App. P. 33.1. As a result, this point has not been properly preserved for our review. See, e.g., Borden, Inc. v. Guerra, 860 S.W.2d 515, 525-26 (Tex.App.Corpus Christi 1993, writ dism'd by agr.) (variance between amount of remittitur requested at trial and that on appeal resulted in waiver of issue on appeal). We overrule Brookshire's tenth point of error.
AFFIRMED.
NOTES
[1] The record is unclear as to the actual date of the second injury. Lewis testified the date was either July 29, 1991, or August 6, 1991.
[2] A "lug" is a plastic pan used to hold meat trimmings.
[3] Act of June 3, 1987, 70th Leg., 1st C.S., ch. 2, § 2.04, 1987 Tex. Gen. Laws 37, 40 (amended 1995) (current version at TEX. CIV. PRAC. & REM.CODE ANN. § 33.001 (Vernon 1997)).
[4] In denying Byrd's petition for review, the Texas Supreme Court stated: "We neither approve nor disapprove the lower court's dictum that `comparative negligence is an element of a worker's non-subscriber action against the employer outside the [Texas Workers' Compensation] Act.'" Byrd, 992 S.W.2d at 448.
[5] Because we hold comparative responsibility is inapplicable, we need not address appellee's cross-point.
[6] Brookshire states the previous payments were established by stipulation. A "stipulation" is defined as "an agreement, admission, or concession made in a judicial proceeding by the parties or their attorneys respecting some matter incident thereto." Shepherd v. Ledford, 962 S.W.2d 28, 33 (Tex.1998). To be enforceable, the agreement must be in writing, signed, and filed as part of the record, or made in open court and entered of record. TEX.R. CIV. P. 11. Lewis asserts the record does not contain evidence of a stipulation between the parties. We agree. After a thorough review of the record, we find no evidence of a stipulation. The only document contained in the record is a printout summary showing medical and indemnity payments made by Brookshire on Lewis' behalf. This document was not admitted at trial, but was instead attached to Brookshire's motion for judgment which was filed subsequent to the the jury's verdict. As such, Lewis asserts Brookshire failed to prove facts necessary to support any right to an offset. See Brown v. American Transfer & Storage Co., 601 S.W.2d 931, 936 (Tex.1980). Because we find Brookshire is not entitled to an offset, we need not address this issue.
[7] In Byrd, the Amarillo court of appeals affirmed the trial court's judgment wherein an offset credit for past medical expenses and lost wages was applied against damages awarded by the jury for future medical care and loss of future earning capacity. Byrd, 976 S.W.2d at 258-59. In denying Byrd's petition for review, the Texas Supreme Court stated, "Because of the offset, the court of appeals' judgment is correct." Byrd, 992 S.W.2d at 448. We conclude Byrd is inapplicable to our determination here because in that case the offset for "undisputed credits" was not challenged.
[8] Lewis asserts Brookshire has failed to preserve error on the exclusion of some of the proposed instructions. We disagree. See State Dept. of Highways & Public Transp. v. Payne, 838 S.W.2d 235, 241 (Tex.1992) ("There should be but one test for determining if a party has preserved error in the jury charge, and that is whether the party made the trial court aware of the complaint, timely and plainly, and obtained a ruling.") | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1614340/ | 331 N.W.2d 486 (1983)
Shirlee MALAND, as personal representative of the Estate of Thilmer J. Maland, Relator,
v.
The COMMISSIONER OF REVENUE, Respondent.
No. C4-82-927.
Supreme Court of Minnesota.
April 1, 1983.
Frundt, Frundt & Johnson, Charles K. Frundt and Brian D. Roverud, Blue Earth, for relator.
Hubert H. Humphrey, III, Atty. Gen., and James W. Neher, Sp. Asst. Atty. Gen., Dept. of Revenue, St. Paul, for respondent.
Considered and decided by the court en banc without oral argument.
*487 YETKA, Justice.
This case comes from an appeal to the Minnesota Tax Court of an order of the Commissioner of Revenue, claiming a balance due on the inheritance tax return of relator's husband, Thilmer J. Maland. At issue is the marital exemption of Minn.Stat. § 291.051, subd. 1 (1978) formerly available to spouses of deceased residents, but not to spouses of deceased non-residents. The relator, Shirlee Maland, claimed the distinction was unconstitutional.
The case was heard on stipulated facts. The court held that the denial of the statutory exemption to spouses of non-residents violated neither the Privileges and Immunities Clause nor the Equal Protection Clause and was constitutional. Relator appeals. We affirm.
Relator's spouse was a Colorado resident who died in November 1978, leaving all his real and personal property to relator. This included an undivided one-half interest in real estate in Minnesota. Relator claimed the marital deduction provided in Minn. Stat. § 291.051, subd. 1 (1978) and paid $1,729.10 as the inheritance tax on the transfer of the real property. Respondent, pointing out that the statute does not provide the exemption to non-residents, claims an additional $1,967.54, plus interest.
The issue raised is: Does denial of the marital exemption under Minn.Stat. § 291.051, subd. 1 (1978) to a spouse of a non-resident decedent violate the Privileges and Immunities Clause of the United States Constitution? U.S. Const. art. IV, § 2, cl. 1. The clause provides: "The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states."
The applicable Minnesota statute is Minn. Stat. § 291.051, subd. 1 (1978), providing in relevant part as follows:
291.051 MARITAL EXEMPTION TAX.
Subdivision 1. Definitions. For the purposes of this section, the terms defined in this subdivision shall have the meaning given them herein.
"Marital exemption" means 50 percent, but not more than $250,000, of the net taxable value passing to the surviving spouse of a decedent domiciled in Minnesota at the time of his death.
Minnesota does not take into account the value of the non-resident's entire estate in computing the graduated tax rate applicable to the property taxable in Minnesota. In addition, under the inheritance tax law in effect during the time period relevant here, non-resident estates having a value of $120,000 or less for Minnesota tax purposes received the same $60,000 spousal exemption as did resident estates. Minn.Stat. § 291.05(3)(i) (1978). The only qualification was that the $60,000 exemption for non-resident estates be reduced by any spousal exemption allowed in the decedent's state of residence. Minn.Stat. § 291.08(c) (1978).
As an alternative election to Minn.Stat. § 291.05(3)(i) (1978), Minn.Stat. § 291.051, subd. 1 (1978) provides that the spouse of a resident decedent is entitled to a marital exemption of 50%, but not more than $250,000, of the net taxable value of property passing to the surviving spouse. This deduction is unavailable to spouses of non-resident decedents. This statute has been amended several times since 1978. At present, the spouses of non-resident decedents dying on or before December 31, 1981, do receive an exemption, but one smaller than that for spouses of residents where the estate is less than $500,000 in value. It is not disputed that for decedents who die after January 1, 1982, the disparity of treatment between resident and non-resident decedents no longer exists. Minn.Stat. § 291.051 (1982), Act of March 22, 1982, ch. 523, art. XXVI, §§ 4, 8, 1982 Minn.Laws 686, 844, 846.[1]
Relator argues that the statute violates the Privileges and Immunities Clause. We disagree. While the statute, at first glance, would appear to pose a problem, a more *488 careful review, we believe, requires a holding affirming the tax court.
1. First, there is a presumption in favor of the constitutionality of any tax. The United States Supreme Court recently emphasized this point in Lehnhausen v. Lake Share Auto Parts Co., 410 U.S. 356, 93 S.Ct. 1001, 35 L.Ed.2d 351, reh'g denied, 411 U.S. 910, 93 S.Ct. 1523, 36 L.Ed.2d 200 on remand sub nom. Lake Shore Auto Parts Co. v. Korzen, 54 Ill.2d 237, 296 N.E.2d 342, cert. denied, 414 U.S. 1039, 94 S.Ct. 539, 38 L.Ed.2d 329 (1973). Examining an earlier decision, the Court wrote:
In Madden v. Kentucky, 309 U.S. 83 [60 S.Ct. 406, 84 L.Ed. 590], a State laid an ad valorem tax of 50¢ per $100 on deposits in banks outside the State and only 10¢ per $1,000 on deposits within the State. The classification was sustained against the charge of invidious discrimination, the Court noting that "in taxation, even more than in other fields, legislatures possess the greatest freedom in classification." Id., at 88 [60 S.Ct. at 408]. There is a presumption of constitutionality which can be overcome "only by the most explicit demonstration that a classification is a hostile and oppressive discrimination against particular persons and classes." Ibid. And the Court added, "The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it." Ibid.
410 U.S. at 364, 93 S.Ct. at 1006.
2. The presumption of constitutionality given tax laws accords with a more general rule that judicial review of legislation must be carried out in light of the need "to preserve to the legislative branch its rightful independence and ability to function." Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 510, 57 S.Ct. 868, 872, 81 L.Ed. 1245 (1937). In Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 101 S.Ct. 715, 66 L.Ed.2d 659 (1981), the Court addressed the standard of review under the Equal Protection Clause. Having reiterated that the standard of review is the "rational basis" test, the Court went on to explain what review under this standard entails.
[S]tates are not required to convince the courts of the correctness of their legislative judgments. Rather, "those challenging the legislative judgment must convince the court that the legislative facts on which the classification is apparently based could not reasonably be conceived to be true by the governmental decision-maker." Vance v. Bradley, 440 U.S. [93] at 111 [99 S.Ct. 939 at 950, 59 L.Ed.2d 171].
449 U.S. at 464, 101 S.Ct. 724. Admittedly, Clover Leaf deals with the Equal Protection Clause, rather than the Privileges and Immunities Clause; nevertheless, in both circumstances, judicial review must respect the legislative prerogative.
One problem in determining the standard of review under the Privileges and Immunities Clause is that it has received relatively little attention from the courts.
That Clause is not one the contours of which have been precisely shaped by the process and wear of constant litigation and judicial interpretation over the years since 1789. * * * Historically, it has been overshadowed by the appearance in 1868 of similar language in § 1 of the Fourteenth Amendment, and by the continuing controversy and consequent litigation that attended that Amendment's enactment and its meaning and application.
Baldwin v. Fish and Game Comm'n of Montana, 436 U.S. 371, 379, 98 S.Ct. 1852, 1858, 56 L.Ed.2d 354 (1978) (footnote omitted).
Nevertheless, the United States Supreme Court has provided some guidance. The following passage outlines certain principles for analyzing a statute in light of the Privileges and Immunities Clause.
Like many other constitutional provisions, the privileges and immunities clause is not an absolute. It does bar discrimination against citizens of other States where there is no substantial reason for the discrimination beyond the mere fact that they are citizens of other States. But it does not preclude disparity of treatment in the many situations *489 where there are perfectly valid independent reasons for it. Thus the inquiry in each case must be concerned with whether such reasons do exist and whether the degree of discrimination bears a close relation to them. The inquiry must also, of course, be conducted with due regard for the principle that the States should have considerable leeway in analyzing local evils and in prescribing appropriate cures.
Toomer v. Witsell, 334 U.S. 385, 396, 68 S.Ct. 1156, 1162, 92 L.Ed. 1460 (1948) (citation omitted) (emphasis added).
3. In the present case, there is a valid and substantial reason for differing treatment of non-resident decedents' estates. The taxable estate of a resident decedent includes tangible and intangible property located within and without the state. For non-residents' estates, only tangible property in Minnesota is included. As a result of this difference, and Minnesota's graduated tax, a non-resident is likely to be taxed at a lower rate than a resident on assets of equal value. This is particularly true where the first $60,000 of non-resident-owned property is exempt under Minn.Stat. § 291.05(3)(i) (1978). Denying the marital exemption to non-residents is an attempt to compensate for this difference.[2]
It is argued that the state could find a better way to deal with the problem of non-residents being taxed at a lower rate than by denying them the marital exemption. The Constitution, however, does not require perfection. Here, all that is required is a "close relation" between the degree of discrimination non-residents endure and the reasons for that discrimination. We believe that the denial of the marital exemption to non-residents is sufficiently closely related to the goal of keeping non-residents from paying taxes at a lower rate and survives constitutional challenge. Thus, we affirm.
NOTES
[1] The convoluted history of the marital exemption is indicative of the difficulties inherent in applying our state inheritance tax. One might even ask if state death taxes are ever justified in light of the large administrative costs of applying them and the small amount of revenue collected. Such a question, however, is one for the legislature.
[2] It should also be noted that the Minnesota Legislature could have taken into consideration the fact that the marital exemption envisions an eventual taxation of the full estate on the death of the surviving spouse. With non-residents' estates, there is the danger that surviving spouses could remove property from the jurisdiction before their deaths, thus preventing it from being taxed in Minnesota. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2003649/ | 54 N.W.2d 891 (1952)
In re BAUR'S ESTATE.
BAUR
v.
WEST et al.
No. 7224.
Supreme Court of North Dakota.
September 25, 1952.
*892 P. M. Clark, Mohall, for respondents and appellants.
C. D. Aaker, Minot, for petitioner and respondent.
BURKE, Judge.
The petitioner, Henry Baur, petitioned the County Court of Renville County to admit to probate the last will and testament of his deceased brother, Robert Baur. The will named Robert M. Baur, a nephew of the testator and a son of the petitioner, as the sole devisee. The respondents, Mary Ogle, Roberta West, Carrie Taylor and Zoe Baur, all daughters of the testator, filed an answer to the petition, alleging: 1st, that the purported will could not be admitted to probate because the testator had never published and declared to the witnesses to the instrument, that such instrument was his last will; and 2nd, that the petitioners, in any event, are entitled to share in the estate of Robert Baur in the same manner as if he had died intestate for the reason that they, the children of Robert Baur, were not mentioned in the will and it did not appear that the failure to mention them was intentional.
After a hearing, the County Court denied the petition that the will be admitted to probate. The petitioner appealed to the District Court from the order denying the petition. After a trial anew upon all the issues, the District Court entered judgment reversing the County Court and directing that the instrument in question be admitted to probate as the last will of Robert Baur, and directing that the daughters of the testator be excluded from participation in the estate. The instant appeal is from that judgment. It is contended by appellants on this appeal that the findings of the trial court that the will was published and that the failure of the testator to mention his children was intentional, are contrary to the evidence. We shall consider first the law and the evidence concerning publication.
Section 56-0302, NDRC 1943 provides:
"1. * * *
"2. * * *
"3. The testator, at the time of subscribing or acknowledging the same, must declare to the attesting witnesses that the instrument is his will;
"4. * * *
"5. * * *"
Section 56-0307, NDRC provides:
"No will is valid unless executed according to the provisions of this chapter, or according to the law of the place in which it was made, or in which the testator at the time was domiciled."
It is a well established rule in this state that section 56-0307, supra, requires a compliance with the provisions of 56-0302, supra, and if a will is executed without such compliance, it is invalid. Moody v. Hagen, 36 N.D. 471, 162 N.W. 704, L.R.A.1918F, 947; Collins v. Stroup, 71 N.D. 679, 3 N.W.2d 742.
The will is short. It is all contained upon one page and we think it will be helpful to set it forth at length. It is as follows:
"Last Will and Testament
"I, Robert Baur, of Sherwood, North Dakota, being of sound mind, memory and understanding, do hereby make, publish and declare the following as and for my last Will and Testament:
"First: I direct my executor hereinafter named to pay all of my just debts and funeral expenses as soon as possible after my decease.
"Second: All the rest, residue and remainder of my estate, whether real, personal or mixed, and wheresoever situated, I give, devise and bequeath unto my nephew, Robert M. Baur, of Erie, Pennsylvania, absolutely and in fee simple, for his own use and behoof forever.
"Third: I nominate and appoint my brother, Henry C. Baur, of Erie, Pennsylvania, my executor of this my last Will and Testament.
"In Witness Whereof I have hereunto set my hand and seal this 1st of November, 1948.
"Robert Baur L. S. (signed) *893 "Signed, sealed, published and declared by the above named testator as and for his last Will and Testament, in our presence, at his request, and in the presence of each other, we hereunto set our hands as attesting witnesses:
"W. A. Coutts (signed)
George Gehringer (signed)
Filed: 9 A. M.
April 2, 1949. J. H. Foster
Judge and Ex-Officio Clerk
of Dist. Court, Renville
County North Dakota."
The will is entirely in typewriting except the date of execution and the signatures. In the date, the day of the month and the month and the year were written in with pen and ink.
The petitioner identified the signature of the testator. Each of the subscribing witnesses testified as to the genuineness of his signature and one of them, the witness Coutts testified that the part of the date which was written with pen and ink was in his hand writing.
Both of the subscribing witnesses, however, testified that they had no recollection of the occasion upon which they signed. The witness, Coutts, was upon the date of the execution of the will, County Auditor of Renville County. The witness, Gehringer, was his deputy. Coutts, when asked if he was prepared to deny that Mr. Baur brought the instrument to his office and asked him to sign it, stated, "I don't deny it, but I don't recall it." "I don't remember who brought it in." When asked if Baur declared to him that the instrument was his last will and testament, he replied, "No he didn't." "I can't remember who brought itin." The witness Gehringer, when asked if he knew, when or how it happened that he witnessed the will, answered, "No Idon't." When asked if he had any recollection whatever of Baur's coming in and asking him to sign as a witness, he replied "No, I haven't." When asked if Mr. Baur stated that the instrument was his last will, he replied, "No he didn't."
In his memorandum opinion in the case, the trial judge said, "I am convinced that the subscribing witnesses are telling the absolute truth when they testify they have no recollection of the circumstances surrounding the execution of the instrument. They are officers in what, on November 1st of any year, would be a busy office. * * * The answers given by these witnesses tending to impeach the attestation clause were, I believe, prompted by their belief that answers of the kind given were necessary. Manifestly if the witnesses had no recollection whatever of the circumstances surrounding the execution of the instrument, and I believe they had no such recollection, they could not say whether this particular act or that particular thing had been done or had taken place at the time when the instrument in question was executed." Thus the trial court resolved the patent inconsistency in the testimony of these witnesses by finding that their statements that they had no recollection whatever of the transaction were true and that therefore their statements which tended to impeach the attestation clause were not entitled to any weight.
It seems to us that this finding of the trial court is amply sustained by the evidence. It is clear from the entire record that the witnesses' testimony that Mr. Baur did not tell them the instrument was a will, was not a statement of fact but a statement of opinion based upon their belief that if he had told them, they would have remembered. The weight to be given to such a deduction is minimized by a glance at the will itself. It is all contained upon one page. It is entitled "Last Will and Testament" set forth in underlined bold type at the top of the page. The attestation clause above the witnesses' signatures is unusual in the sense that it does not appear upon most instruments the county auditor and his deputy would be asked to witness. It is almost unbelievable that men of experience, holding responsible positions, could have signed as witnesses to this will and not have known at the time that it was a will they were attesting. This is particularly true as to the witness Coutts who examined the instrument to the extent that he discovered it was undated and completed the date in his own handwriting.If they knew *894 it was a will at the time, it would seem to us, that whether they learned that fact from observation or from being so informed by the testator, would have little effect upon their subsequent recollection of the transaction. On the other hand if they were so absored in other matters, or so inattentive to what they were doing that they did not notice the instrument was a will, it is also quite likely that they would not remember what was said at the time. We therefore adopt the trial court's finding that the witnesses' testimony that Mr. Baur did not tell them the instrument was a will is not entitled to any weight.
With this testimony eliminated there is no evidence, extraneous to instrument itself, of whether Mr. Baur did or did not publish the instrument as his will. The attestation clause of the will is complete. It sets forth the fact of publication and the fact that the witnesses signed at the request of the testator. The witnesses, themselves, identified their signatures positively. We believe it to be an unvarying rule, that where the signatures of the attesting witnesses are established by unquestioned proof, the recitals of the attestation clause of due execution of the will are presumed to be true and can only be overcome by clear and convincing testimony. In re Monks' Estate, 48 Cal.App.2d 603, 120 P.2d 167; Walters v. Heaton, 223 Iowa 405, 271 N.W. 310; In re Wallace's Estate, 158 Kan. 633, 149 P.2d 595; Poindexter's Administrator v. Alexander, 277 Ky. 147, 125 S.W.2d 981; Van Meter v. Van Meter, 183 Md. 614, 39 A.2d 752; Morrow v. Board of Trustees of Park College, 353 Mo. 21, 181 S.W.2d 945; In re Lazzati's Will, 131 N.J. Eq. 54, 23 A.2d 566; In re Akin's Estate, 41 N.M. 566, 72 P.2d 21; In re Wade's Estate, 174 Or. 531, 149 P.2d 947; In re Rowlands' Estate, 70 S.D. 419, 18 N.W.2d 290; Moore v. Halberstadt, 246 Wis. 263, 16 N.W.2d 819.
Since there is here no credible proof to impeach the attestation clause, it follows that the facts stated therein must be accepted as true and that the decision of the district court, that the will be admitted to probate, must be affirmed.
The remaining question is whether the trial court's finding, that the testator's failure to mention his children in the will was intentional, is supported by the evidence.
Section 56-0417, NDRC 1943 provides:
"When any testator omits to provide in his will for any child of his, or for the issue of any deceased child, unless it appears that such omission was intentional, such child, or the issue of such child, must have the same share in the estate of the testator as if he had died intestate, and succeeds thereto as is provided in section 56-0416."
The omission to provide for a child or the issue of deceased children in a will merely raises a prima facie presumption that such issue were not intentionally omitted and such presumption is rebuttable by extrinsic evidence. Schultz v. Schultz, 19 N.D. 688, 125 N.W. 555; Hedderich v. Hedderich, 18 N.D. 488, 123 N.W. 276.
The testator was married in 1901. He was divorced in 1913. Four daughters were born to the marriage. At the time of the divorce there were one aged six, twins aged eight and one aged nine. From the record in the divorce action it appears that the wife had moved to Missouri with the children more than a year before the divorce action was commenced. The testator was granted the divorce upon the grounds of extreme cruelty and desertion. There is nothing in the record to show that the testator ever saw the children from the time of the divorce until his death.
In September, 1914, the testator made a will in which he made provision for his children and his brothers. However, Paragraph Five of this will provided:
"Fifth: I direct my said Trustee to use his best discretion in applying the income and proceeds of my estate for the support, education and maintenance of my children and I particularly direct him not to use any part of the said income or net proceeds for the support, education or maintenance of any child of mine, so long as the said child is receiving or accepting support or maintenance, of any kind, either directly or indirectly from my divorced wife, *895 Amanda Baur, or any of her relatives. I further stipulate that such of my children as shall choose to leave Amanda Baur and come back to me and be with me at my death, shall participate in the distribution of my residuary estate, but not otherwise, on the same basis as my brothers."
In 1919, the testator left North Dakota and went back to Pennsylvania. There he lived with his brother, Henry, the petitioner herein, until 1921, when he returned to North Dakota. Before returning to North Dakota, he executed a new will in which he named Henry Baur as the sole devisee. Robert Baur thereafter lived alone on his farm in North Dakota. At all times the relationship between him and his brother Henry was cordial and fraternal. During the depression years Henry helped Robert by sending him checks from time to time and by paying his medical and hospital bills.
To a letter which the petitioner, Henry Baur, wrote to the testator in December 1941, there was appended a postscript which read:
"P. S. Many years ago you made a will, bequeathing all of your property to me. You have the right to change this will any time. If you still feel that way toward me, may I suggest that you leave your property to my son, your namesake, Robert M. Baur, instead of to me. What do you think?
H. C. B."
The testator replied to this letter in January 1942. In his reply he stated:
"I have studied over your letter a long time, for it seemed to me that you in the east care nothing about this property, and I had made up my mind to put some german couple on it (as soon as I myself was not able any more to work it) and just stipulate that they keep taxes paid. I am feeling good but am getting along in years, if it any use to will it to my namesake it will be allright to do so, But I do not want any arrangment I make disturbed. (I do not wish to interfere with in your business in the east)."
When petitioner answered the foregoing letter he enclosed the will which is in question here. In his letter dated February 7, 1942 he said:
"I enclose a will for you to sign if you approve, & return to me. If you wish to write out just what you want done with the farm, send it along with the will, and you may be assured your wishes will be carried out. The will should have two witnesses."
The testator kept this will until November 1, 1946, before he executed it and returned it to the petitioner. He died in 1949.
We think this evidence amply supports the trial court's finding that the testator's omission to provide for his four daughters was intentional. All family relationship between the testator and his daughters was severed about thirty-five years before the will was executed. In the will which the testator made in 1914, he clearly expressed the intent that none of his children should share in his estate unless they became reconciled to him and returned to live with him. None of the children ever returned. In 1921, he made a new will in which he left his entire estate to his brother, Henry. Throughout the succeeding years until his death in 1949, he lived alone on his farm. During those years, the only family relationship shown by the record, was with his brother Henry, who gave him help on many occasions. Before the testator made up his mind to leave his property to his nephew he "studied a long time". The reason for his study was not consideration for his daughters, but consideration of whether his nephew would derive any benefit from the will and of his plan to turn his farm over to some German couple, possibly in return for providing him with a home in his declining years. After receiving the will from his brother in 1942, he kept it almost four years before executing it. Apparently, his plans for turning the farm over to a German couple never materialized because according to the evidence he lived alone until his death.
We think the reasonable inference from all of the evidence is that testator's omission to make provision for his daughters was intentional. The judgment of the district court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2256001/ | 181 Cal. App. 4th 1454 (2010)
CALIFORNIA CORRECTIONAL PEACE OFFICERS' ASSOCIATION et al., Plaintiffs and Appellants,
v.
STATE OF CALIFORNIA et al., Defendants and Respondents.
No. A124221.
Court of Appeals of California, First District, Division Four.
February 11, 2010.
*1457 Carroll, Burdick & McDonough, Gregg McLean Adam, Gonzalo C. Martinez; and Daniel M. Lindsay for Plaintiffs and Appellants.
K. William Curtis, Warren C. Stracener, Linda A. Mayhew and Christopher E. Thomas for Defendants and Respondents.
OPINION
RUVOLO, P. J.
The California Correctional Peace Officers' Association (CCPOA) brings a statutory claim, contending that the State of California (the State), through the Department of Personnel Administration (DPA), violated Government Code section 19849.18[1] when DPA refused to grant correctional supervisors of State Bargaining Unit Six (Unit 6) the same increases granted to the rank-and-file correctional officers they supervise. We disagree, and affirm.
FACTS AND PROCEDURAL HISTORY
CCPOA represents certain correctional supervisors of Unit 6 along with a large number of rank-and-file correctional employees (hereafter sometimes also referred to as the rank-and-file members). This appeal is brought on behalf of the organization and the correctional supervisors of Unit 6 (supervisors or correctional supervisors) it represents.
DPA is the agency charged with setting compensation for both the supervisory correctional officers and the rank-and-file correctional officers of Unit 6. (§ 19826, subd. (a); Tirapelle v. Davis (1993) 20 Cal. App. 4th 1317, 1322-1323 & fn. 8, 1325-1326 [26 Cal. Rptr. 2d 666] (Tirapelle); §§ 3513, subd. (j), 19815.4, subd. (g).)
*1458 In May, August and September 2006, CCPOA and DPA arbitrated a contractual dispute relating to compensation for the rank-and-file members. In November 2006, the arbitrator found that the State had underpaid the rank-and-file members. The arbitrator issued a supplemental opinion and award in January 2007. As a result of these arbitration awards (collectively, the Cohn Award), DPA was required to grant the rank-and-file members of Unit 6 a 3.125 percent base pay increase, retroactive to July 1, 2005. The Cohn Award also required DPA to increase health benefits for the rank-and-file members of Unit 6 to an 85/80[2] formula based on 2006 health insurance rates.
Pursuant to section 3533, in February and March of 2007, DPA met and conferred with CCPOA on behalf of the supervisors it represents regarding the impact of the Cohn Award on correctional supervisors. CCPOA's position was that section 19849.18 required that supervisors be given automatic and contemporaneous base pay and health benefit increases "generally equivalent" to those included in the Cohn Award.
As a result of these discussions, DPA agreed to grant correctional supervisors a prospective 3.125 percent base pay increase effective January 1, 2007, but declined to grant additional health benefits or to make the 3.125 percent base pay increase in accordance with the terms of the Cohn Award. DPA disagreed with CCPOA's position that section 19849.18 requires supervisors be given "generally equivalent" compensation changes each and every time salary or benefit awards are granted to rank-and-file members, and posited that its 3.125 percent base pay increase, coupled with the overall salary and benefits differential, satisfied its statutory obligations.
During these meet and confer sessions, DPA supported its decision by presenting statistical charts showing that, even after considering the Cohn Award, supervisors still enjoyed an 11.45 percent differential in salary and benefits over the rank-and-file members. These charts also depicted historical salary and benefits information, illustrating that a significant salary and benefits differential between supervisors and the rank-and-file members had existed since at least 2002-2003, and that supervisors had enjoyed a 5.94 percent advantage over the rank-and-file members in the area of health benefits from 2004 to 2007.
In April 2007, CCPOA filed a formal grievance with DPA challenging its decision on the same grounds. In its grievance denial, DPA reiterated that the 3.125 percent base pay increase, along with the current substantial salary and benefits differential of 11.45 percent, satisfied its statutory obligations.
*1459 In June 2007, CCPOA filed a complaint in the above captioned matter. The trial court ruled in favor of DPA (the State) and issued a written statement of decision dismissing CCPOA's claim in its entirety. In dismissing the statutory cause of action, the trial court concluded that section 19849.18 did not require that supervisors be given contemporaneous compensation changes each and every time compensation changes were granted to rank-and-file members. The trial court further found that CCPOA's interpretation of that section was "unreasonable, and not supported by the plain language of the statute, the legislative history, or other legal authorities." The court reasoned that when "an adequate pay differential already exists between correctional supervisors and the [rank-and-file members], DPA should not be compelled to further expand that differential in the absence of any justification." In support of its ruling, the court found that the statistical data and charts submitted by DPA satisfied its obligation to maintain compensation differentials between supervisors and the rank-and-file members, therefore fulfilling the overall purpose behind sections 19849.18 and 19849.22.
This appeal followed.
DISCUSSION
A. Standard of Review
(1) Setting compensation for public employees is a legislative function. (Wirth v. State of California (2006) 142 Cal. App. 4th 131, 138 [47 Cal. Rptr. 3d 623] (Wirth), citing Lowe v. California Resources Agency (1991) 1 Cal. App. 4th 1140, 1151 [2 Cal. Rptr. 2d 558].) In the case of correctional supervisory employees, the Legislature has delegated that responsibility to DPA.[3] (Wirth, at p. 138, citing § 19826, subd. (a) and Tirapelle, supra, 20 Cal.App.4th at pp. 1322-1323, fn. 8.) As a result, DPA's decision whether to adjust supervisory salary and benefits constitutes a quasi-legislative decision. (Wirth, at p. 138.)
Pursuant to Code of Civil Procedure section 1085, review of quasi-legislative actions "`"`"is limited to an inquiry into whether the action was arbitrary, capricious or entirely lacking in evidentiary support, . . ."' . . . [and] [t]he petitioner has the burden of proof to show that the decision is unreasonable or invalid as a matter of law."' (City of Arcadia v. State Water Resources Control Bd. (2006) 135 Cal. App. 4th 1392, 1409 [38 Cal.Rptr.3d *1460 373], quoting Citizens for Improved Sorrento Access, Inc. v. City of San Diego (2004) 118 Cal. App. 4th 808, 814 [13 Cal. Rptr. 3d 259].)" (Wirth, supra, 142 Cal.App.4th at p. 138.)
The "`arbitrary, capricious or unsupported by evidence' standard applies to a review of the substantive merit of an administrative agency's quasi-legislative actthat is, whether the agency `"reasonably interpreted the legislative mandate."' (Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal. 3d 651, 657 [128 Cal. Rptr. 881, 547 P.2d 993].)" (Wirth, supra, 142 Cal.App.4th at p. 138.) However, when the agency's action depends solely upon the correct interpretation of a statute, a question of law, we exercise our independent judgment. (Ibid., citing Lewin v. St. Joseph Hospital of Orange (1978) 82 Cal. App. 3d 368, 386-387 [146 Cal. Rptr. 892].) In doing so, "we are guided by the principle that an `"administrative [agency's] interpretation [of controlling statutes] . . . will be accorded great respect by the courts and will be followed if not clearly erroneous."' . . ." (Wirth, at p. 138, quoting Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal. 4th 1, 7 [78 Cal. Rptr. 2d 1, 960 P.2d 1031]; see also Spanish Speaking Citizens' Foundation, Inc. v. Low (2000) 85 Cal. App. 4th 1179, 1214 [103 Cal. Rptr. 2d 75] [while final responsibility for the interpretation of law rests with courts, the construction of statute by officials charged with its administration is entitled to great weight].)
B. Interpretation of Section 19849.18
CCPOA remains steadfast in its contention that section 19849.18 requires DPA to automatically grant salary and benefits increases to correctional supervisors employed by the State of as a result of the Cohn Award's grant of salary and health benefits increases to rank-and-file members.
"In 1999, Assembly Bill No. 743 . . . was enacted as section 19849.18. Supporters of the bill pointed out that the compensation of supervisors in certain departments was not keeping up with that of the employees they supervised. In some cases, the supervisors actually earned [even] less than the rank-and-file . . . . A promotion to supervisor could actually result in a lesser compensation package, creating recruitment and retention problems. The purpose of the bill was to halt the erosion of a compensation differential between nonunion supervisors and the rank-and-file employees of State Bargaining Units 5 (highway patrol officers), 6 (state correctional officers) and 8 (firefighters), whom they supervised." (Wirth, supra, 142 Cal.App.4th at p. 135.) Alternatively stated, the law was enacted to prevent compensation "compaction" between supervisors and rank-and-file employees.
Section 19849.18, the statute at the heart of the present dispute, states: "Supervisors of state employees represented by State Bargaining Unit 5, 6, or 8 *1461 shall receive salary and benefits changes that are at least generally equivalent to the salary and benefits granted to employees they supervise. For purposes of this section, `salary' means base pay and shall not be construed to include such forms of compensation as overtime. The benefit package shall be the economic equivalent, but the benefits need not be identical. The determination of the specific benefits that supervisors of state employees represented by State Bargaining Unit 5, 6, or 8 shall receive shall be made through a meet and confer process as defined in Section 3533." (Stats. 1999, ch. 792, § 1, italics added.)
In 2000, Senate Bill No. 1910 (1999-2000 Reg. Sess.) was enacted as section 19849.22, creating a general policy of maintaining a compensation differential between supervisory peace officers and the rank-and-file employees they supervise, in order to attract and retain correctional supervisors. (Stats. 2000, ch. 902, § 1.)
(2) In analyzing what the Legislature contemplated by enacting a statute, our first step is to examine the plain language because words are "`generally. . . the most reliable indicator of legislative intent.' [Citations.]" (People v. Gardeley (1996) 14 Cal. 4th 605, 621 [59 Cal. Rptr. 2d 356, 927 P.2d 713].) "If the language is clear and unambiguous there is no need for construction, nor is it necessary to resort to indicia of the intent of the Legislature . . . . [Citations.]" (Lungren v. Deukmejian (1988) 45 Cal. 3d 727, 735 [248 Cal. Rptr. 115, 755 P.2d 299].) On the other hand, if the language is ambiguous, "courts may employ a variety of extrinsic construction aids, including legislative history, and will adopt the construction that best harmonizes the statute both internally and with related statutes. [Citations.]" (Summers v. Newman (1999) 20 Cal. 4th 1021, 1026 [86 Cal. Rptr. 2d 303, 978 P.2d 1225].)
(3) We turn first to the wording of section 19849.18, and find no clear, unambiguous language that would require DPA to grant contemporaneous salary and benefits increases to supervisory employees each and every time the rank-and-file employees receive salary and benefits changes. The statute requires "salary and benefits changes" that "are at least generally equivalent to the salary and benefits" of the employees they supervise. (Italics added.) By definition, "generally" means "in disregard of specific instances and with regard to an overall picture." ( [as of Feb. 11, 2009].) The inclusion of the word "generally" reflects legislative intent that DPA take into account the totality of the circumstances, including the presence or absence of compaction, the size of the existing compensation differential, and the condition of the State's budget to fund increases. To the contrary, CCPOA's approach asks DPA to grant compensation increases with complete disregard for their need or other extenuating circumstances.
*1462 Nonetheless, the language is not entirely free from ambiguity. Hence, we consider the available legislative history to ascertain whether CCPOA's interpretation is plausible. The Wirth court's analysis of the comprehensive statutory scheme is also instructive and analogously applicable.
C. Analysis of the Legislative History and Statutory Scheme
Similar to the instant dispute, in Wirth, the California Correctional Supervisors Organization (CCSO) sought to compel DPA to afford salary increases for State correctional supervisors in fiscal year 2003-2004, increases CCSO claimed were mandated through its interpretation of section 19849.18. (Wirth, supra, 142 Cal.App.4th at pp. 134-135, 139.) Under CCSO's interpretation, DPA was required to grant supervisors lockstep salary changes to those granted to the rank and file. (Id. at p. 139.)
"In its original form, Assembly Bill No. 743 (1999-2000 Reg. Sess.) required that supervisors be granted `the economic equivalent' of salary and benefits changes accorded to their supervisees, and appropriated `an unspecified sum from the General Fund to the Controller to fund the salary and benefit[s] changes authorized by these provisions.' (Legis. Counsel's Dig., Assem. Bill No. 743 (1999-2000 Reg. Sess.) as introduced Feb. 24, 1999 . . . .) An appropriation . . . was subsequently inserted to implement the legislation. (Assem. Amend. to Assem. Bill No. 743 (1999-2000 Reg. Sess.) May 28, 1999.) Eventually, the bill was amended to delete any fiscal appropriation, and the phrase `at least generally' inserted to modify the term `equivalent.' (Sen. Amend. to Assem. Bill No. 743 (1999-2000 Reg. Sess.) Sept. 8, 1999.)" (Wirth, supra, 142 Cal.App.4th at p. 141, first italics added & fn. omitted.)
"Manifestly, the bill was watered down from its original form so that it did not interfere with DPA's traditional discretion in setting salaries, or require that salaries be increased without legislative appropriation." (Wirth, supra, 142 Cal.App.4th at p. 142.) An enrolled bill memorandum to the Governor also confirms that in enacting section 19849.18, the Legislature did not intend to "jeopardize DPA's salary setting authority." (Enrolled Bill Mem. to Governor, Assem. Bill No. 743 (1999-2000 Reg. Sess.) Sept. 24, 1999, p. 1.)
(4) Therefore, the Wirth court found, and we agree, that the Legislature enacted section 19849.18 "`not for the purpose of attaining exactitude or identity between the salary and benefits of supervisors and the salary and benefits of the employees they supervise [i.e., rank and file], but for the purpose of avoiding compaction between supervisors' and subordinates' salary levels and maintaining a differential between those salary levels sufficient to recruit and retain supervisors.'" (Wirth, supra, 142 Cal.App.4th at *1463 p. 142.) According to Wirth, "the Legislature, in calling for `generally equivalent' compensation changes between the two employee groups, did not intend to strip the DPA of all traditional discretion in fixing the salaries of supervisors and other excluded employees." (Id. at p. 141.)
(5) Wirth also discussed the importance of the overall statutory scheme of which section 19849.18 is a part. "`[A]n individual statute must be construed in the context of the comprehensive statutory scheme of which it is a part. Statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible. Where uncertainty exists, appellate courts must construe provisions in a reasonable, common sense fashion taking into consideration the practical consequences that will flow from a particular interpretation.' . . ." (Wirth, supra, 142 Cal.App.4th at p. 140, quoting Berkeley Center for Independent Living v. Coyle (1996) 42 Cal. App. 4th 874, 878 [50 Cal. Rptr. 2d 39]; accord, Long Beach Police Officers Assn. v. City of Long Beach (1988) 46 Cal. 3d 736, 746 [250 Cal. Rptr. 869, 759 P.2d 504].)
As noted, "[i]n 1981, the Legislature delegated the function of salary setting for nonmerit employees to DPA. . . ." (Wirth, supra, 142 Cal.App.4th at p. 140, citing § 19815.2 and Tirapelle, supra, 20 Cal.App.4th at pp. 1322-1323 & fn. 8.) However, this grant of authority came with a significant caveat. Section 19826, subdivision (a), also enacted in 1981, declares that DPA "shall make no adjustments that require expenditures in excess of existing appropriations that may be used for salary increase purposes." (Italics added.)
(6) In enacting legislation, the Legislature is presumed to be aware of its prior enactments. (Wirth, supra, 142 Cal.App.4th at p. 140; Golden Day Schools, Inc. v. Department of Education (1999) 69 Cal. App. 4th 681, 691 [81 Cal. Rptr. 2d 758] (Golden Day Schools).) "In this era of perennial budget deficits, we find it extremely unlikely that section 19849.18, enacted in 1999, would have been intended by the Legislature to trigger automatic salary [and benefits] increases without corresponding budget appropriations earmarked for that purpose. To indulge in such an interpretation would require that we infer that the Legislature intended section 19849.18 to repeal section 19826, subdivision (a) by implication [and this may not be done] without a declaration by the Legislature to that effect. . . ." (Wirth, at p. 140, citing Golden Day Schools, at p. 691.) Instead, "`"[t]he presumption is . . . `against repeal by implication where express terms are not used and the statutes are not irreconcilable.'"' . . ." (Ibid., quoting County of Tulare v. Campbell (1996) 50 Cal. App. 4th 847, 853 [57 Cal. Rptr. 2d 902].)
"Because DPA is forbidden by statute from increasing salaries without a legislative appropriation, it must necessarily navigate between implementing *1464 lofty legislative policy goals and not committing the state to spending money that it does not have." (Wirth, supra, 142 Cal.App.4th at p. 142.) Thus, the only reasonable method of harmonizing the two statutes is to construe section 19849.18 as taking into account the overall compensation picture, affording DPA sufficient flexibility in maintaining "generally equivalent" compensation differentials so as to avoid compaction, both in times of penury as well as prosperity. (Wirth, at p. 140.)
This is certainly no less a concern today, when California faces its greatest public budgetary crisis in decades. To interpret section 19849.18 as CCPOA argues would necessarily require DPA to navigate its fiscal authority directly onto the shoals of budgetary irresponsibility, while ignoring the admonition that it "not commit[] the state to spending money that it does not have." (Wirth, supra, 142 Cal.App.4th at p. 142.)
(7) Lastly, CCPOA's reading of section 19849.18 also conflicts with the later enacted section 19849.22. Section 19849.22, subdivision (b) provides that "[a] supervisory compensation differential is necessary . . .," leaving the differential percentage up to DPA's discretion. According to the legislative history, Senate Bill No. 1910 (1999-2000 Reg. Sess.) initially included language that would have established a fixed 10 percent differential, but the Legislature ultimately chose not to, deciding that a general policy of "[a] supervisory compensation differential" was more appropriate. This contemplates a statutory scheme that allows DPA discretion in setting supervisory compensation increases. When two statutes touch upon a common subject, courts must construe them "in reference to each other, so as to `harmonize the two in such a way that no part of either becomes surplusage.' [Citations.]" (DeVita v. County of Napa (1995) 9 Cal. 4th 763, 778-779 [38 Cal. Rptr. 2d 699, 889 P.2d 1019].) CCPOA's interpretation does not harmonize the two statutes, but instead ignores section 19849.22's mandate.
(8) Therefore, it is within DPA's discretionary power to decide what compensation increases comply with sections 19849.18 and 19849.22. DPA's discretion allows it to look past each isolated rank-and-file compensation increase and determine the appropriate differential in light of the overall compensation picture, such as the presence or absence of compaction, the size of the existing compensation differential, the size of the demonstrated recruitment and retention problems among supervisors, and the State's budgetary concerns.
(9) Finally, turning to the facts at hand, CCPOA has failed to establish any violation of section 19849.18. CCPOA has presented no evidence to suggest that DPA has maintained an inadequate pay differential, ignored a serious compaction problem, or allowed the rank-and-file members to receive *1465 greater salary or benefits than their correctional supervisors. In fact, the evidence demonstrates the contrary. DPA properly concluded that the supervisors had received other benefits above and beyond those granted to the rank-and-file members such as a substantially higher medical contribution rate ($1,097/month,[4] as compared to $859/month). In light of the fact that supervisors enjoyed an 11.45 percent compensation differential, DPA acted reasonably in only granting a 3.125 percent base pay increase. Under these circumstances, section 19849.18 does not compel DPA to effectuate additional salary and benefits increases.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondent.
Reardon, J., and Sepulveda, J., concurred.
NOTES
[1] All subsequent undesignated statutory references are to the Government Code.
[2] According to the record before us, 85/80 is a health care formula whereby the State pays 85 percent of the average health insurance premium for the employee, and 80 percent for dependants of that employee.
[3] In 1981, the Legislature delegated the function of salary setting for supervisory employees to DPA. (Tirapelle, supra, 20 Cal.App.4th at pp. 1322-1323 & fn. 8, 1325-1326.) Section 19826, subdivision (a) provides that DPA "shall establish and adjust salary ranges" for employees excluded from coverage under section 3512 et seq. (the Ralph C. Dills Act).
[4] Although the trial court states this figure as $1,013 per month in its statement of decision, the record suggests that $1,097 is the correct figure. Nonetheless, our decision remains the same using either figure. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2256003/ | 181 Cal. App. 4th 337 (2010)
JENG-CHENG HO et al., Plaintiffs and Respondents,
v.
SHIH-MING HSIEH et al., Defendants and Appellants.
No. B211501.
Court of Appeals of California, Second District, Division Five.
January 26, 2010.
*339 Orrick, Herrington & Sutcliffe, Matthew H. Poppe, M. Leah Somoano and Frank D. Rorie for Defendants and Appellants.
Eagan, O'Malley & Avenatti and John C. O'Malley for Plaintiffs and Respondents.
OPINION
KRIEGLER, J.
A judgment creditor brought an action under California Uniform Commercial Code section 8112 to reach shares of stock owned by the judgment debtor and his wife to satisfy a money judgment.[1] The debtor *340 surrendered his stock certificate to the trial court. The debtor's wife argued that shares in her name were her separate property. The trial court found that the shares had no value, yet ordered the shares transferred directly to the creditor with no reduction in the outstanding judgment. If the debtor's wife failed to transfer her shares, her shares were to be cancelled and reissued in the name of the creditor. We conclude that it was an abuse of discretion to order worthless shares of stock transferred to a judgment creditor in satisfaction of a money judgment without any reduction in the outstanding judgment. Therefore, we reverse.
FACTS AND PROCEDURAL BACKGROUND
The Parties and the Judgment in the Underlying Action
Dr. Jeng-Cheng Ho (Creditor) was raised in Taiwan. He came to the United States to attend dental school, married, and opened a dental practice in the Los Angeles area in 1986. Shih-Ming Hsieh (Debtor) met Creditor's sister Cheng-Fang Ho (Debtor's Wife) in Taiwan. They married in California in 1988, but live together in Taiwan.
In August 1991, the families purchased a 52-acre golf course property in Colton, California for $6.5 million, paying $2 million in cash and giving the seller a note for $4.5 million at 9 percent interest. Debtor and Debtor's Wife took title to the property as "husband and wife as Joint Tenants." H&H Investment Co., Inc., was incorporated on August 30, 1991. Debtor and his wife quitclaimed the Colton property to H&H. H&H issued 12,500 shares of stock each to Creditor, Creditor's wife, Debtor and Debtor's Wife. Debtor served as the president and chief executive officer of H&H. Creditor acted as the general manager of the golf course.
The golf course was not profitable because of the high interest rate on the seller's note. In 1994, Debtor told Creditor that if they provided substantial collateral, he could get a low interest loan from the French bank BNP Paribas to pay off the seller's note. Debtor obtained a $4.5 million loan from BNP with an interest rate of approximately 2 percent. The loan proceeds were paid to a Taiwanese corporation named Tonical Corporation that was controlled by Debtor. Tonical transferred the loan proceeds to Debtor's daughter-in-law Chiu-Ming Chung. Chung loaned $4.5 million to H&H at 9 percent interest. H&H continued not to show a profit because of the high interest rate on the loan. The difference between the interest rates on the BNP loan and the *341 Chung loan was periodically credited against the H&H shareholders' loan balances.
On February 29, 2000, the father of Creditor and Debtor's Wife died. The relationship between Creditor and Debtor's Wife deteriorated and litigation was instituted in Taiwan over the disposition of their father's assets.
On July 12, 2002, Debtor filed the complaint in the underlying action against Creditor and H&H alleging multiple causes of action, including breach of fiduciary duty, declaratory relief, an accounting, and a shareholder derivative action for breach of fiduciary duty. The issues at trial included whether Creditor had used corporate funds for unauthorized purposes and whether certain accounting adjustments were appropriate. Creditor filed a cross-complaint against Debtor for declaratory relief, breach of fiduciary duty, conversion, fraud and deceit, breach of contract, money had and received, constructive trust, an accounting and injunctive relief.
Debtor paid off the BNP loan in March 2003. The trial court issued monetary sanctions against Debtor twice for refusing to produce documents and ultimately issued evidentiary sanctions against Debtor for his continued refusal to produce documents.
Debtor's Wife attended and testified at the trial in the underlying action. The court found Creditor's expenditures on behalf of H&H were reasonable and denied recovery on the complaint. However, on the cross-complaint, the court found Debtor committed fraud and breached his fiduciary duty when he burdened the corporation with a higher interest rate than the loan available from BNP, failed to openly identify and document the loan transactions, failed to render proper accountings for Creditor's payments toward the loan balance, and required H&H to pay off the loan from Chung. The court found Creditor had paid $1,512,322.50 toward his shareholder loan balance, and therefore, Debtor owed compensatory damages of $1,512,322.50 to Creditor. In addition, the court awarded punitive damages of $6 million based on Debtor's discovery abuses, malicious conduct, and wealth. The court entered a judgment in the underlying action on January 18, 2005, awarding $8,293,534.40 to Creditor for compensatory damages, prejudgment interest, punitive damages and attorney fees. Debtor appealed from the judgment.
The Instant Action to Enforce the Judgment
On June 8, 2006, Creditor and H&H filed the instant action against Debtor and Debtor's Wife to transfer or cancel their H&H stock share certificates *342 pursuant to section 8112. The complaint alleged that Debtor is a resident of Taiwan and Debtor's Wife's primary residence is in Taiwan. Creditor had attempted to execute on the judgment by applying for a judgment debtor's examination, obtaining an assignment order, notifying Debtor to return his share certificates to H&H, and requesting that H&H transfer or cancel Debtor's shares. However, Debtor had evaded Creditor's efforts to satisfy the judgment. Creditor and H&H sought an order canceling Debtor's H&H stock certificates and reissuing them to Creditor or transferring all right, title and interest in Debtor's H&H stock certificates to Creditor. They also sought an order enjoining any action with respect to the outstanding shares.
The judgment against Debtor in the underlying action was affirmed by Division Eight of this court and Debtor filed a petition for review by the California Supreme Court, which was denied. In the instant action, Debtor and Debtor's Wife filed a demurrer on the ground that the relief sought was not authorized by section 8112, subdivision (e). They argued that section 8112, subdivision (e) permits a court to order stock certificates delivered to a levying officer for execution in accordance with California's procedures for the enforcement of judgments. Creditor and H&H argued in opposition that section 8112, subdivision (e), provides the court with broad equitable authority to fashion remedies when a judgment debtor refuses to produce a corporation's share certificates and withholds them from a levying officer's reach in a foreign country. After a hearing on December 15, 2006, the trial court overruled the demurrer. The court concluded that section 8112, subdivision (e), is a statutory exception to the writ of execution procedures for enforcement of a money judgment. The court found that section 8112, subdivision (e), provides remedies to creditors with regard to a debtor's interest in otherwise unreachable securities when the debtor refuses to produce the certificate for levy and execution.
Debtor and Debtor's Wife filed a cross-complaint in the instant action against Creditor and H&H alleging several causes of action, including involuntary dissolution of the corporation. The trial court sustained Creditor's demurrer to the cross-complaint without leave to amend after finding that the issues raised by the cross-complaint were identical to the claims litigated in the prior proceeding and the relationship between Debtor and Debtor's Wife in the underlying litigation was sufficiently close to bar her from relitigating the issues against Creditor. To reach this conclusion, the court reasoned that the shares of H&H stock owned by Debtor and Debtor's Wife were presumptively community property under California law because they were acquired *343 during their marriage, and therefore, any recovery by Debtor in the underlying litigation would have been community property. In addition, the court noted that H&H is a close corporation, Debtor's derivative action was brought on behalf of H&H shareholders, the same attorney represented Debtor and Debtor's Wife, and Debtor's Wife attended and testified at the underlying trial.
Creditor and H&H filed a motion for summary adjudication seeking an order under section 8112 and the court's general equitable powers directing Debtor to turn over his H&H share certificates to be levied upon under the supervision of the trial court, or if Debtor refused to surrender the share certificates in violation of the court's order, to cancel and reissue the shares in Creditor's name and apply them to satisfy the judgment under the supervision of the court. Debtor filed a notice of nonopposition to the motion for summary adjudication and deposited the original certificate issued to him for 12,500 shares of H&H stock dated July 18, 1993. Debtor's attorney declared that he could not ascertain the proper procedure for an execution sale of the shares of stock of a close corporation. The trial court concluded that there were no procedures for valuing shares under section 8112, and therefore, the parties and the court could fashion a valuation method suited to the situation. The court granted the motion for summary adjudication to the extent it sought Debtor's shares of H&H to satisfy the judgment against Debtor. The trial court also allowed Creditor and H&H to file an amended complaint adding causes of action for fraudulent transfer and unjust enrichment.
Characterization of Wife's Interest and Trial
On October 29, 2007, Creditor and H&H filed a motion for summary adjudication on the ground that the H&H shares in Debtor's Wife's name were community property. Debtor's Wife filed a motion for summary judgment on the ground that the shares of stock in her name were her separate property. After a hearing, the trial court granted Creditor's and H&H's motion for summary adjudication based entirely on the March 16, 2007 order sustaining the demurrer to the cross-complaint in which the court had reasoned that the Debtor's shares were community property. Although the characterization of the property was not at issue in the underlying trial between Debtor and Creditor and there was no opportunity to present evidence in connection with the demurrer proceeding in the instant action, the court stated that the characterization of the shares "was already litigated in this very Court and it was against [Debtor's Wife]. Res judicata and collateral estoppel prohibit the Court from revisiting the issue of community property." *344 Therefore, the court concluded no triable issue of material fact existed and Creditor was entitled to reach the shares held by Debtor's Wife.
A trial was held to determine the value of the shares. A real estate appraiser testified on behalf of Creditor and H&H that the fair market value of the golf course was $4.7 million and the liquidation value was approximately $3 million. A valuation expert opined that a 15 percent lack of marketability discount, an 18 percent minority interest discount and a 2 percent transaction cost discount should be applied as to each block of shares. H&H had been successful in a different action in voiding Chung's $7 million lien on the property, but the decision was not final. Therefore, the amount of Chung's lien must be taken into account in the valuation. Based on these factors, the valuation expert concluded that the shares had a value of zero. Alternatively, disregarding the outstanding lien and making assumptions favorable to Debtor and Debtor's Wife, the maximum value for each block of shares would be $1,056,529.
The trial court found that the value of the shares was the value of H&H's assets, less the outstanding liabilities and discounts for minority shares, lack of marketability, and transaction costs. Although the trial court found the real estate appraiser credible, the court chose to use $6.5 million as the value of the real property. The court included the Chung lien in the valuation, because the lien was still of record. The court concluded that the outstanding indebtedness to Chung eviscerated the value of H&H's assets, and therefore, the shares had no present value for purposes of an equitable judgment enforcement proceeding.
The trial court entered a judgment on August 8, 2008, authorizing Creditor and H&H to collect the shares of stock from the clerk of the court, or alternatively, to cancel and reissue the shares in Creditor's name. The judgment noted that with respect to the prior judgment in favor of Creditor in the amount of $8,293,534.40, there was no offset of any sums due and owing under that judgment as a result of the enforcement and cancellation procedures against the shares in the instant action. The H&H shares were adjudged to be of no value that would justify an offset. Debtor and Debtor's Wife filed a timely notice of appeal.
DISCUSSION
I. Standard of Review
"The interpretation of a statute is a question of law, which we review de novo. [Citation.]" (Jhaveri v. Teitelbaum (2009) 176 Cal. App. 4th 740, 749 [98 *345 Cal.Rptr.3d 268] (Jhaveri).) We review the trial court's exercise of its equitable powers under an abuse of discretion standard of review. (City of Barstow v. Mojave Water Agency (2000) 23 Cal. 4th 1224, 1256 [99 Cal. Rptr. 2d 294, 5 P.3d 853].) Similarly, "[a] trial court's decision to apply a credit in partial satisfaction of the judgment is an exercise of the court's equitable discretion. [Citation.] An abuse of discretion occurs when, in light of applicable law and considering all relevant circumstances, the court's ruling exceeds the bounds of reason. [Citations.]" (Jhaveri, supra, 176 Cal.App.4th at p. 749.)
II. Enforcement of a Money Judgment Against a Security Interest
Debtor and Debtor's Wife contend it was an abuse of discretion for the trial court to transfer shares of stock having no value to Creditor without any reduction in the outstanding money judgment against Debtor. We agree.
(1) The Enforcement of Judgments Law (EJL) (Code Civ. Proc., §§ 680-724.260) is a comprehensive statutory scheme for enforcing civil judgments in California (Evans v. Paye (1995) 32 Cal. App. 4th 265, 276 [37 Cal. Rptr. 2d 915]), including procedures to enforce a money judgment (Code Civ. Proc., § 695.010 et seq.). In general, all of the judgment debtor's property is subject to enforcement of a money judgment, except as otherwise provided by law. (Code Civ. Proc., § 695.010.) To levy on a security under a writ of execution to satisfy a money judgment, the EJL directs the levying officer to comply with section 8112. (Code Civ. Proc., § 700.130.) Section 8112 provides a bridge between the ways in which a security interest is held under article 8 of the California Uniform Commercial Code and the means by which a creditor pursues legal process against the debtor's property as set forth in the EJL. (See 7 A Hawkland & Rogers, Uniform Commercial Code Series (2008 Supp.) § 8-112:01, rev. art. 8 [referring to similar § 8-112 of the U. Com. Code, 1994 revision of art. 8].)
(2) Under section 8112, to reach a debtor's interest in a security represented by a certificate, the officer making the attachment or levy must actually seize the security certificate, although a security certificate in the possession of a secured party may be reached through legal process on the secured party and a security certificate that has been surrendered to the issuer may be reached through legal process upon the issuer. (§ 8112, subds. (a) & (d).)[2] Subdivision (e) of section 8112 provides: "A creditor whose debtor is *346 the owner of a certificated security, uncertificated security, or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security, or security entitlement or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process." (Stats. 1996, ch. 497, § 9, p. 2905.) In this case, "legal process" means "personal service by the levying officer of a copy of the writ of execution and notice of levy on the person who is to be served." (Code Civ. Proc., § 700.130.)
The comment to section 8112 states, "In dealing with certificated securities the instrument itself is the vital thing, and therefore a valid levy cannot be made unless all possibility of the certificate's wrongfully finding its way into a transferee's hands has been removed. This can be accomplished only when the certificate is in the possession of a public officer, the issuer, or an independent third party. A debtor who has been enjoined can still transfer the security in contempt of court. [(]See Overlock v. Jerome-Portland Copper Mining Co., 29 Ariz. 560 [243 P. 400] (1926).[)] Therefore, although injunctive relief is provided in subsection (e) so that creditors may use this method to gain control of the certificated security, the security certificate itself must be reached to constitute a proper levy whenever the debtor has possession." (Official Comments on U. Com. Code, com. 1, Deering's Ann. Cal. U. Com. Code (2003 ed.) foll. § 8112, p. 120 [incorporating the official comments to the U. Com. Code].)
(3) As explained in Hawkland & Rogers's Uniform Commercial Code Series, "Subsection 8-112(a) provides that if the debtor is the direct holder of a certificated security, the appropriate means by which a creditor can reach the debtor's interest is by actual seizure of the certificate. The principal effect of this rule would be to direct one to whatever law governs legal process for reaching ordinary chattels, rather than whatever law governs legal process for reaching choses in action. Thus, this rule is merely a reflection, in the context of the rules of creditor process, of the principle that a security certificate is an embodiment of the underlying rights against the issuer." (7A Hawkland & Rogers, Uniform Commercial Code Series (1996) § 8-112:01, rev. art. 8.)
Section 8112, subsection (e) authorizes the court to aid a creditor in reaching a certificated security or, in the case of property that cannot be reached by other legal process, in satisfying the creditor's claim by means allowed at law or in equity. "Subsection (e) simply makes clear that a creditor is entitled to appropriate aid from courts of competent jurisdiction, a proposition that would surely follow from other state law even in the subsection's *347 absence. Subsection (e) provides for no relaxation of the requirements of the rest of section 8-112 (including subsection (a)'s actual seizure requirement) but merely welcomes supplemental means by which those requirements might be met." (7A Hawkland & Rogers, Uniform Commercial Code Series (2008 Supp.) § 8-112:01, rev. art. 8, fns. omitted.)
A court cannot compel a corporation to issue new stock certificates to a judgment creditor if the old certificates have not been surrendered and none of the statutory exceptions for issuing new certificates apply. (Reynolds v. Reynolds (1960) 54 Cal. 2d 669, 679-681 [7 Cal. Rptr. 737, 355 P.2d 481]; see also Detox Industries, Inc. v. Gullett (Tex.App. 1989) 770 S.W.2d 954 [holding that Texas's statutory equivalent of U. Com. Code, § 8-317, the predecessor to § 8-112, did not authorize an order to cancel and reissue a stock certificate in the name of a court-appointed receiver for delivery to a levying officer to be sold at an execution sale to satisfy a money judgment]; cf. House v. Williams (1991) 573 So. 2d 1012, 1013 [terse ruling on an emergency motion for stay of a sheriff's sale pending review that Florida's statutory equivalent of § 8112, subd. (e), "authorizes a judge to order a closely held corporation controlled by the judgment debtors to reissue stock certificates in their names when they refuse to respond to discovery or to disclose the location of the original stock certificates."].)
(4) In this case, once Debtor lodged his H&H stock certificate with the trial court, no further aid was required from the court under section 8112, subdivision (e), to reach Debtor's interest in the security. After a certificated security is reached as required under section 8112, the enforcement procedures of the EJL apply. However, assuming the trial court could properly exercise its equity jurisdiction with regard to Debtor and Debtor's Wife's shares, we conclude that the trial court abused its discretion by ordering the property transferred directly to Creditor without any reduction in the outstanding money judgment. The purpose of Creditor's action was to reach the security interests to enforce the outstanding money judgment against Debtor. The securities at issue were found to have no value and cannot satisfy Creditor's judgment in any amount. It was an abuse of discretion to order property that cannot be applied to satisfy the outstanding money judgment in any measure transferred to Creditor in an action to enforce the judgment. (Cf. Associated Ready Mix, Inc. v. Douglas (1992) 843 S.W.2d 758, 761-763 [abuse of discretion to order judgment debtor to turn over derivative cause of action to judgment creditor who would not pursue claims, because the value of the claims could not be determined and applied to satisfy the judgment].) The judgment ordering the certificates transferred directly to Creditor must be reversed.
*348 DISPOSITION
The judgment is reversed. Appellants Shih-Ming Hsieh and Cheng-Fang Ho are awarded their costs on appeal.
Armstrong, Acting P. J., and Mosk, J., concurred.
NOTES
[1] All further statutory references are to the California Uniform Commercial Code, unless otherwise stated.
[2] Section 8112, subdivision (a) provides: "The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in subdivision (d) [concerning certificates in the possession of a secured party]. However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer." (Stats. 1996, ch. 497, § 9, p. 2905.) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2503388/ | 135 F. Supp. 2d 657 (2001)
Yolanda HOLMES
v.
E.SPIRE COMMUNICATIONS, INC., et al.
No. Civ.A. DKC 99-2011.
United States District Court, D. Maryland.
March 15, 2001.
*658 John M. Seeberger, Law Office of John M. Seeberger, Baltimore, MD, for plaintiff.
David S. Coaxum, Annapolis Junction, MD, Randall E. Robertson, Miller, Canfield, Paddock and Stone, PLC, Washington, DC, for defendants.
MEMORANDUM OPINION
CHASANOW, District Judge.
Plaintiff, Yolanda Holmes, filed suit against Defendants, e.spire Communications, Inc. ("e.spire") and American Communications Services, Inc. ("ASCI"), in the Circuit Court for Prince George's County alleging sex and pregnancy discrimination in violation of Title VII of the Civil Rights Act and the Family Medical Leave Act ("FMLA").[1] Defendants removed the case to this court. Currently pending and ready for resolution are Plaintiff's first motion for summary judgment (Paper No. 32), Defendants' motion to withdraw admissions (Paper No. 34), Defendants' motion for summary judgment (Paper No. 40), and Plaintiff's second motion for summary judgment (Paper No. 41). No hearing is deemed necessary. Local Rule 105.6. For the reasons set forth below, Plaintiff's first motion for summary judgment is denied; Defendants' motion to withdraw admissions is denied as moot; Plaintiff's second motion for summary judgment is denied; and Defendants' motion for summary judgment is granted.
*659 I. Background.
In July 1996, Plaintiff was hired by Defendants as a full-time accounts payable clerk.[2] Prior to this, she worked as a temporary employee for Defendants. In the fall of 1997, Plaintiff learned she was pregnant and would give birth in March 1998. She communicated this information to Defendants. Plaintiff alleges that she was advised that she would receive six weeks of maternity leave that would begin after the birth of her child. Plaintiff also alleges that she was informed that her six week leave would not be reduced in any fashion.
On December 23, 1997, as Plaintiff was beginning a scheduled vacation from work, she was informed by her doctor that she would require bed rest for the remainder of her pregnancy. She notified Defendants of her medical situation and took medical leave, which was approved by Defendants. Plaintiff claims she was told that her position would remain open pending her return from leave, but that Defendants replaced her with a full-time accounts payable clerk shortly after her leave began. Plaintiff claims that she communicated frequently with Defendants' human resources department during her leave.
Plaintiff gave birth on March 5, 1998. Eight days later, on March 13, 1998, Plaintiff received a telephone call from Defendants instructing her to return to work by March 17, 1998 or risk termination. This information, according to Plaintiff, was contrary to her understanding that she would have six weeks of maternity leave following the delivery of her child and that her post-delivery maternity leave would not be reduced by her pre-delivery medical leave. Plaintiff claims that she requested to use her accumulated vacation time, approximately 62 hours, to extend her leave beyond March 17, but her request was denied.
Plaintiff alleges Defendants were advised by her doctor that she was under a continuing disability as the result of recently giving birth and would require accommodations, such as working at home a few hours a day, if she was to return to work so soon after the delivery. Plaintiff claims that despite her efforts to work out a reasonable accommodation, she was terminated from her position on March 17, 1998, because of her pregnancy, child birth, and pregnancy-related medical condition.
On the basis of these allegations, Plaintiff asserts claims for sex and pregnancy discrimination in violation of Title VII and the FMLA. Plaintiff moved for summary judgment on her second countviolation of the FMLAon the basis of facts that were deemed admitted due to Defendants' failure to respond to requests for admission. Defendants, in turn, moved to withdraw those admissions and moved for summary judgment on both of Plaintiff's counts. Plaintiff subsequently filed a cross motion for summary judgment on both counts.
II. Summary Judgment Standard.
Summary judgment is appropriate when (1) there is no genuine issue of material fact and (2) the moving party is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c); Anderson v. Liberty Lobby Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir.1990). A genuine dispute exists if a reasonable fact-finder could return a verdict for the nonmoving *660 party. Anderson, 477 U.S. at 247-48, 106 S. Ct. 2505. Only disputes over facts that might affect the outcome of the case under governing law will preclude summary judgment. Id. at 252, 106 S. Ct. 2505; Thompson Everett, Inc. v. National Cable Advertising, 57 F.3d 1317, 1323 (4th Cir.1995).
The moving party bears the initial burden of demonstrating that there is no genuine issue as to any material fact. Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir.1979). The moving party may meet this burden by demonstrating the absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The non-moving party then must, through affidavits or other kinds of evidentiary material listed in Rule 56(c), demonstrate specific facts showing that there is a genuine issue for trial. Id. at 324, 106 S. Ct. 2548. The non-moving party cannot rely on "the mere pleadings themselves," or simply set forth speculation, allegations, or denials to demonstrate genuine issues of fact. Id.
The court must not weigh the evidence. Rather, the court must determine whether enough evidence exists to enable a reasonable factfinder to find in favor of the non-moving party. Anderson, 477 U.S. at 252, 106 S. Ct. 2505. The court must view all facts and inferences most favorably to the non-moving party, who is entitled to have the credibility of his evidence assumed, his version of events in dispute accepted, and internal conflicts resolved in his favor. Charbonnages de France, 597 F.2d at 414. The non-moving party, however, is only entitled to inferences that "fall within the range of reasonable probability." Thompson Everett, 57 F.3d at 1323.
III. Discussion.
A. Cross motions for summary judgment.
Both parties have filed motions for summary judgment. Plaintiff contends that the evidence establishes intentional discrimination on the part of Defendants in violation of Title VII and the Pregnancy Discrimination Act ("PDA"). She argues that Defendants' proffered nondiscriminatory reason for her termination the alleged expiration of her FMLA leave is merely a pretext for discrimination. Plaintiff also alleges that Defendants violated the FMLA when they terminated her. Defendants argue that Plaintiff failed to establish a prima facie case of Title VII pregnancy discrimination, and that even if a prima facie case has been shown, Plaintiff failed to offer any evidence that Defendants' proffered reason for her termination was a pretext for discrimination. Finally, Defendants argue that Plaintiff failed to establish a prima facie case of an FMLA violation.
1. Title VII Pregnancy Discrimination.
As explained in the following discussion, Plaintiff has failed to establish a prima facie case of Title VII pregnancy discrimination because she has not offered evidence that Defendants treated similarly situated nonpregnant employees more favorably than pregnant employees.[3] Even assuming Plaintiff established a prima facie case, she cannot show that the proffered nondiscriminatory reason for Plaintiff's termination her alleged exhaustion of FMLA leave was actually a pretext for intentional discrimination.
*661 The Pregnancy Discrimination Act ("PDA"), an amendment to Title VII of the Civil Rights Act of 1964, states, in relevant part, that "women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment-related purposes ... as other persons not so affected but similar in their ability or inability to work." 42 U.S.C. § 2000e(k). "A claim of discrimination on the basis of pregnancy must be analyzed in the same manner as any other sex discrimination claim brought pursuant to Title VII." DeJarnette v. Corning Inc., 133 F.3d 293, 297 (4th Cir.1998) (internal quotation marks omitted) (quoting Boyd v. Harding Academy, 88 F.3d 410, 413 (6th Cir.1996)). Plaintiff thus bears the burden of showing that she was a victim of intentional discrimination. Id. (quoting Texas Dep't of Cmty. Affairs v. Burdine, 450 U.S. 248, 256, 101 S. Ct. 1089, 67 L. Ed. 2d 207 (1981)). Additionally, Plaintiff bears the burden of establishing that Defendants discriminated against her "because of her pregnancy." See id.; 42 U.S.C. §§ 2000e-2(a)(1) & (2).
To survive summary judgment, Plaintiff must establish her Title VII discrimination case by one of two methods. First, Plaintiff can utilize "ordinary principles of proof using any direct or indirect evidence relevant to and sufficiently probative of the issue." Brinkley v. Harbour Recreation Club, 180 F.3d 598, 607 (4th Cir.1999) (internal quotation marks omitted) (citations omitted). Under this approach, Ms. Holmes would have to produce "direct evidence of a stated purpose to discriminate and/or [indirect] evidence of sufficient probative force to reflect a genuine issue of material fact." Id. (internal quotation marks omitted) (quoting Goldberg v. B. Green & Co., Inc., 836 F.2d 845, 848 (4th Cir.1988)). Plaintiff has not proffered any proof that directly reflects any discriminatory attitude or intent on the part of Defendants, let alone any nexus between a discriminatory attitude and an adverse employment action. See id. at 608 (explaining that under the direct and indirect basis, a plaintiff must produce evidence that clearly indicates a nexus between discriminatory attitude and the employment action (citing Fuller v. Phipps, 67 F.3d 1137, 1142 (4th Cir.1995)); EEOC v. Clay Printing, 955 F.2d 936, 942 (4th Cir.1992)).
Under the second method of proof, the McDonnell Douglas framework, Plaintiff must first establish a prima facie case of discrimination by a preponderance of the evidence. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973); Brinkley, 180 F.3d at 607. To establish a prima facie case of pregnancy discrimination, Plaintiff must demonstrate that (1) she was pregnant; (2) she suffered an adverse employment action; (3) at the time of the adverse employment action she was performing her job satisfactorily; and (4) the position remained open or was filled by a similarly qualified applicant outside of the protected class-someone not pregnant. See Brinkley, 180 F.3d at 607. Some courts have framed the fourth inquiry to require a PDA plaintiff to offer evidence of disparate treatment, which means showing that the defendant treated similarly situated nonpregnant employees more favorably. See Ilhardt v. Sara Lee Corp., 118 F.3d 1151, 1154-55 (7th Cir.1997); EEOC v. Lutheran Family Services, 884 F. Supp. 1022, 1028 (E.D.N.C.1994). The question under either approach is whether there is evidence that the defendant treated similarly situated nonpregnant employees more favorably, either by placing them in the position formerly held by the pregnant employee, or by not terminating them or taking adverse employment actions when encountered with a situation similar to the plaintiff *662 employee's.[4]
If the prima facie case is successfully established, a rebuttable presumption that Defendants unlawfully discriminated is created, and the burden of production shifts to Defendants to articulate a legitimate, nondiscriminatory reason for the adverse employment action. St. Mary's Honor Center v. Hicks, 509 U.S. 502, 507, 113 S. Ct. 2742, 125 L. Ed. 2d 407 (1993). If the Defendants provide such a reason, the burden shifts back to Plaintiff to show that the reason proffered by Defendants is actually a pretext for impermissible discrimination. Id. at 507-08, 113 S. Ct. 2742. See also, Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 120 S. Ct. 2097, 2108-09, 147 L. Ed. 2d 105 (2000) (explaining a plaintiff's evidentiary burden).
There is no dispute that Plaintiff was pregnant, and thus, a member of the protected class. There is also no dispute that she was terminated, and that at the time of termination she was performing her job within the legitimate expectations of Defendants. Plaintiff, however, offers no evidence that Defendants treated nonpregnant employees more favorably than pregnant employees, or that Defendants filled Plaintiff's position with a nonpregnant employee.[5] Rather, she summarily contends that she need not show that Defendants treated nonpregnant employees more favorably because "Defendants admit that they terminated the Plaintiff for reasons related to her pregnancy, and the notion that she was terminated under the FMLA is a pretext." Pl.'s Reply Mem., 2nd Summ.J., at 5 (Paper No. 48). Defendants, however, make no such admission. Moreover, an inquiry into pretext does not occur until after a plaintiff has established a prima facie case. It is therefore irrelevant at this stage.
Plaintiff also asserts that Defendants failed to extend to her the same benefits that they provided to other temporarily disabled employees. As evidence, Plaintiff offers an email, sent between two of Defendants' employees, David Coaxum and Andrea Colbert, that inquired as to the "reasons why each of the [employees listed] ... were [sic] allowed to extend their leave beyond the FMLA leave." Pl.'s 2nd Mot.Summ.J., Ex. 5. The email provided the names of seven female employees, all of whom, it could be inferred, were allowed to take leave beyond the amount provided by the FMLA without being terminated. *663 In response, Defendants have provided an affidavit of their Director of Human Resources, Cathy Boland, which states that each of these seven women was on leave due to pregnancy or a pregnancy related condition. Defs.' Opp'n to Pl.'s 2nd Summ.J.Mot., Ex. 1. In sum, this evidence may show how other pregnant employees were treated but does not show how anyone outside of Plaintiff's class was treated.
Plaintiff's only other "evidence" that Defendants treated nonpregnant employees more favorably is Plaintiff's deposition testimony that "[to] her knowledge" a female co-worker, Kena Drew, had a "disease" and "got to be out more than 12 weeks in a year and return back to work." Pl.'s Reply Mem.Supp. 2nd Mot.Summ.J., at 7; Pl.'s 2nd Mot.Summ.J., Ex. 4, Dep. of Yolanda Holmes, at 54. Plaintiff concluded that Ms. Drew must have been out more than 12 weeks because she "noticed that she was absent for a long period of time." Id. at 78. Plaintiff cannot demonstrate a dispute as to a genuine issue of fact by simply setting forth unsubstantiated speculation and allegations. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
Under the PDA and Title VII, an employer is barred from treating a woman who is pregnant differently for employment purposes than those employees who are not pregnant. 42 U.S.C. § 2000e(k). Plaintiff has offered no evidence to support the conclusion that she was treated differently than nonpregnant employees. As such, she has failed to establish disparate treatment or that her termination occurred under circumstances giving rise to a reasonable inference of discrimination.
Even if Plaintiff had established a prima facie case, she has not offered evidence that Defendants' reason for her termination was actually a pretext for intentional discrimination. Defendants' corporate designee, Cathy Boland, testified that Plaintiff was terminated for the sole reason that she could not return to work upon the expiration of her FMLA leave. See Defs.' Mot.Summ.J., Ex. 2, Dep. of Catherine Boland, at 81-82. Ms. Boland calculated Plaintiff's FMLA leave from December 23, 1997, and concluded that it expired on March 16, 1998. Id. at 81-82. Plaintiff disputes this calculation of her FMLA leave. Under Plaintiff's calculation, her FMLA leave began on January 7, 1998 and thus expired on March 31, 1998. Thus, under Plaintiff's calculation, Defendants fired Plaintiff before her leave expired. From this she concludes that Defendants' proffered reason is a pretext.
When reviewing a Defendants' proffered reason for discharge and a plaintiff's corresponding claim of pretext, the court must "keep in mind that Title VII is not a vehicle for substituting the judgment of a court for that of the employer." DeJarnette, 133 F.3d at 298-99 (internal quotation marks omitted) (quoting Jiminez v. Mary Washington College, 57 F.3d 369, 377 (4th Cir.1995)). The court "does not sit as a kind of super-personnel department weighing the prudence of employment decisions." Id. at 299 (internal quotation marks omitted) (quoting Giannopoulos v. Brach & Brock Confections, Inc., 109 F.3d 406, 410 (7th Cir.1997)). Thus, once Defendants articulated a nondiscriminatory reason for Plaintiff's termination, expiration of FMLA leave, it did not become this court's "province to decide whether the reason was wise, fair, or even correct, ultimately, so long as it truly was the reason for plaintiff's termination." DeJarnette, 133 F.3d at 299 (internal quotation marks omitted) (emphasis added) (quoting Giannopoulos, 109 F.3d at 410-11).
Plaintiff failed to offer any evidence that Defendants proffered reason for termination *664 their belief that her FMLA leave had expired and that she could not return to work was false. Taking the evidence in the light most favorable to Plaintiff, it shows that Defendants miscalculated Plaintiff's FMLA leave. Plaintiff's speculation that Defendants' alleged mistake must be a pretext is not sufficient evidence sustain a claim under Title VII.[6]
2. FMLA.
Plaintiff argues that Defendants are liable under the FMLA for failing to restore her to her former position. Defendants contend that they were not obligated to restore Plaintiff to her former position because, upon the expiration of her FMLA leave, she was not able to return to work. The parties dispute the dates Plaintiff's FMLA leave began and expired, as well as the date Plaintiff was able to return to work.
Defendants contend that Plaintiff's FMLA leave began on December 23, 1997 and expired on March 16, 1998. Plaintiff contends that her FMLA leave did not begin until January 7, 1998 and thus did not end until March 31, 1998. It is not disputed that Plaintiff was pre-approved for vacation from December 23, 1997 through January 6, 1998, and learned during that time that she would not be able to return to work due to a pregnancy related disability; rather, the parties dispute whether that vacation period counts toward Plaintiff's FMLA leave.
The FMLA provides that an eligible employee[7] must be allowed to take up to twelve work weeks of leave during any twelve-month period because of a serious health condition that prevents the employee from performing his or her job. 29 U.S.C. § 2612(a)(1)(D). Under the FMLA, Defendants were entitled to require Plaintiff to substitute her vacation leave for FMLA leave. 29 U.S.C. § 2612(d)(2); Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 300 (4th Cir.1998). However, under the regulations promulgated under the FMLA, Defendants were required to "promptly (within two business days absent extenuating circumstances) notify [Plaintiff] that the paid leave [was] designated and [would] be counted as FMLA leave." 29 C.F.R. 825.208(b); Cline, 144 F.3d at 300.[8] The record is devoid of any proof that Defendants provided *665 such notice. The only notice Defendants contend Plaintiff received was that of their general policy, articulated in their handbook, and a phone call, admittedly placed on March 13, 1998, informing Plaintiff that if she did not return to work by March 17, she would be fired. Defs.' Mem. Opp'n Pl.'s 1st Mot.Summ.J., at 15; Defs.' Mot.Summ.J., Ex. 2, Dep of Cathy Boland, at 49, 61-66. In other words, although Defendants could have required Plaintiff to use vacation or other leave as FMLA leave, that option was waived when they failed to give proper notice of their intentions. Cline, 144 F.3d at 300. In the absence of proper notice that her FMLA leave began on December 23, Plaintiff was entitled to twelve weeks of FMLA leave beginning on January 7, 1998, and ending on March 31, 1998. See id. at 301.[9]
Under the FMLA, an eligible employee is entitled, upon return from FMLA leave, to be restored "to the position of employment held ... when the leave commenced." 29 U.S.C. § 2614(a)(1)(A). If an employee is unable to "perform an essential function" of her job "because of a physical or mental condition, including the continuation of a serious health condition, the employee has no right to restoration to another position under the FMLA." 29 C.F.R. § 825.214(b); see also Sarno, 183 F.3d at 161-62 (2d Cir.1999) (explaining that if, at the end of the FMLA's twelve week leave period, an employee is unable to perform the essential functions of her former job, then "[a]ny lack of notice of the statutory twelve week limitation on FMLA leave could not rationally be found to have impeded" the employee's return to work). If, however, Plaintiff was able to return to work upon the expiration of her FMLA, then Defendants are liable for failing to restore her to her former position. 29 U.S.C. § 2614(a)(1)(A).
Plaintiff claims that had she known that her FMLA leave expired on March 31, 1998, "it is reasonable to infer that ... Plaintiff, to save her job, could have returned to work, albeit not the ideal or planned time frame." Pl.'s Opp'n Defs.' Summ.J., at 5. Plaintiff argues that "it is quite likely and reasonable to conclude that with the additional two weeks, and faced with the choice of losing her job or providing for her children, that [Plaintiff] would had to have returned." Pl.'s Reply Defs.' Mot.Summ.J., at 3. This argument is flatly contradicted by the evidence, for Plaintiff's own deposition testimony establishes that she was unable to return to work on March 31, 1998. When asked *666 whether her medical condition prevented her from returning to work by March 17, Plaintiff responded that she was "still healing after having a child" and that "[y]ou have to heal at least six weeks before you can go out and walk and jump and play. You just don't bounce back out the bed." See Defs.' Mot.Summ.J., Ex. 3, Dep. of Yolanda Holmes, at 35-36.[10] Plaintiff believed that her short-term disability benefits expired on March 31. Id. at 31. When asked whether she was "able to work when the short-term disability benefits ceased?" she further responded "[n]o, not according to my physician, no." Id. at 88. She testified that she was ready to return to work on April 16, 1998, that she reapplied for her job after that date, and that "I couldn't [re]apply until I was able to work and look for a job so it wasn't immediately after I was terminated." Id. at 40-41, 50. Thus, Plaintiff's own testimony establishes that she was not able to return to work when her FMLA leave expired on March 31.
Plaintiff's alternative position is that she was entitled to FMLA leave until she gave birth, and was then entitled to six weeks of maternity leave that would not be counted against the FMLA twelve week/sixty day leave. She claims that Defendants had a policy granting six weeks post-birth maternity leave, after which employees were entitled to take the remainder of their FMLA leave that was "suspended" upon the birth of the child. See Pl.'s Opp'n Defs.' Mot.Summ.J., at 4. She offers as proof the email between David Coaxum and Andrea Colbert, which provides names of pregnant employees who were given leave beyond their FMLA leave. See supra, ¶ 3(A)(1). She also contends that she herself was promised additional leave. See Defs.' Mot.Summ.J., Ex. 3, Dep. of Yolanda Holmes, at 83-84. Defendants deny that Plaintiff was promised an additional six weeks of post-birth maternity leave and deny that they have ever maintained such a policy.
This factual dispute is immaterial to Plaintiff's FMLA claim. First, Plaintiff's own testimony establishes that she believed that her FMLA leave expired on March 31, 1998. Pl.'s Mot.Summ.J., Ex. 4, Dep. of Yolanda Holmes, at 32. She thus cannot show that she was mislead regarding her FMLA rights. Viewing the evidence in the light most favorable to Plaintiff on the post-birth leave would show that Plaintiff was promised and then denied a benefit beyond that provided by the FMLA. The FMLA, however, does not provide a remedy for broken promises or deviation from policy. The FMLA is a "balanc[ing]" act, an attempt to provide employees with some leave, "a reasonable leave," without completely ignoring the legitimate "demands of the workplace." 29 U.S.C. §§ 2601(b)(1) & (2). The Act limits the reasons that employees may take leave and establishes that the "employee shall be entitled to a total of 12 workweeks of leave during any" year. 29 U.S.C. § 2612(a)(1) (emphasis added).
Plaintiff argues that Section 2652 of the Act and 29 C.F.R. § 825 .700 require Defendants to extend to her any benefit given to other pregnant employees. Section 2652 states that "[n]othing in [the FMLA] ... shall be construed to diminish the obligation of an employer to comply with ... any employment benefit program or plan that provides greater family or medical leave rights to employees than the rights established under" the FMLA. 29 U.S.C. § 2652(a). Section 825.700 provides, *667 in relevant part, "[a]n employer must observe any employment benefit program or plan that provides greater family or medical leave rights to employees than the rights established by the FMLA." 29 C.F.R. § 825.700(a). These provisions cannot be interpreted to give employees a cause of action under the FMLA to enforce other employment agreements. This very argument was made and rejected in Rich v. Delta Air Lines, Inc., 921 F. Supp. 767, 773 (N.D.Ga.1996) (explaining that "Section 825.700 does not, and could not, however, create a federal cause of action under the FMLA to enforce the voluntary employer policies of providing benefits that exceed those required by the FMLA" and that the "Department of Labor has no regulatory power to rewrite, and clearly did not rewrite, the FMLA in such a manner"); see also Ragsdale, 218 F.3d at 939 (explaining that "the FMLA's legislative history supports the view that the FMLA was intended only to be a statute that provided a minimum labor standard; an assurance that employers would provide employees with twelve weeks of leave every year." (citing S.Rep. No. 103-3, at 4 (1993), reprinted in 1993 U.S.C.C.A.N. 3, 6; S.Rep. No. 103-3, at 28 (1993), reprinted in U.S.C.C.A.N. 3, 30)). As the Eighth Circuit explained in Ragsdale, "twelve weeks of leave is both the minimum the employer must provide and the maximum that the [FMLA] requires." Ragsdale, 218 F.3d at 937. Defendants' alleged six weeks post birth maternity policy cannot be used to expand Plaintiff's FMLA rights. The FMLA does not entitle Plaintiff to additional leave beyond the twelve weeks of FMLA leave. Id. at 938 (citing 29 U.S.C. § 2612(a)(1); 29 U.S.C. § 2612(d)(1)).[11]
In sum, Plaintiff's FMLA leave began to run upon the completion of her vacation, January 7, 1998, and expired twelve weeks later, on March 31, 1998. Plaintiff was unable to return to work on that date, and thus had no right to be restored to her former position. Accordingly, summary judgment will be entered in favor of Defendants on Plaintiff's FMLA claim.
B. Plaintiff's first motion for summary judgment/Defendants' Motion to Withdraw.
Plaintiff's first summary judgment motion addresses Defendants' failure to respond to her request for admissions. (Paper No. 32). She claims that summary judgment is proper because all material facts in regard to this claim have been admitted by Defendants, failure to respond to Plaintiff's requests for admission. Defendants then moved to withdraw their admissions.
None of Plaintiff's requests for admissions is a material fact. At most, the admissions establish that Defendants treated other pregnant employees more favorably than Plaintiff because Defendants maintained a policy that provided six weeks of post-birth maternity leave that *668 would not be reduced by FMLA leave, that Plaintiff was told she would be allowed six weeks post-birth leave, and that Defendants denied Plaintiff the leave. For the reasons previously discussed, Defendants are entitled to summary judgment even assuming the accuracy of those facts.[12] Accordingly, the motion to withdraw is denied as moot. Plaintiff's motion for summary judgment based on the admissions is denied.
IV. Conclusion.
Accordingly, Plaintiff's first motion for summary judgment is denied. Defendants' motion to withdraw admissions is denied as moot. Defendants' motion for summary judgment is granted. Plaintiff's second motion for summary judgment is denied. A separate order will be entered.
ORDER
For the reasons stated in the foregoing memorandum Opinion, it is this ______ day of March, 2001, by the United States District Court for the District of Maryland, ORDERED that:
1. Plaintiff's First and Second motions for summary judgment BE, and the same hereby ARE, DENIED;
2. Defendants' motion to withdraw admissions BE, and the same hereby IS, DENIED as moot;
3. Defendants, motion for summary judgment BE, and the same hereby IS, GRANTED;
4. JUDGMENT BE, and the same hereby IS, ENTERED in favor of E.SPIRE COMMUNICATIONS, INC. and AMERICAN COMMUNICATIONS SERVICES, INC., and against YOLANDA HOLMES;
5. All prior rulings are incorporated herein and this is a final judgment for purposes of Fed.R.Civ.P. 58; and
6. The Clerk is directed to transmit copies of the Memorandum Opinion and this Order to counsel for the parties and CLOSE this case.
NOTES
[1] Plaintiff's complaint also alleges wrongful discharge under Maryland common law. Defendants' motion to dismiss that claim was granted (Paper No. 30), leaving only Plaintiff's Title VII and FMLA claims.
[2] ASCI and e.spire are the same entity. The company was operating as ASCI when Plaintiff was hired and changed its name to e.spire at or around the time of the events giving rise to Plaintiff's complaint.
[3] Plaintiff also alleged sex discrimination. She has not, however, provided any evidence to establish a prima facie case or even attempted to support a claim for discrimination on any basis other than pregnancy.
[4] The Fourth Circuit has recognized that because a particular prima facie case may vary depending on the relevant facts and context of the situation, a plaintiff may also have the option of satisfying the fourth inquiry by establishing that the adverse employment action occurred under circumstances that give rise to a reasonable inference of discrimination. See Taylor v. Virginia Union Univ., 193 F.3d 219, 230 (4th Cir.1999) (applying in failure to promote case); Brown v. McLean, 159 F.3d 898, 902, 905 (4th Cir.1998) (adapting the fourth prong to the facts of a gender discrimination claim and providing an example of when adaptation of the prong of a prima facie age discrimination claim would be necessary); Glunt v. GES Exposition Servs., Inc., 123 F. Supp. 2d 847, 865-66 (D.Md.2000); see also Kerzer v. Kingly Mfg., 156 F.3d 396, 401 (2d Cir.1998) (explaining that, in some circumstances, "a plaintiff may establish a prima facie case by demonstrating that the discharge occurred in circumstances giving rise to an inference of unlawful discrimination" (citations omitted)).
[5] Plaintiff contends that the exhibits clarify that her position was "held open and filled". Pl.'s 2nd Mot.Summ.J., at 5-6. The only evidence she offers for this proposition is the deposition testimony of Defendants' corporate designee, who, when asked "[w]hen was Ms. Holmes' position filled by someone else?" answered that she didn't know. She was never asked who filled the position. Id. at 3, Ex. 1, at 54-56. Plaintiff has not, therefore, offered evidence to show that her position was filled by someone who was not pregnant.
[6] In Reeves, the Supreme Court clarified that it is "permissible for the trier of fact to infer the ultimate fact of discrimination from the falsity of the employer's explanation." Id. at 2108; see Rowe v. Marley Co., 233 F.3d 825, 830 (4th Cir.2000). Thus, "a plaintiff's prima facie case, combined with sufficient evidence to find that the employer's asserted justification is false, may permit the trier of fact to conclude that the employer unlawfully discriminated". Reeves, 120 S.Ct. at 2102 (emphasis added); see Rowe, 233 F.3d at 830. Here, there is an allegation of error but not of falsehood.
[7] An "eligible employee" is one who has been employed for more than twelve months before requesting leave under the FMLA, and has worked at least 1,250 hours within that period. 29 U.S.C. § 2611(2)(A). There is no dispute that Plaintiff was an "eligible employee."
[8] Some courts have concluded that the notice provisions articulated in the C.F.R. are invalid because they attempt to expand an employee's FMLA leave beyond twelve weeks. See e.g., McGregor v. Autozone, Inc., 180 F.3d 1305, 1307-08 (11th Cir.1999) (finding that the provisions of 29 C.F.R. § 825.208 that require additional notice of substitution of paid leave for FMLA leave are "invalid and unenforceable," and explaining that if an employer exercises its right to require an employee to substitute paid leave, and the employee is absent for more than the protected twelve week period, then she has no right to bring suit under the FMLA). As Cline indicates, the Fourth Circuit has not adopted this view.
[9] The absence of notice is not, in and of itself, a violation of the FMLA. As the Eighth Circuit recognized, failure to give proper notice is a valid basis for suit only if that failure functioned to "interfere with or deny an employee's substantive FMLA rights." Ragsdale v. Wolverine Worldwide, Inc., 218 F.3d 933, 939-40 (8th Cir.2000). The court provided two examples of factual scenarios, similar to Plaintiff's, in which failure to give notice could interfere with the ability to exercise FMLA rights. The court noted that "in some cases where the leave was anticipated, an employer's failure to provide notice that the leave counts against the FMLA entitlement could interfere with the employee's ability to plan and use future FMLA leave." Id. at 940. Likewise, if an employee "exceeded her FMLA leave ... due to the employer's failure to notify her that her leave was designated as FMLA leave, and if she had been so notified, she would have returned to work at the end of the twelve weeks," then the employee's FMLA rights would have been hindered. Id. at 939. Thus, the crucial inquiry is whether the failure to give notice interfered with, restrained, or denied Plaintiff the ability to exercise any right provided by the FMLA. See 29 U.S.C. § 2615(a)(1). The right Defendants are alleged to have interfered with is Plaintiff's right to restoration to her former position upon the expiration of twelve weeks of FMLA leave. To prevail, Plaintiff must show that failure to notify interfered with, restrained or denied her the ability to exercise that right.
[10] Plaintiff gave birth to her child on March 5, 1998. March 31 arrived only three and a half weeks later. Plaintiff acknowledged that her doctor told her she would be able to return to work on April 16, 1998. Id. at 39.
[11] The FMLA also provides that it is unlawful for "any employer to discharge or in any other manner discriminate against any individual for opposing any practice made unlawful" by the Act. 29 U.S.C. § 2615(a)(2); see also Cline, 144 F.3d at 301 (explaining that under Section 2615, a plaintiff must show that "she engaged in protected activity, that the employer took adverse action against [her], and that the adverse action was casually related to the plaintiff's protected activity.") (citing Williams v. Cerberonics, Inc., 871 F.2d 452, 457 (4 th Cir.1989)). Defendants contend that Plaintiff has failed to establish that Defendants terminated her in retaliation for exercising her FMLA rights. Defs.' Mot. Summ.J., at 18-19. This is, however, a question this court need not address because Plaintiff has admitted that she has "not alleged retaliation under the FMLA." Pl.'s Opp'n Defs.' Mot.Summ.J., at 3.
[12] The court would, in any event, grant Defendants' motion to withdraw the admissions in the absence of prejudice to Plaintiff. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2311641/ | 356 A.2d 193 (1976)
Louis H. JOLICOEUR and Claire G. Jolicoeur
v.
KENNEBEC WATER DISTRICT et al.
Supreme Judicial Court of Maine.
April 8, 1976.
Marcou & Marcou by Louis R. Marcou, Clyde L. Wheeler, Waterville, for plaintiffs.
Weeks, Hutchins, Frye & Welch by Miles P. Frye, Waterville, for Kennebec Water Dist.
Shiro & Jabar by Burton G. Shiro, Waterville, for Henry and Rose Manzo.
*194 Before DUFRESNE, C. J. and WEATHERBEE, POMEROY, WERNICK and ARCHIBALD, JJ.
POMEROY, Justice.
Before us for decision is an appeal from a declaratory judgment fixing the boundary line between two adjacent pieces of property, denying appellants' claim of right to injunctive relief, and denying appellants' claim for damages.
We deny the appeal.
The dispute between the parties had its genesis in a decision by the Kennebec Water District to build a water tower on a section of high ground in Winslow, Maine. Investigation by the water district determined to its satisfaction that the property on which it proposed to build the water tower was that of Henry and Rose Manzo. After negotiations seeking to acquire the property from the Manzos had failed, the water district exercised its statutorily granted right of eminent domain. The property was acquired and the Manzos were justly compensated.
Subsequently, appellants, husband and wife, brought action against the water district and Mr. and Mrs. Manzo premising their claim on the asserted conclusion that the water tower and the associated water main had been constructed at least in part on their property.
Basic to the appellants' claim to a cause of action against appellees was that the boundary separating the Manzo and Jolicoeur properties was at a place other than that which the water district had determined it to be.
By agreement of the parties, the hearing below was directed solely to the question of the true boundary line between the properties. After hearing testimonial evidence, much of it appropriately denominated "expert", the presiding Justice found the boundary in question to be delineated by a wire fence running north-south between the properties. As of course, judgment for the appellees followed such finding.
It is agreed the boundary line in question was described in several conveyances as running North 21° East to Taylor Avenue. The sourthern terminus of the line was described as "at a stake in the town line quite near the corner of the six acre lot and the Ira Getchell lot." The difficulty in the case results from the fact that the terminus could not be located.
The Justice below determined that the disputed boundary was "afloat" and concluded that the wire stock fence between the Manzo and Jolicoeur properties is "the only thing on the face of the earth in the case that even resembles a property line between the termini suggested in the deed." In effect, the Justice determined that the fence constituted the boundary line by acquiescence.
Appellants attack that determination on several grounds.
First, they question the conclusion that the boundary line was "afloat." In their view a granite post marking the north-west corner of the Ira Getchell lot meets the calls of the deed and was intended by the predecessors in interest of the disputants to indicate the sourthern terminus of the boundary in question. Appellants urge that a stone "marker at" the corner of the Ira Getchell lot can properly be construed as a "stake quite near" the corner; and if that interpretation is accepted and a line is drawn from the stone marker North 21° East to Taylor Avenue, much of the land taken for the water tower falls within their western boundary.
Where on the face of the earth the boundaries are located is a question of fact. Leighton v. Leighton, Me., 329 A.2d 164 (1974).
It is now established law that the findings of fact of the single Justice cannot *195 be disturbed by this Court unless they are clearly erroneous. The burden is upon the appellants to demonstrate to us that the factual finding of the court below was "clearly erroneous." Findings of fact are not "clearly erroneous" if such findings are supported by credible evidence. Leighton v. Leighton, supra, at 165-166.
The history of this land ownership is important to a clear understanding of the presiding Justice's finding. The evidence is that at one time all the land later owned by the Manzos and that owned by the Jolicoeurs was a single parcel owned by James Drummond. The presiding Justice found that the James Drummond farm comprised parcels of land lying in the towns of Winslow and Vassalboro, and a portion of the farm seemed to straddle the town line although the parcels are distinctly described where this is the case.
For the purposes of this case, our interest is in that portion of the Drummond farm which lay northerly of the Vassalboro town line and southerly of Taylor Avenue, so-called, in the Town of Winslow. The parcel of land where the boundary is in question is on a very steep hill rising sharply to the south from Taylor Avenue, reaching a crest in the vicinity of the Winslow-Vassalboro town line.
The presiding Justice bottomed his conclusion that the boundary line was where he declared it to be on the basis that the deed, which the parties agree controlled, describes the terminal point of the disputed boundary line as "a stake at the northeast corner of land now or formerly of Ira Getchell." The appellants located a stone. Their contention was and is that the stone marks the terminal point of the disputed boundary. The Justice's conclusion, after considering the unusual topography of the area in dispute and after appellants had failed to produce a monument answering the description found in the controlling deed, was that the true line between the abutting owners, the Jolicoeurs and the water district, is the fence as presently constructed.
Under all the circumstances, we cannot say that the appellants have established that such findings of fact are "clearly erroneous."
Appellants rely heavily upon their claim that the presiding Justice improperly disregarded evidence that a prior owner of Manzo land had declared that the fence was not the boundary line. The declarations were made by a former owner, now deceased. They were made while he was owner of the property and were against such owner's interest, and they did relate to the identity of monuments called for in the deed. They were, therefore, admissible. Bradstreet v. Bradstreet, 158 Me. 140, 180 A.2d 459 (1962).
Appellants claim that this declaration by a predecessor in title serves to estop the declarant's grantee from asserting title in excess of that declaration against interest made by the prior grantor, even though it is agreed the grantee had no knowledge of the declaration of his predecessor (if indeed one was made).
In Hibbard v. Fromkin Woolen Corp., 156 Me. 433, 439, 165 A.2d 49, 53 (1960), the Court declared the issue as to whether an estoppel arose in these circumstances an "interesting question." However, the point was not there reached.
The Justice below did conclude the issue was before him in such posture that he must meet it. His conclusion was, in his words:
"It seems to this Court that to permit the uncorroborated oral admission against interest of an abutting land owner in possession who is now deceased, made ante litem motam to prevail as against grantees from such deceased owner, who take without notice of such declaration, and where no physical act is done on the face of the earth, such as *196 the erection of a fence or any other physical object or boundary marker and nothing done on the public record of the registry validating this act or giving subsequent purchasers notice of it, is to virtually sanction conveyance by parole and to open very wide the door for all sorts of mischievous interference with the sanctity of titles and the security of property lines based on years and years of occupancy undisturbed and unchallenged."
We conclude, as did the Justice below, that there is no estoppel resulting against appellees arising from the alleged declaration against interest of a now deceased grantor.
The conclusion of the presiding Justice was not clearly erroneous.
The entry must be:
Appeal denied.
DELAHANTY, J., sat at argument but did not participate further in the case.
All Justices concurring. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2308778/ | 535 Pa. 95 (1993)
634 A.2d 201
Kathryn JONES, Appellee,
v.
Joseph TROJAK, Appellant.
Supreme Court of Pennsylvania.
Submitted April 7, 1992.
Decided November 23, 1993.
Reargument Denied February 28, 1994.
*96 *97 Ronald Ervais, Mary Jane Deaves Hopkins, Philadelphia, for appellant.
Paul R. Beckert, Doylestown, for appellee.
Before NIX, C.J., and FLAHERTY, ZAPPALA, PAPADAKOS, CAPPY and MONTEMURO, JJ.
OPINION
NIX, Chief Justice.
Appellant, Joseph Trojak ("Trojak"), appeals from the Order of the Superior Court affirming the Order of the Court of Common Pleas that blood tests had been properly ordered and reversing the determination of paternity. This case presents *98 two issues for our review. The first is whether an order by a trial judge that parties to a paternity suit submit to a blood test is appealable.[1] The second issue is whether blood tests were properly ordered. Our determination of that depends on whether Appellee, Kathryn Jones ("Jones"), overcame the presumption that her child is the child of her former husband with whom Jones lived at the time of conception and birth.
The factual circumstances of this case are as follows: On January 20, 1988, Jones filed a paternity suit against Trojak, alleging that he was the biological father of Katie Jones ("Katie"), who was born October 30, 1987. At the time of the child's birth, Jones was still married to and living with William Jones. The trial court ordered all of the parties involved to undergo blood tests to determine paternity. Trojak objected, contending that Jones failed to rebut the presumption of her ex-husband's paternity and, therefore, blood tests were unnecessary. The trial court overruled the objection, and the blood tests were administered. The results from the blood tests indicated that William Jones could not be the father and that Trojak shared genetic markers with Katie which gave rise to a 99.9% probability that he is the biological father. On October 26, 1988, the trial court found Trojak to be the biological father of Katie. An appeal was filed, but was discontinued after the trial court granted a new trial.
During the second trial, Trojak raised an objection to the use of the results from the blood tests from the first trial. Trojak argued that the results from the blood tests from the first trial could not be used because the disposition of the first trial was vacated and a new trial was ordered. Record at 16A. *99 However, on June 19, 1989, the trial court entered an Order that the blood tests taken at the first trial would be considered in determining paternity at the second trial. Trojak filed an interlocutory appeal to the Superior Court, and Jones filed a motion to quash. The motion to quash was denied. Subsequently, on January 11, 1990, while the appeal was pending before the Superior Court, the trial court filed an Opinion and Order finding that Trojak was the child's natural father. The Superior Court reversed the trial court's June 19, 1989 Order and remanded the matter to the trial court. We granted Trojak's request for review.
Prior to reaching the substantive issue raised herein, we will address the procedural question of whether Trojak's appeal of the trial court's June 19, 1989 Order is an appealable order. The question presented is whether a court order requiring blood testing is entitled to interlocutory review. This Court has not determined whether a court order requiring blood testing is appealable, and we find that these circumstances present us with the opportunity to speak on this issue.
Although we have not addressed the issue, the Superior Court recently did so in Christianson v. Ely, 390 Pa.Super. 398, 568 A.2d 961 (1990). In arriving at its decision, the Superior Court acknowledged that a matter is not appropriate for appellate review where there has not been a finding as to the issue of paternity. Moreover, an appeal from an order to draw blood from a putative father is generally not appealable. Id. at 401, 568 A.2d at 962. However, in Christianson, the Court reasoned that, because of the circumstances of that case,[2] the appeal was allowed under the authority of Myers v. *100 Travelers Ins. Co., 353 Pa. 523, 46 A.2d 224 (1946).[3] The Superior Court granted the appeal from an order requiring the putative father to submit to a blood test based on this Commonwealth's long-standing doctrine of estoppel.[4] The Superior Court held that, "[w]hen an Order appealed from involves a blood test and the issue presented focuses on whether or not the doctrine of estoppel must be applied to the denial of paternity by a presumptive parent which will control whether or not an Order to submit to blood tests will issue, [we have] treated the Order as appealable." Christianson, 390 Pa.Super. at 402, 568 A.2d at 962.
For the purpose of resolving this issue, we find it helpful to look to courts in other jurisdictions for insight. In some jurisdictions, an order for a blood test is interlocutory and, thus, non-appealable,[5] while other courts have held that, although *101 interlocutory, it was appealable because of the nature of the order.[6]
We hold that court ordered blood tests to determine paternity are appealable, even though they are interlocutory. Our holding is necessitated by this Court's concern for the best interests of the child. See In re Change of Name of Zachary Thomas Andrew Grimes to Zachary Thomas Andrew Grimes-Palaia, 530 Pa. 388, 609 A.2d 158 (1992); McMillen v. McMillen, 529 Pa. 198, 602 A.2d 845 (1992). The best interests of the child standard has also inspired decisions in other jurisdictions. In those jurisdictions, the primary concern is that because blood tests, for the purposes of determining paternity, may potentially have a negative impact on the mental, moral and spiritual well-being of the child and the family unit, it is in the best interest of all parties that court ordered blood tests, for the purpose of determining paternity, be appealable. See, e.g., Marriage of Ross, 245 Kan. 591, 783 P.2d 331 (1989); McDaniels v. Carlson, 108 Wash.2d 299, 738 P.2d 254 (1987).
The Washington Supreme Court in McDaniels was confronted with a case that involved a paternity action where the plaintiff claimed that he, and not the presumptive father, was the natural father of the child born to the mother. One of the two issues raised by the parties was, "what role does public policy and the best interests of the child play in the allowance of paternity actions sought under the Uniform Parentage Act...." 108 Wash.2d at 303, 738 P.2d at 257. The Washington Supreme Court acknowledged that:
[a] paternity suit, by its very nature, threatens the stability of the child's world.... It may be true that a child's interests are generally served by accurate, as opposed to inaccurate or stipulated paternity determinations.... However, it is possible that in some circumstances a child's interests will be even better served by no paternity determination at all....
*102 Id. at 310, 738 P.2d at 261. The Washington Supreme Court held that "[t]he mere filing of a paternity action does not automatically imply that the action is in the child's best interest." Id. at 313, 738 P.2d at 262. The Washington Supreme Court went on to say "that [a] court must reach this conclusion independently based on the facts in the record...." The Washington Supreme Court held that, upon consideration of the facts of that case, the paternity action would be permitted because it was in the child's best interest to have her biological father identified. Id. at 313, 738 P.2d at 262.
Similarly, the Kansas Supreme Court recognized that, because of the potential for irreparable emotional and physical harm, the best interests of the child must be considered prior to ordering blood tests. The Kansas Supreme Court reversed the decision of the Kansas Court of Appeals which held that an evidentiary hearing on the best interests of the child need not preclude a paternity determination. Marriage of Ross, 245 Kan. 591, 783 P.2d 331 (1989). The Kansas Supreme Court concluded it was error to fail to weigh the best interests of the child prior to permitting the paternity action to proceed because "[o]nce the judge, in the interest of judicial economy, ruptures the father/child relationship, the judge cannot return the parties to the position they were in prior to the blood tests, no matter how wise or great his or her judicial power." Id. at 601, 783 P.2d at 338. The Kansas Supreme Court, in concluding that the lower court erred by failing to weigh the best interests of the child prior to permitting the paternity action to proceed, stated:
Prior to ordering a blood test to determine whether the presumed parent is the biological parent, the District Court must consider the best interests of the child, including physical, mental, and emotional needs. The shifting of paternity from the presumed father to the biological father could easily be detrimental to the emotional and physical well-being of any child.
Id. at 602, 783 P.2d at 338. The Court relied on McDaniels, and held that, "the mere filing of a paternity action does not *103 automatically imply that the action is in the child's best interests." Id.
We find the decisions of both the Washington and Kansas Supreme Courts instructive. Permitting these types of blood tests to be appealable, notwithstanding their interlocutory nature, provides appellate courts the opportunity to insure that trial courts have properly scrutinized the facts and determined that blood tests would be in the child's best interests. Our concern is that once a party to a paternity action submits to a blood test, the psychological and moral damage will have been done, the family unit will have been intruded upon, and, most importantly, the child will have been scarred from the mental stress and the social stigma associated with having the identity of his or her parents investigated. Restated, this Court's concern is that the potential negative ramifications of a blood test on the child are irreversible.
Although the general rule that interlocutory orders are not appealable is based on concerns related to judicial economy, we find that protecting the emotional and physical well-being of innocent children caught in adult controversies overrides any argument based upon judicial economy. In the present case, Katie's interest must not be overlooked. Katie's mother is claiming that someone other than the man she was married to and living with at the time Katie was conceived is the father. The potential for these types of accusations to have a lasting negative impact on children is too great for this Court to overlook. Accordingly, we find it necessary that, when an appeal is taken, appellate courts in this jurisdiction review court ordered blood tests at the interlocutory stage.
Having held that the order requiring blood tests was appealable, we now turn to the substantive issue of this appeal: whether there must be a determination that a child born to a married couple, living together at the time of conception and birth, is not a child of the marriage before a blood test can be ordered on a third party.
Trojak argues that there is a presumption that a child born to a married couple is a child of that marriage and this *104 presumption remains unless rebutted by evidence from someone other than the parties. Trojak avers that, in the instant case, the presumption that William Jones is the father has not been overcome. To buttress his position, Trojak refers to evidence indicating that Mr. and Mrs. Jones have publicly held themselves out as the parents of Katie, that William Jones took the child to the hospital and signed as the responsible party and gave his consent to the Caesarean delivery. Furthermore, Trojak submits that William Jones' medical insurance paid the cost of hospitalization, that William Jones is listed as the father on both the birth and baptismal certification, and that William Jones has never publicly denied his paternity of the child.
Jones contends that the trial court correctly ordered the blood tests and admitted the results based upon the factual record indicating that there was strong evidence[7] that Trojak was the parent of the child. Also, because the trial court found no intact family[8] considerations were present, Jones avers that the presumption that her former husband is the father of the child has been overcome and, therefore, blood tests were properly ordered.
We adopt the approach taken by the Superior Court in Christianson v. Ely, which mandates that before an order for a blood test is appropriate to determine paternity the actual relationship of the presumptive father and natural mother *105 must be determined. 390 Pa.Super. 398, 409, 568 A.2d 961, 966. In Christianson, a mother was estopped from challenging the paternity of her husband without exhibiting that he had denied paternity and refused to accept responsibility for the child from the time he was reasonably aware of nonpaternity. Id. at 410, 568 A.2d at 966. In Christianson, there was a question as to whether estoppel could be invoked to prevent the blood tests which were ordered of the putative father, presumptive father and the natural mother. The Superior Court reasoned that, "[w]here the father has accepted the child and treated him as his own, he may not thereafter, upon separation, reject paternity and demand a blood test to rebut the presumption." Id. at 402, 568 A.2d at 963. The Superior Court also concluded that the same must be said regarding the mother. Id. "[A mother] cannot hold out her husband to be the father and thereafter, upon separation, charge a different man with paternity." Id. Depending upon the court's determination as to the above-mentioned relationship between the presumptive father and natural mother, the doctrine of estoppel may apply. Id. at 403, 568 A.2d at 963.
A court may order blood tests to determine paternity only when the presumption of paternity has been overcome. John M. v. Paula T., 524 Pa. 306, 571 A.2d 1380, cert. denied, 498 U.S. 850, 111 S. Ct. 140, 112 L. Ed. 2d 107 (1990). This Court has held that the presumption can be overcome by proof of facts establishing non-access or impotency. Cairgle v. American Radiator and Standard Sanitary Corp., 366 Pa. 249, 77 A.2d 439 (1951). However, under certain circumstances, a person might be estopped from challenging paternity where that person has by his or her conduct accepted a given person as the father of the child. John M., 524 Pa. at 318, 571 A.2d at 1386. These estoppel cases indicate that where the principle is operative, blood tests may well be irrelevant, for the law will not permit a person in these situations to challenge the status which he or she has previously accepted. Id. However, the doctrine of estoppel will *106 not apply when evidence establishes that the father failed to accept the child as his own by holding it out and/or supporting the child. Christianson, 390 Pa.Super. at 409, 568 A.2d at 966. Only when the doctrine of estoppel does not apply will the mother be permitted to proceed with a paternity claim against a putative father with the aid of a blood test. Id. Instantly, the trial court found that Jones had presented the requisite clear, direct, convincing and unanswerable evidence to support her claim that her husband had not accepted the child as his own.
Trojak cites our holding in John M. v. Paula T., 524 Pa. 306, 571 A.2d 1380, cert. denied, 498 U.S. 850, 111 S. Ct. 140, 112 L. Ed. 2d 107 (1990), to buttress his position that the presumption that Katie is a child of the marriage has not been overcome. Trojak fails to comprehend the important distinction between our reasoning in John M. and the facts of the instant case. In John M., our rationale grew out of this Commonwealth's concern for the survival of the family unit. This Court believed that "the Superior Court, in ordering the presumptive father to submit to a blood test at the request of the putative father, over-emphasized the rights and interests of the [putative] father and minimized the rights and interest of others involved in and affected by its decision, namely the mother, [presumptive] father, the family unit and the Commonwealth." John M., 524 Pa. at 316, 571 A.2d at 1385. We stated that "[t]here is in short, a family involved here . . . [a] woman and a man who have married and lived together as husband and wife, giving birth to and raising four children." Id. at 317, 571 A.2d at 1386.
In this case, however, we agree with the trial court and are convinced that the facts indicate that the presumptive father and mother repudiated their marriage vows long ago. Additionally, we have evidence that the presumptive father did not accept the child as his own. The circumstances before us, as found by the trial court, are that the presumptive father has never financially or emotionally supported Katie. Moreover, *107 the trial court found that during the time Katie was conceived, Jones was not sexually involved with the presumptive father because he was impotent, and this testimony was not rebutted by either the presumptive father or the putative father. Thus, we agree with the Superior Court that there being no intact family considerations present, a determination regarding Trojak's paternity is necessary to resolve the child support claim made by Jones.
We also agree with the Superior Court that only properly admitted results from the blood tests, along with other relevant evidence, may be used to determine paternity. The Superior Court determined that the use of the results from the blood tests from the first trial before the Court of Common Pleas could not be used in the second trial because only a printed report of the results from the blood tests was issued by the laboratory which had performed the tests, and this evidence was not properly authenticated and proved. We agree that the results from the blood tests from the first trial were improperly admitted at the second trial and could not be used to determine paternity at the second trial.
Accordingly, we affirm the Superior Court Order reversing the Court of Common Pleas Order of June 19, 1989, and remanding this case to the Court of Common Pleas for additional proceedings.
PAPADAKOS, J., concurs in the result.
NOTES
[1] The Superior Court stated, "[w]hether the trial court's order . . . was appealable is not free from doubt. A motion to quash, however, was denied by a judge of this Court, and that ruling was not reviewed by the full Court. The issue of appealability, moreover, was not again briefed or argued by the parties." Jones v. Trojak, 402 Pa.Super. 61, 65-66, 586 A.2d 397, 399 (1990). In order to resolve any doubts and to serve the interest of judicial economy and fairness, the Superior Court considered the issue. Id. at 66, 586 A.2d at 399. Neither party raised the issue of appealability to this Court; however, upon examination of the procedural history of this case, we find that in order for this Court to determine the substantive issue raised by the parties, the issue regarding appealability must be determined.
[2] The circumstances in Christianson were that the order requiring the parties to submit to blood tests "was inappropriate as the procedure utilized in the court below did not properly present a case which permitted the Order to be issued." Thus the Superior Court reasoned "[t]o quash the appeal and remand without considering the merits of the appeal at this time would be to permit the court to continue in error, to impose a likely invasion of privacy on appellant, to violate due process and to assure that a subsequent appeal would follow." Christianson, 390 Pa.Super. at 402, 568 A.2d at 962. Accordingly, the court said that "[f]or the sake of judicial economy, a common sense approach requires our resolution of the fundamental issues presented by [this] case." Id.
[3] The issue in Myers was whether, in an action in assumpsit, a plaintiff may be required to submit to a physical examination. Before the proceedings commenced, the defendant petitioned the trial court to stay the proceedings until plaintiff submitted to a physical examination. 353 Pa. at 524, 46 A.2d at 225. The court issued a rule upon plaintiff to show cause why the prayer of the petitioner should not be allowed, and after an answer and hearing, the rule was made absolute. Id. Plaintiff appealed and defendant filed a motion to quash the appeal on the premise that it was from an interlocutory order. In Myers, this Court referenced Wigmore on Evidence, Vol. VIII, p. 208, which suggested that such an order may be made final and appealable by dismissing the suit if plaintiff persisted in refusing to submit to such a physical examination. Although finding that to be undoubtedly true, this Court found it unnecessary to require the formal dismissal of the action and treated it as an appealable order. Id. at 525, 46 A.2d at 225.
[4] The doctrine of estoppel relating to paternity suits mandates that neither a presumptive father nor the natural mother may be permitted to deny paternity if the two have lived together as husband and wife and the presumptive father has acted in a manner indicating that he was the child's father. John M. v. Paula T. and Michael T., 524 Pa. 306, 571 A.2d 1380, cert. denied, 498 U.S. 850, 111 S. Ct. 140, 112 L. Ed. 2d 107 (1990).
[5] E.g., Scheland v. Childress, 313 Ark. 165, 852 S.W.2d 791 (1993); State v. Marut, 63 Ohio App. 3d 487, 579 N.E.2d 281, appeal dismissed, 45 Ohio St. 3d 711, 545 N.E.2d 910 (1989); Heavner v. Heavner, 73 N.C.App. 331, 326 S.E.2d 78, review denied, 313 N.C. 601, 330 S.E.2d 610 (1985).
[6] See, e.g., County of Stearns and Kim Marie Olson v. Schaaf, 472 N.W.2d 191 (Minn.App.1991); Commonwealth v. Beausoleil, 397 Mass. 206, 490 N.E.2d 788 (1986).
[7] According to Appellee, this strong evidence was that "(1) [Appellant] admitted plaintiff told him that she was not having sexual relations with her husband at or around the time the child was conceived; (2) Sexual relations for one to two years prior to conception and during the time of conception were admitted by both parties; (3) Appellant made regular weekly payments for approximately two years of amounts of support culminating in payments of $50.00 per week; (4) [Appellant] paid other expenses, such as, school clothes, shoes, tuition and other amounts denominated `for Katie.'" Appellee's Brief at 18.
[8] The phrase "intact family" has been used by our lower courts to describe a situation where the presumptive father and natural mother live together as husband and wife and accept the responsibility of parenthood. See Everett v. Anglemeyer, 425 Pa.Super. 587, 625 A.2d 1252 (1993); Coco v. Vandergrift, 416 Pa.Super. 444, 611 A.2d 299 (1992). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2593087/ | 805 F. Supp. 541 (1991)
Clarence O. COFER, et ux., et al., Plaintiffs,
v.
HORSEHEAD RESEARCH AND DEVELOPMENT CO., INC., Defendant.
No. CIV 3-91-0473.
United States District Court, E.D. Tennessee, at Knoxville.
October 4, 1991.
Gerald Largen, Kingston, Tenn., for plaintiffs.
Richard L. Hollow, Watson, Hollow & Reeves, Knoxville, for defendant.
MEMORANDUM OPINION
JORDAN, District Judge.
This civil action is before the Court for consideration of the plaintiffs' motion to remand it to the Circuit Court for Roane County, Tennessee [doc. 5]. There is also pending a motion by the defendant [doc. 7] to amend its petition for and notice of removal [docs. 1 and 3]. The Court has determined that oral argument would not be of substantial assistance in deciding these motions.
*542 This civil action began as multiple actions in the Roane County Circuit Court in October, 1989, in which the various plaintiffs sought damages for an alleged nuisance caused by the industrial operations of the lone defendant. Each original complaint filed in the Roane County Circuit Court included an ad damnum of $49,999.00. In May or June, 1990, the Circuit Court, finding "that all the captioned cases are stated to arise from identical allegations of liability and damages as well as similarly situated Plaintiffs and an identical Defendant," consolidated these actions for trial "in the interest of judicial economy."[1]
After this consolidation, the plaintiffs, who are all represented by one attorney, moved to amend their complaints to pray for, in each case, compensatory damages of $150,000.00, plus punitive damages in an unspecified amount.[2] It is unclear from the copies of the pleadings, orders and briefs filed in the Roane County Circuit Court and submitted by the defendant with its removal papers filed in this Court when this amendment occurred, but the defendant says that the plaintiffs' attorney served a copy of the plaintiffs' motion to amend on July 16, 1991. The defendant's removal papers were filed in this Court on August 14, 1991.
There does not appear to be any dispute that the defendant filed its removal papers within 30 days of the service of the motion to amend, see 28 U.S.C. § 1446(b)[3], although the plaintiffs make a legal argument that the removal was untimely because the defendant had some notice or knowledge earlier that the plaintiffs were seeking in excess of the jurisdictional amount in their respective cases. There is also no dispute that this removal came more than one year after the commencement of the actions which the Roane County Circuit Court consolidated. The first issue which the Court must therefore address is whether the statute regarding the procedure for removal, as amended, bars in these circumstances removal of a diversity action or actions more than one year old.[4] If this issue must be resolved in favor of the plaintiffs, then the other issues raised will be moot.
The provision relied upon by the plaintiffs comes from the Judicial Improvements and Access to Justice Act, Pub.L. No. 100-702, § 1016(b)(2)(B), 102 Stat. 4642, 4669 (1988)[5]. David D. Siegel, in his *543 "Commentary on 1988 Revision," following 28 U.S.C.A. § 1446 (West 1991 supp.), refers to this as a "one-year cap on removal" of diversity cases, and writes that the provision might allow a plaintiff to resist removal to a federal district court by keeping his or her case in a nondiverse posture for more than one year. Mr. Siegel gives the following example:
A plaintiff with [the] motive [to resist removal] can conceivably join as a defendant, in a case in which there is genuine diversity between the plaintiff and the other defendants, someone of nondiverse citizenship whom the plaintiff does not really intend to sue but who is arguably liable on the claim and hence properly joined under state law. The plaintiff can then just wait the year and drop that party, polishing his action to just the point he wants it and at the same time ridding himself of the threat of federal jurisdiction.
Mr. Siegel notes that this result can be avoided by application of the fraudulent joinder doctrine, but that this doctrine applies to preserve removal jurisdiction of a diversity case only when the plaintiff has no genuine claim under the applicable substantive law against the nondiverse party. The defendant argues for removal jurisdiction in the case at bar by analogy to the fraudulent joinder doctrine, but, for the reasons stated below, the Court does not find this argument persuasive.
Wright, Miller and Cooper describe the amendment to § 1446(b) "as a means of reducing the opportunity for removal after substantial progress has been made in state court." 14A C. Wright, A. Miller & E. Cooper, FEDERAL PRACTICE AND PROCEDURE, § 3732 (1991 supp.) (footnote omitted). This language is taken verbatim from the available legislative history, H.R.REP. NO. 889, 100th Cong., 2d Sess. 72, reprinted in 1988 U.S.CODE CONG. & ADMIN.NEWS 5982, 6032. The House Report goes on to state, "The result is a modest curtailment in access to diversity jurisdiction," id., but discusses the amendment only in terms of a change in parties which creates diversity jurisdiction of an action pending before a State court. As the legislative history makes clear elsewhere, however, id. at 44-45, 1988 U.S.CODE CONG. & ADMIN.NEWS at 6005, the Act contained other provisions designed to give effect to an expressed Congressional intent "to reduce the basis for Federal court jurisdiction based solely on diversity of citizenship," including an increase of the jurisdictional amount from $10,000.00 to $50,000.00.
The weight of authority is against the defendant. Molden v. Firestone Tire & Rubber Company, 754 F. Supp. 521, 523 (M.D.La.1990) (citations omitted) ("[T]he one year provision in 28 U.S.C. § 1446(b) is jurisdictional and must be noticed by the court sua sponte.") (dictum); Royer v. Harris Well Service, Inc., 741 F. Supp. 1247, 1249 (M.D.La.1990) ("While the one year limitation could lend itself to abuses and inequities, it is for the Congress and not this Court to rewrite the provisions of section 1446(b)."); Hom v. Service Merchandise Company, Inc., 727 F. Supp. 1343 (N.D.Cal.1990) (§ 1446(b) requires remand under the one-year-after-commencement rule even though process was served upon the defendants only 30 days before the attempted removal); Foiles by Foiles v. Merrell National Laboratories, A Division of Richardson-Merrell, Inc., 730 F. Supp. 108 (N.D.Ill.1989) (the one-year limit is jurisdictional, so that the 30-day limit on a motion to remand imposed by 28 U.S.C. § 1447(c) does not apply); Rezendes v. Dow Corning Corporation, 717 F. Supp. 1435 (E.D.Cal.1989); and Borders v. Unites States Gypsum Company, 704 F. Supp. 615 (D.Md.1989).
The authority contra is scant: Leidolf by Warshafsky v. Eli Lilly and Company, Inc., 728 F. Supp. 1383 (E.D.Wis.1990) (following Gray v. Moore Business Forms, infra); Gray v. Moore Business Forms, Inc., 711 F. Supp. 543 (N.D.Cal.1989) (the *544 amendment to § 1446(b) is procedural, so that the motion to remand must be made within 30 days as required by § 1447(c)); and Greer v. Skilcraft, 704 F. Supp. 1570, 1583 (N.D.Ala.1989) ("The one-year period does not begin to run until the complaint has been filed and there has been a bona fide effort to have it served. To hold otherwise would be to provide the plaintiff the power to prevent removal by manipulation and inaction.") (all district judges concurring). The defendant concedes in its brief [doc. 8] in response to the motion to remand, "Counsel is aware of no cases interpreting the fraudulent evasion of federal jurisdiction doctrine in the specific context of a suit where a Plaintiff pretextually pleads damages in the amount of $49,999, awaits the passage of more than one year from the date of commencement, and then amends the complaint to increase the ad damnum to $150,000 in compensatory damages and to seek punitive damages."
The Court is constrained to apply the plain language of § 1446(b) as amended. The argument by analogy to the fraudulent joinder doctrine is not a good one. Under that doctrine, a case in which the plaintiff has, for the purpose of defeating removal, sued a nondiverse party against whom the plaintiff cannot recover is treated as if it were a diversity case from its commencement. See Wecker v. National Enameling & Stamping Company, 204 U.S. 176, 27 S. Ct. 184, 51 L. Ed. 430 (1907). The law has long allowed, however, a plaintiff to pray for unliquidated damages in an amount less than the jurisdictional amount, even when it is apparent that much more might be recoverable, for the purpose of preventing removal. Iowa Central Railway Company v. Bacon, 236 U.S. 305, 35 S. Ct. 357, 59 L. Ed. 591 (1915). In Brady v. Indemnity Insurance Company of North America, 68 F.2d 302 (6th Cir.1933), the Circuit Court of Appeals for this circuit, citing Iowa Central Railway Company v. Bacon, supra, applied the same rule to a plaintiff's claim under an accident insurance policy, expressly distinguishing Wecker, supra, and the fraudulent joinder rule.
While it is true that the authorities cited by the defendant held also that a plaintiff who later amended his or her complaint to pray for damages in excess of the jurisdictional amount might then be subjected to removal, in accordance with what is now the second paragraph of 28 U.S.C. § 1446(b), the one-year cap on the removal of diversity cases, at least in instances where removability did not exist initially, acts like a statute of repose, and cuts off this possibility at the end of a year. If this has the effect of permitting a plaintiff to lie in wait with his or her amended complaint containing an increased ad damnum, and thereby to keep diversity litigation in a State court, the remedy, if one is warranted, must come from Congress, which superimposed this effect on existing law permitting prayers for damages purposefully less than the jurisdictional amount.
For the reasons stated, the Court will remand this action to the Roane County Circuit Court. This result renders the defendant's motion to amend its petition for removal and notice of removal moot, since the Court's decision is not based upon any defects in removal procedure sought to be cured by the defendant's motion. The Court will not award costs and the expenses of removal or sanctions against the defendant or its counsel under either 28 U.S.C. § 1447(c) or Fed.R.Civ.P. 11, which is referred to in 28 U.S.C. § 1446(a), for the reasons that the issues raised by the amendment of § 1446(b) to include the one-year cap have not yet been settled by much appellate litigation, and that the application of the cap to change the result under previous law, under which an amendment to increase an ad damnum might have led to permissible removal, has an arbitrary effect, at least in the light of prior practice. See Jennings v. Bunch Trucking Company, Inc., 748 F. Supp. 457, 459 (N.D.Miss. 1990); Hom, supra, 727 F.Supp. at 1345 (citation omitted); and Coman v. International Playtex, Inc., 713 F. Supp. 1324, 1329 (N.D.Cal.1989) (citations omitted).
NOTES
[1] Tenn.R.Civ.P. 42.01 provides,
When actions involving a common question of law or fact are pending before a court, the court may order all the actions consolidated or heard jointly, and may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay. When the actions are to be tried before a jury, the joint hearing or trial shall be on all of the matters in issue in the actions, except as to issues on which jury trial has been waived by all parties. When the actions are not to be tried before a jury, the joint hearing or trial may be on all or any of the matters in issue in the actions.
It is unnecessary to address in this case whether federal removal procedure permits removal of multiple, consolidated civil actions by a single petition or notice.
[2] This had the effect, as is obvious, of pushing each of these civil actions past the $50,000.00 jurisdictional amount threshold set by 28 U.S.C. § 1332(a). There is no dispute that complete diversity of citizenship exists between the defendant and each of the plaintiffs.
[3] The second paragraph of 28 U.S.C. § 1446(b) reads,
If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.
[4] Because the actions filed in the Roane County Circuit Court were not removable initially, on the basis of the ad damnums below the 28 U.S.C. § 1332 jurisdictional amount, it is unnecessary to address in this Memorandum Opinion the plaguing question whether the one-year limitation upon removal added to 28 U.S.C. § 1446(b) by Pub.L. No. 100-702, § 1016(b)(2)(B) applies only to cases covered by the second paragraph of § 1446(b), or to all removed diversity cases. See, e.g., Zogbi v. Federated Department Store, 767 F. Supp. 1037 (C.D.Cal.1991).
[5] Because the effective date of the amendment of 28 U.S.C. § 1446(b) antedates the commencement of this litigation in the Roane County Circuit Court, no problem concerning retroactive application of the amendment is presented here. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2985434/ | Continuing Abatement Order filed November 21, 2013.
In The
Fourteenth Court of Appeals
____________
NO. 14-12-00913-CV
____________
LEON THOMAS, Appellant
V.
CHANDRA JONES, Appellee
On Appeal from the 58th District Court
Jefferson County, Texas
Trial Court Cause No. A-189,572-A
CONTINUING ABATEMENT ORDER
This is an appeal from a partial summary judgment granted in favor of
Chandra Jones, which was made final by an order of severance. Jones sued
appellant for personal injuries after an automobile accident. After Santa Fe Auto
Insurance Company, appellant’s insurer, was placed into receivership by the State
of Texas and later declared insolvent, the appeal was abated pursuant to the Texas
Insurance Code. See Tex. Ins. Code §§ 443.008(d); 462.309. The period for a stay
of as set out in Section 462.309 has expired. Unless any party files a response
within fifteen days of the date of this order demonstrating that the stay has been
extended or other good cause for extending the abatement, the appeal will be
reinstated.
PER CURIAM
2 | 01-03-2023 | 09-23-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1406862/ | 170 S.E.2d 676 (1969)
Stanley N. GAINES
v.
Earl Vernon HAWKINS, etc., et al.
No. 12788.
Supreme Court of Appeals of West Virginia.
Submitted September 9, 1969.
Decided October 21, 1969.
*677 Payne, Minor, Ray, Price & Loeb, Walter C. Price, Jr., John L. Ray, Charleston, for appellants.
Dean E. Lewis, Charleston, for appellee.
BERRY, Judge.
This case involves a civil action instituted in the Common Pleas Court of Kanawha County by Stanley N. Gaines against Earl Vernon Hawkins and Alice Carrine Hawkins to recover damages for alleged personal injuries to Gaines arising out of an automobile accident which resulted in a verdict in favor of the plaintiff in the amount of $12,500 upon which judgment was entered in the trial court. A petition for an appeal was filed by the defendants in the Circuit Court of Kanawha County which was granted on November 6, 1967 and provided that it should not become effective until a bond was given before the clerk of that Court in the penalty of $15,000. The bond was later reduced to $10,000 purportedly under the provisions of Code, 58-5-14, as amended, because of the insurance coverage involved. On motion of the appellee the Circuit Court on June 18, 1968 dismissed the appeal heretofore awarded for lack of jurisdiction because the bond required by the order allowing the appeal was filed in the Circuit Court instead of the trial court as required by the statutes pertaining to such matter, which are Code, 58-4-13 and 14. Upon application to this Court an appeal and supersedeas were granted on December 2, 1968 and the case was submitted for decision on briefs filed by the parties and arguments by counsel for the appellee at the September Regular Term, 1969, the brief of the appellant not having been timely filed in accordance with Rule VI, Section 1, as amended, of the Rules of Practice in the Supreme Court of Appeals.
The sole issue involved in this appeal is whether the defendants gave the required bond dated December 11, 1967 before Lewis A. Hatcher as Clerk of the Court of Common Pleas or as Clerk of the Circuit Court. This is the issue stated in the brief of the appellants which was raised by motion of the appellee to dismiss the appeal and supersedeas granted by the Circuit Court for lack of jurisdiction by virtue of appellants not having complied with the provisions of Code, 58-4-11, 12, 13 and 14 and various court rules related to these matters.
It is the contention of the appellants that the bond involved herein was filed in the proper court as required by the statutes because "The bond given before him was signed only `Lewis A. Hatcher, Clerk,'" and during the period involved in this litigation Lewis A. Hatcher was Clerk of both the Circuit Court and the Common Pleas Court by virtue of an Act of the Legislature, 1915, creating the Common Pleas Court of Kanawha County. It is also contended that when the action was instituted in the Common Pleas Court it was designated as Civil Action 8851-C thus clearly showing it was an action in the Common Pleas Court and that this number appeared on the face of the bond, therefore identifying the bond as having been given before the clerk of the Common Pleas Court. The appellants contend that when the bond was presented it was the statutory duty of Hatcher who was Clerk of both Courts to file the bond in the Common Pleas Court. Regardless of the duty of the Clerk it is the responsibility of the parties to comply with the laws in connection with the trial or appeal of any case and the record in this case shows *678 that the bond was filed by direction in the wrong Court which gave rise to the jurisdictional question involved in this case.
The bond filed before Lewis A. Hatcher, Clerk, clearly had a certificate attached to it signed by Lewis A. Hatcher as Clerk of the Circuit Court of Kanawha County. The original record filed in this Court shows that the order entered by the Judge of the Circuit Court granting the appeal required the defendants to file the bond in the amount of $15,000 "before the clerk of this Court" in order to make the appeal effective. Admittedly the order was erroneous in specifying the wrong court but it was "presented by counsel for the defendants" and "inspected by counsel for the plaintiff." The original bond is found with the papers filed in the Circuit Court and is styled "Bond in Circuit Court of Kanawha County, West Virginia".
It also appears from the original record that the sworn statement required in order to reduce the bond where insurance is involved was filed in the Circuit Court Clerk's Office on December 7, 1967 and not with the Clerk of the Common Pleas Court as required by Code, 58-5-14, as amended.
The original record does not show that any process, either by a summons or by court order in lieu thereof endorsed with date returnable, was ever served on the interested parties, as required by Code, 58-4-11, nor as required by Code, 58-4-12, that there was an endorsement by the Clerk of the Circuit Court on either a summons or a certified copy of the court order in lieu thereof that the bond required by Code, 58-4-13, would not be effectual until it was given before the Clerk of the Common Pleas Court with good personal security. Furthermore, there was no endorsement by the Clerk of the Common Pleas Court on said summons or a certified copy of the court order in lieu thereof that the bond had been given and listing names of sureties thereon, as required by Code, 58-4-12, nor was a certified copy of the bond forwarded to the Circuit Clerk as required by Code, 58-4-12.
Code, 58-4-15, provides that no appeal shall be heard in the Circuit Court until all proper process has been served as provided for by Code, 58-4-11, and all bonds had been taken as provided by Code, 58-4-13.
Code, 58-4-14 provides that the appeal, writ of error or supersedeas shall be dismissed whenever it appears that four months have elapsed since such date before the record is delivered to the circuit clerk, or that two months have elapsed since the date when the appeal, writ of error or supersedeas was granted before such bond is given before the clerk of the Common Pleas Court as required by Code, 58-4-12.
It appears from the original record in this case that the bond required to be filed with the Clerk of the Common Pleas Court was never filed with the Clerk of that Court and that more than two months had elapsed since the date the appeal was granted. The provisions of Chapter 58, article 4 of the Code of West Virginia, with regard to this matter are mandatory and jurisdictional. Scott v. Coal & Coke Railroad Company, 70 W.Va. 777, 74 S.E. 992; Elite Laundry Co. v. Dunn, 126 W.Va. 858, 30 S.E.2d 454. In the Elite Laundry Co. case it was held by this Court that where a petition for an appeal or writ of error was timely filed within four months with the Clerk of the Common Pleas Court of Kanawha County but was not filed with the Clerk of the Circuit Court within the four months period required by Code, 58-4-4 the appeal should be dismissed as such filing was jurisdictional. In that case, as in this case, the Clerk of the Common Pleas Court and the Clerk of the Circuit Court of Kanawha County was the same individual but in that case, as in this case, there were two separate courts and the filing of the petition for *679 a writ of error with the Clerk of the Common Pleas Court was not a filing of the petition with the Clerk of the Circuit Court.
In the case at bar the filing of the bond with the Clerk of the Circuit Court is not a filing of a bond with the Clerk of the Common Pleas Court. It was held in the Scott v. Coal & Coke Railroad Co., supra, case that the failure to perfect an appeal by giving the bond specified within the time required, which is now two months from the date the appeal, writ of error or supersedeas was granted makes it mandatory for the appellate court under Code, 58-4-14 to dismiss the appeal, writ of error or supersedeas.
It is true that the order granting the appeal and ordering the bond in question to be filed before the clerk of the Circuit Court was presented by the attorney for the defendants and inspected by the attorney for the plaintiff and entered by the judge granting the appeal. However, jurisdiction can never be conferred by either the court or the parties by consent or waiver, 11 M.J., Jurisdiction, § 2; Blanchard v. Twin-City Market, 157 Va. 13, 160 S.E. 310; Boggs v. Settle, 150 W.Va. 330, 145 S.E.2d 446.
The judgment of the Circuit Court dismissing the appeal for lack of jurisdiction is affirmed.
Affirmed.
CALHOUN, Judge (dissenting).
Respectfully, I dissent because I believe that the decision embodied in the majority opinion is unsupported by proper precedent and contrary to law, common sense, reason and justice. I believe also that the Court in this case has sacrificed substance, justice and reason for the sake of a slavish adherence to empty technicality.
Following the decision in Pettry v. Chesapeake and Ohio Railway Company, 148 W.Va. 443, 135 S.E.2d 729, R.C.P. 1 was amended so as to place therein the italicized portion of the following language: "These rules govern the procedure in all trial courts of record in all actions, suits, or other judicial proceedings of a civil nature whether cognizable as cases at law or in equity, and in any appellate review of such actions, suits, or other judicial proceedings, with the qualifications and exceptions stated in Rule 81. They shall be construed to secure the just, speedy, and inexpensive determination of every action." It is clear, therefore, that proceedings for appellate review by the circuit court of the judgment of the trial court in this case are embraced by the rule quoted above in its amended form and that all pertinent portions of the Rules of Civil Procedure, including Rule 1, should have been applied by the circuit court and must be applied by this Court on appeal so as to secure a "just" determination of the civil action involved in this case. R.C.P. 61, dealing with the subject of harmless error, is as follows:
No error in either the admission or the exclusion of evidence and no error or defect in any ruling or order or in anything done or omitted by the court or by any of the parties is ground for granting a new trial or for setting aside a verdict or for vacating, modifying or otherwise disturbing a judgment or order, unless refusal to take such action appears to the court inconsistent with substantial justice. The court at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties. (Italics supplied.)
R.C.P. 60(a) is as follows:
Clerical Mistakes. Clerical mistakes in judgments, orders or other parts of the record and errors therein arising from oversight or omission may be corrected by the court at any time of its own initiative *680 or on the motion of any party and after such notice, if any, as the court orders. During the pendency of an appeal, such mistakes may be so corrected before the appeal is docketed in the appellate court, and thereafter while the appeal is pending may be so corrected with leave of the appellant court. (See Lugar & Silverstein, W.Va. Rules, page 461 et seq. for notes and comments relative to the language quoted immediately above.)
Adherence to the doctrine of harmless error has been firmly enjoined upon this Court and upon all trial courts of record of this state by statute, court rules and numerous court decisions. State Road Commission v. Bowling, W.Va., 166 S.E.2d 119, 125. This salutary rule of law, I believe, has been flagrantly disregarded by the Court's decision in this case.
In a case involving the same trial court and the same circuit court as the courts involved in this case, this Court held that it would regard as harmless certain procedural irregularities in connection with the appeal to the circuit court which did not affect "the substantial rights of the parties". Boggs v. Settle, 150 W.Va. 330, pt. 2 syl., 145 S.E.2d 446. The Court there (150 W.Va. at 336, 145 S.E.2d at 450) made a distinction between the mandatory, jurisdictional requirement of R.C.P. 59(b) that a "motion for a new trial shall be served not later than 10 days after the entry of the judgment" and mere procedural provisions of R.C.P. 5(d).
I believe that all prerequisites to appeal which have been held by this Court previously to be jurisdictional in character and which, therefore, in various situations, have required dismissals of appeals as having been improvidently granted, have involved elements of time as distinguished from mere procedural irregularities. Code, 1931, 2-2-3 prescribes a precise method by which the "time within which an act is to be done shall be computed." Wholly aside from that statute, it is obvious that sixty days does not mean sixty-one days; four months cannot be held to mean four months and one or more additional days; and that eight months means eight months and no more.
This Court has recognized in innumerable cases that various appellate procedures are wholly statutory, that a court, acting in an appellate capacity, can have and exercise only such appellate jurisdiction as is conferred upon it by statute and that various time periods prescribed by statute as prerequisites to appellate jurisdiction are mandatory and jurisdictional in character. Such time periods are mandatory and jurisdictional because a specified, precise time period must be regarded as unambigous and not subject to judicial construction. Now, for the first time, I believe, this Court has placed a mere procedural irregularity in the same harsh category. In making this decision, the Court has not paused to consider whether the procedural irregularities involved in this case were matters of substance or whether the rights of a party have been prejudiced thereby.
The four-months period prescribed by Code, 1931, 58-4-4, as amended, for appeal, as in this case, to a circuit court from a trial court of record of limited jurisdiction is regarded as mandatory and jurisdictional. State ex rel. Davis v. Boles, 151 W.Va. 221, pt. 2 syl., 151 S.E.2d 110; Elite Laundry Co. v. Dunn, 126 W.Va. 858, 30 S.E.2d 454. The thirty-day provision of Code, 1931, 11-3-25, as amended, relating to an appeal to a circuit court from a property assessment by a county court is likewise mandatory and jurisdictional. In re Tax Assessment, 147 W.Va. 719, 131 S.E.2d 52. Code, 1931, 3-7-7, as amended, prescribing a three-months period from the date of an election within which a county court may consider an election contest is mandatory and jurisdictional. Qualls v. Bailey, W. Va., pt. syl., 164 S.E.2d 421. Code, 1931, 58-3-4, requiring that a petition for appeal from a county court to a circuit court be presented within four months is mandatory and jurisdictional. In Re Tax Assessment, *681 147 W.Va. 719, 726, 131 S.E.2d 52, 56; Miller v. Miller, 117 W.Va. 138, 184 S.E. 246. The eight-months period for appeal from a circuit court to this Court is mandatory and jurisdictional. Sothen v. Continental Assurance Co., 147 W.Va. 458, 128 S.E.2d 458. In cases in which bills of exception or certificates in lieu thereof were required, "the failure to obtain [such bill or certificate] within the time prescribed is jurisdictional and may be raised by this Court on its own motion." Pyles v. Coiner, W.Va., pt. 3 syl., 164 S.E.2d 435. See also Pozzie v. Prather, 151 W.Va. 880, 157 S.E.2d 625. The jurisdictional prerequisites to a valid appeal were discussed generally in State v. Legg, 151 W.Va. 401, 406-407, 151 S.E.2d 215, 219.
The final judgment of the trial court was entered on July 14, 1967. The petition for appeal to the circuit court was duly filed on September 27, 1967, well within the four-months appeal period. By an order entered on November 6, 1967, still within the four-months period, the circuit court entered an order granting "a writ of error" and supersedeas. The order of the circuit court provided that "before the supersedeas shall become effective the defendants, or someone for them, shall give bond before the Clerk of this Court in the penalty of $15,000 conditioned according to law, with surety to be approved by the said Clerk." (Italics supplied.) Counsel representing the plaintiff and counsel for the defendants indicated their approval of the order by their respective signatures on the original order. The judge of the circuit court, by his signature, directed the entry of the order as an order of the circuit court.
The penalty of the bond was thereafter reduced to $10,000 by an order entered by the judge of the circuit court. A proper bond in the penalty of $10,000 was approved on December 11, 1967, the approval being indicated by a signature as follows: "Lewis A. Hatcher, Clerk", the word "Clerk" being a part of the printed form of the bond. It is conceded that, by reason of an act of the legislature, the clerk of the circuit court is ex officio clerk of the court of common pleas. The clerk, therefore, serves and acts in a dual capacity in his offices in the county courthouse.
Appearing at the top of the bond, as a part of the printed form, is the following language: "BOND IN CIRCUIT COURT OF KANAWHA COUNTY, WEST VIRGINIA". The bond bears further language as follows: "CIVIL ACTION NO. 8851-C". That is the number assigned to the action in the trial court. The condition of the bond is prefaced by the following language: "That Whereas, Earl Vernon Hawkins and Alice Carrine Hawkins have, upon petition, obtained from the Circuit Court of Kanawha County, West Virginia, a Writ of Error & Supersedeas from a Judgment of the Court of Common Pleas of Kanawha County, rendered on the 14th day of July, 1967, in a suit therein lately pending, wherein Stanley N. Gaines, was plaintiff and Earl Vernon Hawkins and Alice Carrine Hawkins were defendants." By an order entered by the circuit court on June 18, 1968, the appeal was dismissed, on motion of the plaintiff, "for lack of jurisdiction" for reasons assigned in the circuit court's written opinion which, by the order, was made a part of the record. The written opinion contains the following language:
Counsel for the appellant contend that the bond given on December 11, 1967 was actually given before the Clerk of the Court of Common Pleas, despite the fact that the caption on the printed form stated that it was a "Bond in Circuit Court of Kanawha County, West Virginia." Counsel argue that more weight should be given to the civil action number assigned to the case in the Court of Common Pleas, and to the other recitals of the instrument, than to the caption. While it is true that the civil action number recited on the bond (8851-C) may indicate that the action was originally brought in the Court of Common *682 Pleas, that, in my opinion, is no indication that the bond was given before the Clerk of that Court. The only indication of the description of the court for which the Clerk was acting at the time the bond was given is the caption on the bond which clearly designates the Circuit Court. Also, I find no merit in the applicant's contention that under the statute requiring that the bond be filed with the clerk of the court of limited jurisdiction, by assuming the clerk would properly perform his official duties, that the bond should be deemed filed with the Clerk of the Court of Common Pleas. I find no duty on the part of the Clerk to determine in which court the bond is to be filed. Moreover, the order which I signed on November 6, 1967 ordered that the supersedeas bond be given before the Clerk of the Circuit Court. This order should not have been entered, since it was in conflict with the statute, and although it was inspected by counsel for the appellee, yet it is well established that jurisdiction cannot be conferred by consent. I am, therefore, of opinion that the bond was in fact given before the Clerk of the Circuit Court, not the Clerk of the Court of Common Pleas.
I believe that the bond was in proper form, timely executed, before the proper public official and timely lodged or filed in the proper office in the courthouse. The written opinion states that "it is well established that jurisdiction cannot be conferred by consent." It is true, of course, that both courts had "jurisdiction" of both the subject-matter and of the person. Both had previously assumed and exercised such jurisdiction. The circuit court's order was a consent order. If, as I believe, the irregularity involved in this case was merely procedural and not jurisdictional in nature, the irregularity was waived by absence of objection or the error was invited by counsel for the plaintiff by his approval of the language of the order.
It has not been asserted that the bond is void, a nullity or otherwise invalid. I would hesitate to write and publish before the bench and bar an opinion holding that there could not have been a recovery in favor of the plaintiff against the principal and surety on the bond. So far as I have been able to discern, nobody involved in the case, including counsel, the judge of the circuit court or the members of this Court who joined in the majority opinion, has indicated that the bond itself is improper, invalid or void. If, as I believe, the bond is valid in all respects, then the appellee, the plaintiff in the action, was fully protected by the bond and protection of the plaintiff-appellee is the sole purpose of the bond.
"A paper is filed when delivered to the proper custodian and by him received for the purpose of filing." Dwight v. Hazlett, 107 W.Va. 192, pt. 1 syl., 147 S.E. 877, 66 A.L.R. 102. The word "file", referring to papers in judicial proceedings, usually means to place them in the custody of the clerk or court or among the court records. "Filing" originally signified placing papers on a thread or wire for safekeeping. Dawson v. Phillips, 78 W.Va. 14, 17, 88 S.E. 456, 457. See also In re Estate of Kneeream, 119 W.Va. 25, 30, 191 S.E. 867, 869; Forest Glen Land Company v. George, 96 W.Va. 209, pt. 1 syl., 122 S.E. 543; Darnell v. Flynn, 69 W.Va. 146, pt. 5 syl., 71 S.E. 16; 36A C.J.S. File pp. 394 and 396.
The bond is included in the original record in the office of the clerk of this Court. Appended to the original record is the following certificate of the clerk of the circuit court, dated July 30, 1968:
I, Lewis A. Hatcher, Clerk of the Circuit Court of Kanawha County, State aforesaid, hereby certify that the foregoing are the original papers filed and a complete record of the proceedings had in the within action of Stanley N. Gaines, Vs. Earl Vernon Hawkins and Alice Carrine Hawkins, lately pending in said Circuit Court.
So far as I am able to discern, it does not appear whether the bond was placed *683 in the file of the trial court proceedings or whether it was lodged and kept in some place in the clerk's office designated solely for bonds filed in the court of common pleas or for bonds filed in the circuit court. One thing I know is that if anybody were interested in the bond, he should have known to what public official and to what office in the county courthouse he should have gone for information in this respect. There he would have found a valid, enforceable bond. In the absence of evidence to the contrary, it must be presumed that the clerk in this case performed his official duties in conformity with requirements of the law. State v. Professional Realty Company, 144 W.Va. 652, 662-663, 110 S.E.2d 616, 623.
For reasons stated, I would reverse the final judgment of the Circuit Court of Kanawha County and remand the case with directions to that court to entertain the appeal and decide the case on its merits. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1491175/ | 818 F. Supp. 721 (1993)
COOPER SPORTSWEAR MANUFACTURING COMPANY, INC., Plaintiff,
v.
HARTFORD CASUALTY INSURANCE COMPANY, Defendant.
HARTFORD CASUALTY INSURANCE COMPANY, Third-Party Plaintiff,
v.
James PAGNOTTA, Third-Party Defendant.
Civ. A. No. 91-1895 (WGB).
United States District Court, D. New Jersey.
February 23, 1993.
*722 Glenn A. Jacobson, Fort Lee, NJ, for plaintiff.
Bigham, Engler, Jones & Houston by Thomas R. Pattison, Newark, NJ, for defendant and third-party plaintiff.
Walder, Sondak, Berkeley & Brogan, P.A. by Barry A. Kozyra, Roseland, NJ, for third-party defendant.
OPINION
BASSLER, District Judge:
The defendant, Hartford Casualty Insurance Company, ["Hartford"] moves for summary judgment under Fed.R.Civ.P. 56. The Court grants the motion because the insured's undisclosed knowledge of the offending employee's dishonesty, prior to Hartford's issuance of its policy insuring against employee dishonesty, entitles it to disclaim coverage.
I. BACKGROUND
Hartford issued a comprehensive dishonesty, disappearance and destruction insurance policy to the plaintiff, Cooper Sportswear Manufacturing Company, Inc., ["Cooper"] on March 25, 1988, in response to Cooper's application in February 1988. By letter dated July 5, 1988, Cooper notified its insurance broker, Kalvin-Miller International, Inc., ["Kalvin-Miller"] that it had discovered that one of its employees "committed dishonest acts against our company." Hartford on July 25, 1988 received a claim report under the policy from Kalvin-Miller.
Cooper's claim ultimately involved James Pagnotta, an employee of 40 years who served as the manager of the company's warehouse at 720 Frelinghuysen Avenue in Newark, N.J. The company, which manufactures and imports leather coats, jackets and other sportswear, maintains its executive offices, warehouse, manufacturing facilities and outlet store at that address. Pagnotta allegedly stole from the company cash and merchandise worth more than the $500,000 policy limit. Affidavit of Laurence P. Jortner, Esq., Exhibits G, J.
*723 Hartford denied the claim in November 1990 for various reasons, including its determination that Pagnotta's dishonest acts were excluded from the policy, under Sections 7 and 15, because Cooper had prior information about Pagnotta's dishonesty. Hartford's Support Memorandum at 11. Cooper filed suit on April 11, 1991 in the Superior Court of New Jersey, Law Division, Essex County, alleging that it sustained a loss in excess of $500,000. On May 8, 1991, Hartford removed the action to this Court, 28 U.S.C. § 1441, under diversity jurisdiction. 28 U.S.C. § 1332. Hartford filed a third-party complaint against Pagnotta on May 22, 1991. Cooper alleges in its complaint that the policy covers its loss up to the $500,000 limit. Hartford in its third-party complaint seeks a judgment against Pagnotta, should Hartford be found liable for Cooper's loss.
II. DISCUSSION
A. The Summary Judgment Standard
Rule 56(c) provides that summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." See also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986).
B. The Summary Judgment Analysis
In moving for summary judgment, Hartford argues, inter alia, that Sections 7 and 15 of the policy bar the claim because Cooper discovered Pagnotta's dishonesty before the inception of the policy. This argument merits summary judgment in favor of Hartford.
Section 7 of the policy provides:
The coverage of Insuring Agreement I shall not apply to any Employee from and after the time that the Insured or any partner or officer thereof not in collusion with such Employee shall have knowledge or information that such Employee has committed any fraudulent or dishonest act in the service of the Insured or otherwise, whether such act be committed before or after the date of employment by the Insured.
Jortner Affidavit, Exhibit A. Section 15 provides, in relevant part:
Insuring Agreement I shall be deemed canceled as to any Employee: (a) immediately upon discovery by the Insured, or by any partner or officer thereof not in collusion with such Employee, of any fraudulent or dishonest act on the part of such Employee....
Id.
No New Jersey case appears directly on point. As the courts of the state have not authoritatively addressed the critical issue, the Court must make a "prediction of how the state's highest court would decide were it confronted by the problem." McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 661 (3d Cir.), cert. denied, 449 U.S. 976, 101 S. Ct. 387, 66 L. Ed. 2d 237 (1980). The Third Circuit in McKenna explained:
In sum, a federal court attempting to forecast state law must consider relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data tending convincingly to show how the highest court in the state would decide the issue at hand.
Id. at 663.
Courts in other jurisdictions have considered cases where very similar policy language applied. These courts have consistently held that the type of clause stated in Section 7, which excludes fidelity coverage for an employee if the insured had learned of a dishonest act by that employee prior to the inception of the policy, is legally enforceable. See, e.g., C. Douglas Wilson & Co. v. Insurance Co. of North America, 590 F.2d 1275, 1278-79 (4th Cir.), cert. denied, 444 U.S. 831, 100 S. Ct. 59, 62 L. Ed. 2d 39 (1979); Ritchie Grocer Co. v. Aetna Casualty & Surety Co., 426 F.2d 499, 500 (8th Cir.1970); St. Joe Paper Co. v. Hartford Accident & Indemnity Co., 376 F.2d 33, 35 (5th Cir.), cert. denied, 389 U.S. 828, 88 S. Ct. 91, 19 L. Ed. 2d 86 (1967); Verneco, Inc. v. Fidelity & Casualty Company of New York, 253 La. 721, 219 So. 2d 508, 510 (1969). The Court concludes *724 that the New Jersey Supreme Court would follow this uniform line of cases.
Hartford has produced evidence showing that Sidney Cooper, the company's secretary-treasurer, had substantial information prior to the inception of the policy on March 25, 1988 that Pagnotta, Cooper's plant manager, had committed fraudulent and dishonest acts. In particular, it has submitted an internal memorandum of Norman Jaspan Associates, Inc., a private investigation firm retained by Cooper. The memo, dated March 16, 1988, describes a meeting the previous day between Sidney Cooper and several Jaspan representatives. First Affidavit of Thomas R. Pattison, Esq., Exhibit B.
This memorandum shows that Cooper Sportswear, particularly Sidney Cooper, had sufficient information about Pagnotta's dishonest conduct to trigger the exclusionary provisions of Sections 7 and 15. It was prepared by Jaspan employee William J. Luby, who met March 15, 1988 with Sidney Cooper and Norman Jaspan, president of the firm, to discuss "information which had surfaced implicating James Pagnotta." Id. at 1.
As a threshold matter, the Court concludes that there are no hearsay or multiple hearsay problems with the Jaspan memo. The Court notes that, in the final Pre-Trial Order of October 20, 1992, entered by United States Magistrate Judge Stanley R. Chesler, Cooper objects to the admissibility of the memo as hearsay and double hearsay. Pre-Trial Order at 27, 38. The parties, however, have stipulated that any documents produced by Jaspan Associates at its April 16, 1992 deposition, including the March 16, 1988 memo, are considered prepared and maintained by Jaspan "in the ordinary course of that company's business." Id., Exhibit E. The author of the memo, Luby, had knowledge of what transpired at the meeting, having attended it, and was keeping a routine record of it. The memo, therefore, qualifies under the hearsay exception for "records of regularly conducted activity." Fed.R.Evid. 803(6).
Furthermore, any statements by Cooper employees quoted in the memo, tending to show knowledge of Pagnotta's dishonesty, qualify as "admissions by party-opponent," considered non-hearsay under Fed.R.Evid. 801(d)(2). As the relevant portions of the memo only quote statements by Cooper employees, these "admissions" cure any potential multiple hearsay problems within the memo.
According to the memo, Sidney Cooper told Jaspan representatives of several instances where Pagnotta's honesty was called into question by Cooper employees. First, Mary Perez of customer relations told Cooper that "she knew that Pagnotta was stealing. She claimed that she did not know how, but was sure about her information." First Pattison Affidavit, Exhibit B, at 1. Second, Cooper said he approached Jimmy Nash, a longtime employee, and asked "about rumors that Pagnotta was stealing from the company. Nash turned white and said, `Please, don't ask me about it.'" Nash also reportedly told Cooper that a supervisor, Arthur White, after being told by Cooper to "keep an eye on the back of the building," told Nash "the company should be looking at the front of the building instead." Id. As Cooper and Nash were discussing Pagnotta, the warehouse manager, at the time, this statement could be reasonably construed to be a reference to him.
Third, Cooper told the Jaspan representatives that he believed Pagnotta, four days earlier, had sold two leather jackets and a skirt to a saleswoman from the Ideal Zipper Co. for $400, but at first misled Cooper by saying he sold them for the full price of $500, before revising his story. Cooper said he suspected that Pagnotta had "pocketed the difference" of $100. Id.
According to the memo, Cooper asked the Jaspan representatives for two undercover "placements" within the factory: a woman to work in the warehouse and retail store and a male warehouseman. Id. at 2. From the context of the memo, it is clear that Cooper intended that these two undercover Jaspan employees keep an eye on Pagnotta.
In summary, the memo shows that, while Cooper's application was pending, and before the inception of the Hartford policy on March 25, 1988, Sidney Cooper had substantial *725 information, if not knowledge, about Pagnotta's commission of dishonest acts. The fact that Cooper asked Jaspan Associates to send two undercover operatives to watch Pagnotta at the warehouse indicates that Cooper, far from discounting this information, was taking it very seriously. Compare Harris W. Hall Company, Inc. v. Security Ins. Co., 289 So. 2d 832, 834 (La.Ct.App.1974) (supervisor discounted evidence of dishonesty out of trust for the suspected employee). The memo further demonstrates that Cooper's information about Pagnotta's dishonesty concerned a series of acts, not an isolated incident. Compare Salley Grocer Co. v. Hartford Accident & Indemnity Co., 223 So. 2d 5, 8 (La.Ct.App.), writ refused, 254 La. 134, 222 So. 2d 883 (1969) (no information that employee had engaged in a consistent course of dishonest conduct).
Cooper does not dispute the authenticity of the Jaspan memo. Nor does it dispute that Sidney Cooper said what the memo indicates he said. The company, instead, characterizes the information as mere "unsubstantiated rumors." Opposition memorandum at 14. The Court, however, finds that the statements by Cooper in the memo, as a matter of law, show that he had sufficient "information," if not "knowledge," to trigger the exclusionary effects of Section 7 of the policy. As a legal matter, the policy never applied to Pagnotta when it took effect March 25, 1988.
Section 7 excludes coverage for any employee from the time the employer has "knowledge or information" that the employee has acted fraudulently or dishonestly. Here, the insured had such "knowledge or information" prior to the issuance of Hartford's policy. Hartford, therefore, is entitled to summary judgment and the dismissal of Cooper's complaint.
The policy provision in question should be enforced for the additional reason that it simply embodies the equitable concept that it is unfair to impose upon an insurer the risk of loss from an employee whom the employer knows or has ample reason to suspect is dishonest, but continues to employ.
III. CONCLUSION
For the reasons discussed above, the Court grants Hartford's motion for summary judgment. An appropriate order follows. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1859467/ | 794 So. 2d 962 (2001)
CITY OF SHREVEPORT, Plaintiff-Appellee,
v.
CHANSE GAS CORPORATION, et al., Defendant-Appellants.
Nos. 34,958-CA, 34,959-CA.
Court of Appeal of Louisiana, Second Circuit.
August 22, 2001.
*966 Darrell Keith Cherry, New Orleans, Joseph Walter Greenwald, Baton Rouge, Billy Ray Pesnell, Shreveport, John Whitney Pesnell, New Orleans, Counsel for Appellants.
C. Gary Mitchell, Charles Gordon Tutt, Shreveport, Thomas Anthony Bordelon, Natchitoches, Jennifer Pool McKay, Counsel for Appellee.
Before NORRIS, CARAWAY and KOSTELKA, JJ.
NORRIS, Chief Judge.
The City of Shreveport filed these two suits to expropriate three tracts of land on the northwest corner of Caddo and Market Streets for the purpose of building a convention center complex. The property owners, Chanse Gas Corp. and Harold S. Hollenshead,[1] contested the City's action. After a five-day taking trial, the District Court approved the expropriation, finding a valid public purpose and legitimate public interest. The parties then proceeded to a compensation trial in which the jury unanimously fixed the market value of the property and awarded moving and other expenses to the defendants; judgments were rendered accordingly for a total of $1,055,635. Finally, the Court held a contradictory hearing, after which it awarded attorney fees of $200,000 and costs of $51,612.88, each only a portion of the amount claimed by the defendants.
The defendants appeal devolutively, contesting the finding of a public purpose and demanding that the property be restored; they also seek additional attorney fees and costs. The City answers the appeal, seeking to reverse or reduce the award of attorney fees and costs. For the reasons expressed, we affirm.
Factual and procedural background
Since at least 1998, government leaders of the City of Shreveport, as well as civic and business leaders, had advocated the need for a new, larger convention center. In January 1998 the City hired Ernst & Young, the large accounting and management firm, to conduct a convention center study. Ernst & Young's report, delivered to the City in July 1998, recommended building a new, state-of-the-art convention center and predicted its success as "the means to transition Shreveport's meetings industry from primarily local to the next level." This report also suggested that the City "foster the development" of a convention headquarters hotel. The report was made public and copies were distributed to the media.
The mayor at the time, "Bo" Williams, appointed a committee to study the report and consider how to implement its proposals. The committee strongly supported the plan, citing its benefits for economic development and improving the character of downtown. When the current mayor, Keith Hightower, assumed office in November 1998, he received the committee's report and named a new committee[2] to decide how the matter should be presented *967 to the voting citizens of Shreveport. This committee recommended a bond issue be presented to voters on July 17, 1999, for authority to sell $85 million in bonds to build the convention center and parking garage. Bonds were to be repaid out of Harrah's Casino revenues. The committee vigorously promoted the bond issue. According to testimony, special emphasis was placed on the 1,300 permanent jobs with $25 million in wages, and $3.5 million in annual taxes that the convention center was predicted to generate. There was less emphasis on its projected $1 million annual deficit. The bond issue passed overwhelmingly, approving funds for the project.[3] The City planned to induce a private developer to build the headquarters hotel, but despite its efforts none had expressed interest in doing so.
The City then contracted with Slack, Alost, Miremont & Associates, architects ("SAM"), which assembled a team of architects, real estate developers and hotel consultants to develop the convention center in accord with the bond issue.[4] The team was to assess various requirements of the convention center, particularly a contiguous 300,000 sq. ft. location, with due regard to cost, environmental impact, long range planning and safety considerations. The team also assessed whether the convention hotel was economically feasible. It advised that without an adjacent headquarters hotel, the convention center would not appeal to large or regional groups, and would be no more than a civic center. It therefore advised that the hotel was essential to the success of the convention center.
Although the initial Ernst & Young report had suggested a location close to the riverfront, entertainment district and casinos, both mayors' committees approved slightly expanding the target area. After exhaustive consideration, SAM and the other consultants found the only practicable location was a three-block strip on the north side of Caddo Street, which the City began making efforts to purchase.
The selected area included Chanse and Hollenshead's warehouse and parking lot and Chanse's office building. They had bought these properties in early 1997 for a total of $246,000. In August 1999, they listed them for sale for a total of $750,000. Days later, Hollenshead read in The Times that the City was considering that location; he raised the asking price to $900,000. On August 25, the City offered the defendants a total of $512,000 for the three tracts, in accord with its appraisals; they refused. The City gradually increased its bids, offering $750,000 on January 5, 2000.[5] This offer was also refused. In the meantime, the City Council authorized an expropriation action; the City filed the instant suits on January 11, 2000. The defendants vigorously denied the City's right to expropriate, but alternatively demanded over $3.25 million in compensation. The cases were consolidated for trial.
The taking trial was held May 24-31, 2000. Pursuant to La. R.S. 19:105, this was a bench trial. The court received extensive testimony and documentary evidence regarding the convention center and *968 hotel, notably the City's claim that the project promoted economic development for the City and its residents, and thus served public purposes and the public interest. La. Const. Art. 1, § 4; R.S. 19:102. The defendants contended that economic development is not a public purpose; their witnesses testified that the project would actually be a financial drain on the City, that it would interfere with other ongoing City projects, that the headquarters hotel would compete with existing hotels, and that the City would ultimately have to donate property to a hotel developer in order to induce the construction of the hotel.
By written reasons for judgment, the District Court listed both sides' contentions and analyzed them. Citing Town of Vidalia v. Unopened Succession of Ruffin, 95-580 (La.App. 3 Cir. 10/4/95), 663 So. 2d 315, and Board of Com'rs v. Missouri Pacific R. Co., 625 So. 2d 1070 (La.App. 4 Cir.1993), writs denied 93-3100, 93-3088 (La.1/28/94), 630 So. 2d 802, cert. denied 512 U.S. 1220, 114 S. Ct. 2707, 129 L. Ed. 2d 835 (1994), the court held that economic development in the form of a convention center with a supporting hotel is indeed a public purpose and in the public interest. Weighing all the evidence, the court concluded that while the project "is not without some potential risk, the City has demonstrated reasonable, prudent and sound discretion as well as good faith." The court therefore adjudicated that the properties be expropriated and ordered a jury trial on compensation.
The compensation trial took place August 21-25, 2000.[6] The City's experts appraised the tracts at approximately $600,000. Hollenshead admitted that he and Chanse's president, Mr. Kai S. Chang, had paid $63,000 for the warehouse in 1997, but he estimated he had spent $200,000 improving the structure and remodeling it into a luxury apartment, private office and showroom for his antique cars and other collectibles; most of these improvements were undertaken after the City expressed an interest in buying the property. Other defense witnesses estimated the properties' fair market value at $2.4 million,[7] and replacement cost at about $1.9 million. A final defense witness, an expert appraiser and real estate market analyst from Connecticut, Dr. W.M. Kinnard, did not appraise the property but attended the entire trial and offered an oral critique of the five appraisals introduced into evidence. He felt that the appraisal with the best methodology was the one fixing the fair market value at $2.4 million.
The jury rendered a unanimous verdict fixing the total fair market value at $688,000,[8] and declining to award replacement costs. It also awarded moving expenses of $192,635 and other expenses of $175,000, for a total verdict of $1,055,635. The quantum has not been appealed.
Finally, in September 2000 the court held a hearing on the defendants' motion to complete compensation with respect to attorney fees and costs. For the taking and compensation trials, the defendants requested attorney fees of $344,048.95 and *969 costs of $150,310.77.[9] The City countered that because the jury awarded a fair market value less than the City's final offer for the property, the defendants were not entitled to attorney fees for the taking trial, citing R.S. 19:201 and Illinois Central R. Co. v. 16.032 Acres of Land in Jefferson Parish, 2000 WL 278096 (E.D.La.3/14/00). The court rejected this argument, finding it would penalize a property owner for exercising (albeit unsuccessfully) his right to contest expropriation. The court ruled the defendants were entitled to attorney fees for the entire proceedings, but found that these must be reasonable. After discussing the claims and finding many of them to be excessive or unnecessary, the court awarded attorney fees of $200,000 and costs of $51,612.88. Judgments were rendered accordingly, detailing every allowed amount.
Discussion: Power of expropriation
By their first assignment of error the defendants urge that the District Court erred in allowing the City to expropriate their property. In support they advance three arguments. First, the legislature has never expressly authorized the City to take private property for economic development or general economic benefits. Various special statutes, which might have conferred the power, are simply not applicable to this case, while the expropriation statute, R.S. 19:102, is procedural only and does not confer a power to expropriate. Second, operating a convention center, a hotel, or both cannot be a public purpose as intended by La. Const. Art. 1 § 4. Finally, this expropriation must be denied because the project entails donating public property to a private corporation for the purpose of running a hotel, in violation of La. Const. Art. 7 § 14(A).
With respect to the power to appropriate, the defendants' basic premise is stated as follows:
The City has no power or authority to take Appellants' properties for the Project or any of its component parts. The power of expropriation is strictly construed. It cannot be allowed unless it is clearly and unmistakably within the authority granted by the Constitution and the Legislature. Orig. br., 9-10.
The Constitution guarantees every person the right to "acquire, own, control, use, enjoy, protect and dispose of private property." This right is "subject to reasonable statutory restrictions and the reasonable exercise of the police power." Further, "Property shall not be taken or damaged by the state or its political subdivisions except for public purposes and with just compensation paid to the owner or into court for his benefit." La. Const. Art. 1, § 4.
Another provision of Art. 1, § 4 requiring "a public and necessary purpose" and making such determination "a judicial question" applies only to takings by private entities authorized by law to expropriate and is inapplicable to the instant case. Lee Hargrave, The Declaration of Rights of the Louisiana Constitution of 1974, 35 LA. L.REV. 1, 16-17 (1974).
Since expropriation proceedings derogate from the right of individuals to own property, the law governing these *970 proceedings is strictly construed against the expropriating authority. State v. Estate of Davis, 572 So. 2d 39 (La.1990).
The defendants assert that in view of strict construction, the City may exercise only those powers expressly conferred by the legislature or Constitution. Kel-Kan Investment Corp. v. Village of Greenwood, 428 So. 2d 401 (La.1983), and citations therein. They illustrate, with various statutes conferring a right of expropriation under special circumstances, that special authority is needed, but argue none of these applies to the instant case.[10] They even contend that R.S. 19:102 confers no right to expropriate, despite its plain statement that "any municipal corporation of Louisiana may expropriate property whenever such a course is determined to be necessary for the public interest by the governing authority of the municipality[.]"
The defendants' theory is conceptually flawed. The Supreme Court traced the history of the relationship between State and local government in Lafourche Parish Council v. Autin, 94-0985 (La.12/9/94), 648 So. 2d 343, 348-349. Prior to the Constitution of 1974, the legislature maintained a "creature" political relationship with parish and municipal governments, whereby the latter could exercise only those powers specifically granted to them by the legislature. The Constitutional Convention of 1973 abrogated this awkward situation by adopting provisions for home rule charters which were ratified as La. Const. Art. 6, § 5. This section authorizes "any local governmental subdivision [to] draft, adopt, or amend a home rule charter in accordance with this Section." Adoption of a home rule charter confers general powers:
(E) Structure and Organization; Powers; Functions. A home rule charter adopted under this Section shall provide the structure and organization, powers, and functions of the government of the local governmental subdivision, which may include the exercise of any power and performance of any function necessary, requisite, or proper for the management of its affairs, not denied by general law or inconsistent with this constitution. (Emphasis added.)
Moreover, the legislature "shall enact no law the effect of which changes or affects the structure and organization or the particular redistribution of the powers and functions of any local governmental subdivision operating under a home rule charter." La. Const. Art. 6, § 6. These sections plainly show that a municipality operating under a home rule charter possesses power as broad as that exercised by the State, except where limited by the Constitution, by laws permitted by the Constitution, and the charter itself. Francis v. Morial, 455 So. 2d 1168 (La.1984).
The City adopted a home rule charter, entitled Plan of Government of the City of Shreveport, on May 13, 1978. Ex. P-4. The plan provides, "Without limiting the general powers granted in this Chapter, the City shall have power: (a) To acquire and lease property and property rights within and without its boundaries for any *971 municipal purpose by purchase, gift, devise, or expropriation, and to hold, manage, control, sell, grant, lease, or donate such property or property rights in any manner for any purpose not prohibited by the Constitution or general laws of the State as may be necessary, requisite or proper[.]" Plan of Govt., § 2.03(a) (emphasis added). In short, the City has adopted a home rule charter which expressly assumes the power of expropriation.
In light of the charter, expropriation is clearly a "power given [to the City] by the state legislature * * * in attempting to expropriate defendant's property." City of Lafayette v. Delhomme Funeral Home, 413 So. 2d 348 (La.App. 3 Cir.1982). For this reason, we reject the defendants' contention that R.S. 19:102 does not confer "any substantive power of expropriation." Orig. br., 12. Given the constitutional authority and the home rule charter, we find the statute specifically confers this power.
Moreover, we have closely examined the special statutes cited by the defendants.[11] They do not persuade us that special legislative authority is needed for the City to expropriate land; they all antedate the Constitution of 1974 and its more expansive concept of home rule charters. They are obviously valid within their special circumstances, but are simply irrelevant to the instant case.
For these reasons, the defendants' claim that the City lacked the power to expropriate their property is without merit.
Economic development as public purpose
The defendants next contend that the District Court erred in finding that the convention center project served a public purpose, as required by La. Const. Art. 1, § 4; while the project may promote economic development in the City, this is too broad to support a public purpose, which is the major limitation on the power of expropriation. The gist of the argument is that "if economic development is a `public purpose,' then, as a practical matter, there is no limit to the power of expropriation. * * * Because that interpretation would render the `public purpose' limitation meaningless and lead to an absurd consequence, it must be rejected." Orig. br., 19. They further ask us not to follow Town of Vidalia, supra, which holds that economic development is a public purpose, on grounds that it is overbroad. They also argue that the City has no legal right to operate a hotel, thereby negating any valid public purpose. Finally, they extensively reiterate the trial evidence and argue that, on this record, the District Court could not find that the project will really promote economic development.
Expropriation is permitted only "for public purposes and with just compensation to the owner." La. Const. Art. 1, § 4. The finding of public purpose is made by the court on the particular facts presented. Town of Vidalia, supra. A municipal corporation may expropriate only when "such a course is determined to be necessary for the public interest by the governing authority of the municipality." R.S. 19:102. The expropriating authority must show by a preponderance of the evidence a public need or interest in the expropriation. Recreation and Park Com'n v. C & S Development Inc., 97-2652 (La.7/8/98), 714 So. 2d 706, and citations therein. Once the expropriating authority meets its burden with regard to public need, the burden shifts to the defendant to show that the authority has abused its discretion in selecting the site to be expropriated. Id. An expropriating authority *972 abuses its discretion when it "acts in bad faith, without adequate determining principles, or without reason." Id., citing United States v. Carmack, 329 U.S. 230, 67 S. Ct. 252, 91 L. Ed. 209 (1946). The determination of public necessity "will not be disturbed by the courts if made in good faith." Missouri Pacific R. Co., supra.
Federal jurisprudence under the public use clause of the Fifth Amendment expresses the same core concepts. In Berman v. Parker, 348 U.S. 26, 75 S. Ct. 98, 99 L. Ed. 27 (1954), the Supreme Court held that "the role of the judiciary in determining whether that power [expropriation] is being exercised for a public purpose is an extremely narrow one." 348 U.S. at 32, 75 S.Ct. at 102. In the more recent case of Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 104 S. Ct. 2321, 81 L. Ed. 2d 186 (1984), the Court elaborated:
There is, of course, a role for courts to play in reviewing a legislature's judgment of what constitutes a public use, even when the eminent domain power is equated with the police power. But the Court in Berman made clear that it is "an extremely narrow one." * * * The Court in Berman cited with approval the Court's decision in Old Dominion [Land] Co. v. United States, 269 U.S. 55, 66, 46 S. Ct. 39, 40 [70 L. Ed. 162] (1925), which held that deference to the legislature's "public use" determination is required "until it is shown to involve an impossibility." The Berman court also cited to United States ex rel. TVA v. Welch, 327 U.S. 546, 552, 66 S. Ct. 715, 718 [90 L. Ed. 843] (1946), which emphasized that "[a]ny departure from this judicial restraint would result in courts deciding on what is and is not a governmental function and in their invalidating legislation on the basis of their view on that question at the moment of decision, a practice which has proved impracticable in other fields." In short, the Court has made clear that it will not substitute its judgment for a legislature's judgment as to what constitutes a public use "unless the use be palpably without reasonable foundation." United States v. Gettysburg Electric R. Co., 160 U.S. 668, 680, 16 S. Ct. 427, 429 [40 L. Ed. 576] (1896).
* * *
To be sure, the Court's cases have repeatedly stated that "one person's property may not be taken for the benefit of another private person without a justifying public purpose, even though compensation be paid." * * * But where the exercise of the eminent domain power is rationally related to a conceivable public purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause. 467 U.S. at 240-241, 104 S.Ct. at 2329-2330.
In Town of Vidalia, supra, the board of aldermen sought to acquire property on a batture of the Mississippi River "for recreation and tourism purposes * * * and to promote economic growth through tourism." The project included a hotel with commercial retail center, a marina and boat ramp, and other outdoor attractions. The owners of part of the land objected on grounds that the project lacked a public purpose, urging "there must be a general public right to a definite use of the property, as distinguished from a use by a private individual or corporation which may prove beneficial or profitable to some portion of the public." The court disagreed, finding that the jurisprudence has not defined public purpose so narrowly:
Rather, any allocation to a use resulting in advantages to the public at large will suffice to constitute a public purpose. Moreover, a use of the property *973 by a private individual or corporation, when such use is merely incidental to the public use of the property by the state or its political subdivisions, does not destroy an otherwise valid public purpose. 663 So.2d at 319 (emphasis in original).
The court further found that the project would "stimulate economic growth in Concordia Parish, an area which has struggled with a poor economy and high unemployment. It is uncontradicted that the Project will contribute to the general welfare and prosperity of the community of Vidalia." In short, the Third Circuit affirmed that a project including a hotel and retail center would promote economic development, thus meeting the requirement of a public purpose and supporting expropriation.
In Board of Com'rs v. Missouri Pacific R. Co., supra, the governing board of the New Orleans Exhibition Hall Authority sought to expropriate property adjacent to its convention center on the Mississippi River. The purpose was to expand the existing convention center and truck marshaling area. The land owner, however, refused to sell the portion requested by the Board, insisting instead on selling the entire 72-acre tract. The Board successfully appropriated the partial tract. On appeal, the owner urged that the Board failed to prove a public need for the expansion. The Court of Appeal found that the Board "established that in order to fulfill its public purpose of promoting economic growth and development of the area, it is necessary to further expand the convention center." The court cited studies in evidence "which demonstrate the consistent beneficial impact of the convention center by creating new jobs and aiding the economy." In short, the court affirmed the finding of a public need and purpose for the expansion of the convention center.
Collectively, these cases provide the framework for finding that economic development, in the form of a convention center and headquarters hotel, satisfies the public purposes and public necessity requirements of Art. 1, § 4 and R.S. 19:102. We decline the defendants' invitation to disregard this jurisprudence. We also note that the legislature has declared, and courts have held, that economic development is a valid public purpose.[12]
We are cognizant of the older cases cited by the defendants for the proposition that economic development projects cannot be equated with public purpose or public benefits. See, New Orleans Land Co. v. Board of Levee Com'rs of Orleans Levee Dist., 171 La. 718, 132 So. 121 (1930); State ex rel. Porterie v. Housing Authority of New Orleans, 190 La. 710, 182 So. 725 (1938). Despite the somewhat restrictive language of those opinions, however, in Levee Board the court approved the expropriation, and in Housing Authority the court refused to declare an expropriation statute unconstitutional; it even noted that "a public purpose or public business has for its objective the promotion of the public health, safety, morals, general welfare, security, prosperity, and contentment of all the inhabitants or residents[.]" These *974 cases do not negate the rationale of Town of Vidalia and Missouri Pacific R. Co., supra.
The defendants further argue that there is no public purpose because the City has no right to own or operate a hotel. In support they cite Sugar v. City of Monroe, 108 La. 677, 32 So. 961 (1902), which is not an expropriation case but a suit to enjoin the city of Monroe from using a school building as a theater. The court stated that Monroe's city charternot introduced into evidencedid not confer the right to run a theater, and the court would not infer such a right. In the instant case, the City obviously assumed general powers by adopting a home rule charter under Art. 6, § 5, a concept that did not exist in 1902, and specifically the right to "provide for, maintain, operate * * * recreational facilities as may be necessary, requisite or proper." Plan of Govt., § 2.03(b). The court's dicta in Sugar v. City of Monroe are therefore inapposite to the instant case.
The District Court accurately summarized and carefully discussed each of the factual contentions raised by the defendants. See, Written Reasons for Judgment, R.V. 3, pp. 519-526. In this large record there was substantial evidence on which the court could find economic growth and development and, hence, public purpose and necessity. All witnesses agreed that the City's existing Expo Hall was landlocked and could not be enlarged. The Ernst & Young report predicted that a larger convention center would bring more and larger meetings to Shreveport; the PKF Consulting report confirmed this, adding that without a headquarters hotel the convention center would not succeed. Ernst & Young also projected 1,300 construction jobs with $32 million in wages, 1,300 permanent jobs with $25.6 million in annual wages, $3.5 million in annual tax revenue, and an out-of-town conventioneer who spends an average of $228.65 in town. The District Court found these reports "well documented and based on sound, reasonable premises." Michael Alost, the lead architect, testified that the three-block strip on the north side of Caddo Street was the only viable location for a project of this size, with due regard for cost, traffic management, future expansion, proximity to other attractions, and environmental concerns. This will easily support the finding that the location is necessary.
There was, of course, evidence that the proposed convention center, like centers around the country, would likely run a deficit, perhaps up to $1 million a year, at least for the first several years. There was evidence that the potential fiscal drain was de-emphasized in the bond campaign, while the glowing projections of the Ernst & Young report were heralded. There was considerable evidence that the headquarters hotel would require financial support from the City, would seldom have full occupancy, and would compete with existing hotels and motels in the area. The District Court, however, described the defendants' contentions as "interesting topics of discussion" and "not supported by the evidence; * * * unreasonably pessimistic, somewhat unprogressive, and legally without merit." On this large record, we find the City proved a public purpose.
The defendants' argument to the contrary lacks merit.
Prohibited donation of public property
The defendants next urge that expropriation must fail because the City's planned use of the hotel is a donation of public property, prohibited by La. Const. Art. 7, § 14(A). In support they cite a Louisiana Attorney General Opinion, No. 00-34 (2/29/00), advising that the City may not guarantee a portion of a private developer's *975 loan for another, unrelated City project.[13] They also urge that the City's proposed incentives to attract a hotel developer are tantamount to the municipal risk-sharing scheme that was declared unconstitutional in City of Port Allen v. Louisiana Municipal Risk Mgt. Agency, 439 So. 2d 399 (La.1983).
The basic prohibition against the donation of public property, Const. Art. 7, § 14(A), states:
(A) Prohibited Uses. Except as otherwise provided by this constitution, the funds, credit, property, or things of value of the state or of any political subdivision shall not be loaned, pledged, or donated to or for any person, association, or corporation, public or private. Neither the state nor a political subdivision shall subscribe to or purchase the stock of a corporation or association or for any private enterprise.
Certain exceptions are contained in Section 14(B), which the parties concede do not apply to the instant case. The City, however, urges that its incentives, when formulated, will be permissible under Section 14(C):
(C) Cooperative Endeavors. For a public purpose, the state and its political subdivisions or political corporations may engage in cooperative endeavors with each other, with the United States or its agencies, or with any public or private association, corporation, or individual.
(Emphasis added.)
The question whether a grant or payment is for a public purpose is "left to the judiciary so that there is sufficient flexibility for a lasting and workable document." Lee Hargrave, The Work of the La. Appellate Courts for the 1975-1976 Term: Constitutional Law, 37 LA. L.REV. 480, 486, and citations therein. Section 14(C) had no counterpart in the prior constitution; it "liberalizes" the rule of Section 14(A) which "if strictly construed would prevent much of what a modern state is expected to do for its citizens." Id.
The Ernst & Young report suggested that substantial public subsidies may be needed from the City; Mr. Alost admitted that financial incentives were a "probability," and a memo from SAM to the mayor suggested that the incentive package would be $5-7 million. A request for proposals, distributed to hotel operators in December 1999, indicated the City would make the land for the hotel available without cost to the developer. However, Mr. Keeling of PKF Consulting testified that making the land available free of cost would not attract a developer; he described, in some detail, public-private ventures to "enhance financibility," including tax regulation and cost sharing. He added that public-private ventures had succeeded in Wichita, Kansas and Norfolk, Virginia. Mayor Hightower testified that the City had not yet entered a cooperative endeavor agreement with any hotel operator. On this evidence, the District Court was entitled to find that the exact incentives "remain undetermined." The record does not support the defendants' contention that the City will donate expropriated land to any hotel developer. City of Port Allen and the Attorney General Opinion are thus distinguished.
As noted earlier, once the public purpose has been established, the fact that a private entity may develop and profit from the project does not negate its public nature. *976 Town of Vidalia v. Unopened Succession of Ruffin, supra; State ex rel. Porterie v. Housing Authority, supra; Hawaii Housing Authority v. Midkiff, supra. Similarly, the fact that a private developer may build or operate the hotel does not violate Art. 7, § 14.
For these reasons, the judgment of expropriation will be affirmed.
Attorney fees
By their second assignment of error, the defendants urge the District Court failed to award reasonable attorney fees and costs incurred in defending the expropriation suits. By answer to appeal, the City also contests the award of attorney fees and costs as legally erroneous or excessive. We will consider the attorney fees first.
The defendants claim that attorney fees for both phases of the trial are mandated by La. Const. Art. 1, § 4's guarantee of compensation "to the full extent of his loss." They also cite R.S. 19:109 A, which provides in part:
Immediately after compensation has been determined, the plaintiff shall, upon motion of the defendant, present evidence as to the highest amount it offered defendant for the property prior to trial on the merits. After hearing evidence on the issue, the court shall determine the highest amount offered. If the highest amount offered is less than the compensation awarded, the court may award reasonable attorney fees.
The defendants demand attorney fees of $344,000, the full amount invoiced by their various attorneys, plus additional fees for the appeal.[14] The District Court awarded $200,000 for all attorney fees.
The City urges the court committed legal error by awarding any attorney fees. As it prevailed in the taking trial, the City argues it should not have to pay the losing party's legal fees. In support it cites Illinois Central R. Co. v. 16.032 Acres of Land, supra; City of Lafayette v. Delhomme, 401 So. 2d 1044 (La.App. 3 Cir.1981); City of New Orleans v. Condon, 600 So. 2d 78 (La.App. 4 Cir.), writ denied 605 So. 2d 1130 (1992); and R.S. 19:201. It further contends that before the compensation trial, it made all efforts to negotiate a fair price with the defendants; ultimately, the jury awarded a fair market value less than the City's final offer, and a total award of only $207,635 more than the final offer. Given its good faith effort to avoid litigation and the small margin of the verdict, the City urges that any award of attorney fees is an abuse of discretion. If any fees are warranted, the City suggests the measure of R.S. 48:453 E, or 25% of the difference.[15]
*977 In Illinois Central, the plaintiff, a railroad company, sued to expropriate 16 acres; according to the opinion, "the parties agreed to have this Court try the issue of expropriation on a written record." The judge found the railroad was entitled to appropriate the land, and ordered a jury trial on compensation. Prior to trial, the railroad offered the defendant $2 million; the jury awarded $2.9 million. The defendant then filed a motion for attorney fees, including those incurred in the taking trial. The federal judge noted that under the statute,[16] "the trial court may award reasonable attorney fees if the highest amount offered by [sic ] the landowner is less than the amount awarded by the jury." However,
It does not provide that, if the landowner wins the expropriation phase of the trial, he may recover fees. The statute only mentions attorneys fees after it discusses the compensation phase and the sentence providing for fees specifically discusses only the issue of compensation. Thus, the statute's plain language indicates that it was designed to reward persons who claim that they have not been offered the fair market value of their land and prevail, rather than to enrich those who contest an expropriation of their land and lose.
(Emphasis added.)
The court analogized the defendant's claim to those in civil rights cases, in which only the "prevailing" party may recover attorney fees,[17] concluding that the statute "was not designed to reward landowners for issues on which they failed to prevail." The court declined to follow Louisiana Resources Co. v. Greene, 406 So. 2d 1360 (La.App. 3 Cir.1981), writ denied 412 So. 2d 84 (1982), which held the opposite: it rejected the theory that if the landowner lost the taking trial, he could win attorney fees only for the compensation trial. The Federal Court therefore refused to award attorney fees for the taking trial.
We have closely examined Illinois Central and find it unpersuasive. Its reading of R.S. 19:8 is strained. The statute reads, "If the highest amount offered is less than the compensation awarded, the court may award reasonable attorney fees"; this is not modified by a limiting clause such as "for the compensation trial only." The rule of strict construction against the expropriating authority, State v. Estate of Davis, supra, prohibits engrafting such a proviso onto a plainly written statute. The Greene court specifically recognized "the right of landowners to test the right of an agency authorized to expropriate generally under Title 19 * * * to (1) expropriate in a specific case and (2) to have its day in court on the issue of compensation." 406 So.2d at 1371 (emphasis added). Notably, Greene, supra, City of Shreveport v. Pupillo, 390 So. 2d 941 (La.App. 2 Cir.1980), writ denied 396 So. 2d 921 (1981), and City of New Orleans v. Condon, supra, all affirmed attorney fees to defendants who lost their taking trials.
Furthermore, the trial in Illinois Central was "on a written record," which might equitably warrant denying attorney fees, but the same simply cannot be said about the five-day taking trial herein. We therefore decline to follow Illinois Central, and affirm attorney fees as an element of compensation for "the fundamental right of landowners to test an expropriation on all points or issues which may arise." *978 Louisiana Resources Co. v. Greene, 406 So.2d at 1371.
The City also argues that R.S. 19:201 defeats the defendants' claim for attorney fees. This statute provides that the court shall award the landowner "such sum as will, in the opinion of the court, reimburse such owner for his reasonable attorney fees actually incurred because of the expropriation proceeding," if the expropriation claim is rejected or abandoned. Prentice Oil & Gas Co. v. State, 421 So. 2d 937 (La.App. 1 Cir.), writ denied 423 So. 2d 1165 (1982). The statute does not, however, state the contrary; viz., it does not state that if the municipality obtains a judgment of expropriation, no attorney fees are due the owner. The City's suggestion to interpret it that way lacks merit. The defendants are entitled to reasonable attorney fees in accord with R.S. 19:109.
The amount of attorney fees in expropriation cases is discretionary with the trial court. State v. Estate of Davis, 572 So.2d at 45. Relevant factors include the ultimate result obtained, the responsibility incurred, the importance of the litigation, the amount of money involved, the extent and character of the work performed, legal knowledge, attainment and skill of the attorneys, number of appearances, intricacies of the facts involved, diligence and skill of counsel, and the court's own knowledge. State v. Williamson, 597 So. 2d 439 (La.1992), and citations therein. The court is not bound by a contingency fee contract or the amount actually charged by the attorney. Taylor v. Production Serv. Inc., 600 So. 2d 63 (La.1992); Norris v. Goeders, 26,130 (La.App. 2 Cir. 3/10/95), 652 So. 2d 144. The trial court's discretion is great and will not be disturbed in the absence of a clear abuse of that discretion. Red River Waterway Com'n v. Fry, 628 So. 2d 38 (La.App. 2 Cir.1993), writ denied 93-3050 (La.2/4/94), 633 So. 2d 581.
The District Court commented that there were significant, novel issues in the compensation trial, but that one defendant, Hollenshead, "sought to get a windfall from the City in this matter." The court observed:
At one point early on he had all these properties listed for a certain amount of money, and then as there appeared to be a trend by the City in terms of beginning to focus on this area and specifically perhaps his properties, all of a sudden, the property was not listed anymore, the prices went up and then, all of a sudden, they weren't on the market, and then it seems that negotiations began which were ultimately, of course, fruitless. And then there was battle in the courtroom.
As this protracted two-part trial resulted in a net gain to the defendants of only $207,000 more than the City's final offer, the claimed fees of $344,000 are apparently excessive. The court also noted that defense counsel went on some "wild goose chases," a point which can hardly be disputed. At trial the defendants spent much time and effort attempting to prove that the convention center is not a good idea, instead of focusing on public purposes. The final verdict in the taking trial was large, over $1 million, but still less than half of the value asserted by the defense.
Under the circumstances, we cannot say the District Court committed error in awarding slightly over half of the claimed attorney fees. The award is neither inadequate nor excessive. It will be affirmed.
Costs
Both sides challenge the award of costs. The defendants urge the District Court erred in denying costs (and attorney *979 fees) for a mock trial held in preparation for the compensation trial. The City denies any expert witness fees are due because the jury flatly rejected the defense appraisals.
Unless the judgment provides otherwise, costs shall be paid by the party cast. Except as otherwise provided by law, the court may render judgment for costs, or any part thereof, as it may consider equitable. La. C.C.P. art. 1920. The court has great discretion in fixing costs. Cajun Elec. Power Co-Op. v. Owens-Corning Fiberglass Corp., 616 So. 2d 645 (La. 1993). The defendant can have taxed as costs the reasonable cost of time spent by experts in gathering facts necessary for his testimony but not for time spent in consultation which only assists the attorney in preparing for litigation. State v. United Pentecostal Church of Hodge, 313 So. 2d 886 (La.App. 2 Cir.), writ denied 318 So. 2d 60 (1975), cert. denied 423 U.S. 1018, 96 S. Ct. 453, 46 L. Ed. 2d 389 (1975); Albin v. Illinois Central Gulf R. Co., 607 So. 2d 844 (La.App. 1 Cir.1992).
The cost of a mock trial was apparently allowed in Edmundson Bros. Partnership v. Montex Drilling Co., 98-1564 (La.App. 3 Cir. 5/5/99), 731 So. 2d 1049. Federal courts have held that mock trial costs are recoverable if they are not excessive and they confer a benefit to the prevailing party by helping to produce a favorable result. Charles v. Daley, 846 F.2d 1057 (7 Cir.1988); United Steelworkers of Amer. v. Phelps Dodge Corp., 896 F.2d 403, 114 Lab. Cas. ¶ 56,173 (9 Cir.1990); Sigley v. Kuhn, 2000 WL 145187 (6 Cir. 1/31/00) (unpublished op.). These cases, however, caution against "supererogation," or excessive preparation. Here, the District Court viewed the mock trial and jury consultant as overhead items which cannot be reimbursed. Given that these exercises were strictly to aid the attorneys and yielded only marginal results, we cannot say the District Court abused its great discretion in denying these items as costs.
Witnesses called to testify as experts shall be compensated for their services, with the amount to be determined by the court and taxed as costs to be paid by the party cast in judgment. La. R.S. 13:3666; Hammock ex rel. Thompson v. Louisiana State Univ. Med. Center, 34,086 (La.App. 2 Cir. 11/1/00), 772 So. 2d 306, and citations therein. An expert witness is entitled to reasonable compensation for his court appearance and for his preparatory work. Id. The court is not required to award the amount charged by the witness. Stonecipher v. Mitchell, 26,575 (La.App. 2 Cir. 5/10/95), 655 So. 2d 1381. Relevant factors in fixing the fee include the time spent testifying, time spent in preparation for trial, time spent away from regular duties while waiting to testify, extent and nature of the work performed, and the knowledge, attainments of the expert. Id. The court may also consider the helpfulness of the expert's report and testimony. Id.
The District Court awarded costs for five defense experts, some for much less than the amount claimed.[18] While the jury did not accept the defendants' elevated appraisals, it obviously utilized them in rendering a total verdict higher than the City's estimates or offers. The District Court's judgment strikes a reasonable balance between professional effort expended and the utility of the real estate appraisals. On this record, the expert witness fees are not an abuse of discretion.
*980 Finally, the defendants requests additional attorney fees for the appeal. They initiated an appeal which was unsuccessful, so additional fees are not warranted. See, Caparotti v. Shreveport Pirates Football Club, 33,570 (La.App. 2 Cir. 8/23/00), 768 So. 2d 186, writ denied 00-2947 (La.12/15/00), 777 So. 2d 1230.
Conclusion
For the reasons expressed, the judgments are AFFIRMED. Appellate costs are assessed 50% to the defendants, Harold H. Hollenshead and Chanse Gas Corp.; the other 50% is not assessed. La. R.S. 13:4521.
AFFIRMED.
CARAWAY, J., concurring in part and dissenting in part, with written reasons.
CARAWAY, J., concurring in part and dissenting in part.
I agree with much of the majority's extensive analysis of the law regarding a home rule chartered municipality's power to expropriate and the issue of public purpose. However, I can only concur in the conclusion that the taking was appropriate in this case because I find that the majority's application of the law suggests that the trial court, as fact-finder in this case, could have vetoed the action of the elected legislative body had it accepted the defendants' evidence that economic growth and development will not result from the proposed convention center and hotel and that the economic drain on the City's revenues will be to the public's detriment.
Initially, the defendants' contention that the City can have nothing to do with a hotel should be further addressed. To answer this contention, I would expand upon the majority's conclusion that Article 6, Sections 5 and 6 of the constitution "plainly show that a municipality operating under a home rule charter possesses power as broad as that exercised by the State." The State's power of expropriation to carry out a project in the public interest should be as broad as the plenary power of the people of the State, exercised through the legislature. Our supreme court has stated that "[i]n its exercise of the entire legislative power of the state, the legislature may enact any legislation that the state constitution does not prohibit." Board of Commissioners of Orleans Levee District v. Department of Natural Resources, 496 So. 2d 281, 286 (La.1986). A portion of that same legislative power of the State under the constitution's framework for home rule local governmental subdivisions is delegated to the City pursuant to Article 6, Section 5(E) for anything "necessary, requisite or proper for the management of its affairs, not denied by general law or inconsistent with this constitution." No state statute (general law) nor the constitution prohibits the City, through its legislative process as a home rule entity, from deciding that a convention center with a hotel to facilitate that convention center is necessary for the welfare of the City.
With this broad legislative power of the State or City defined, the judiciary's role to prevent a decision to expropriate is limited. Nevertheless, the majority first makes an overly broad statement of law that "the finding of public purpose is made by the court on the particular facts presented," and then concludes that "in this large record there was substantial evidence on which the court could find economic growth and development and, hence, public purpose and necessity." First, from the language of Article I, Section 4 of our constitution, there is the clear implication that the issue of "whether the purpose is public and necessary" is precluded from judicial review as a "judicial question" and is instead a legislative decision for any *981 expropriation proposed for the benefit of the State or political subdivision. Next, under the majority's analysis, with future economic projections in play as a relevant fact inquiry, the majority would have been hard pressed under the manifest error standard of appellate review to overrule the trial court had the trial court accepted the testimony of the defendants' economic experts that the City Council's decision for the convention center will result in a governmental boondoggle.
Future economic projections and any other policy considerations weighed by the City Council were not relevant facts for consideration in the five-day taking trial in this case. On the face of the pleadings and admitted by both sides are the facts that (i) the City Council voted for this project, (ii) the public at large approved a bond issue for the convention center, (iii) other significant businesses and tracts of land surrounding the defendants' property will be acquired by the City, and most importantly, (iv) the project is for a convention center which, like a park or public building, is intended for the obvious purpose of entertaining, educating and serving the public. Those basic facts represent a prima facie case of public purpose. In the face of such evidence, a defendant in an expropriation trial may only challenge the taking of his property by showing that no such project is in fact intended to be carried out so that his property has been singled out arbitrarily to be acquired by a governmental body under some other rare motive exercised in bad faith that is not rationally related to any conceivable public purpose. While the defense at trial presented a sufficient case challenging the wisdom of the City Council's decision, which an elected representative on that council might have argued to defeat the project, nothing in the five-day taking trial was presented to show that the defendants have been singled out arbitrarily to be put out of business for a project that the City has no intention of attempting. Only such evidence of abusive use of the taking power is relevant. As the United States Supreme Court has stated "[w]hen the legislature has spoken, the public interest has been declared in terms well-nigh conclusive. In such cases the legislature, not the judiciary, is the main guardian of the public needs to be served...." Berman v. Parker, 348 U.S. 26, 32, 75 S. Ct. 98, 99 L. Ed. 27 (1954).
While the above view of the power of expropriation may at first glance appear too powerful and unstoppable, my view of the framework of our government is that legislative boondoggles may be changed and prevented through collective participation in elective government and the political process. Most important to the present defendants, under the Bill of Rights and our constitutions, the individual's protection from governmental intrusion, which courts must insure, is not afforded by second guessing the legislative body but by just compensation for the expropriated property.
In summary, the minimal level of scrutiny which a court must apply to a legislative determination of the public interest causes much, if not all, of the defense evidence presented during the five-day taking trial to be irrelevant. I do not agree that the trial court could have accepted the economic projections of the defendants' experts and determined that the City Council's decision for the convention center did not justify the taking of the property. Therefore, I concur in the ruling regarding the propriety of the expropriation. Furthermore, because I believe the "taking trial" raised no defense against the expropriation, I dissent to the $200,000 award for attorney's fees determined from the legal services rendered in both phases *982 of the case and would reduce the award considerably.
NOTES
[1] A third owner, Allright Parking Systems, was named defendant in one of the suits. It elected "not to contest" the proceedings, however, so only Chanse and Hollenshead litigated the case as defendants.
[2] Several members of Mayor Williams's committee were appointed to the second committee.
[3] The measure passed by a margin of 78% for, 22% against. See, www.sec.state.la.us/cgibin/ ?rqsdtyp=ELCMR & rqsdta=071799 & ID=99922243.
[4] Team members included Hellmuth, Obata & Kassabaum, an international architecture firm; Morlok Development Group, a real estate developer from Philadelphia; and PKF Consulting, a hospitality or leisure real estate consultant from Houston.
[5] The offer was as follows: Chanse's office building, $250,000; Chanse and Hollenshead's warehouse and parking lot, $310,000 and $190,000 respectively.
[6] According to the argument of counsel, on the eve of the compensation trial, the City offered the defendants $848,000 for the three tracts. R.V. 14, pp. 4-5.
[7] Oren Russell, a real estate appraiser and consultant from Baton Rouge, appraised Chanse's office at $430,000, and Chanse and Hollenshead's warehouse and parking lot (together) at $2,010,000.
[8] Fair market value for Chanse's office building was $210,000; and for Chanse and Hollenshead's warehouse and parking lot, $190,000 and $288,000 respectively.
[9] For the compensation trial alone, the defendants claimed attorney fees of $186,854.50 and costs of $106,785.45. Costs included filing fees, court reporter fees, expert deponent fees, and copying expenses; airfare, taxi service, lodging and meals for defendants' lead counsel, Darrell K. Cherry, who commuted from New Orleans for the trial; hotel and lodging for other expert witnesses; and "other litigation expenses," including office supplies, Lexis-Nexis fees, a jury consultant and the costs of conducting a mock trial on the compensation issue.
[10] These include La. R.S. 33:4621 (authorizes municipalities to acquire property "for any of the purposes for which they are organized"); R.S. 33:4671 (authorizes municipalities with a population over 25,000 acquire property for a "municipal auditorium or convention hall" and finance it by the sale of bonds); R.S. 39:553 (authorizes municipalities to issue bonds for enumerated public purposes); R.S. 33:4625 B and H (authorizes expropriation to abate "slum and blighted" property under Parish Redevelopment Law); La. Acts 1968, No. 179 (authorizes City of Shreveport to expropriate property to abate "slum and blighted" areas).
[11] See fn. 10, supra.
[12] See, La. R.S. 33:9021(4) ("The maintenance of the economy of the several local governmental subdivisions of the state at a high level is a matter of public policy and the cooperative economic development activities * * * are for a public purpose for which public money may be expended"); R.S. 33:9021(5) ("the maintenance of the economies of said local political subdivisions at a high level is found and declared to be a public purpose"); Polk v. Edwards, 626 So. 2d 1128 (La.1993) ("The legislature specifically stated that the Casino Act is `for a public purpose' to improve the Louisiana economy, improve tourism, and enrich the public fisc").
[13] The Red River Entertainment District, also called Shreve Square, is approximately seven blocks from the Convention Center site.
[14] Although the award was a lump sum, the defendants contest various specifics. Darrell Cherry, of the New Orleans firm of Deutsch, Kerrigan & Stiles, represented the defendants at the compensation trial at a rate of $225 an hour; the District Court found this was excessive by Shreveport standards. The court questioned awarding Billy Pesnell, lead counsel for the taking trial, his normal $175 an hour fee for the compensation trial, in which he was co-counsel with Mr. Cherry. The court also "minimized" a fee of $2,692.95 claimed by New Orleans firm Barham & Arceneaux for preparing a writ application on certain pretrial rulings; no writs were actually filed.
[15] For expropriation by the Department of Transportation and Development for roads, bridges and ferries, R.S. 48:453 E states: "Reasonable attorney fees may be awarded by the court if the amount of the compensation deposited in the registry of the court is less than the amount of compensation awarded in the judgment. Such attorney fees in no event shall exceed twenty-five percent of the difference between the award and the amount deposited in the registry of the court."
[16] The Federal District Court cited R.S. 19:8, a general provisions statute which is identical to R.S. 19:109, a special statute for expropriation by municipalities.
[17] 42 U.S.C. § 1988; Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76 L. Ed. 2d 40 (1983).
[18] The witnesses were Elmo W. Bryant, $2,000 (amount claimed was $3,055); J. Jon Fels, $5,000 (claimed $11,295); George McInnis, $2,500 (claimed $2,500); Oren Russell, $7,500 (claimed $35,009); and William Kinnard, $7,500 (claimed $30,421.72). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1871582/ | 21 S.W.3d 394 (2000)
Margaret LUKASIK, et al., Appellants,
v.
SAN ANTONIO BLUE HAVEN POOLS, INC., et al., Appellees.
No. 04-98-00603-CV.
Court of Appeals of Texas, San Antonio.
February 9, 2000.
*398 Daniel A. Bass, Law Office of Daniel A. Bass, Ronald B. Prince, Law Offices of Ronald B. Prince, P.C., San Antonio, for appellant.
Gail M. Deml, Joe Frazier Brown, Jr., Thornton, Summers, Biechlin, Dunham & Brown, L.C., San Antonio, for appellee.
Sitting: PHIL HARDBERGER, Chief Justice, ALMA L. LÓPEZ, Justice KAREN ANGELINI, Justice.
OPINION
Opinion by: KAREN ANGELINI, Justice.
PROCEDURAL BACKGROUND
Margaret Lukasik, Kenneth Lukasik, Christina Lukasik, and the estate of Jacob Lukasik (Lukasiks) filed suit against San Antonio Blue Haven Pools, Jody Carpenter, and Beto Garcia (Blue Haven defendants) alleging causes of action for wrongful death, negligence, gross negligence, and violations of the DTPA arising out of the drowning of Jacob Lukasik. The Blue Haven defendants filed a motion for summary judgment, which the trial court granted without stating reasons. The Lukasiks appeal. We affirm the trial court's grant of summary judgment.
FACTUAL BACKGROUND
On April 24, 1995, Margaret Lukasik contracted with Blue Haven to construct a swimming pool in her backyard. Beto Garcia acted as the supervisor of pool construction. During construction, Margaret contacted Garcia and another Blue Haven employee, Jody Carpenter, regarding acquisition of a pool alarm. Carpenter informed Margaret that Blue Haven did not sell such alarms. The parties dispute whether Carpenter agreed to locate an alarm and install it or whether Carpenter just agreed to locate a supplier as a courtesy to Margaret. In any event, Carpenter was unsuccessful in locating an alarm for the pool. On July 12, 1995, the pool was completed, and Margaret accepted responsibility for it. On or about July 25, 1995, Kenneth and Christina Lukasik and their young children moved into a garage apartment behind Margaret's house and in close proximity to the pool. On August 1, 1995, Jacob Lukasik wandered out of the garage apartment, fell into the pool, and drowned.
The Lukasiks filed suit alleging that the Blue Haven defendants' failure to provide a pool alarm and misrepresentation regarding their ability to procure the alarm constituted violations of the DTPA, negligence, and gross negligence. The Lukasiks also allege the Blue Haven defendants were negligent by preventing them from erecting a fence between the garage apartment and the pool. Kenneth and Christina Lukasik also alleged a cause of action for wrongful death, and Christina and Margaret asserted a bystander claim.
DISCUSSION
Standard of Review
In a motion for summary judgment, the movant has the burden of showing there is no genuine issue of material fact and it is entitled to judgment as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex.1985). If the defendant, as movant, negates an essential element of the plaintiff's claim, the plaintiff must present evidence raising a fact issue precluding summary judgment. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex.1979). Evidence *399 favorable to the nonmovant is taken as true, and every reasonable inference in favor of the nonmovant will be resolved in its favor. Nixon, 690 S.W.2d at 548-49. When a trial court grants summary judgment without stating reasons, this court will review the summary judgment record and may affirm the summary judgment on any meritorious theory advanced below. Casso v. Brand, 776 S.W.2d 551, 553 (Tex. 1989).
Analysis
In their first point of error, the Lukasiks contend the trial court erred by considering the affidavits of Jody Carpenter and Beto Garcia. The Lukasiks contend this summary judgment evidence was improper because it consisted solely of testimony of interested witnesses which was not clear, direct, and positive and because the affidavits were contradictory, internally inconsistent, and not otherwise credible and controvertible. The Lukasiks contend the affidavits contained self-serving legal conclusions regarding whether the two employees acted in their individual capacities or as employees of Blue Haven Pools.
Summary judgment may be based on the uncontroverted testimony of an interested or expert witness if the testimony is (1) clear, positive, and direct; (2) otherwise credible and free from contradictions and inconsistencies; and (3) susceptible of being readily controverted. Tex.R. Civ. P. 166a(c); Timothy Patton, Summary Judgments in Texas: Practice, Procedure and Review § 6.03[9][a], [b], at 79-83 (1995). Whether testimony satisfies this rule and is sufficient to support summary judgment is decided on a case-by-case basis. Patton, § 6.03[9][a], at 80. The phrase "susceptible of being readily controverted"means "the testimony at issue is of a nature which can be effectively countered by opposing evidence." Casso, 776 S.W.2d at 558 n. 5. Self-serving statements of interested parties testifying as to what they knew or intended are not readily controvertible and will not support summary judgment because "the mental workings of an individual's mind are matters about which adversaries have no knowledge or ready means of confirming or controverting." Hayes v. E.T.S. Enterprises, Inc., 809 S.W.2d 652, 657 (Tex.App.-Amarillo 1991, writ denied); Patton, § 6.03[9][b], at 82. However, if the affidavits of interested witnesses are detailed and specific, those affidavits may be objective proof sufficient to establish the affiant's state of mind as a matter of law. Channel 4, KGBT v. Briggs, 759 S.W.2d 939, 942 (Tex.1988).
The declarations on which the Lukasiks focus their argument include statements by both Carpenter and Garcia that they acted as employees of Blue Haven in their dealings with Margaret and that they never acted in their personal or individual capacities. The Lukasiks also contend Carpenter's affidavit is internally inconsistent because he states, "I did contact a few suppliers, but they did not have an alarm," and later states, "I told Mrs. Lukasik that Blue Haven did not supply alarms and that I could not find one through any other supplier in town." The Lukasiks also contend Garcia's affidavit was inconsistent because Garcia first states, "I did not have any discussions with Margaret Lukasik or her children regarding a fence between the pool and garage apartment, and I did not prevent Margaret Lukasik from building a fence between her garage apartment and the pool." The Lukasiks contend Garcia then implies that he did converse with the Lukasiks regarding construction of a fence because he goes on to state that Blue Haven needed some "sort of access to the worksite, but there was no problem with access to the Lukasik worksite," and "... the pool was released to Margaret Lukasik on July 12, 1995. After such date, Margaret Lukasik could have built a new fence anywhere on her property if she so desired."
The Lukasiks argue that Carpenter's and Garcia's affidavits contained improper legal conclusions as to their capacity to be *400 sued as individuals, and this legal conclusion, alone, was inadequate to establish the scope of their authority.[1] To substantiate Carpenter's and Garcia's statements that they only acted as employees, the Lukasiks contend Blue Haven should have tendered some evidence that it authorized these individuals to search for a pool alarm, even though it was not in the business of pool alarms. The Lukasiks argue that, because Blue Haven did not provide or sell pool alarms, it did not authorize Carpenter or Garcia to attempt to locate one, and therefore, the two men acted in their individual capacity in so doing.
The statements in Carpenter's and Garcia's affidavits are not improper legal conclusions regarding their legal capacity, but show that there was no factual basis to hold them personally liable. These statements provide factual support to show Carpenter and Garcia acted in the course and scope of their employment at the time they committed the conduct forming the basis of the lawsuit. The Lukasiks attempt to transform Carpenter's and Garcia's affidavits into self-serving statements regarding their intentions or mental processes. The statements in the affidavits are not statements of intention or mental process, but are statements regarding Carpenter's and Garcia's actions and statements to Margaret. The Lukasiks could have effectively countered these statements with competent summary judgment evidence, but failed to do so.
The affidavits are not internally inconsistent. Whether Carpenter contacted a few suppliers or all suppliers in the city is immaterial to the substance of the lawsuit and does not transform the affidavit into incompetent summary judgment evidence. Any argument that the statements in Garcia's affidavit are inconsistent is contrived. Accordingly, this argument must fail.
The affidavits otherwise comply with Rule 166a(c). Because Carpenter's and Garcia's affidavits satisfied Rule 166a(c), the trial court properly considered them. The Lukasiks' first point of error is overruled.
In their second point of error, the Lukasiks contend the trial court erred by granting summary judgment on their DTPA and negligence causes of action because the Blue Haven defendants failed to negate one or more elements of the causes of action and because their response to the motion for summary judgment raised a genuine issue of material fact on all elements. The Lukasiks raise several contentions particular to each specific cause of action under this one general point of error. We will address these contentions by separating the causes of action, and, then, by discussing the application of relevant case law to each party.
DTPA cause of action:
The DTPA protects a consumer from "false, misleading, or deceptive acts or practices, from an "unconscionable action or course of action by any person," and from the breach of an implied or express warranty in the conduct of any trade or commerce that is the producing cause of actual damage. Tex. Bus. & Com.Code Ann. §§ 17.46(a), 17.50(a)(1), (2), (3)(Vernon 1987 & Vernon Supp.1999). To have standing to pursue a DTPA cause of action, a plaintiff must be a consumer. Flenniken v. Longview Bank and Trust Co., 661 S.W.2d 705, 707 (Tex.1983). Therefore, consumer status is an essential element of a DTPA cause of action. Mendoza v. American Nat'l Ins. Co., 932 S.W.2d 605, 608 (Tex.App.-San Antonio 1996, no *401 writ). The question of consumer status under the DTPA is question of law for the court to decide, unless there is a dispute concerning factual issues that create consumer status. Id. A jury must resolve any of these underlying factual issues, but the trial court still must decide the legal effect of resolved issues. Id.; Luker v. Arnold, 843 S.W.2d 108, (Tex.App.-Fort Worth 1992, no writ). To qualify as a consumer, the plaintiff must meet two requirements: (1) the person must seek or acquire goods or services by purchase or lease; (2) the goods or services purchased or leased must form the basis of the complaint. Mendoza, 932 S.W.2d at 608. A plaintiff's standing as a consumer is established by his relationship to the transaction, not by a contractual relationship with the defendant. Id. Consequently, a person need not be a direct purchaser to satisfy the requirement that he "seek or acquire goods or services by purchase or lease." Kennedy v. Sale, 689 S.W.2d 890, 892-93 (Tex. 1985); Flenniken, 661 S.W.2d at 707. Therefore, in very limited situations, a third party beneficiary may qualify as a consumer of goods or services, as long as the transaction was specifically required by or intended to benefit the third party and the good or service was rendered to benefit the third party. See e.g., Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 815 (Tex.1997)(purchasing corporation is a consumer and may sue accounting firm in connection with firm's preparation of financial statements of acquired corporation done with express intent to facilitate purchase); Kennedy, 689 S.W.2d at 892-93 (employee is a consumer of medical insurance purchased by employer for employee's benefit); see also Wellborn v. Sears, Roebuck & Co., 970 F.2d 1420, (5th Cir.1992)(son of woman who bought garage door opener was a consumer because primary purpose of the purchase and installation into home was to benefit son and was used by son). A representative of an estate is not a "consumer" under the DTPA because a DTPA cause of action does not survive the death of the original consumer. Mendoza, 932 S.W.2d at 608; see also First Nat'l Bank of Kerrville v. Hackworth, 673 S.W.2d 218, 220-21 (Tex.App.-San Antonio 1984, no writ)(en banc).
With regard to Kenneth and Christina Lukasik, as individuals, the summary judgment evidence conclusively shows they are not "consumers" as defined by the DTPA. The Blue Haven defendants' summary judgment evidence showed they conversed only with Margaret regarding the pool alarm. In response, the Lukasiks' summary judgment evidence established that Kenneth and Christina never sought to acquire the pool alarm that forms the basis of their DTPA claim. Kenneth and Christina did not reside on the property until two weeks after the pool's completion, and they admittedly did not independently pursue acquisition of a pool alarm from the Blue Haven defendants. In their affidavits, both Kenneth and Christina attest they only requested that Margaret call Blue Haven Pools to inquire about the status of getting a pool alarm after they moved onto her property. Because Kenneth and Christina did not independently act to purchase the pool alarm from the Blue Haven defendants, they are not consumers under the DTPA. See Plumley v. Landmark Chevrolet, Inc., 122 F.3d 308, (5th Cir.1997)(applying Texas law; individual who attempts to help son purchase a truck and who contributes to purchase and acts as cosigner is not a consumer). Therefore, the summary judgment evidence established that these two parties, as individuals, were not "consumers" under the DTPA and have no standing to pursue such cause of action.
Kenneth and Christina cannot assert a DTPA cause of action as third-party beneficiaries of any transaction of Margaret's, nor can they claim they are in privity to the contract, because the summary judgment evidence conclusively shows that any transaction to acquire a pool alarm was not specifically required by or intended *402 to benefit them, specifically and directly. See Arthur Andersen & Co., 945 S.W.2d at 815; Kennedy, 689 S.W.2d at 892-93; Wellborn, 970 F.2d at 1426. In this case, unlike in Arthur Andersen and Wellborn, the summary judgment evidence shows that Kenneth and Christina did not seek to acquire or purchase a pool alarm from the Blue Haven defendants, nor did Margaret seek to purchase a pool alarm with the intent to benefit them directly. The summary judgment evidence establishes that Kenneth and Christina requested that Margaret acquire a pool alarm after Carpenter had agreed to search for one. Kenneth, Christina, and their children did not live on the premises at the time Margaret Lukasik inquired about the pool alarm or even at the time Margaret accepted responsibility for the pool; therefore, any transaction was not intended for their direct benefit. Margaret did not request the pool alarm to benefit Kenneth, Christina, or Jacob, specifically. Neither Kenneth or Christina Lukasik had a relationship to the transaction nor were they more than incidental beneficiaries of any pursuit of the pool alarm. Kenneth and Christina are therefore not "consumers" under the DTPA and lack standing to assert a DTPA cause of action as a matter of law.
As representatives of the estate of Jacob Lukasik, Kenneth and Christina do not have standing to sue under the DTPA because any cause of action Jacob could have pursued did not survive his death. See Mendoza, 932 S.W.2d at 608; First Nat'l Bank of Kerrville, 673 S.W.2d at 220-21.[2] The Lukasiks contend this court should overrule Mendoza and follow Thomes v. Porter, 761 S.W.2d 592, 593-94 (Tex.App.-Fort Worth 1988, no writ), in which the Fort Worth Court of Appeals allowed recovery under the DTPA for statutory damages and damages for claims other than personal injuries. Id. This court rejected Thomes and its reasoning in Mendoza. See Mendoza, 932 S.W.2d at 609 n. 4. We find no compelling reason to now overrule Mendoza.
With regard to Margaret Lukasik, the summary judgment evidence shows that she does not have standing to pursue a DTPA cause of action also because she is not a consumer. The first prong of the definition of "consumer" requires that the plaintiff seek or acquire goods or services through purchase or lease. See. The facts in this case present a critical and unsettled question: whether the exchange of consideration is necessary to comprise a "purchase" under this prong. See e.g. Martin v. Lou Poliquin Ent., Inc., 696 S.W.2d 180, 183-85 (Tex.App.-Houston [14th Dist.] 1985, writ ref'd n.r.e.); Reuben H. Donnelley Corp. v. McKinnon, 688 S.W.2d 612, (Tex.App.-Corpus Christi 1985, no writ)(both concluding that exchange of consideration is not necessity for DTPA-consumer status); but see Hall v. Bean, 582 S.W.2d 263, 265 (Tex.Civ.App.-Beaumont 1979, no writ)(gratuitous service is not a "purchase" under the DTPA); Exxon Corp. v. Dunn, 581 S.W.2d 500, 501 (Tex.Civ.App.-Dallas 1979, no writ)(automobile owner who was not charged for unsuccessful repair services was not a consumer because he did not purchase services). However, this court need not answer this question because, even if we determined that consideration is not necessary to establish consumer status, a "consumer" under the DTPA must at least have a good faith intent and the capacity to purchase the good or service from the party sued, and the evidence must show an agreement to do so. See Martin, 696 S.W.2d at 184-85. This is where the facts in this case collapse.
The undisputed summary judgment evidence shows that Margaret asked Carpenter if she could buy a pool alarm from Blue Haven, and Carpenter responded to her *403 that Blue Haven did not sell pool alarms. Carpenter then agreed to call other suppliers to see if he could find a pool alarm for Margaret. The undisputed summary judgment evidence shows that the parties did not enter into any agreement or understanding as to a price of the pool alarm, how it would be purchased or paid for, or whether Margaret would pay Blue Haven or the supplier. See id. (parties must execute written agreement and evidence must show intent, action, and capacity to purchase). Margaret presented summary judgment evidence of her deposition in which she stated that she "had every intention of paying for [the pool alarm]." However, this evidence does not establish that she intended to pay Blue Haven, or that any agreement had been reached for the exchange of consideration, or that she took any action or had the capacity to purchase the alarm. Any argument that Margaret sought to purchase a service from the Blue Haven defendants, that of locating a pool alarm, must fail for the same reason.
To the extent Margaret argues that she is a consumer because she purchased a pool from the Blue Haven defendants, this argument fails because Margaret does not assert a DTPA complaint with regard to the pool purchase. Margaret's cause of action is based on the Blue Haven defendants' failure to deliver and install a pool alarm. Margaret's purchase of the pool cannot make her a consumer with respect to the pool alarm. See Mendoza, 932 S.W.2d at 608 (goods or services purchased must form the basis of the complaint); see also Rutherford v. Whataburger, Inc., 601 S.W.2d 441, 444 (Tex.App.-Dallas 1980), writ ref'd n.r.e., 642 S.W.2d 30 (plaintiff must seek or acquire goods upon which his complaint is based). Therefore, Margaret is not a "consumer" under the DTPA and lacks standing to assert a DTPA cause of action.
The Blue Haven defendants' summary judgment evidence negates the element of consumer status necessary to bring a DTPA cause of action, and the Lukasiks' summary judgment evidence does not raise a fact issue as to their consumer status. Because the summary judgment evidence establishes that Kenneth, Christina, and Margaret are not consumers under the DTPA as a matter of law, the trial court did not err by granting summary judgment as to their DTPA cause of action.
Negligence cause of action:
Negligence consists of three essential elements: (1) a legal duty owed by one person to another; (2) breach of that duty; and (3) damages proximately resulting from that breach. El Chico Corp. v. Poole, 732 S.W.2d 306, 311 (Tex. 1987). To defeat a claim of negligence by summary judgment, a defendant must disprove at least one of these essential elements as a matter of law. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991). Every person has a duty to exercise reasonable care to avoid a foreseeable risk of injury to others. El Chico Corp., 732 S.W.2d at 311. In determining whether a duty exists, we consider the risk, foreseeability, and likelihood of injury, and weigh these factors against the social utility of the actor's conduct, the burden of guarding against the injury, and the consequences of placing that burden on the defendant. Bird v. W.C.W., 868 S.W.2d 767, 769 (Tex.1994). Foremost and dominant among these considerations is foreseeability of the risk. El Chico Corp., 732 S.W.2d at 311; Corbin v. Safeway Stores, Inc., 648 S.W.2d 292, 296 (Tex.1983). "In the absence of foreseeability, there is no duty." NationsBank, N.A. v. Dilling, 922 S.W.2d 950, 954 (Tex.1996). The test for foreseeability is what a person should, under the circumstances, reasonably anticipate as the consequences of one's action or failure to act. See Allright San Antonio Parking, Inc. v. Kendrick, 981 S.W.2d 250, (Tex. App.-San Antonio 1998, no writ); Rodriguez v. Spencer, 902 S.W.2d 37, 41 (Tex. App.-Houston [1st Dist.] 1995, no writ). Foreseeability does not require the actor *404 to anticipate the specific incident or precise manner of injury, but only requires that he reasonably anticipate the general character of the injury. Travis v. City of Mesquite, 830 S.W.2d 94, 98 (Tex.1992); Bird, 868 S.W.2d at 769.
The Lukasiks' contentions related to their negligence claims are all dispelled as a matter of law because the summary judgment evidence shows that the Blue Haven defendants owed them no duty. The Blue Haven defendants' summary judgment evidence shows that their conduct could not have foreseeably created the risk of injury to Jacob or the Lukasiks. Kenneth, Christina, and Jacob did not live on the property at the time construction was completed and Margaret accepted responsibility for the pool. At the time the pool was completed, Margaret signed a statement acknowledging that she received all "pool accessories and cleaning equipment" required under the contract. While a person of ordinary intelligence would anticipate that an unprotected pool poses a risk of injury to toddlers, it was unforeseeable to the Blue Haven defendants that any failure to procure a pool alarm for the Lukasiks would create a danger of injury to Jacob or the remaining plaintiffs. The Blue Haven defendants undertook no responsibility to make the pool safe from drowning incidents to all future visitors to Margaret's home, and such imposition of responsibility would create devastating social and economic consequences. The Lukasiks' summary judgment evidence did not raise a fact issue as to foreseeability, as it confirmed that no agreement was reached regarding the Blue Haven defendants' commitment to procure a pool alarm, and the evidence did not show that the Blue Haven defendants could have anticipated any injury under these facts.
The trial court did not err by awarding summary judgment on the Lukasiks' negligence cause of action based upon the Blue Haven defendants' failure to allow them to erect a fence between the garage apartment and the pool. The summary judgment evidence showed the Blue Haven defendants did not prevent the erection of a fence during their construction of the pool. While the Lukasiks' summary judgment evidence disputed this fact through an affidavit submitted by Margaret, the Lukasiks' evidence does not show that the Blue Haven defendants prevented its placement during the two weeks following the pool's completion and Margaret's acceptance of it and Jacob's death. The Blue Haven defendants held no duty to the Lukasiks following the pool's completion. Any injury resulting from the Lukasiks' failure to erect a fence after the pool's completion was not foreseeable to the Blue Haven defendants.
The Lukasiks' arguments amount to nothing more than a theorization on an extraordinary sequence of events to retrospectively impose liability on the defendants. We conclude that the summary judgment evidence establishes that the Blue Haven defendants could not reasonably foresee that any failure to find a pool alarm for Margaret or any prevention of the placement of a fence during pool construction would create the dangerous condition to Jacob, and the Lukasiks' summary judgment proof fails to raise a fact issue concerning foreseeability under either theory. We therefore conclude that the Blue Haven defendants did not owe a duty to the Lukasiks under either theory, and the trial court did not err by awarding summary judgment on the Lukasiks' negligence causes of action.
For the same reasons summary judgment was proper for the negligence causes of action, it was also proper for any cause of action for gross negligence. See Ford Motor Co. v. Miles, 967 S.W.2d 377, 390 (Tex.1998); Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 23 (Tex.1994). The Lukasiks cannot assert a cause of action for wrongful death because they cannot show that the Blue Haven defendants' conduct caused Jacob's death. See Tex. Civ. Prac. & Rem.Code Ann. *405 § 71.002 (Vernon 1997). The Lukasiks cannot assert any bystander claims for mental anguish damages as a matter of law because a prerequisite to such claims is a finding that the defendant negligently inflicted injuries on the primary victim. See Lehmann v. Wieghat, 917 S.W.2d 379, 381-82 (Tex.App.-Houston [14th Dist.] 1996, writ denied). The trial court did not err by granting summary judgment on the Lukasiks' causes of action for gross negligence, wrongful death, and bystander claims for mental anguish.
The Lukasiks' second point of error is overruled.
In their third point of error, the Lukasiks assert that the Blue Haven defendants failed to establish sufficient summary judgment evidence to support their affirmative defense of tolling of the statute of limitations. We need not discuss this point of error.
The trial court's summary judgment is affirmed.
NOTES
[1] The Blue Haven defendants argue that the Lukasiks waived error based on the argument that the affidavits contain improper legal conclusions because they failed to object to the evidence in the trial court. Objections to defects in the form of an affidavit may be waived by failure to object, while objections to defects in the substance of affidavits may be raised for the first time on appeal. See Ramirez v. Transcontinental Ins. Co., 881 S.W.2d 818, 829 (Tex.App.-Houston [14th Dist.] 1994, writ denied). An objection to an affidavit on the ground it states a legal conclusion relates to a defect in substance, not to the form, and, therefore, the argument may be raised for the first time on appeal. Id.
[2] The Fifth Circuit certified this question to the Texas Supreme Court in Wellborn v. Sears, Roebuck, and Co., 970 F.2d at 1426. However, the Supreme Court failed to answer the question prior to the parties settling the dispute. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1501445/ | 349 F. Supp. 1354 (1972)
The DOW CHEMICAL COMPANY
v.
TUG THOMAS ALLEN, her engines, tackle, apparel, furniture, etc., in rem, et al.
Louie Ray BROWN
v.
NEW YORK UNDERWRITERS INSURANCE COMPANY et al.
Civ. A. Nos. 71-526, 71-530.
United States District Court, E. D. Louisiana.
September 14, 1972.
*1355 *1356 James B. Kemp, Jr., Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for Dow Chemical.
George A. Frilot, III, Lemle, Kelleher, Kohlmeyer, Matthews & Schumacher, New Orleans, La., for New York Underwriters.
Donald L. King, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for Utica Mutual Insurance Co.
H. Harwell Herrin, Diaz & Herrin, Golden Meadow, La., for Pitre & Guildry Towing Co.
Philip E. Henderson, Henderson, Hanemann & Morris, Houma, La., for plaintiff Brown.
Stanley E. Loeb, Loeb & Livaudais, New Orleans, La., for defendant Dow.
MITCHELL, District Judge.
These cases involve a fire aboard the manned Barge 19-10 owned by Dow Chemical Company[1] while in tow of the Tug THOMAS ALLEN.
The first suit is brought by DOW[2] as owner of the Barge 19-10 against the Tug THOMAS ALLEN, in rem, against her owner, Pitre & Guidry Towing Co., Inc.,[3]in personam, and against the primary and excess hull and tower's liability insurers of the Tug THOMAS ALLEN, New York Underwriters Insurance *1357 Company[4] and Utica Mutual Insurance Company,[5] respectively. Dow's complaint claimed damages for the cost of repairing the barge and loss of use on the ground of negligent towage, breach of the warranty of workmanlike service and breach of a contract of towage, all resulting from an explosion and fire caused by a collision with an unmarked submerged gasline while the Barge 19-10 was in tow of the Tug THOMAS ALLEN in an oil field in Quarantine Bay, Louisiana, on February 28, 1970.
Dow, as a named assured, also claims damages (including attorneys fees, penalties and interest) for nonpayment pursuant to the insurance coverages afforded by New York and Utica.
Louie Ray Brown, a seaman employed by Dow aboard the Barge 19-10, filed an action for personal injuries[6] against his employer and its insurer, Fireman's Fund Insurance Company[7] under the Jones Act and general maritime law. Also named as defendants in this action were Pitre & Guidry and its primary and excess insurers, New York and Utica.
Dow and its insurer, Fireman's Fund, filed a cross-claim against Pitre & Guidry and its two insurers, contending that the contract of towage and the insurance policies obligated these defendants to indemnify Dow from any loss resulting from the casualty. They also seek reimbursement of maintenance and cure paid Brown, and reasonable attorneys fees.
Pitre & Guidry seek limitation of liability in both actions.
These actions were consolidated for trial on the merits and tried to the Court on a former date.[8] By stipulation, all parties settled Brown's claim;[9] the Court was simply to determine who should bear any, all or part of the loss of Brown.
After careful consideration of the evidence adduced at trial, briefs submitted by counsel and the law, the Court makes the following findings of fact and conclusions of law:
FINDINGS OF FACT
I.
At all times pertinent hereto Dow, a Delaware Corporation, was the owner and operator of the service Barge 19-10, a non-self propelled, flat-deck inland coastal water vessel, approximately 120 feet in length, 35 feet in breadth and 8 feet in depth.
II.
At all times pertinent hereto, Louie Ray Brown was a citizen of the State of Mississippi, employed by Dow aboard its Barge 19-10.
III.
At all times pertinent hereto, Fireman's Fund was the general liability insurer of Dow as owner of Barge 19-10.
IV.
At all times pertinent hereto, Pitre & Guidry, a Louisiana corporation, was the owner and operator of the Tug THOMAS ALLEN, a twin screw steel-hull model tug, approximately 49.1 feet in length, 17.1 feet in breadth and 7.1 feet in depth.[10]
*1358 V.
Pursuant to a Towing Contract[11] between Pitre & Guidry and Dowell, a division of Dow, on February 27, 1970, the Tug THOMAS ALLEN was standing by Dow's Barge 19-10, which was completing the servicing of a well for Gulf Oil Corporation on Ward Rig Number 7, located in Quarantine Bay, Louisiana. The waters of Quarantine Bay are relatively shallow outside the main deep-water channels. In connection with drilling operations being conducted in the bay, unmarked submerged gas pipelines ran between the rigs. The evidence reflects that if any charts showing the locations of these pipelines existed, none were aboard the tug or the barge.
VI.
The crew aboard the THOMAS ALLEN consisted of her master, Forrest Anthony "Cisco" Plaisance, a tug skipper with approximately 18 years of experience on inland waters, and Harris J. Savoie, deckhand-cook. The barge was manned by Dow employees: A. J. Richard, a service engineer, who was in charge of the barge and the men on her; and two marine equipment operators, Louie Ray Brown and Edward Eugene Jones. None of Dow's employees had any experience in navigating a tug.[12]
VII.
Shortly after midnight, at approximately 1:00 a. m. on February 28, 1970, Dow completed its job aboard Ward Rig No. 7. Upon being told by a Gulf Oil Company employee to proceed with dispatch to Williams Rig No. 7 for a similar job, Richard told Captain Plaisance that the men on the Williams Rig were waiting and to get there as quickly as possible.
Upon information from the Gulf employee, Richard told Plaisance to tow the barge in a straight line from Ward Rig No. 7 to Williams Rig No. 7. Richard and the other personnel aboard the barge then went to sleep.
VIII.
The Williams rig was approximately one half mile away and clearly in sight. The tide was low. After making up to the Barge 19-10 in a "push" position, the THOMAS ALLEN proceeded toward Williams Rig No. 7 as directed. About half-way across, the THOMAS ALLEN ran aground on a sandbar. The tug captain radioed E. P. Lucas, the Dow dispatcher at Venice, Louisiana, who instructed Captain Plaisance to get the tug off the strand and to reach the Williams Rig as quickly as possible. After unsuccessful attempts to free the tug from the strand, the tug captain shut down to await high tide, and went to bed, leaving his deckhand on watch.
IX.
When Richard awakened at daybreak, approximately 5:00 a. m., he noticed the vessels were at a standstill. He boarded the tug, awakened the captain, and they returned to the barge for a discussion over a cup of coffee. Richard testified that he advised the tug captain that Dow was running late, the men on the Williams rig were waiting for them, and that the THOMAS ALLEN had to attempt to get to the Williams Rig No. 7.
Captain Plaisance testified that Richard directed that the tug back track over the same course used to reach the point of the strand and to return to the deep-water channel marked with buoys. From there the tug was ordered to follow a course through another deep-water channel, likewise marked with buoys, until reaching a point where it would be necessary to leave the deep-water channel and proceed over the shallow areas of the bay to Williams Rig No. 7.[13]
The uncontradicted evidence reflects that the tug captain protested, stating that he knew there were unmarked, submerged gaslines in the shallow areas of *1359 the bay adjacent to the deep-water channel and that he did not know the location of those gaslines. He further stated that if such a course were followed, he could not be responsible for striking the unmarked, submerged gaslines.[14]
X.
When Richard persisted that the tug attempt to reach Williams Rig No. 7 since the Barge 19-10 was already late, the tug captain requested a guide boat to lead the tug through the shallow areas containing the unmarked, submerged gaslines. The tug was made up in a pull position and proceeded to her destination. When the flotilla was in the main channel, Dow's dispatcher, Lucas, was contacted, and a guide boat was requested. However, the testimony reflects that Lucas reported that none was available at that time.
Captain Plaisance stated to both Richard and Lucas that the water in Quarantine Bay was shallow, that he did not know where the gas pipelines were, and that it was dangerous to proceed without a guide boat.
Lucas and Richard told Plaisance they must get to the rig as quickly as possible.[15]
XI.
At Lucas' request, radio contact was made with Norris Falgout, captain of the tug BAYPORT, who had been last to work Quarantine Bay. Captain Falgout and the BAYPORT generally did the same type of work as Captain Plaisance and the THOMAS ALLEN.
Captain Falgout told Richard that the field was dangerous, but if a man knew what he was doing, he shouldn't have any trouble.
Plaisance, not to be outdone by Captain Falgout, said he knew where he was and what he was doing.[16]
Plaisance admits making this statement, explaining that he meant that he knew the field, but did not know where the pipelines were.
XII.
The flotilla, with the tug pulling the barge stern first, proceeded in the marked navigable channel. As it reached a point abreast of the Williams Rig, Captain Plaisance made the decision to turn out of the channel into the bay toward the rig, which was plainly in view.
As anticipated, the water in the bay was shallow. The barge drew between 4½ feet of water; the tug drew approximately 5½ feet at her keel and, when pulling the barge, had a tendency to squat approximately 6" deeper in the water. Captain Plaisance testified that the tug was not dragging bottom as the flotilla slowly made its way to the rig.
The Court finds no evidence to indicate that Captain Plaisance acted unreasonably in turning into the bay at that point or proceeding in a straight line to the rig. The testimony reveals that there were no markings to indicate any type of existing underwater obstructions.
XIII.
At approximately 6:30 a. m., after the tug was approximately 200 feet into the bay from the channel, the tug collided with a four-inch gas pipeline, causing an explosion which was followed by fire, which engulfed the galley of the barge; Brown went out onto the deck and was severely burned.
Immediately upon seeing flames, Captain Plaisance yelled to Savoie to wake up and cut the towline. This was done so the wind would carry the barge from the fire. Plaisance immediately radioed to Lucas to report the fire.
Richard jumped overboard; in a few minutes Richard, Jones and Brown were rescued by speedboats from the Williams Rig.[17]
*1360 XIV.
The Court finds as a fact that the fire and explosion which precipitated the damages happened because the Barge 19-10 was towed through a dangerous field of unmarked, submerged gas pipelines without a guide boat to lead her, without a map charting the location of the gaslines and without a captain who knew where the gaslines were located.
XV.
Although the tug had navigation charts aboard, she had no pipeline charts, nor was she equipped with a depth finder.
The Court finds that failure of the tug to be equipped with a depth finder or charts showing the specific locations of pipelines in Quarantine Bay was not the proximate cause of the casualty under the facts and circumstances of this particular case.
Captain Plaisance testified that on prior occasions he had never been asked to traverse Quarantine Bay without the aid of a guide boat to lead him through the field.
Louis Pitre testified that he had never checked to see if the tug had pipeline maps of the Quarantine Bay area aboard because the only people who had them were the oil companies and they do not furnish the boat companies copies thereof.
Although no evidence was introduced on this point, the Court is well aware that, generally speaking, pipeline charts are not readily available to the public. Usually they can only be secured from the owner of the pipelines, in this case Gulf.
Under the terms of the towing contract, the THOMAS ALLEN was "confined to the inland waters of the States of Louisiana and Texas . . .". Nowhere is Quarantine Bay mentioned. Although Quarantine Bay is an inland body of water located in the State of Louisiana, there was no evidence introduced to show that Pitre, when it leased its tug, knew that the tug would be operating in Quarantine Bay and therefore should have pipeline charts aboard. It appears to the Court that if anyone knew that the THOMAS ALLEN would be operating in Quarantine Bay, it would have been the barge owner and if anyone had a duty to have those charts aboard, it would have been the duty of DOW.
XVI.
The Court finds that Dow was negligent in directing Captain Plaisance to proceed through a dangerous area without a guide boat, knowing that he was totally unfamiliar with the location of pipelines.
When the tug was stranded near Ward Rig No. 7, it was Richard who directed the route the flotilla was to take to get to the Williams Rig; and it was Richard and Lucas who stressed the fact that the flotilla was late and they must hurry to the Williams Rig. It certainly appears to the Court that although Plaisance was in charge of how to navigate the flotilla, i. e., the manner in which it was piloted, it was Richard who directed when, where and what route was to be taken.
Even Dow's expert, Arthur Terry, testified that generally, companies engaged in oil exploration, directed the activities of the vessels in their employ, ignoring the advice and warnings of experienced mariners. Although under normal circumstances Plaisance may have been the person in charge of picking the route, the court finds that in this instance it was Richard who was giving the orders. Even Captain Falgout, experienced in the same type of work, testified that the Engineer is always in charge of the tow, "he tells us where to go and what to do."
XVII.
Although no evidence was introduced showing that Captain Plaisance was proceeding at excessive speed or was negligent in the manner in which he towed the barge, the Court finds that Plaisance was guilty of negligent towage in towing the Barge 19-10 into the shallow area while knowing of the presence of pipelines; *1361 he knew or should have known that to proceed without a guide boat or a chart was risking not only his life, but the lives of all persons aboard the tug and the barge.
Captain Plaisance testified that if he had failed to proceed with the navigation, he and the tug would be out of a job. Although this was somewhat confirmed by Captain Falgout, neither Richard nor Lucas made any threats to Plaisance, nor did they have the power to fire him. However, Richard did testify that if Plaisance had refused to take the barge where Richard told him, Richard would "pass it on to my people".
Captain Falgout also testified that it was not unusual for Dow to order vessels to proceed under dangerous conditions in order to meet its work schedule.
Even Arthur Terry, Dow's expert, conceded that in cases involving the oil industry, it was not unusual for a tug captain to proceed as directed "under protest", notwithstanding his belief that it might be dangerous. And that because of economic reasons, a tug captain must work under unsafe conditions.
Notwithstanding the above, the Court finds that in the situation at bar, Captain Plaisance had an affirmative duty to refuse to navigate the flotilla until he had been furnished with a guide boat or a map charting the location of the pipelines, even if it meant losing his job. He did not have the right to risk the lives of the men aboard the barge or the tug.
XVIII.
We find that Dow has failed to prove by a preponderance of the evidence that failure to have a lookout aboard the tug rendered the THOMAS ALLEN unseaworthy. There is no evidence to indicate that Quarantine Bay was either a clear or a muddy body of water, nor was any evidence introduced to show that had a lookout been posted, the pipelines could be seen under the water.
Even Richard testified that he didn't see anything which would indicate an underwater obstruction.
XIX.
Since no evidence was introduced at the trial to the contrary, we find that the Barge 19-10 was in all respects seaworthy.
TOWAGE CONTRACT
XX.
Under the terms of the towage contract,[18] Pitre & Guidry agreed to furnish hull and P & I insurance, including tower's liability and excess coverages on the THOMAS ALLEN, naming Dow an additional insured therein. An indemnity provision running from Pitre & Guidry in favor of Dow is contained therein, which Pitre & Guidry agreed to insure by a comprehensive liability insurance policy covering bodily injury and property damage, naming Dow as an additional insured.[19]
XXI.
We find that under the terms of the towing contract, although Pitre agreed to indemnify Dow against all claims for personal injury and property damage arising out of the towage of Barge 19-10, it did not contract to indemnify Dow against its own negligent conduct.[20]
*1362 INSURANCE
XXII.
At all times material hereto, defendant, Fireman's Fund had in effect a policy of employers liability coverage, insuring Dow. This policy contained a maritime endorsement providing coverage for claims by members of the crews of vessels with limits of $500,000.[21]
XXIII.
At all times hereto, defendant New York Underwriters had in effect a policy of insurance issued to Pitre & Guidry covering the hull and tower's liability of the THOMAS ALLEN and the protection and indemnity risks of Pitre & Guidry as owner of the THOMAS ALLEN.[22] This policy had limits of $45,000. hull, $45,000. P & I and one single limit, aggregate excess of $55,000. Although Dow was named as an additional insured, under the terms of the policy the assurer was liable to pay to its assured only those losses or damage for which the insured became legally liable as owner of the vessels named in the policy. Although the THOMAS ALLEN was a named vessel, the Barge 19-10 was not. The court finds that this policy afforded no coverage to Dow as owner of the Barge 19-10, nor as a service company conducting operations in the offshore oil fields of Louisiana.[23]
Under the terms of this policy, contractual liability was specifically excluded.[24]
Under the tug hull endorsement of the policy, if the THOMAS ALLEN caused any loss or damage to her tow and the insured shall become liable to pay damage to any other persons, the insurer was liable to pay such proportion of such sum as the insurer's subscriptions bore to the value of the THOMAS ALLEN.[25]
XXIV.
At all times material hereto, defendant, Utica Mutual, had in effect a policy of excess insurance issued to Pitre,[26] providing excess protection and indemnity and excess tower's liability insurance, with limits of $150,000. Dow is also a named assured in this policy but, again, the policy provisions offer coverage to Dow only for its liability vis-a-vis the tug.
CONCLUSIONS OF LAW
I.
The Court has jurisdiction of this case and venue is proper.
II.
While a tug is not the insurer of its tow,[27] generally speaking a tug which is solely in command of her flotilla, especially where her tow is non-self propelled and unmanned, is responsible for the safe navigation of the flotilla; and she has the duty to exercise such reasonable care and skill as prudent navigators would exercise under similar circumstances.[28]*1363 She is charged with knowledge of navigational conditions, including knowledge of channels, depth of water, obstructions, pipelines and other dangers to her tow.[29]
III.
However, if a tug tows a vessel which is in her charge through dangerous conditions without any consultation with the vessel's owner, the tug and her owners are solely responsible for damage to the vessel but if she tows the vessel with the consent of the vessel's master or owner, the tug and her owners will be liable for one half.[30]
IV.
The general rule is that, in the absence of an agreement to the contrary, when the tug supplies the motive power she becomes the dominant mind, and the tow is required to follow directions from the tug. A different arrangement may be made by agreement, expressed or implied from the circumstances. If the tow is the "dominant mind", the tug is not liable provided the tug has obeyed the tow's orders and has not herself been guilty of negligence, either in the manner of executing the orders or by participating in an obviously dangerous maneuver.[31]
V.
The Court concludes that the two proximate causes of the casualty were (1) the negligent insistence of those in charge of Barge 19-10 that the flotilla proceed to Williams Rig No. 7 when they knew that no pipeline charts or guide boats were available and that Captain Plaisance had no knowledge of the location of these pipelines, and (2) the negligence of Captain Plaisance in the actual conduct of navigating the flotilla through Quarantine Bay without a guide boat or a chart. His decision to follow orders was unjustified in light of the dangers involved.[32]
VI.
The testing of a known danger is inconsistent with reasonably prudent navigation.[33]
"This was not a voyage of exploration seeking a route around Cape Horn or through the Northwest Passage, where a venturesome admiral might risk life and vessel for a taste of glory; . . ."[34]
It was a tow across a shallow bay filled with unmarked pipelines, to deliver a workover barge to a rig.
VII.
Although lack of a depth finder or a lookout may render a vessel unseaworthy, the Court concludes that under the facts and circumstances of this case, insufficient evidence was introduced to support a finding that lack of a depth finder or a lookout posted *1364 aboard the tug was the proximate cause of the casualty.[35]
VIII.
Although sailing without a chart may render a vessel unseaworthy,[36] the Court concludes that under the facts of this case, failure of Pitre & Guidry to have charts of the pipeline locations aboard the tug was not the proximate cause of the casualty.
IX.
Where the master of the tug and owners of the barge, through her employees, were both guilty of negligence and the fault of each was a direct legal cause of the personal injuries sustained by Brown as well as the physical damage to the barge, contribution is allowed and damages may be equally divided.[37]
X.
The Court concludes that the owner of the Tug THOMAS ALLEN was without privity or knowledge of Captain Plaisance's negligence and are thus entitled to limit its liability to the value of its interest in the vessel and her freight then pending. In this case, the emergency was met by the master of the vessel alone. There was no opportunity to consult or to bring the proposed action of the master to the owner's knowledge.[38]
XI.
Indemnity is only available in favor of one who is passively, vicariously or secondarily at fault against a party whose active or primary negligence causes the injury or damage upon which recovery is predicated. Where both parties are guilty of active proximate negligence, they are not entitled to indemnity.[39]
XII.
The Court concludes that the negligence of Dow was a direct cause of the casualty in question and thus it is not entitled to indemnity on its cross-claim, either in tort or in contract. Unless the intention is unequivocally expressed, the law will consider that parties to a contract did not undertake to indemnify one against the consequence of his own negligence. The court concludes that Pitre & Guidry did not contract to indemnify Dow for Dow's own negligence.[40]
XIII.
The insurance afforded by Fireman's Fund Insurance Company clearly applies to the liability for the personal injuries sustained by Louie Ray Brown.
XIV.
Although the tug's P & I policy names Dow as an additional assured, the *1365 coverage afforded thereunder is limited to the assured's liability "in respect of" the insured vessel, i. e., the Tug THOMAS ALLEN. Dow, therefore, is afforded no coverage under this policy except with respect to fault on the part of the THOMAS ALLEN or the negligence of her crew. Dow's liability in this case arises from its negligence as a barge owner, or more importantly, a service company anxious to perform services for its customers without a delay. No such coverage was provided by New York Underwriters Insurance Company or Utica Mutual Insurance Company, Pitre & Guidry primary and excess P & I underwriters, respectfully.[41]
XV.
Should the parties be unable to agree on the extent of plaintiff Dow's provable damages, the Court, upon application of one of the parties, will appoint a Magistrate to determine damages.
XVI.
Let judgment be entered in Civil Action 71-530 in favor of plaintiff, Louie Ray Brown and against defendant, The Dow Chemical Company, Inc., and its insurer Fireman's Fund Insurance Company and defendants Pitre & Guidry Towing Co., and its insurers New York Underwriters Insurance Company and Utica Mutual Insurance Company, in the sum of $168,750.00 with interest at the legal rate to run beginning 30 days from April 14, 1972.
XVII.
Let judgment be entered in Civil Action 71-530 in favor of defendants, Pitre & Guidry Towing Co., Inc., New York Underwriters Insurance Company and Utica Mutual Insurance Company dismissing the cross-claims of defendants, The Dow Chemical Company, Inc. and Fireman's Fund Insurance Company for indemnity.
XVIII.
Let judgment be entered in Civil Action 71-530 in favor of The Dow Chemical Company, Inc. and Fireman's Fund Insurance Company and against defendants, Pitre & Guidry Towing Co., Inc., New York Underwriters Insurance Company and Utica Mutual Insurance Company for one half of all maintenance and cure payments paid to or on behalf of plaintiff.
XIX.
Let judgment be entered in Civil Action 71-526 in favor of The Dow Chemical Company, Inc., and against the Tug THOMAS ALLEN, in rem, and Pitre & Guidry Towing Company, in personam, and its insurers New York Underwriters Insurance Company and Utica Mutual Insurance Company for one half of the damages sustained by them as a result of the fire aboard the Barge 19-10, with interest from date of judgment.
NOTES
[1] Hereinafter referred to as Dow.
[2] Civil Action 71-526.
[3] Hereinafter referred to as Pitre & Guidry.
[4] Hereinafter referred to as New York Underwriters.
[5] Hereinafter referred to as Utica Mutual.
[6] Civil Action 71-530.
[7] Hereinafter referred to as Fireman's Fund.
[8] By agreement of counsel, the damage and liability portions of these actions were severed.
[9] The stipulation dated April 14, 1972, provided that judgment be entered in favor of Louie Ray Brown in the sum of $168,750.00, with interest at the legal rate to run beginning 30 days from April 14, 1972. It was further agreed that the above settlement was to be free and clear of any amounts paid for maintenance and cure.
[10] Exhibit Dow 8.
[11] Exhibit Dow 11.
[12] Testimony of A. J. Richard.
[13] See Exhibit New York 1.
[14] Testimony of A. J. Richard, E. P. Lucas and Captain Norris Falgout.
[15] Testimony E. P. Lucas.
[16] Testimony of E. P. Lucas, Captain Falgout.
[17] Testimony of Edward E. Jones.
[18] Exhibit Dow 11.
[19] Sec. 6 of the Contract provides: "Contractor agrees to indemnify Dow and hold it harmless from and against all . . . claims, demands, causes of action, suits or other litigation (including the defense thereof and payment of any judgment rendered in any such action) arising out of personal injury, including . . . damage to property and occurring, incident to or arising out of the work performed by Contractor hereunder except that in no instance shall Contractor be held responsible for personal injury including . . . damage to property attributable to the sole negligence of Dowell, its agents, employees, representatives or sub-contractors; . . ."
[20] Exhibit Dow 11. Under Section 6, Pitre agreed to indemnify Dow and hold it harmless against all claims (including the defense thereof and payment of any judgment rendered) arising out of personal injury, including damage to property and occurring, incident to or arising out of the work performed by Pitre, except that Pitre shall not be held responsible for personal injury and property damage attributable to the sole negligence of Dow.
[21] Policy WP-115 95 00.
[22] Policy OM 43 43-07-96, Exhibit Dow 9.
[23] Exhibit Dow 9, Page 2, reads as follows: ". . . The assurer hereby undertakes to make good to the assured . . . all such loss and/or damage . . . as the assured shall as owners of the vessel named herein have become liable to pay . . ." Emphasis added.
[24] Exhibit Dow 9, Page 2, Section 5 provides: coverage for "Liability for loss of or damage to any other vessel . . . not caused by collision, provided such liability does not arise by reason of a contract made by the assured."
[25] Exhibit Dow 9, Par. 23.
[26] Certif. No. 42986, Exhibit Dow 10.
[27] Stevens v. White City, 285 U.S. 195, 52 S. Ct. 347, 76 L. Ed. 699 (1932); A. E. Staley Mfg. Co. v. Porto Rico Lighterage Co., 323 F. Supp. 27 (E.D.La.1970), aff'd 438 F.2d 1 (CA5-1971).
[28] Stevens v. White City, supra; Dixon Chemical Ind., Inc. v. Vincent C. Turecano, Inc., 417 F.2d 619 (CA2-1969); Hart v. Blakemore, 410 F.2d 218 (CA5-1969).
[29] Humble Oil & Refining Co. v. Tug Crochet, 288 F. Supp. 147 (E.D.La.1968), aff'd 422 F.2d 602 (CA5-1970).
[30] Monk v. Cornell Steamboat Co., 198 F. 472 (CA2-1912); The Packer, 28 F. 156 (C.C.1886); McWilliams Transit Inc. v. The Gerd H. Henjes, 50 F. Supp. 159 (E.D.N.Y.1943).
[31] The Fort George, 183 F. 731 (CA2-1910); Griffin On Collision, p. 414; Sturgis v. Boyer, 24 How. (65 U.S.) 110, 16 L. Ed. 591 (1871); The Stella, 278 F. 939 (CA5-1922); Great Lakes Towing Co. v. American SS Co., 165 F.2d 368 (CA6-1948).
[32] Guillory v. Ocean Drilling & Exploration Co., 433 F.2d 833 (CA5-1970); Matter of Complaint of Seaboard Shipping Corp., 449 F.2d 132 (CA2-1971); Houma Well Service, Inc. v. Tug Capt. O'Brien, 312 F. Supp. 257 (E.D.La.1970).
[33] Philadelphia Elec. Co. v. Curtis Bay Towing Co. of Pa., 260 F. Supp. 505, aff'd 390 F.2d 125 (CA3-1968).
[34] Matter of Complaint of Seaboard Shipping Corp., supra.
[35] Russell, Poling & Co. v. Conners Standard Marine Corp., 252 F.2d 167 (CA2-1958); See The M/S Bella Dan, 1967 A.M.C. 2295 (E.D.Va.1967).
[36] DeBardeleben Marine Corp. v. United States, 451 F.2d 140 (CA5-1971).
[37] Horton v. Dyer, 428 F.2d 1131 (CA5-1970); Watz v. Zapata Off-Shore Co., 431 F.2d 100 (CA5-1970); Bilkay Holding Corp. v. Consol. Iron & Metal Co., Inc., 330 F. Supp. 1313 (S.D.N.Y.-1971); See Transcontinental Gas Pipe Line Corp. v. Mobile Drilling Barge or Vessel Mr. Charlie, 294 F. Supp. 1025 (D.C.), rev. 424 F.2d 684 (CA5-1970); White Oak Transp. Co. v. Boston, Cape Cod & New York Canal Co., 258 U.S. 341, 42 S. Ct. 338, 66 L. Ed. 649 (1922).
[38] See Findings of Fact, footnote 27; 46 U.S.C. § 183; La Bourgogne, 210 U.S. 95, 28 S. Ct. 664, 52 L. Ed. 973 (1908); See The Linseed King, 285 U.S. 502, 52 S. Ct. 450 (1932) at pp. 452-453, 76 L. Ed. 903; American Tobacco Co. v. The Katingo, 81 F. Supp. 438 (S.D.N.Y.1948).
[39] Grigsby v. Coastal Marine Serv., 412 F.2d 1011 (CA5-1969), cert. dis. Fidelity & Cas. Co. v. Grigsby, 396 U.S. 1033, 90 S. Ct. 612, 24 L. Ed. 2d 531; Acme Boat Rentals, Inc. v. J. Ray McDermott & Co., 424 F.2d 393 (CA5-1970); In re Standard Oil Co. of Cal., 325 F. Supp. 388 (D.C. Cal.-1971).
[40] United States v. Seckinger, 397 U.S. 203, 90 S. Ct. 880, 25 L. Ed. 2d 224 (1970); Transcontinental Gas Pipeline Corp. v. Mobile Drill Barge Mr. Charlie, 424 F.2d 684 (CA5-1970); Tri-State Oil Tool Industries, Inc. v. Delta Marine Drilling Co., 410 F.2d 178 (CA5-1969); Gorsalitz v. Olin Mathieson Chemical Corp., 429 F.2d 1033 (CA5-1970); In re Tidewater Oil Co., 321 F. Supp. 14 (E.D.La.-1970).
[41] Lanasse v. Travelers Insurance Co., 450 F.2d 580 (CA5-1971). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3347039/ | The defendant has filed a motion to dismiss contending that he cannot be prosecuted as a third offender for operating under the influence.
On July 20, 1993, the defendant was arrested and charged with operating a motor vehicle while under the influence of intoxicating liquor in violation of General Statutes § 14-227a(a)(1). On March 15, 1994, a jury found the defendant guilty of that charge. That same day, the state filed a second part to the information charging the defendant with being a third offender of operating under the influence of alcohol, in violation of General Statutes § 14-227a(h)(3). The information alleges that the defendant has twice before been convicted of driving under the influence in violation of § 14-227a(a), specifically, on October 13, 1988, and again on October 28, 1988. To this information, the defendant pleaded not guilty. *Page 78
On March 23, 1994, the defendant moved the court to dismiss the part B information for the reason that neither of the two prior convictions occurred within five years of the current conviction. The defendant urges the court to interpret § 14-227a(h)(3) to require that the five year limitation be applied from the date of the last conviction to the date of the present conviction. The state maintains, however, that the five year period runs from the date of the last conviction to the date of the present violation.
The court, having considered the entire record of this case, denies the motion to dismiss because § 14-227a(h)(3) provides that the five year period is to be calculated from the date of the last conviction to the date of the current violation.
In the present matter, the state alleges that a second conviction occurred on October 28, 1988, and a third violation occurred on July 20, 1993. The recent violation is within the five year limitation provided in § 14-227a(h)(3). Accordingly, the motion to dismiss is denied.
The defendant has moved the court pursuant to Practice Book § 146 et seq. to dismiss the amended part B information dated March 1, 1994.
The statute at issue is § 14-227a(h)(3), which provides in relevant part: "Any person who violates any provision of subsection (a) of this section shall . . . (3) for conviction of a thirdviolation within five years after a prior conviction for the sameoffense, be fined not less than one thousand dollars nor more than four thousand dollars and imprisoned not more than two years. . . ." (Emphasis added.)
The issue, therefore, is whether the defendant can be charged as a third offender under § 14-227a(h)(3), when his last conviction for driving under the influence *Page 79
was within five years of his present violation but beyond five years of his conviction for that violation.
An appropriate analysis of the issue required the court to apply several established rules of statutory construction. "In construing any statute, we seek to ascertain and give effect to the apparent intent of the legislature . . . . [W]hen the language of a statute is plain and unambiguous, we need look no further than the words themselves because we assume that the language expresses the legislature's intent. . . . When the language of a statute is unclear, we may ascertain the intent of the legislature by looking beyond the language to the statute's legislative history and the purpose that the statute was intended to serve." (Citations omitted; internal quotation marks omitted.) Weinberg v. ARA Vending Co.,223 Conn. 336, 340-41, 612 A.2d 1203 (1992).
"`[T]he court must use common sense in construing statutes and must assume that a reasonable and rational result was intended by the promulgating legislature.'" State v. Harris, 32 Conn. App. 831,840, 632 A.2d 50 (1993). "Every word in a legislative enactment is presumed to have meaning." State v. Freedom of InformationCommission, 184 Conn. 102, 107, 441 A.2d 53 (1981). Finally, the court is mindful that criminal statutes should be construed strictly in favor of the accused. Our courts have held, however, that "[t]he rule of strict construction . . . does not require that the most narrow, technical and exact meaning be given to the language of a statute in frustration of an obvious legislative intent. . . . Common sense should be applied to the language of a penal statute, particularly if otherwise absurdity or frustration of the evident design of legislature results." (Citation omitted.)State v. Morelli, 25 Conn. App. 605, 609, 595 A.2d 932 (1991); Statev. Rogue, 190 Conn. 143, 151, 460 A.2d 26 (1983). *Page 80
The legislative purpose for the enactment of § 14-227a(h) was articulated by the Supreme Court in Plourde v. Liburdi, 207 Conn. 412,420, 540 A.2d 1054 (1988), in the following manner: "One need not be an in depth observer of our times and their prevailing conditions to detect the complex social, legal and economic burdens brought about by the confluence of alcohol and the modern motor vehicle. To maximize the deterrent effect of the drunk driving laws by imposing a mandatory minimum sentence, is `a valid social purpose properly within the legislature's police power.' State v.Darden, [171 Conn. 677, 681, 327 A.2d 99 (1976)]."
The legislature amended § 14-227a(h) through the enactment of Public Acts 1985, No. 85-387. "[T]his provision was part of a statutory package that enhanced mandatory minimum sentences for both first and multiple offenders and increased penalties for each successive offense. In enacting Public Acts 1985, No. 85-387 so as to amend § 14-227a, the legislature clearly intended to provide harsher penalties for offenders with a history of driving while under the influence." State v. Mattioli, 210 Conn. 573, 578,556 A.2d 584 (1989).
The Supreme Court in State v. Mattioli, supra, 210 Conn. 577
n. 3, recognized but did not resolve the issue of whether the language of § 14-227a(h)(3) requires that the five year period run from conviction to conviction or from conviction to violation.
This court holds that the correct interpretation of § 14-227a(h)(3) is that the five year period is to be calculated from prior conviction to current violation. Accordingly, the court finds that the phrase "within five years" refers to the word "violation" as opposed to "conviction." In this regard it is a rule of statutory construction that"[r]eferential and qualifying words and phrases, where no contrary intention appears, refer solely to the last antecedent. . . ." 2A J. Sutherland, *Page 81
Statutory Construction (5th Ed. Singer 1992 Rev.) § 47.33, p. 270. The last antecedent is "`the last word, phrase, or clause that can be made an antecedent without impairing the meaning of the sentence.'" Id.; seeEagle Hill Corp. v. Commission of Hospitals Health Care,2 Conn. App. 68, 74-75, 477 A.2d 660 (1984), for application of this principle. Accordingly, the court finds that the phrase "within five years" refers to the last antecedent, "violation." Were it to be otherwise, as the defendant argues, the word "violation" would lose its meaning.
Further, to the extent that § 14-227a(h) could be considered ambiguous, the court's interpretation is supported by the remarks of Richard F. Tulisano, house chairman of the judiciary committee, when, in summarizing the intent of the legislature, he stated, in relevant part: "Mr. Speaker, all of the individuals on both sides of the question so far have raised some really pertinent issues. The fact of the matter is . . . [t]his attempts to straighten out that a second offender, for purposes of this statute, will be onewho commits a violation within five years of a prior conviction, so it's a five year limitation on the second offender status." (Emphasis added.) 28 H.R. Proc., Pt. 19, 1985 Sess., p. 7039.
Finally, the court believes that a conviction to violation interpretation of § 14-227a(h)(3) leads to a reasonable and rational result. "A statute must be sufficiently clear to give fair notice of the conduct that it forbids." State v. Mattioli, supra,210 Conn. 579. Laws must give a person of ordinary intelligence a reasonable opportunity to know what is prohibited so that he may act accordingly. State v. Cavallo, 200 Conn. 664, 667,513 A.2d 646 (1986).
The language of § 14-227a(h)(3) plainly warns an individual who has been twice convicted of operating *Page 82
under the influence that a third violation for the same offense within the next five years will result in the application of the enhanced penalty provision. See State v. Tyson, 195 Conn. 326, 332,487 A.2d 1091 (1985), for a similar application to General Statutes § 53a-40(a) (persistent dangerous felony offender).
In comparison, a conviction to conviction analysis may not bring about the same result. In this instance, an individual is left to what may be the uncertainty of a somewhat lengthy judicial process. The state may also be left to uncertainty since the defendant's manipulation of the court calendar, e.g., failure to appear, may prolong his conviction beyond the five year limitation. In fact, it may be very advantageous for the defendant to do so, and the conviction approach would encourage such delay tactics.
The court should avoid statutory interpretations that lead to difficult and bizarre results. Shelby Mutual Ins. Co. v. DellaGhelfa, 200 Conn. 630, 636, 513 A.2d 52 (1986). In seeking the meaning of a statute, the court is mindful that the legislature is presumed to have "intended a reasonable, just and constitutional result." Sanzone v. Board of Police Commissioners, 219 Conn. 179,187, 592 A.2d 912 (1991). Accordingly, the court denies the motion to dismiss.
The defendant was arrested on July 20, 1993, for violation of operating a motor vehicle under the influence of intoxicating liquor. The second part of the information alleged that the defendant was previously convicted of the same offense on October 13, 1988, and on October 28, 1988. Section 14-227a(h)(3) provides that a defendant can be adjudged a third offender when his last conviction was within five years of his most recent violation. Accordingly, the defendant was properly charged as a third offender under § 14-227a(h)(3). The motion to dismiss is, therefore, denied. The state may proceed with trial under the part B information. *Page 83 | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/2432181/ | 438 S.W.2d 891 (1969)
WESTRIDGE VILLA APARTMENTS et al., Appellants,
v.
LAKEWOOD BANK AND TRUST COMPANY, Appellee.
No. 16984.
Court of Civil Appeals of Texas, Fort Worth.
February 7, 1969.
Rehearing Denied March 21, 1969.
*892 Gladden & Cook, and Dan Curlee, Fort Worth, for appellant, Westridge Villa Apartments.
Christopher & Bailey, and Sheridan E. Taylor, Fort Worth, for appellant, Alliance Capital Corp.
Storey, Armstrong & Steger, and Robert S. Addison, Dallas, for appellee, Lakewood Bank and Trust Co.
OPINION
LANGDON, Justice.
On July 25, 1967, the plaintiff, Lakewood Bank and Trust Company, filed its original application for writ of garnishment in Dallas County, Texas, against the defendant, Westridge Villa Apartments, alleging that Lakewood Bank and Trust Company had a suit pending against one Roger Smith for a debt of approximately $32,000.00, plus interest and costs, and that the garnishee, Westridge Villa Apartments, was indebted to or had in its possession effects belonging to the said Roger Smith. The garnishee, Westridge Villa Apartments, filed its answer, which was controverted by appellee. Certified copies of the pleadings were filed in compliance with Article 4096, Vernon's Ann.Tex.St., in the 96th District Court of Tarrant County, the residence of appellant, the primary defendant, and the latter filed its first supplemental answer.
The garnishment proceeding was regularly set and duly called to trial on March 7, 1968. All parties and their attorneys appeared and announced ready for trial. *893 On such date Lakewood Bank and Trust Company and Westridge Villa Apartments, the only parties to the suit, through their attorneys, announced to the court that although it appeared a settlement had been reached, the parties desired to enter into certain stipulations. The attorneys then in open court in the presence of all parties dictated the following stipulation into the record of the court:
"First, it would be stipulated that final judgment was entered in cause No. 67-705-G, styled Lakewood Bank and Trust Company vs. John D. Godwin and Roger Smith in the 134d Judicial District Court, Dallas County, Texas on July 28th 1967, such judgment being against Roger Smith, in the total sum of $39,000.53, plus interest and cost.
"1. That such suit was pending on the 25th day of July, 1967, that such judgment is final, is unpaid except as to $400.00 which has been paid thereon; that the judgment and claim is still unpaid and is still owned by Lakewood Bank and Trust Company and there has been no appeal from that judgment and that same is now final as against Roger Smith, as a matter of law.
"2. That Lakewood Bank and Trust Company filed application for writ of garnishment against defendants in this case, Westridge Villa Apartments, a Trust, on July 25, 1967.
"3. That writs of garnishment were served upon the defendants by service upon each of the Trustees of the Trust, on July 25th, 1967.
"4. That on July 26, 1967 funds payable to Roger Smith and Company in the approximate amount of $54,000.00 came into the possession of the defendant.
"5. That Roger Smith and Company is not incorporated and is legally the same person as Roger Smith against whom plaintiff holds the above described judgment referred to in paragraph 1, above."
The stipulations entered into by the parties and dictated into the record, without any objection thereto, on March 7, 1968, constituted the only proceedings had in the court on that date and conformed with the provisions of Rule 11, Texas Rules of Civil Procedure.
On March 29, 1968, some 22 days after the March 7 proceedings, Alliance Capital Corporation filed its petition of intervention, asserting an interest in the garnishment proceedings because funds previously paid to it by the defendant. Westridge Villa Apartments, were the same funds the plaintiff, Lakewood Bank and Trust Company, was attempting to garnishee. The defendant, Westridge Villa Apartments, filed a motion to withdraw stipulations and to deny judgment to plaintiff on stipulated fact on the same date, March 29, 1968.
On April 2, 1968, the plaintiff, Lakewood Bank, filed a motion to strike Alliance Capital Corporation's petition of intervention and a motion for judgment in its original garnishment proceeding.
On April 2, 1968, a hearing was held on Alliance Capital Corporation's petition of intervention, the plaintiff's motion to strike such petition of intervention, the defendant Westridge Villa Apartments' motion to withdraw stipulations and to deny judgment to plaintiff, and the plaintiff's motion for judgment. Evidence was taken by the court at such hearing. All parties were given ample opportunity to present any and all evidence on the matters presented.
On April 3, 1968, the trial court entered a judgment striking the petition of intervention of Alliance Capital Corporation, denying the defendant Westridge Villa Apartments' motion to withdraw stipulations and to deny judgment, overruling the motions for continuance, and granting judgment to plaintiff against Westridge Villa Apartments in the sum of $39,000.53, plus interest. From this judgment the defendant, Westridge Villa Apartments, a trust, and the intervenor, Alliance Capital Corporation, appealed. Westridge sets *894 forth two points of alleged error as follows:
1. That the trial court's judgment cannot stand as a "consent judgment," and
2. That the pleadings and stipulations will not support the trial court's judgment as a matter of law.
The intervenor sets forth one point of error.
We affirm.
The appellee has not at any time alleged that this is a "consent judgment" case and does not on this appeal urge any such contention. Motions to deny judgment were filed and an extended hearing was conducted before the trial court entered its judgment which was "approved as to form" by the appellant. It is apparent that the judgment entered was not a "consent judgment" but was one rendered by the court based upon stipulations of the parties to the suit. The authorities cited by the appellant involving agreements to enter a certain judgment have no application to the facts of this case. Here we are concerned with stipulations of certain facts which were freely dictated into the record of the court in the presence of all parties and their attorneys without any objections being made thereto or any request for additional stipulations. Such stipulations would have been unnecessary had a consent judgment been intended. The appellant recognized this when it directed its motion to deny judgment to "a judgment on the stipulated facts stipulated in the record of March 7, 1968 * * *." Appellant has raised the question of a "consent judgment" for the first time on this appeal which comes too late. Further, in our opinion the contention is without merit.
In connection with its second and last point the appellant contends that the judgment of the trial court fails to dispose of all issues presented and thus as a matter of law cannot stand.
Such undisposed of issues, their materiality and in what way failure to dispose of them may be harmful to the appellant is not set out. Rule 434, T.R.C.P.
The single specific issue referred to by appellant in the trial court is contained in its motion to deny judgment as follows:
"That these stipulations even if proper would not dispose of the issue of a good faith payout of funds on July 31, 1967, and that therefore the defendant is entitled to present evidence in connection with this affirmative defense."
Appellant has not presented this court with findings of fact or conclusions of law, nor has it perfected a bill of exception to show what evidence would have been presented as to any specified undisposed of issues. (Rule 372, T.R.C.P.). We have not been cited any authority holding that "good faith" is a defense to the voluntary payment of garnished funds. The established rule in Texas is that a garnishee cannot after service of process prejudice the rights of a plaintiff in a lawsuit and if he transfers during the pendency of the garnishment any of the indebtedness belonging to the defendant in the suit, he does so at his peril. Pure Oil Co. v. Walsh-Woldert Motor Co., 36 S.W.2d 802 (Texarkana Civ.App., 1931, writ dism.).
The trial court's final judgment is amply supported by the stipulations entered of record in open court in the presence of all parties and their attorneys pursuant to Rule 11, T.R.C.P. The stipulations are clear and unambiguous. The parties were present for their day in court. Each had full opportunity to present any and all issues, evidence of other matters of their choosing.
Appellant has never complained of the validity of the stipulations as a whole. In its "Motion to Withdraw Stipulation and to Deny Judgment to Plaintiff on Stipulated Facts" it "prays" the court to withdraw the stipulation "* * * that Roger Smith and Company is legally the same as *895 Roger Smith, an individual, * * *." (A portion of Stipulation No. 5 above set out.)
The appellant has failed to show or to allege good cause why this stipulation should have been withdrawn. There is no allegation of fraud, mistake, lack of consent, or other reason constituting good cause.
"The modification or rescission of a stipulation rests in the discretion of the trial court and is not reviewable on appeal in the absence of an abuse of that discretion. Good cause must be shown for setting aside a stipulation, * * *." 53 Tex.Jur.2d, § 26, p. 348. In § 27, p. 350 of the same text it is stated:
"As a general rule, a valid stipulation binds the court as well as the parties. Stipulations are favored as expediting litigation, and appellate courts, as well as the trial court, will generally uphold the agreements, unless good cause is shown for rejecting them." See also Early v. Burns, 142 S.W.2d 260 (Beaumont Civ.App., 1940, writ ref.).
The fact contained in Stipulation No. 5 is a simple fact as to whether or not an individual is operating a business under an assumed name and is, therefore, one and the same.
Appellant argues that the stipulations terminated under their own terms. This contention is based on the clause "subject to a tentative settlement." It seems readily apparent that had the anticipated settlement been consummated the stipulations would have been wholly unnecessary. Thus, it appears clear that the stipulations were before the court if settlement failed.
The trial court correctly performed its function of construing and interpreting the instrument as unambiguous, and in favor of its validity. Viewing the evidence in the light most favorable to upholding the court's judgment, we find no abuse of discretion.
The intervenor under its single point of error argues that (1) it has a vital interest in the garnishment proceeding, and (2) it timely filed its petition of intervention.
It is undisputed that intervenor had knowledge of this pending litigation from its inception eight months before it made any effort to intervene.
McDonald's Texas Civil Practice, Vol. 1, § 3.48-B, "Time for Intervention," states at page 398: "The intervention must be timely. The intervenor should file his pleading as promptly as possible. Intervention should not be allowed where it will delay the principal suit, unless the intervenor can demonstrate facts which justify his tardiness in coming forward." See also 37 A.L.R. 2d 1306, entitled "Time within which right to intervene may be exercised."
It is also well settled that the trial court has a wide discretion in judging the sufficiency of an opposing party's motion to dismiss an intervenor. 44 Tex.Jur.2d 192, § 41.
Testimony reflects that at the time the check payable to The Roger Smith and Co., Inc., and Alliance Capital was delivered to intervenor, it had full and complete knowledge of appellee's pending garnishment suit. The check referred to was dated July 26, 1967, and paid July 31, 1967. Thus, it is without dispute that the intervenor had knowledge of appellee's pending garnishment for at least eight months prior to its attempt to intervene. There is no evidence presented by intervenor to explain this delay. The secretary-treasurer of Alliance Capital Corporation was unable to explain why the intervenor did not seek to intervene until after the case had been called to trial. It appears clear from the evidence and authorities that intervenor's petition was not timely filed and that the trial court was correct in granting appellee's motion to strike the petition of intervention.
*896 We next consider the question of intervenor's "interest" in this controverted garnishment action. The appellee is seeking to establish personal liability against appellant for the improper disposition of funds which were garnished. It is not alleging that appellant still has these funds or that they are within the court's jurisdiction. It is clearly established under this record that appellant no longer has the funds and that such funds are not under the control of the court. The intervenor is not an indispensable or necessary party. Barnett & Record Co. v. Fall, 62 Tex.Civ. App. 391, 131 S.W. 644 (1910, no writ hist.). The intervenor at best is a proper party subject to the court's sound discretion.
The intervenor cites Payne v. Finley, 291 S.W. 944 (Waco Tex.Civ.App., 1927, no writ hist.), to support its position. The funds sought to be garnished in the Payne case had not been paid out in violation of a judicial writ and were subject to disposition by the court. The intervenor in Payne claimed an actual interest in funds which were within the court's jurisdiction, and timely filed a petition of intervention. The Payne case is not applicable to the facts in this case.
The intervenor further relies on another lawsuit pending in Dallas, Texas, in which it is a defendant and appellee is plaintiff, to show its interest in this suit. This garnishment action does not prevent intervenor from alleging any defense it may have in the Dallas suit. Assuming the lawsuits are the same, the intervenor's proper remedy was a plea in abatement or motion to consolidate. However, the two cases are not the same since the Dallas case has many different parties, different issues and is a different type of action.
The intervenor has alleged only that it has a "substantial interest" and "timely filed" its petition of intervention. The appellee's motion to strike the petition contained good and sufficient reasons why the petition should have been stricken, i. e., waiver, estoppel, doctrine of unclean hands, etc. The intervenor has failed to negate these reasons advanced by the appellee and in the absence of findings of fact and conclusions of law it is presumed that the trial court found in favor of the appellee as to each.
All points of error presented by the appellant and the intervenor are overruled.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2552198/ | 13 A.3d 476 (2010)
COM.
v.
JONES.
No. 323 EAL (2010).
Supreme Court of Pennsylvania.
November 17, 2010.
Disposition of Petition for Allowance of Appeal Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2573621/ | 149 F. Supp. 2d 416 (2001)
Daron HILL, et al., Plaintiffs,
v.
SHELL OIL COMPANY, et al., Defendants.
No. 98 C 5766.
United States District Court, N.D. Illinois, Eastern Division.
June 4, 2001.
*417 Thomas R. Meites, Michael M. Mulder, Paul William Mollica, Johanna Josie Raimond, Meites, Mulder, Burger & Mollica, Chicago, IL, for Plaintiffs.
Steven Francis Molo, Gerald C. Peterson, Norman K. Beck, Winston & Strawn, Gerald David Zansitis, Peter Francis Heraty, Jones, Ware & Grenard, Stephanie R. Gaines, Hinshaw & Culbertson, Ray G. Rezner, James Robert Vogler, Randall Lee Oyler, Barack, Ferrazzano, Kirschbaum, Perlman & Nagelberg, Chicago, IL, Frank M. Grenard, Whitfield & Eddy, Des Moines, IA, Andrea Michele Buford, R. Delacy Peters, Jr., Buford, Peters & Ware, Chicago, IL, for Defendants.
Manuel Sanchez, John Scott Huntley, Connie P. Limperis, Daniel Thomas Grosso, Sanchez & Daniels, George B. Collins, Christopher Robert Bargione, Adrian M. Vuckovich, Collins & Bargione, Joseph Michael Gagliardo, Gregory Robert James, Jr., Clifford Raymond Perry, III, Laner, Muchin, Dombrow, Becker, Levin & Tominberg, Ltd., Chicago, IL, for Defendants.
Robert Joseph Meyer, Sheryl A. Pethers, Scott De Salvo, Swanson, Martin & Bell, Debrai G. Haile, Wessels & Pautsch, Cary S. Fleischer, Alan R. Dolinko, Jeralyn Hartwick Baran, Chuhak & Tecson, Timothy Alan Wolfe, Meckler, Bulger & Tilson, Chicago, IL, for Defendants.
MEMORANDUM OPINION AND ORDER
MORAN, Senior District Judge.
On February 7, 2001, this court denied Motiva's motion to dismiss for lack of personal jurisdiction. Motiva has now filed a motion for reconsideration. As explained below, Motiva's motion is granted in part and denied in part.
*418 In our prior order we held that it would be appropriate to retain personal jurisdiction over Motiva based on a joint venture theory. The joint venture theory provides that the minimum contacts of one co-venturer are attributable to other co-venturers such that personal jurisdiction over one means personal jurisdiction over all. Because there was enough evidence to suggest that Shell, Equilon and Motiva were engaged in a joint venture to market and sell Shell-brand gasoline, we concluded that Motiva could not be dismissed from this lawsuit given the sufficient Illinois contacts of Shell and Equilon. We went on to state, however, that although a joint venture may exist, we were unable to say so with certainty. Accordingly, we advised the parties to revisit the issue at a later, more evolved stage of the litigation. Motiva has taken up our invitation sooner than we had anticipated. Although the facts regarding the joint venture issue have not ripened enough to change our decision, Motiva's motion for reconsideration does raise certain issues that merit discussion and clarification.
First, the parties once again debate the appropriate standards for personal jurisdiction in a federal question case. Plaintiffs argue that the Fifth Amendment, not the Fourteenth Amendment, applies to this federal law action and therefore our focus should be on Motiva's contacts with the United States and not, as in our prior order, on its minimum contacts with Illinois. Plaintiffs concede, however, that personal jurisdiction in this case also depends on whether Motiva is amenable to service of process from this court. See Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104, 108 S. Ct. 404, 98 L. Ed. 2d 415 (1987). None of the federal statutes at play here contain a nationwide service clause. Absent such a clause, the federal rules provide that service of process is appropriate only if "the state in which the district court is located is authorized to exercise personal jurisdiction...." Janmark, Inc. v. Reidy, 132 F.3d 1200, 1201 (7th Cir.1997); Fed.R.Civ.P. 4(k). Thus, even under Fifth Amendment due process principles, the minimum contacts test is central to the jurisdictional question.
Second, Motiva stresses that it is an independent company affiliated with Equilon through a common corporate parent, Shell. Relying on Central States, Southeast & Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 943-44 (7th Cir.2000), cert. denied, ___ U.S. ____, 121 S. Ct. 1406, 149 L. Ed. 2d 348 (2001), and other cases, Motiva argues that the contacts of one company cannot be imputed to its corporate affiliate unless there are grounds for piercing the corporate veil or other evidence indicating that one corporation has exercised a substantial degree of control over the other. Motiva is correct in that there are serious due process concerns associated with exercising personal jurisdiction over a company based solely on its corporate affiliations. See Reimer, 230 F.3d at 943-44. Our decision to retain jurisdiction over Motiva, however, was not based on its status as a corporate affiliate of Shell and Equilon, but rather on its status as a co-venturer with those two companies. See Aigner v. Bell Helicopters, Inc., 86 F.R.D. 532, 540-42 (N.D.Ill.1980). Therefore, the concerns identified in Reimer do not alter our conclusions.
Third, Motiva argues that we should apply Texas law when deciding whether a joint venture exists between Shell, Equilon and Motiva. In our prior order we cited the Illinois standard on *419 joint ventures.[1] Insofar as there is a difference between Illinois and Texas law on this issue (see infra note 4), we agree with Motiva that the Texas standard should govern. Initially, we observe that the courts have not settled on what choice of law rules are to apply in federal question cases. See In re Gaston & Snow, 243 F.3d 599, 605-07 (2d Cir.2001); Pescatore v. Pan American World Airways, Inc., 97 F.3d 1, 12-13 (2d Cir.1996); In re Aircrash Disaster Near Roselawn, Ind. on October 31, 1994, 948 F. Supp. 747, 753 (N.D.Ill.1996). Some say that the conflicts rules of the forum state govern, while others rely on federal choice of law principles. See Pescatore, 97 F.3d at 12-13 (collecting and contrasting cases). We need not choose sides, however, because federal law and Illinois law both follow the "most significant contacts test" to resolve conflicts of laws. See In re Gaston & Snow, 243 F.3d at 605 (federal law); Diamond State Ins. Co. v. Chester-Jensen Co., Inc., 243 Ill.App.3d 471, 183 Ill. Dec. 435, 611 N.E.2d 1083, 1093 (1993) (Illinois law); see also Roselawn, 948 F.Supp. at 753 (declining to decide the issue because federal law and Illinois law both track the Restatement (Second) of Conflicts of Laws).
As it pertains to contractual relationships, the "most significant contacts test" requires us to examine factors such as the place of contracting, the place of negotiations, the place of performance, the location of the subject matter, and the domicile, residence, nationality, place of incorporation, and place of business of the parties. Curran v. Kwon, 153 F.3d 481, 488 (7th Cir.1998). Applying the test is an easy task in this case. Shell, Equilon and Motiva are Houston-based companies and their relationship (joint venture or not) was formed and centered in Texas. Accordingly, the law of Texas should be used when determining whether a joint venture between the defendants in fact existed. The Second Circuit reached a similar decision on nearly identical facts in Bensmiller v. E.I. Dupont De Nemours & Co., 47 F.3d 79 (2d Cir.1995). In Bensmiller, the Second Circuit had to decide whether a Texas hospital could be subject to personal jurisdiction in a Connecticut federal court based on a joint venture theory. The court held, under Connecticut's long-arm statute and as a matter of federal due process, that the law of Texas should determine whether a joint venture existed among the defendants. Id. at 82-85. Bensmiller provides a cogent discussion of the relevant issues. We agree with the Second Circuit that, absent a choice of law provision to the contrary,[2] Texas law should govern whether Shell, Equilon and Motiva were engaged in a joint venture sufficient to subject Motiva to personal jurisdiction in this court.[3]
*420 Finally, Motiva argues that the strict standards of Texas law preclude us from finding that a joint venture existed between Shell, Equilon and Motiva. In Texas, a joint venture exists where there is: (1) a community of interest in the venture; (2) an agreement to share profits; (3) an agreement to share losses; and (4) a mutual right of control or management of the enterprise. See Coastal Plains Development Corp. v. Micrea, Inc., 572 S.W.2d 285, 287 (Tex.1978). Motiva claims that plaintiffs cannot establish that the defendants engaged in profitsharing. Absent this critical element,[4] Motiva argues, there can be no joint venture and, consequently, no personal jurisdiction. Motiva is right in that, under Reimer, 230 F.3d at 943-44, the receipt of stock dividends and/or the exercise of a degree of managerial control is not enough to exercise personal jurisdiction. Similarly, the language contained in defendants' SEC filings and on their websites (describing defendants' relationship as an "alliance") falls short of the mark, at least under Texas law of joint ventures. See Coastal Plains, 572 S.W.2d at 287-88. On the other hand, we cannot say that the profitsharing question is a settled issue at this point in the litigation. So far the only evidence on the subject is an affidavit from Motiva's chief financial officer stating that there was no sharing of profits or losses (Motiva Br.Exh. A). Motiva cannot win on this statement alone. There is sufficient uncertainty on the matter to justify "narrowly targeted discovery" as to whether Shell, Equilon and Motiva shared profits or losses. Reimer, 230 F.3d at 947.[5] As before, we remain open to the possibility that upon further investigation the evidence will reveal an absence of any profit or loss-sharing and therefore the lack of a joint venture relationship. In the event that such a record develops, our denial of Motiva's motion to dismiss continues to be without prejudice.
For the reasons set forth above, our February 7, 2001 order is vacated to the extent that it relies on the Illinois law of joint ventures and permits discovery beyond that necessary to determine whether defendants shared profits and/or losses. We also strike footnote 1 of our prior order since, as Motiva points out, it did not join Equilon and Shell in opposing plaintiffs' amendment of the complaint. Motiva's motion for reconsideration is granted as to these issues but denied in all other respects.
NOTES
[1] Illinois cases discussing the joint venture theory of personal jurisdiction have applied Illinois law without engaging in a choice of law analysis. See Gruca v. Alpha Therapeutic Corp., 19 F. Supp. 2d 862, 872 (N.D.Ill.1998); Fomusa v. Permian Petroleum Co., 1997 WL 792983, at *2 (N.D.Ill. Dec. 16, 1997); Aigner, 86 F.R.D. at 540-42.
[2] Plaintiffs suggest that further investigation may uncover a contractual choice of law clause governing the joint venture between Shell, Equilon and Motiva; of course, such a revelation would bear directly on the issue at hand.
[3] Plaintiffs argue that the federal common law of joint ventures should apply to determine the nature of defendants' relationship. Plaintiffs are correct in that federal common law plays a role in determining liability under federal statutes. See Brotherhood of Locomotive Engineers v. Springfield Terminal Railway Co., 210 F.3d 18, 25-26 (1st Cir.), cert. denied, ___ U.S. ____, 121 S. Ct. 571, 148 L. Ed. 2d 489 (2000); Davidson v. Enstar Corp., 848 F.2d 574, 577-78 (5th Cir.1988). But the question here is one of personal jurisdiction, not ultimate liability, and Bensmiller is on point.
[4] Motiva explains that Texas joint venture law is much more stringent than Illinois law with respect to the profitsharing element of the test. Compare Coastal Plains, 572 S.W.2d at 288 (holding that there was no joint venture where there was no agreement to share profits and losses) with Fitchie v. Yurko, 212 Ill. App. 3d 216, 156 Ill. Dec. 416, 570 N.E.2d 892, 899-900 (1991) (holding that profitsharing is one factor to be considered when determining the parties' intent to form a joint venture); but see Aigner, 86 F.R.D. at 541 (Under Illinois law, the "expectation of profits and the sharing thereof, as well as the sharing of losses, are also necessary elements of a joint venture.").
[5] The parties should refrain from conducting general discovery until the personal jurisdiction question has been resolved. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1368429/ | 30 S.W.3d 19 (2000)
WAL-MART STORES, INC., Appellant,
v.
Leonor GARCIA, Appellee.
No. 04-99-00344-CV.
Court of Appeals of Texas, San Antonio.
August 16, 2000.
*21 J. Preston Wrotenbery, Kevin D. Jewell, Magenheim Bateman & Helfand, P.L.L.C., Houston, for Appellant.
Robert L. Rodriguez, Rodriguez & Muniz-Berain, P.C., Eagle Pass, Thomas H. Crofts, Jr., Ellen B. Mitchell, Crofts, Callaway & Jefferson, P.C., San Antonio, for Appellee.
Sitting: PHIL HARDBERGER, Chief Justice, SARAH B. DUNCAN, Justice, KAREN ANGELINI, Justice.
OPINION
Opinion by: PHIL HARDBERGER, Chief Justice.
Leonor Garcia ("Garcia") slipped on a jalapeño in a Wal-Mart store and fell, injuring herself. A jury assessed $75,000 in damages against Wal-Mart Stores, Inc. ("Wal-Mart") for past and future physical pain, mental anguish, and medical expenses.
Wal-Mart argues that the evidence is legally and factually insufficient to support the jury's finding that Wal-Mart possessed actual or constructive knowledge of the jalapeño. In addition, Wal-Mart challenges the award of future medical expenses and mental anguish damages on legal and factual sufficiency grounds.
Discussion
1. Standard of Review
In considering legal sufficiency points, a reviewing court considers only the evidence favorable to the decision of the trier of fact and disregards all evidence and inferences to the contrary. See Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988). If more than a scintilla of evidence is offered on a fact, the evidence is legally sufficient to support the jury's finding on that matter. See Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983).
In considering factual insufficiency points, a reviewing court assesses all the evidence and reverses for a new trial only if the challenged finding is so against the great weight and preponderance of the evidence as to be manifestly unjust. See Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). Under this analysis, the reviewing court does not serve as fact finder, pass upon the credibility of witnesses, or substitute its judgment for that of the trier of fact, even if there is conflicting evidence upon which a different conclusion could be supported. See Thrift v. Hubbard, 974 S.W.2d 70, 76 (Tex.App.-San Antonio 1998, pet. denied).
2. Issue One: Actual or Constructive Notice of the Jalapeño
In its first issue, Wal-Mart argues that no legally or factually sufficient evidence exists to support the jury's finding that Wal-Mart had actual or constructive *22 knowledge of the dangerous condition in the store.
a. Narrowing the Issue
Wal-Mart is the land owner; Garcia was an invitee on Wal-Mart's land. Wal-Mart owed Garcia a duty to exercise ordinary care to protect her from those risks of which Wal-Mart was aware. Wal-Mart also owed Garcia a duty to protect her from those risks of which Wal-Mart should have been aware after a reasonable inspection. See Motel 6 G.P., Inc. v. Lopez, 929 S.W.2d 1, 3 (Tex.1996). These duties, however, do not make Wal-Mart an insurer of Garcia's safety on the premises. See Wal-Mart Stores, Inc. v. Gonzalez, 968 S.W.2d 934, 936 (Tex.1998). Wal-Mart is not liable for every injury arising from a dangerous condition on its premises. In order to hold Wal-Mart liable for the dangerous condition on its premises, Garcia has the burden of proving:
(1) Actual or constructive knowledge of some condition on the premises by Wal-Mart;
(2) That the condition posed an unreasonable risk of harm;
(3) That Wal-Mart did not exercise reasonable care to reduce or eliminate the risk; and
(4) That Wal-Mart's failure to use such care proximately caused Garcia's injuries.
See id.
The disputed issue in this case is whether Wal-Mart had actual or constructive knowledge of the jalapeño on the floor before Garcia slipped and fell. Constructive knowledge means that Wal-Mart should have known or discovered the jalapeño after a reasonable inspection. See Lopez, 929 S.W.2d at 3. To show that Wal-Mart had constructive knowledge of the jalapeño, Garcia has the burden to demonstrate "that it was more likely than not that the [jalapeño] had been there" for a period of time within which Wal-Mart should have been aware of the condition. See Gonzalez, 968 S.W.2d at 938; Lopez, 929 S.W.2d at 3. Proving merely that the jalapeño "could possibly have been there long enough to make Wal-Mart responsible for noticing it" is insufficient. Gonzalez, 968 S.W.2d at 938.
b. Garcia's Argument
Garcia argues that Wal-Mart was on notice of the dangerous condition in the snack bar area and failed to take appropriate action in keeping the area clean. By failing to keep the area clean, Wal-Mart did not exercise reasonable diligence that would have led to the discovery of the jalapeño. Garcia states that there were no customers in the area at the time of her accident who had food items from which a jalapeño could have dropped. As a consequence, the jalapeño must have been on the floor for an adequate period of time within which Wal-Mart should have discovered it, especially considering the employees were looking directly at the area.
Garcia testified that, while waiting in line, she noticed the floor was dirty. She saw "trash, Styrofoam cups" on the floor. She also explained that the trash bins were "full ... it was so full that the lid was open and there were some on the floor." Garcia waited for her order for seven to nine minutes; during that time, she did not see anyone clean the area. After Garcia left the counter, she slipped and fell. Garcia's daughter, Patricia Gonzalez ("Gonzalez"), later discovered a jalapeño on Garcia's sandal.
Gonzalez testified that "the floor was dirty, and the trash was very full. There were cups on the floor, napkins." She said the jalapeño was wrinkled and was not fresh. She explained that after Garcia fell, the employees "were starting to clean up, cleaning the tables, the floor."
c. Wal-Mart's Argument
Three Wal-Mart employees testified; two of the employees indicated the snack bar area was clean before the accident. Maria Ofelia Regaldo, who works at the *23 snack bar, could not remember the last time the area had been cleaned before Garcia fell. Maria Isabel Fuentes ("Fuentes"), the snack bar manager, gave testimony that was generally favorable to Wal-Mart, but that was frequently contradicted. She said also that prior to the accident, "[a]s always, I was cleaning the areas in the snack bar." But she could not recall "exactly where I was" at the time of the accident. She testified that from behind the counter, she could "pretty much see the entire snack bar area." The jury also heard excerpts from her deposition in which the following exchange occurred:
[Q:] And are you not saying that you looked at that; that you went out there and cleaned that floor right before she fell? Are you?
...
A: No, because we never knew-we never knew he is going to fell or not. [sic] We cannot be looking at who is going to be throwing things on the floor, who is going to be falling and who is not going to be falling.
...
Fuentes' then contradicted herself again. She stated, "We don't have time to be cleaning. Every time that the area needs cleaning, we clean it." Jesus Rodriguez ("Rodriguez"), the store manager, agreed that "it would be a matter of a few seconds to scan the floor and detect a jalapeno [sic] on the floor."
Wal-Mart argues the jalapeño went unnoticed by snack bar personnel because it fell immediately prior to Garcia's accident. It argued that the jalapeño was fresh at the time of Garcia's accident. Rodriguez speculated that because the jalapeño still had juice in it, as evidenced by its streak mark, it was fresh. Yet, Rodriguez agreed with the proposition that "if somebody else had dropped a jalapeno [sic] 5, 10, 15 minutes before, it still would have had juice in it." Rodriguez testified that the jalapeño came from Martha Rodriguez ("Martha"), a customer who was sitting next to the area where Garcia fell. Rodriguez recalled that "no one else [was] eating nachos." Martha, however, testified that she ordered popcorn and soda only, and never had any nachos.
d. Factual Sufficiency
The testimony by the six witnesses is conflicting. We conclude, however, that factually sufficient evidence exists to support the jury's verdict.
e. Legal Sufficiency
In reviewing the legal sufficiency point, we set aside the evidence that does not support the verdict. Testimony by Martha and Gonzalez provide a scintilla of evidence that the jalapeño was not fresh. The testimony in favor of the jury's verdict is clear: no one had been served a jalapeño prior to the accident. The amount of time that the jalapeño could have been on the floor is within the time, according to Rodriguez, that Wal-Mart should have cleaned the area. Garcia and Gonzalez's testimony provide a scintilla of evidence that Wal-Mart failed to clean the area in a timely fashion. In addition, the food service personnel were in very close proximity to the site where the jalapeño fell and had an unobstructed view of the area. They should have noted the hazardous condition and taken remedial steps to keep the area safe. This case is factually distinguishable from Gonzalez. The evidence in the present case shows "more likely than not" that the jalapeño had been on the floor for several minutes-a period of time within which Wal-Mart employees, by their testimony, should have cleaned the jalapeño from the floor. The evidence does not even show a remote possibility that the jalapeño had fallen immediately prior to Garcia's accident.
We conclude legally sufficient evidence exists that establishes the jalapeño was on the floor for a sufficient period of time within which Wal-Mart should have discovered the hazard.
*24 3. Issue Two: Mental Anguish Damages and Future Medical Expenses
a. Mental Anguish Damages
The jury awarded Garcia $25,000 for "physical pain and mental anguish sustained in the past" and $5,000 for "physical pain and mental anguish" that Garcia will likely sustain in the future. Wal-Mart argues that the evidence is legally and factually insufficient to support the award of mental anguish damages.
Garcia argues that Wal-Mart waived its challenge to the sufficiency of mental anguish evidence. Wal-Mart attacks only the mental anguish element of the jury's awards; it does not attack the physical pain element.
When a damage issue is submitted in broad form, ascertaining the amount the jury awarded for each element of damages is difficult, if not impossible. See Brookshire Bros., Inc. v. Lewis, 997 S.W.2d 908, 921-22 (Tex.App.-Beaumont 1999, pet. denied). An appellant who seeks to challenge a multi-element damage award on appeal must address each element and show the evidence is insufficient to support the entire award. See id. at 922. If an appellant fails to address an element of damages, the appellant waives the sufficiency challenge. See id.
In Brookshire Brothers, Inc., the appellant attacked only the mental anguish element of an award that was for past and future physical pain and mental anguish. It did not offer argument regarding physical pain. The court held that it waived its right to complain about the sufficiency of the awards. See id.
We conclude that Wal-Mart waived its right to complain on appeal about the sufficiency of the mental anguish award.
b. Future Medical Expenses
The jury awarded Garcia $22,000 for future medical expenses. Wal-Mart argues that the evidence is legally and factually insufficient to support this award. Wal-Mart asserts that the award should be deleted entirely or, in the alternative, reduced to $17,000.
Texas follows the "reasonable probability rule" for future damages arising from personal injuries. See Rosenboom Mach. & Tool, Inc. v. Machala, 995 S.W.2d 817, 828 (Tex.App.-Houston [1st Dist.] 1999, pet. denied). We have acknowledged that the award of future medical expenses also lies within the discretion of the jury. See City of San Antonio v. Vela, 762 S.W.2d 314, 321 (Tex.App.-San Antonio 1988, writ denied). No precise evidence is required; the jury may award such damages based upon the nature of the injury, the medical care rendered prior to trial, and the condition of the injured party at the time of trial. See id.
Wal-Mart argues that surgery is not reasonably probable because Garcia is afraid of further surgery. Although she testified that she does not want further surgery, she stated also that she would be willing to undergo an additional operation if her physician recommended it.
Garcia's physician testified that the additional surgery would cost $17,000. The jury was not bound by this figure. See id. Consistent with Vela, the jury could have considered Garcia's particular injuries, previous medical treatments, previous expenses of $23,000, her current debilitated physical condition, and her attendant treatment subsequent to the surgery. See id. We conclude that the evidence is legally and factually sufficient to support the award of $22,000 for future medical expenses.
Conclusion
The evidence is legally and factually sufficient to support the jury's verdict. The trial court's judgment is affirmed.
SARAH B. DUNCAN, Justice, concurring in the judgment only. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3347041/ | [EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]MEMORANDUM OF DECISION
The parties are before the court on two motions. One motion is for contempt filed by the plaintiff alleging that the defendant has failed to comply with the terms of the separation agreement entered as part of a decree of dissolution. The other motion is one asking for the determination of an arrearage claiming the plaintiff owes the defendant money under the terms of the same separation agreement. CT Page 5692
The plaintiff claims that the defendant has failed to pay her what he owes under the terms of the separation agreement with respect to the following:
1. $350 per week for 77 weeks of her employment for Peerless Importers, Inc.;
2. the balance of a $185,000 which the defendant was supposed to pay for the college expenses for their three children;
3. the interest payment on the third mortgage in full for one year and half for the second year;
4. uninsured medical expenses which he failed to pay; and,
5. a telephone bill which he did not pay.
The parties have agreed, however, that the uninsured medical and the telephone bill will be paid.
The defendant, on the other hand, claims that there is a balance due him from commissions which the plaintiff received from Peerless Importers. He also alleges that he has paid $185,000 toward the college expenses of the three children and that his obligation to pay the interest on the third mortgage should be waived because the plaintiff was able to settle with the FDIC on a lower amount of principal and interest following the default on the mortgage caused by his failure to pay.
The agreement which is the basis for the claims of both parties was approved by Judge Ryan at the time of the dissolution and it became a part of the court's order and decree. Interpreting the agreement, which has been incorporated into the judgment, requires that it be construed as a contract. Barnard v.Barnard, 214 Conn. 99 at 109 (1990).
Such a contract must be construed as a whole and to effectuate the intent of the contracting parties. Barnard v.Barnard, supra, at 109. Further, the court in Barnard said,
"In interpreting contract items we have repeatedly stated that the intent of the parties is to be ascertained by a fair and reasonable construction of the written words and that the language used must CT Page 5693 be accorded its common, natural and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract."
Barnard v. Barnard, supra, p. 109.
Further, the court said, "Where the language of the contract is clear and unambiguous, contract is to be given effect according to its terms." Barnard v. Barnard, supra, p. 110.
The first claim which covers both the plaintiff's and the defendant's arguments is that requiring the interpretation of paragraph 5.10 of the separation agreement which reads as follows:
"Commencing January 1, 1992, the wife herein agrees to retain an amount equal to $350 per week, and to remit to the husband the balance of any and all monies received from Peerless Importers, Inc., which monies represent commissions earned on liquor sales to stores owned or operated by the husband or any partner or designee of the husband or sold by the husband on the wife's behalf to any store. Upon the sale of the premises, the wife agrees to remit to the husband any and all monies received from Peerless representing commissions earned on liquor sales to stores owned or operated by the husband or any partner designee of the husband or sold by the husband on the wife's behalf to any store. The wife shall be entitled to reimbursement of amounts necessary to meet her tax obligations on the commissions earned from Peerless in the event the amount withheld was insufficient to meet the tax obligation on said earnings. Said obligations shall only continue as long as the wife is an employee of Peerless Importers, Inc. In the event the commissions from Peerless are less than $350 per week, the husband shall be obligated to pay the difference to the wife such that she has $350 per week. Such adjustment shall be made at the end of each month."
The wife was employed as a sales person at Peerless Importers, Inc. for a period of 77 weeks following the judgment of dissolution. During that time, the premises referred to above was the marital home located at 42 Hurlingham Drive, Greenwich, and it was not sold during that period. It was sold in June of 1994, and the plaintiff's employment terminated in August or CT Page 5694 September of 1993. The wife, therefore, claims that during the period of 77 weeks the wife was due $350 per week or $26,950. She did receive $14,890 from Peerless Importers, Inc. for liquor sales relating to liquor stores owned or operated by the husband. However, that did not amount to $350 per week as set forth in the agreement and, therefore, her claim is that the defendant owes her $12,060 representing the difference between $14,890 she received and the $26,950 representing $350 a week for 77 weeks.
The defendant claims that the agreement required her to turn over all commissions, both before and after the sale of the premises.
The court believes that the agreement as it stands requires the plaintiff to pay to the defendant the difference between $350 and whatever commissions were received from Peerless Importers prior to the sale and during the term of her employment. This interpretation is bolstered by the fact that the first sentence with respect to the commissions reads, "commencing January, 1982, the wife herein agrees. . . ." In a subsequent sentence the words are, "upon the sale of the premises the wife agrees to remit to the husband. . . ." Furthermore, the latter part of the paragraph says, "said obligation shall only continue as long as the wife is an employee of Peerless Importers, Inc." It further goes on, "in the event the commissions from Peerless are less than $350, the husband shall be obligated to pay the difference to the wife such that she has $350 per week, such adjustment shall be made at the end of each month." Moreover, an additional sentence says, "the wife shall be entitled to reimbursement of the amounts necessary to meet her tax obligations on the commissions earned from Peerless in the event the amount withheld was insufficient to meet the tax obligation on said earnings."
It appears to the court that if the plaintiff were to turn over all of the commissions earned both before and after the sale to the defendant there would be no need to reimburse her for amounts needed to meet her tax obligations on the commissions earned since they would not be her earnings. Moreover, the fact that the obligation was to continue only so long as she was an employee reinforces the plaintiff's claim that that is what she was and she was entitled to the amount she had agreed to accept for working during that period.
Consequently, for all of the above reasons, the court interprets the agreement paragraph 5.10 to mean that the CT Page 5695 plaintiff was required to remit to the defendant only the difference between the $350 per week and the commissions earned between the time she started employment on January 1, 1992 and when she left some time in 1993. She was not required to pay all commissions received both before and after the sale of the premises. Therefore, the court finds that the plaintiff is entitled to receive $12,060 from the defendant.
The next claim in which there are conflicting positions is that the defendant has failed to pay the interest on the third mortgage on the house in accordance with paragraph 5.4 of the separation agreement. Paragraph 5.4 reads,
"The property shall continue to be listed for sale and until such time of the sale of the premises or February 1, 1993, rental of the premises, wife's remarriage, cohabitation, or death, whichever shall first occur, the husband shall pay the following monthly expenses: (1) first mortgage payment; (2) second mortgage payment; (3) third mortgage payment; (4) all utilities including telephone to a maximum telephone charge of $200; and (5) home insurance."
The plaintiff claims the defendant owes her $20,981.70 because of his failure to pay the third mortgage. His obligation was to pay 100 percent of the monthly mortgage amount from February 1, 1992 to January 31, 1993 and 50 percent from February 1, 1993 to January 31, 1994. The monthly mortgage payment was $1,165.65 for twelve months at 100 percent and twelve months at 50 percent. The total would be $20,981.70.
The defendant claimed he did not make the payment because the FDIC took over the Bank of Stamford and he did not know where to pay it. However, the plaintiff testified that she discussed with him the takeover by FDIC and suggested that he try to negotiate with FDIC to reduce the interest. He told her it was her responsibility. She therefore did negotiate with FDIC and reduced the amount of the principal and interest. The defendant now claims that he should get the benefit of that and not have to pay the plaintiff the amount he owed under the terms of the agreement.
There appears to be no basis for relieving the defendant of this obligation given the fact that he had the opportunity to reduce it himself and failed to do so. CT Page 5696
Consequently, the court finds that the defendant owes the plaintiff the sum of $20,981.70.
The next part of the agreement which the parties interpret differently is that concerning the husband's obligation to pay the first $185,000 for the college expenses of their three children, Anthony, Marisa and Michael. The provision in question is paragraph 4.1 and reads as follows:
"The husband shall be solely obligated to pay the first $185,000 of the college expenses of the parties three children, to wit: Anthony M. Mazzola, Marisa A. Mazzola, and Michael A. Mazzola. The husband shall receive a credit towards said $185,000 obligation in an amount equal to any payments made for college expenses after January 1, 1992. College expenses as used herein shall be defined to include any and all payment for tuition, room, board, books and fees charged by the institution, transportation costs to and from the college or university. College expenses shall include all institutions which provide for post secondary education whether college, university or two year educational program."
The question is whether the defendant has now paid the first $185,000 for these college expenses. To substantiate his claim, the defendant has produced checks and credit card statements indicating the payments he has made on behalf of the three children. The parties are in agreement that he paid $52,367.40 for Marisa and $19,000 for Michael. However, the major dispute is with respect to the amount he paid for Anthony.
The defendant claims he paid $86,907.37 and the wife claims he paid $32,857.74 and an additional $448.50 for transportation expenses. The difference between the two figures is that the plaintiff claims that transportation expenses do not include the cost of buying a car or repairing it or filling it with gas. The court believes that all of those expenses are part of transportation to and from the college or university, whether to the university from home or to the university from wherever Anthony was living at the time since at one time he was not living at the college but outside of the campus. Therefore, the cost of a bicycle and its repair was included by the defendant, and the court believes it is within the terms of the agreement. CT Page 5697
In addition, using the figures supplied by plaintiff's counsel of the payments made by Mr. Mazzola and their classification, the court deducts the following items:
1. all items labeled allowances;
2. line of credit;
3. all clothing;
4. cash advances and miscellaneous household expenses;
5. gas bought in Scarsdale, Newark and Yonkers;
6. Bruce Park Sports, Frederick Super Eight, Comfort Inn, LAX World, Maryland;
7. BP Oil of Ohio.
Some of the gas was apparently not related to transportation to or from the college because it was purchased in other areas and that was deleted from the approved expenses. There was no provision for allowance and that was deleted. This is in contrast to the provision for Michael while at Brunswick where an allowance was specifically provided. (See paragraph ___ of the agreement.)
The total of the items not included under educational expenses in the court's opinion is $5,704.46 leaving a total paid by the defendant for what the court considers to be included in educational expenses of $81,202.91 for Anthony. Adding this amount to the amount spent for Marisa of $52,367.40 and $19,000 for Michael equals $151,955.78. Deducting that from $185,000 leaves $32,429.69 which would be due to the plaintiff.
The next item concerns the payment of educational expenses for Michael. The paragraph in question is paragraph 2.2 which reads:
"Commencing January 1st, 1992, the husband shall pay to the wife during his lifetime as support for the minor child any and all educational expenses of the minor child Michael whether that be at Brunswick Preparatory School or any boarding school as and for child support CT Page 5698 until such child attains the age of 18, marries, dies or becomes emancipated, whichever event first occurs. Educational expenses shall be defined as any and all tuition, room, board, books, fees charged by the institution and the husband shall provide the minor son with an allowance. In addition, the husband shall pay the car insurance premiums for the minor child Michael as and for support."
The plaintiff is claiming the amount of $2,034 which she paid for summer school at Rye Country Day School and also for an SAT tutor. The court finds that neither of these payments come within the definition of educational expenses for Michael which are limited to "Brunswick Preparatory School or any boarding school. . . ." Neither Rye Country Day nor the SAT tutor are included within the definition of "boarding school"; consequently, the defendant does not owe the plaintiff $2,034.
There are two other items on which there is still disagreement. The husband claims he should receive a credit for having paid for heating oil in the amount of $4,000. He was obligated and agrees he was to pay for the utilities; one of the utilities would appear to be the heating system which requires oil to operate. Consequently, the court finds that heating oil is included in the requirement that he pay for the utilities and he is, therefore, not entitled to any credit for having paid it apparently under the assumption that it was part of the utility requirement.
In addition, the defendant also claims a credit for $18,000 which he paid to Antonio Vallardo, Inc. for work on the premises for which a mechanics lien was filed but never activated, that is, no lawsuit was ever filed to enforce it. It was the plaintiff's obligation to pay this bill and she did so. (See exhibit EEE.) The defendant's payment was purely voluntary and there is no basis in the agreement for any repayment to him for sums he paid voluntarily and apparently in error. Consequently, that claim is denied. The parties seemed to agree that it was the wife's obligation to pay for the lien which she has apparently done, and the defendant agrees that his was a voluntary payment. His recourse would seem to be against Mr. Vallardo, who happens to be his father-in-law. However, it does not seem the plaintiff should be required to pay him for something which she has already paid. Consequently, his claim for the $18,000 is denied. CT Page 5699
On the basis of the foregoing, the court finds that the plaintiff is entitled to the following:
1. $32,439.69 for the educational expenses still owing by the defendant;
2. telephone expenses of $1986.70 agreed to by the defendant;
3. unreimbursed medical expenses of $1291.16 agreed to by the defendant by stipulation;
4. $20,981.70 representing the interest the defendant failed to pay on the third mortgage;
5. $12,060 representing the difference between the $350 a week to which the plaintiff was entitled when the commissions from Peerless Importers were not sufficient to pay that amount.
The parties have agreed that the defendant is entitled to a credit in the amount of $32,921.82. Deducting this amount from the above total determined to be due the plaintiff gives us a balance of $35,837.43. The court orders the defendant to pay this amount to the plaintiff within thirty (30) days of the date of the judgment.
Each party shall pay the liabilities listed on his or her affidavit and each party shall pay his or her own counsel fees. The court will not find either party in contempt given the difference in the interpretation of the agreement which each presented.
It is so ordered.
MARGARET C. DRISCOLL STATE TRIAL REFEREE | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/1746061/ | 82 S.W.3d 571 (2002)
Frank J. PAGEL, Appellant,
v.
Richard WHATLEY d/b/a Whatley Flying Service, Appellee.
No. 13-00-753-CV.
Court of Appeals of Texas, Corpus Christi.
May 16, 2002.
Dissenting Opinion on Denial of Rehearing August 22, 2002.
Cynthia T. Sheppard, Cuero, John W. Griffin, Jr., Larry Elliott, Robert P. Houston, Houston, Marek & Griffin, Victoria, for appellant.
Charles A. Hood, Port Lavaca, for appellee.
*572 Before Chief Justice VALDEZ and Justices HINOJOSA and CASTILLO.
Dissenting Opinion on Denial of Rehearing En Banc August 22, 2002.
OPINION
Opinion by Justice CASTILLO.
Appellant Frank J. Pagel appeals from a trial court judgment in favor of appellee Richard Whatley, doing business as Whatley Flying Service ("Whatley"). Whatley's suit was based on Pagel's non-payment of an open account. Pagel filed a counterclaim, seeking damages for usurious interest charged on the account. After a bench trial, judgment was entered in favor of Whatley in his suit on the open account. A take-nothing judgment was entered disposing of Pagel's counterclaim, from which this appeal ensued. We affirm.
Factual Background
Richard Whatley is a self-employed farmer and owner of Whatley Flying Service, a crop dusting service, in business since 1966. Frank Pagel, a farmer, was Whatley's first customer and motivated Whatley to go into the business of crop dusting. Pagel employed his services during the period between 1992 and 1995 on an open account. Pagel would request crop dusting of fields on his farm, and Whatley would provide the service and bill him, sometimes charging him less than the normal rate. Pagel was to pay at a later date. All services performed were at Pagel's request. As of the time of trial, the principal outstanding balance due on Pagel's account was $7,971.69, which represented "more than reasonable" charges for the services rendered. Pagel last paid on the account on December 23, 1996.
Wanting Pagel to "just pay his bill" and after several visits to Pagel's home, Whatley told Pagel that he would "dismiss all service charge[s] and everything." Pagel told him that the service charge was too high, so Whatley agreed to take the service charges off the account and requested that Pagel make arrangements to pay with Whatley's attorney within the next month.[1] At that time, Pagel agreed to pay him 10% interest on the money owed. The agreement was not reduced to writing. Whatley waited the month and sent Pagel a "corrected statement of just the money that he owed me so that there would be no question about anything other than the principal that he owed me." Whatley explained that, in 1994, Pagel had agreed to pay him "whatever interest I normally charged," on the approximately $10,000 due on his account at that time, if Whatley would "finance him through" that season. Whatley agreed and completed a "credit statement," reflecting 18% per year which was his finance rate; however, Pagel never signed the document, despite Whatley's repeated attempts to have Pagel sign it. The statements that Whatley sent thereafter included the 18% annual interest charge on the account but that charge was ultimately deleted. Regarding billing Pagel at 18% interest, Whatley explained:
We have a computer, and it sends out a statement; and if a person agrees to pay the service charge that we charge, we have a little button. We push on it, and it puts an asterisk by its name, and it sends out the service charge to that person. If it does not have a service charge, we push the little button, and it takes it off. It doesn't even put it on there. So, he agreed to it, and we punched the computer.
* * *
My wife and I were both sitting in the office when he made the agreement, and *573 she can testify to that fact, too. She was there. She's the one that pushed the button.
* * *
He [Pagel] agreed to give me a written agreement, but he never gave it to me.
Charging 18% was Whatley's standard procedure, if he had "an agreement with a person." He knew that he needed a written agreement with Pagel in order to charge 18% interest. Whatley ultimately sued for the principal amount, attorney's fees, and pre-judgment interest.
On December 22, 1998, Whatley filed a lawsuit alleging that, after demand, Pagel had not paid for crop dusting products and services rendered at Pagel's request. Signed on the same date and attached to the original petition was Whatley's signed statement:
I, RICHARD WHATLEY, hereby certify that I was fully and completely informed by CHARLES HOOD of the possibility and consequences of a usury violation in regard to collection work he is doing for me, and told him to proceed.
Also attached were invoices and a ledger sheet reflecting debits and credits to the account.[2] The first and last debits to the account are dated July 16, 1992, and September 28, 1995, respectively. Reflected on the account are seven credits with the last three payments made in 1996, leaving a balance of $7,971.69.[3] No interest is shown on the ledger sheet.
On March 13, 2000, Pagel filed his counterclaim for usury. He alleged that "Whatley charged interest at the rate of 18% per annum and that there was no written or oral agreement authorizing such charge." Pagel also alleged he was "entitled to recover all sums paid to Whatley, plus three times the usurious interest charged, plus attorney fees and costs of court ... and that Whatley is not entitled to recover any sums from him as a result of such usurious conduct."
The Judgment
At the conclusion of the proceedings, the trial court stated:
Well, here's B what I've seen from the evidence is that there was an agreement, and that there was a bonafide error, and that there was a correction after that. I find for the plaintiff in this case.
In material part, the judgment was entered in favor of Whatley for "actual damages in the principal sum of $7,971.69" on his claim for damages against Pagel. A take-nothing judgment in favor of Whatley was entered against Pagel on his counterclaim for usury. The judgment awards pre-judgment interest at the rate of 6% per annum totalling $518.92. It further awards reasonable and necessary attorney's fees in the amount of $6,759.95 and post-judgment interest at the rate of 10% per annum.
The Complained of Findings of Fact and Conclusions of Law
Upon Pagel's timely request, the trial court filed its "Findings of Fact and Conclusions of Law."[4] Appellant complains of the following findings of fact:
6. After Defendant agreed to pay Plaintiff interest on the account, Plaintiff's *574 computer automatically began adding eighteen percent (18%) interest, the normal amount Plaintiff charged, but Defendant never signed and did not return it to Plaintiff.
14. Defendant was contacted by Plaintiff before limitations ran and the principal balance alone demanded by Plaintiff.
15. When Plaintiff contacted Defendant as referred to in Finding of Fact # 13, Plaintiff discovered a bona fide error had been made in is [sic] computer charging eighteen percent (18%) per annum interest, and first discovered Defendant would not sign and return to Plaintiff the credit agreement referred to in Finding of Fact # 5.[5]
17. Plaintiff's Original Petition, filed on December 22, 1998, and served on Plaintiff, had attached thereto an admission of usury and did not change [sic] any interest.
Appellant also complains about the following conclusions of law:
4. Plaintiff's charge of illegal interest was the result of bona fide and accidental error.
5. Plaintiff corrected its charge of illegal interest within sixty (60) days of its discovery and gave Defendant written notice of any violation before Defendant gave Plaintiff written notice of a usury claim or filed suit therefore [sic].
6. Defendant is entitled to take nothing on his counterclaim of illegal interest.
Issue Presented for Review
Pagel presents a single issue for our review. He complains that the trial court's findings of fact are not supported by legally or factually sufficient evidence and the conclusions of law are erroneous. More specifically, he states that: (1) Whatley's charge of usurious interest was not the result of bona fide and accidental error and (2) Whatley failed to statutorily cure his charge of illegal interest by giving appellant correction and notice of his usury violation. In effect, Pagel complains that the evidence was legally and factually insufficient to support the findings of fact and conclusions of law that Whatley established two statutory defenses.
Standard of Review
This is an appeal challenging the legal and factual sufficiency of the evidence of the written findings of fact and conclusions of law. In considering a factual sufficiency issue, we must review all the evidence in the record. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex.1996). Inferences may be used to support the judgment "so long as they are reasonable in light of all the evidence." Id. We will overturn a trial court's factual findings only if the challenged findings shock the conscience, clearly demonstrate bias, or are so against the great weight and preponderance of the evidence as to be manifestly unjust. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406-07 (Tex.1998). If those factual findings are found to be against the great weight and preponderance of the evidence, we must set aside the verdict and remand the cause for a new trial. In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951). We review a factual sufficiency issue in a bench trial using the same standard that we use in reviewing factual sufficiency following a jury verdict. K.C. Roofing Co., Inc. v. Abundis, 940 S.W.2d 375, *575 377 (Tex.App.-San Antonio 1997, writ denied).
Legal sufficiency issues following a bench trial are also reviewed in the same manner as legal sufficiency issues following a jury verdict. Id. We review a legal sufficiency challenge by considering all the evidence in the light most favorable to the prevailing party, indulging every reasonable inference in that party's favor. Formosa Plastics v. Presidio Eng'rs, 960 S.W.2d 41, 48 (Tex.1998); Norwest Mortgage, Inc. v. Salinas, 999 S.W.2d 846, 853 (Tex.App.-Corpus Christi 1999, pet. denied). A "no evidence" standard of review is applied when the party not bearing the burden of proof at trial challenges a finding of fact by arguing that the evidence is legally insufficient to support the finding. Hickey v. Couchman, 797 S.W.2d 103, 109 (Tex.App.-Corpus Christi 1990, writ denied). A legal sufficiency point may only be sustained when the evidence conclusively establishes the absence of a vital fact, the record discloses no more than a mere scintilla of evidence to prove a vital fact, or the court is bound by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact. Hines v. Commission for Lawyer Discipline, 28 S.W.3d 697, 701 (Tex.App.-Corpus Christi 2000, no pet.).
Conclusions of law are reviewed de novo and will be upheld if the judgment can be sustained on any legal theory supported by the evidence. Harlingen Irrigation Dist. Cameron County No. 1 v. Caprock Comm. Corp., 49 S.W.3d 520, 530 (Tex.App.-Corpus Christi 2001, pet. denied). We will not reverse an incorrect conclusion of law if the controlling findings of fact support a correct legal theory. Id. at 531. Nor will we reverse conclusions of law unless they are erroneous as a matter of law. Id. at 530-31.
Discussion
In his brief, Pagel asserts that the undisputed evidence in the case, including Whatley's admissions, shows that Whatley charged Pagel the illegal rate of interest of 18%. He adds that, although the trial court's findings acknowledge the charging of this illegal rate of interest, the trial court made the erroneous and unsupported findings that: (1) such charges were the result of bona fide and accidental error; and (2) such illegal charges were statutorily "cured" by Whatley's written notice and correction of such violation. Pagel complains that the trial court erred in finding excuse on the basis of two alternative defenses: (1) that the usurious charges were the result of bona fide and accidental error; and, (2) that Whatley "corrected" the illegal charges by sending a statement with the interest charges deleted and by giving written notice of the violation. Appellant concludes that neither of these defenses are supported by legally and factually sufficient evidence, and that the trial court's legal conclusions regarding the defenses are erroneous.
Whatley counters that usury was not charged and, even if charged, it was a result of accidental and bona fide error. He further states that he cured any complained-of error.
Pagel's counterclaim was based upon the relief accorded by section 305.001 of the Texas Finance Code, which provides:
(a) A creditor who contracts for, charges, or receives interest that is greater than the amount authorized by this subtitle is liable to the obligor for an amount that is equal to the greater of:
(1) three times the amount computed by subtracting the amount of interest allowed by law from the total amount of the interest contracted for, charged, or received; or,
*576 (2) $2,000 or 20 percent of the amount of the principal, whichever is less.
Tex. Fin.Code Ann. § 305.001 (Vernon Supp.2002).
Whatley's defense to that counterclaim was premised upon sections 302.002, 305.101, and 305.103(a) of the finance code. Section 302.002 provides, in relevant part:
If a creditor has not agreed with an obligor to charge the obligor any interest, the creditor may charge and receive from the obligor legal interest at the rate of six percent per year on the principal amount of the credit extended beginning on the 30th day after the date on which the amount is due and payable.
Tex. Fin.Code Ann. § 302.002 (Vernon Supp.2002).
Sec. 305.101 provides:
A creditor is not subject to penalty under this chapter for any usurious interest that results from an accidental and bona fide error.
Tex. Fin.Code Ann. § 305.101 (Vernon Supp.2002).
Section 305.103(a) provides:
A creditor is not liable to an obligor for a violation of this subtitle if:
(1) not later than the 60th day after the date the creditor actually discovered the violation, the creditor corrects the violation as to that obligor by taking any necessary action and making any necessary adjustment, including the payment of interest on a refund, if any, at the applicable rate provided for in the contract of the parties; and
(2) the creditor gives written notice to the obligor of the violation before the obligor gives written notice of the violation or files an action alleging the violation.
Tex. Fin.Code Ann. § 305.103(a) (Vernon Supp.2002).
There are two affirmative defenses to a claim for usury, corresponding to Pagel's complaints. Under the first defense, there is no penalty when usurious interest results from an "accidental and bona fide error." Tex. Fin.Code Ann. § 305.101 (Vernon Supp.2002); Tyra v. Bob Carroll Const. Co., 639 S.W.2d 690, 691 (Tex.1982). Under the second defense, liability is not imposed where the creditor gives written notice to the obligor of the violation before the obligor gives written notice of the violation or files an action alleging the violation. Tex. Fin.Code Ann. § 305.103(a) (Vernon Supp.2002).
"Curing" the Error
In his brief, Pagel correctly states that a creditor is not liable to an obligor for a usury law violation if the creditor (1) takes sufficient and timely corrective action, and (2) gives written notice of the violation to the obligor of the violation before the obligor gives written notice of the violation or files an action alleging the violation. Id. Pagel complains that the trial court's findings of fact and conclusions of law were erroneous because Whatley failed to statutorily cure his charge of illegal interest by giving him correction and notice of his usury violation.[6]
On cross-examination regarding written notice to Pagel about the interest charged "above the rate that you're allowed to charge," Whatley testified that his statement filed with the lawsuit was his notice. Upon further questioning, he agreed that the petition was his written notice to Pagel *577 that he had corrected the interest and admitted there was no other written statement regarding violation of the usury statute and taking steps to correct it. He testified that he "never received one nickel's worth of interest" from Pagel. In a November 1994 conversation, Pagel told him that "I've been in business before, and I know how not to pay you;" and he said, "If you file this lawsuit, I'm not going to pay you anything." Of the three checks that Pagel sent him, all amounts were applied to principal only.
Pagel was then called to testify. He agreed that he requested the products used and services Whatley performed and the charges were reasonable and necessary. He agreed that he had an outstanding balance on his account but did not know whether $7,971.69 was a reasonable and necessary charge. When asked, "Other than the usury claim, do you have any other defense to this lawsuit," he answered, "No, sir." On questioning by his counsel, Pagel agreed that there was not a written document allowing Whatley to charge 18% interest per year. Although Whatley and he "talked about" a charge for interest, "there was never any agreement" and no figure quoted. When he made payments in 1996, he did not know that they would be applied to principal only. He did not receive written notification from Whatley that the interest charged was usurious. Upon questioning by Whatley's counsel, he admitted agreeing to pay interest "but we never did talk about rates" and agreed to let Whatley charge him for interest. He acknowledged that Whatley's wife was present when the agreement was made. He admittedly did not sign Whatley's credit agreement. He conceded that prior to his attorney's letter regarding usurious interest, he had not made any claim that Whatley was charging illegal interest.[7] Pagel testified he had complained to Whatley that the interest was "awful high." When shown the exhibit, he admitted the ledger sheet "doesn't reflect interest on the invoices."[8]
The record further shows that, after several unsuccessful efforts to secure payment on the account, Whatley accepted that Pagel had not paid on the account and had not returned the executed credit agreement. Contrary to appellant's contention, Whatley corrected any usury violation by deleting charges of any interest whatsoever on the unpaid account, making demand for only the principal balance reflecting products and services rendered, and applying payments made to principal only, thereby satisfying the first prong of finance code section 305.103(a). Tex. Fin. Code Ann. § 305.103(a)(1) (Vernon Supp. 2002). In addition, the record before us establishes that by Whatley's statement attached to his original petition, he provided Pagel notice of the possibility and consequences of a usury violation. The sufficiency of the notice can reasonably be inferred by Pagel's actions after he received Whatley's written statement. First, we note that Pagel admittedly made no claim for a usury violation at any time prior to his attorney's letter dated over seven months after the lawsuit was filed *578 against him. Second, Pagel filed his counterclaim over fifteen months after receiving Whatley's statement. The trial court could reasonably infer that the statement was sufficient to prompt the counterclaim for usury where none had been urged previously.
Considering all the evidence in the record as is required for a review of factual sufficiency, we find that the findings of fact neither shock the conscience, nor demonstrate bias, and they were not against the great weight and preponderance of the evidence. See Ellis, 971 S.W.2d at 406-07; Ortiz, 917 S.W.2d at 772.
Viewing all the evidence in the light most favorable to Whatley as the prevailing party, indulging every reasonable inference in his favor, we hold that the evidence was legally sufficient to establish that Whatley contacted Pagel before limitations ran and demanded the principal balance alone, as the trial court found. See Formosa Plastics, 960 S.W.2d at 48.
We also find that the trial court did not err in entering the conclusions of law as Whatley established his excuse as a matter of law. See Harlingen Irrigation Dist. Cameron County No. 1, 49 S.W.3d at 530.
Because we have found that Whatley conclusively established an affirmative defense to the counterclaim under section 305.103(a) of the Texas Finance Code, we need not address whether he also established a defense of "bona fide and accidental error." Tex.R.App. P. 47.1.
We note that Pagel does not address the sixty-day requirement in section 305.103(a)(1) of the Texas Finance Code, and he does not address conclusion of law number 6, which states, "Defendant is entitled to take nothing on his counterclaim of illegal interest." Therefore, Pagel has waived any error related to these issues.[9]
Conclusion
We overrule Pagel's sole issue and affirm the judgment of the trial court.
Justice DORSEY, dissenting on motion for rehearing en banc.
I believe the panel erred in determining that Whatley gave Pagel the required statutory written notice of his usury violation. The notice is required in order to maintain the statutory defense to usury. Whatley merely attached to his petition a note that he, Whatley, had been notified by his lawyer of "the possibility and consequences of a usury violation." That is not notice to Pagel that Whatley violated the statute. I would grant rehearing and reverse.
Whatley sued Pagel for non-payment of an open account for crop-dusting services. Pagel filed a counterclaim against Whatley, seeking damages for usurious interest charged on the account. Pagel's counterclaim alleged that "Whatley charged interest at the rate of 18% per annum and that there was no written or oral agreement authorizing such charge." The trial court entered a judgment in favor of Whatley on his claim for damages against Pagel, and it entered a take-nothing judgment against Pagel on his counterclaim for usury.
One of Whatley's defenses to Pagel's counterclaim is found in the Texas Finance Code, which states:
(a) A creditor is not liable to an obligor for a violation of this subtitle if:
(1) not later than the 60th day after the date the creditor actually discovered the violation, the creditor corrects the violation as to that obligor by taking any necessary action and making any necessary adjustment, including the payment of interest on a refund, if any, at the *579 applicable rate provided for in the contract of the parties; and
(2) the creditor gives written notice to the obligor of the violation before the obligor gives written notice of the violation or files an action alleging the violation.
Tex. Fin.Code Ann. § 305.103(a) (Vernon Supp.2002). Accordingly the issue in this case is whether Whatley's statement attached to his original petition meets the requirements of section 305.103(a)(2) and, therefore, qualifies as a defense to Pagel's counterclaim for usury. Whatley's statement provided:
I, RICHARD WHATLEY, hereby certify that I was fully and completely informed by CHARLES HOOD of the possibility and consequences of a usury violation in regard to collection work he is doing for me, and told him to proceed.
The majority found that Whatley, by this statement, conclusively established an affirmative defense to the counterclaim under section 305.103(a)(2), stating
the record before us establishes that by Whatley's statement attached to his original petition, he provided Pagel notice of the possibility and consequences of a usury violation. The sufficiency of the notice can reasonably be inferred by Pagel's actions after he received Whatley's written statement. First, we note that Pagel admittedly made no claim for a usury violation at any time prior to his attorney's letter dated over seven months after the lawsuit was filed against him. Second, Pagel filed his counterclaim over fifteen months after receiving Whatley's statement. The trial court could reasonably infer that the statement was sufficient to prompt the counterclaim for usury where none had been urged previously.
Pagel filed a motion for rehearing en banc, stating that this Court found that Whatley, appellee,
proved as a matter of law, that he is entitled to the statutory defense of cure to his usury violation. The Court's basis for this holding is the fact that Appellee, after charging Appellant illegal usurious interest for four years, filed a lawsuit that itself did not include any interest charges, along with an attached affidavit stating that he understood the consequences of a possible usury violation and instructed his lawyer to proceed anyway.
(emphasis in original). Pagel argues that Whatley's statement had absolutely nothing to do with any intent on Whatley's part to notify him of a usury violation. I agree.
Construing Section 305.103(a)(2)
Our objective when we construe a statute is to determine and give effect to the Legislature's intent. Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 484 (Tex.1998). We accomplish that purpose, first, by looking to the plain and common meaning of the statute's words. Id. We must also view a statute's terms in context and give them full effect. Id. Section 305.103(a)(2) requires the creditor to give "written notice to the obligor of the violation. ..." (emphasis added). Whatley's statement stated only that he had been advised of the possible consequences of a usury violation. However the plain and common meaning of the statute's words required Whatley to give Pagel written notice "of the violation", and not a possible violation. Nowhere in Whatley's pleadings or attached statement did Whatley admit or notify Pagel that he had actually violated the usury statute, a requirement under section 305.103(a)(2). See Tex. Fin.Code Ann. § 305.103(a)(2) (Vernon Supp.2002).
The question here is whether a creditor, Whatley, upon discovering he has committed usury, has taken timely and sufficient steps to cure it by correcting it and notifying the debtor in writing that he had violated *580 the statute. See id. I perceive the statute to address primarily inadvertent charges of usury, so in order to avoid the statutory penalties, the one charging excessive interest can confess the violation and delete the charges. The inference that the affidavit notified Pagel of the usury violation cannot be derived from the fact that Pagel later counterclaimed for the penalties. It has been recognized by the Texas Supreme Court in a unanimous opinion in Steves Sash & Door Co. v. Ceco Corp., 751 S.W.2d 473 (Tex.1988), "that since the time of the Code of Hammurabi (around 1800 B.C.) legislatures have imposed exceedingly harsh penalties for usury." Id. at 476. The statutes that the legislatures have enacted, which are penal in nature, are enacted for the protection of those who owe money. They were enacted for the prevention of unjust oppression by unscrupulous persons who are ready to take undue advantage of others. Risica & Sons, Inc. v. Tubelite, 794 S.W.2d 468, 470 (Tex.App.-Corpus Christi, 1990), aff'd, 819 S.W.2d 801 (Tex.1991).
I would grant the motion for rehearing.
NOTES
[1] Fred Turner, an attorney, had written Pagel a letter "requesting him that he pay his bill." Whatley testified he personally had requested payment several times throughout the four-year period.
[2] The petition was admitted as an exhibit at the trial. The ledger sheet was admitted as a separate exhibit.
[3] The credits reflect as follows: 11/18/92 $500; 2/3/93 $240.23; 2/5/94 $73.60; 7/2/95 $324.50; 4/7/96 $2,000; 6/28/96 $1,000; 12/23/96 $4,000.
[4] Tex.R. Civ. P. 296.
[5] Finding of fact number 5 states: "Plaintiff sent Defendant a written credit agreement memorializing Defendant's agreement to pay eighteen percent (18%) per annum service charges to Defendant's statements" (emphasis in the original). Finding of fact number 13 states: "Plaintiff never collected any interest or applied payments to interest; all of Defendant's payments were applied to old principal balances."
[6] Specifically, Pagel challenges findings of fact numbered 14, 15, and 17 as well as conclusions of law numbered 5 and 6.
[7] Admitted as an exhibit at trial, a letter dated July 7, 1999, from Pagel's counsel advised Whatley's counsel of a claim for usury. Whatley was cross-examined about the letter, which was received after he filed his lawsuit, acknowledging he had reviewed it with his attorney and instructed his attorney to proceed with the case. On March 13, 2000, Pagel filed his counterclaim for usury.
[8] The account balance reflected on the ledger sheet is "7971.69" and reflects a carryover balance from 1995 in the amount of "14971.69." The exhibit shows that in 1996, Pagel made payments in the amounts of $2,000, $1,000, and $4,000. No other payments are reflected thereafter.
[9] In addition, we note that the record affirmatively establishes that, well before the lawsuit was filed, Whatley deleted the 18% interest altogether. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1787824/ | 355 So. 2d 963 (1977)
Mrs. Violet M. DERBOFEN, wife of Gail T. Kreher, and Mrs. Florence Juncker, widow of Dr. John C. Derbofen
v.
T. L. JAMES & COMPANY, INC., Succession of Joe W. Brown, No. 368-953, Civil District Court, Orleans Parish of Louisiana, Mrs. Dorothy Dorsett Brown, Individually and as Testamentary Executrix of the Succession of Joe W. Brown, George Dallas Williams, Sabine Dredging and Construction Company, Inc., and T. M. Dorsett.
No. 7126.
Court of Appeal of Louisiana, Fourth Circuit.
October 20, 1977.
Writs Refused May 5, 1978.
*964 John M. Mamoulides, Gretna, Gail T. Kreher and Abbott J. Reeves, New Orleans, for plaintiffs-appellees.
Hurley, McNulty & Stakelum, Paul E. Hurley and P. J. Stakelum, III, New Orleans, for defendants-appellants.
Before SAMUEL, LEMMON, BOUTALL, SCHOTT and BEER, JJ.
LEMMON, Judge.
DECREE
The result of the attached opinions, stating the votes of the members of the fivejudge panel on the merits of this case and the reasons therefor, is a judgment for plaintiffs in the amount of $1,494.00, plus legal interest from October 30, 1958, and all costs in both courts.
LEMMON and BEER, JJ., concur in the decree and assign reasons.
SCHOTT, J., concurs in the decree only and assigns reasons.
BOUTALL, J., dissents from the decree and assigns reasons.
SAMUEL, J., concurs in part and dissents in part and assigns reasons.
LEMMON and BEER, JJ., vote to amend and affirm on the merits and assign reasons.
BOUTALL, J., votes to affirm and amend on the merits and assigns reasons.
SCHOTT, J., dissents on the merits and assigns reasons.
LEMMON and BEER, Judges, concur in the Decree and assign reasons.
The members of the five-judge panel have taken different points of view as to why the five votes (stated in the attached opinions on the merits) result in a judgment for plaintiffs in the amount of $1,494.00. We therefore state our reasons for agreeing or disagreeing with the decree separately from our divergent opinions on the merits of the case.
A defendant had appealed from a judgment for plaintiffs in the amount of $183,112.30. On appeal we (Judges Lemmon and Beer) voted for judgment for plaintiffs in the amount of $1,494.00, Judges Samuel and Boutall voted for judgment for plaintiffs in the amount of $199,637.50, and Judge Schott voted for judgment for defendant.
In our view there are two reasonable approaches to the decision that these votes result in the stated decree. One point of view is that since defendant sought relief by appeal, the effect of Judge Schott's vote, combined with our votes, is to grant that relief, at least to the extent of a reduction of $181,618.30. Under this view the effect of Judge Schott's vote for the ultimate reduction (to zero) resulted in three votes concurring to reduce by $181,618.30 to $1,494.00, since a vote for a greater reduction encompasses a vote for a lesser reduction.
The other point of view is that there are four votes to award a judgment to plaintiffs, and the effect of the votes of Judges Samuel and Boutall to award judgment in the amount of $199,637.50, combined with our votes, is to award a judgment of at least $1,494.00, since a vote for a greater award includes by inference a vote for at least the lesser award.
Either point of view appears plausible to us. We agree that the result of our votes is a judgment for plaintiff for $1,494.00, and it matters not whether one voter believes another's vote caused this result. There is no doubt as to the decree, and the disagreement as to why this decree resulted from the votes does not affect the decree itself.
SCHOTT, Judge, concurring in Decree only.
Because this court is required to sit in panels of at least three judges and five under the circumstances present in this case, and because a majority must concur to *965 render a judgment, Art. 5, § 8, Constitution of 1974, we are presented with somewhat of a riddle in deciding what decree has emerged from the diverse opinions of the judges who have participated in the case.
The judgment of the trial court is in favor of plaintiffs and against defendants for $183,112.30. I would reverse this judgment and dismiss plaintiffs' suit. All of my colleagues agree that the judgment should be affirmed but two would amend the amount to $1,494.00, while the other two would amend the amount to $199,637.50. Since the lesser amount is included in the greater, all four concur in an award of $1,494.00.
Nevertheless, Judges Samuel and Boutall will not sign the decree awarding plaintiffs $1,494.00, and while they have espoused good reasons for this decision I submit with all due respect to my colleagues that they are in error. In my opinion, by their decision, Judges Samuel and Boutall have unintentionally concurred in the award made by Judges Lemmon and Beer for $1,494.00, and that has become the judgment of the majority of this court.
The result reached in this case is indeed bizarre with the one judge of this court who would reverse the judgment of the trial court and dismiss plaintiffs' suit, being required to join in a decree which effectively affirms the judgment of the trial court. But I perceive the effect of the judgment of two of my colleagues differently than they do. The case must be decided by the court of which I am a member, and it is the decree of the court in which I concur, although I am convinced that my basic position is correct, i. e., the judgment should be reversed and plaintiffs' suit dismissed.[1]
BOUTALL, Judge, dissenting from Decree.
The result of our consideration of this case before a 5 man panel is that 2 judges would decrease the award in plaintiff's judgment, 2 judges would increase the award, and 1 judge would reverse the judgment, granting plaintiff nothing. The Constitution of 1974 Art. 5 § 8(B) requires "a majority must concur to render judgment." Is there such concurrence here?
In all cases before the courts of appeal the basic inquiry is whether the trial court judgment is correct. This judgment can only be modified or reversed by a majority vote. When a judgment is modified by the Court, the starting point of the modification is the judgment itself. Thus, when the judgment awards money and the modification is quantum, an effective decree is produced when a majority concurs at the least amount of the reduction or the least amount of the increase. See for example Lowe v. Gentilly Dodge, Inc., 342 So. 2d 1231 (La.App. 4th, 1977). To some degree this principle supports the same basic principles behind cases like Coco v. Winston Industries, Inc., 341 So. 2d 332 (La.1976) in the setting of damages.
In this case it could be said that 4 judges have concurred that plaintiff is entitled to recover, but what shall he recover? Here, 2 judges have said the award shall be decreased and 2 have said the award shall be increased. The disparity in the amounts of award is not simply a dispute over discretionary general damages as per C.C. Art. 1934(3), but is caused by dispute over the legal basis for setting the award. Thus I say that I do not concur in the proposed decree and that this case should be placed before the court en banc for consideration. The amount I would award is so close to the trial judgment that I could conscientiously affirm it, but I cannot concur in the proposed decree.
Prior constitutional provisions have provided methods of appointing other judges or attorneys in order to arrive at a majority concurring. Our present constitution does not so provide but neither does it limit us to panels of three judges or five judges. Under our inherent powers we can sit en banc and hopefully reach a majority. See Dauzat v. Allstate Insurance Co., 257 La. 349, 242 So. 2d 539 (La.1970).
*966 However, three judges have now concurred in a decree for expressed reasons, so that the constitutional mandate has been fulfilled. While I do not approve of the third judge's reasons, I do commend him for moving this ancient case forward to final resolution.
SAMUEL, Judge, concurring in part and dissenting in part.
I agree with the reasons expressed and the conclusions reached in the "Affirming and Amending on the Merits" opinion of Judge Boutall. Accordingly, I concur in the majority decree that plaintiffs are entitled to recover additional damages, but I dissent from that portion of the now majority decree which awards only $1,494 as I would set those damages at $199,637.50 as does Judge Boutall.
In addition, because my fellow judges on the panel have stated their views as to what the decree would be if Judge Schott had not concurred in the now majority decree and despite the fact that such opinions are dicta, I feel it necessary to give my own views on that question.
With reference to the Louisiana Courts of Appeal, Article 5, Section 8(B) of our 1974 Constitution specifically provides that a majority of the judges sitting in any case "must concur to render judgment" (emphasis added). As I see it, "concur" means and requires an affirmative action on the part of the concurring judge.[1] In other words, in order for a judge to concur in a decree he must affirmatively say he concurs. Thus, when the conclusions of this five judge panel were two for a $199,637.50 award, two for a $1,494 award and one for no award, the result was no judgment at all. Certainly, it cannot be said that I concurred in a decree awarding $1,494 because in my opinion the award should be $199,637.50 simply because the greater includes the lesser, or on any of the other various views expressed by my colleagues, when I did not concur in the lesser amount and actually dissented therefrom. The decree in this case is now a majority decree and the judgment of the court simply because Judge Schott has stated he concurs in the $1,494 award, a concurrence deserving commendation because it brings this too long delayed matter to an end as far as this court is concerned.
ON THE MERITS
LEMMON and BEER, Judges, amending and affirming on the merits.
This litigation involves a trespass by agents of T. L. James & Company onto plaintiffs' property in the course of dredging operations. This suit is the second filed by plaintiffs, and this appeal is the third time the matter has come before this court. Although the record is voluminous, the facts pertinent to this appeal are virtually undisputed, and the issues now before us are essentially legal ones, being (1) whether the plaintiffs under the circumstances of this case can recover an additional award in this second suit after a judgment in the first suit has already granted an award for the trespass, and (2) if so, the proper method of determining the amount of the award.
Facts
In the early 1950's plaintiffs owned a five-acre tract of land, known as Grove 57, in eastern New Orleans. The land was generally low and subject to tidal overflow, and the area was largely uninhabited.
Having contracted to construct the base for Interstate Highway 10 in the vicinity of Grove 57, T. L. James negotiated an agreement with the owner of an adjoining tract of land, who desired to have a lake dug on his property. The contractor dredged the lake in 1957 and utilized most of the excavated material in the construction of the road base, compensating the owner for the material on an agreed basis. During the course of the dredging, the contractor inadvertently dredged completely across the center of Grove 57, excavating about 80,025 *967 cubic yards of fill material over a surface area of 2.236 acres.
When plaintiffs learned of the trespass, they filed a suit in 1958, seeking to recover damages itemized (1) for removal of the soil at an asserted price per yard, (2) for destruction of trees and vegetation, and (3) for loss of use and enjoyment, reserving the right "to claim future damages for the continuing trespass". The suit also demanded that the court order T. L. James to restore the property to its former condition, reserving the "right to claim damages for indemnification of necessary expenses to be incurred on account thereof in the event of defendants' failure to so do".
The trial court found the admitted trespass was in good faith and rendered a judgment for $6,044.00 against T. L. James. Noting that the sole issue was the quantum of damages to be awarded for the trespass, the court awarded damages based on "the difference in the market value of the property as a whole before and after the injury".[1]
Plaintiffs appealed, and this court granted a higher award, taking a different view of the measurement of damages. After mentioning plaintiffs' request for restoration of the property (noting "they have asked for no alternative moneyed judgment for this") and their two reservations of "rights", the court concluded "the only item of damages we can consider is the value of the dirt in place on plaintiffs' property at the time it was removed".[2] (Emphasis supplied) The court then awarded plaintiffs 20 cents per yard, or $16,005.00, based substantially on T. L. James' net profit on the dirt removed in the entire project. The court further amended the judgment to reserve "plaintiffs' right to sue for future damages as prayed for in their petition . . . ." See 148 So. 2d 795 (La.App.1962).
After applying unsuccessfully for a rehearing, plaintiffs did not seek review of our judgment, but immediately filed the present suit, alleging they had been "damaged by the continuing trespass" and claiming "damages for indemnification for necessary expenses to be incurred" for removal of the water and restoration of the original contour, for engineering and other fees, and for loss of use to date.
After extensive periods with little action, an exception of prescription was filed and was maintained by the trial court. On appeal from the judgment maintaining the exception, this court reversed, holding that since the same cause of action was asserted in each suit, prescription had been interrupted by the filing of the first suit.[3] See 274 So. 2d 734 (La.App.1973).
On remand, the case was tried on the merits, and in December, 1974 judgment was rendered against T. L. James. The trial court, reasoning that plaintiffs "have the right to damages for the trespass" and that the trespass had continued up to the date of trial, determined that those damages should be measured by the 1974 value of the portion of Grove 57 injured by the 1957 dredging. Since 97,400 square feet of Grove 57 was covered by water and since fully developed estate sites in the prestige subdivision then surrounding Grove 57 sold for as high as $1.88 per square foot, the court set the damages at $183,112.30.[4]
That judgment is now before us for review.
*968 Continuing Tort
The trial court erred in finding that a continuing trespass existed 17 years after the dredging operations were completed.
A continuing tort is one in which the damage-causing act continues over a period of time.[5]DiCarlo v. Laundry & Dry Cleaning Service, 178 La. 676, 152 So. 327 (1933). A continuing trespass must be distinguished from a trespass which causes continuing injury by permanently changing the physical condition of the land. See Restatement, Second, Torts § 162, Comment e (1965).
When a trespass which permanently changes the physical condition of the land is concluded, no additional causes of action accrue merely because the damage continues to exist or even progressively worsens. Griffin v. Drainage Commission, 110 La. 840, 34 So. 799 (1903). The problem in this case, therefore, is one of measuring damages at the time the dredging operation was concluded, and not one of assessing damages for successive causes of action accruing because of a continuing tort.[6]
We conclude that there was no continuing tort in this case after the dredging operation was completed. Plaintiffs' right to recover an additional award in this suit therefore depends upon the effect of the reservation of rights recognized by the prior panel of this court.
Exceptions of Res Judicata, Estoppel by Judgment and Improper Division of an Obligation
T. L. James initially reurges its exceptions which were overruled by the trial court.
For the exception of res judicata to apply, the demand must be between the same parties and founded on the same cause of action, and the thing demanded must be the same. C.C. art. 2286.
Concededly, the demand in this case is between the same parties who were involved in the earlier action. Since we have concluded there was no continuing tort beyond 1957, the test of identity of causes of action is also met.[7] Finally, the thing demanded in both suits was reparation of tort-caused injury, and it would appear at first blush that relitigation of that demand is barred by res judicata.
As to the tort obligation, C.C. art. 2315 obliges him whose fault caused damage to repair it. Plaintiffs' petition in the first suit itemized only some of the cost of reparation due under the tort obligation imposed on T. L. James by C.C. art. 2315, but failed to itemize a cost for restoring the property, attempting instead to reserve the right to demand this item of damages later.[8]
However, at the first trial the pleadings were expanded when both parties introduced evidence without objection as to the cost of restoring the property to its original condition. Either the trial court (under C.C.P. art. 862) or the appellate court (under C.C.P. art. 2164) could have decided the issue of whether plaintiffs should be awarded the cost of restoration as an item of damages. However, this court did not either grant or deny recovery of the cost of restoration, but specifically declined to adjudicate *969 that issue, although it was properly before the court.[9] Furthermore, in the decree this court reserved "plaintiffs' right to sue for future damages as prayed for in their petition".[10]
Considered together, this court's refusal to adjudicate the issue and our reservation of plaintiffs' rights "prayed for in the petition" could reasonably have led plaintiffs to believe that they had the option of seeking certiorari or of filing an itemized demand for the cost of restoration by either a supplemental petition or a second suit.
Res judicata cannot apply to issues which a previous panel of this court has refused to adjudicate, and it would be patently unfair for this panel to apply the doctrine of res judicata. Because of these unusual circumstances, we reluctantly conclude that the exceptions were properly overruled.
Method of Determining Award
Plaintiffs argue that under C.C. art. 508 they had the right to demand "demolition of such works", and they contend the article gives them the right to demand removal of the lake and restoration of the property to its original condition.[11]
We reject the applicability of C.C. art. 508, which is found in Title IIOf Ownership, Chapter 3Of the Right of Accession to What Unites or Incorporates Itself to the Thing, and Section 1Of the Right of Accession in Relation to Immovables. This case does not involve the right of accession, and neither is the ownership of the lake involved. In our view this case involves reparation of tort-caused damages to property.
The basic concept of tort reparation required by C.C. art. 2315 is that the tort victim should be restored, as nearly as possible according to the particular circumstances of each and every case, to the position he enjoyed prior to the tort-caused damage. No hard and fast rule can be formulated for reparation of every tort victim, and each case must be decided equitably under its own particular facts and circumstances.
In the present case plaintiffs (and the heirs of some plaintiffs) had purchased the five-acre tract of land as an investment, and at the time of the tort plaintiffs were still holding the land for investment purposes. None of the plaintiffs had ever seen the land prior to the tort because of the physical character of the general area in which the land was located. Significantly, there was a considerable amount of similar undeveloped land in the area which was on *970 the market at the time and available for investment purposes.
Under these circumstances we believe that the damage to plaintiffs' investment property could most justly be repaired by awarding the full value of the virtually destroyed property so that plaintiffs could replace their land held for investment with other similar land in the area, which they could likewise hold for investment.[12] Additionally, plaintiffs would be entitled to any other damages sustained, such as loss of use during a reasonable period to allow replacement, but no such damages were proved in this case.[13]
Therefore, as of the date of judicial demand, October 30, 1958, T. L. James was obliged (if ultimately cast in judgment) to pay plaintiffs the 1957 value of the property. Because of the peculiar procedural circumstances of this case, that obligation still remains unpaid in part. Nevertheless, although the value of property in this area has become greatly enhanced, plaintiffs are not entitled to an award of the enhanced value of the property because T. L. James failed to pay the cost of reparation upon judicial demand and prior to judgment.[14] While plaintiffs are entitled to interest from the date of judicial demand, they are entitled to judgment only in the amount of the 1957 value of the property. Of course, T. L. James is entitled to a credit for the amount previously paid in accordance with an earlier judgment of this court awarding partial reparation.
The value of the property in 1957 was $17,500.00.[15] The previous award by this court was $16,006.00. Accordingly, the judgment in this case should be the difference between the two sums, or $1,494.00, plus interest from the original date of judicial demand.[16]
We vote to render judgment accordingly.
BOUTALL, Judge, affirming and amending on the merits.
I would affirm the judgment appealed as to plaintiffs' right to recover damages, but *971 I disagree with the basis of the award and would amend the judgment only to increase the amount awarded.
The basic issue in this case is the right of an owner of immovable property to compel a trespasser to take away or demolish a structure installed by the trespasser and the measure of damages for failure to do so under the provisions of Louisiana Civil Code Article 508. The issue has been compounded by the various pleadings and procedural steps as set out in the majority opinion.
There is no need here to recount these events, and I refer to the opinion authored by Judge Lemmon as well as our prior opinions in Derbofen v. T. L. James & Co., 148 So. 2d 795 (La.App.1962) and Kreher v. T. L. James & Company, Inc., 274 So. 2d 734 (La.App.1973). Suffice it to say that in the original petition filed by plaintiffs there were allegations in support of a prayer for relief requiring that the defendants remove the lake built upon plaintiffs' lands, and that, upon defendants' failure to remove the lake, monetary damages be assessed.
In our 1962 decision, at 148 So. 2d 797, the court made the following statement:
"It will be noted that the plaintiffs in addition to reserving their rights to claim future damages for the continuing trespass, as set forth, also pray that the defendants be required to remove the water standing on their property and reserve their right to claim damages for indemnification of necessary expenses to be incurred on account thereof in the event the defendants failed to do so. They have set no monetary value on this and pray for none."
In that same 1962 decision, at page 800, the decree reads:
"For the reasons assigned, the judgment of the lower court is amended by increasing the award to plaintiffs to $16,005, and by further reserving plaintiffs' right to sue for future damages as prayed for in their petition; in all other respects the judgment is affirmed."
A reading of that judgment, emphasized by the above quotations, makes it clear that the reservation of plaintiffs' right to sue for future damages included not only future damages for continuing trespass but also plaintiffs' right to claim damages for indemnification of necessary expenses to be incurred in the event defendants failed to remove the water standing on their property.
Neither form of relief is now banned, as defendants argue, by either res adjudicata or estoppel by judgment. Neither party to that appeal applied for writs of certiorari or review to the Supreme Court and that judgment became final and definitive, acquiring the authority of the thing adjudged. C.C.P. Article 1842. Since the parties in that appeal are also the parties presently before the court, that judgment became the law of the case controlling the litigation between the parties. Day v. Campbell-Grosjean Roofing & Sheetmetal Corp., 260 La. 325, 256 So. 2d 105 (La.1972). It would be an evident injustice to prevent plaintiffs from prosecuting those rights which they had in the first case and urged before the court, when the court, instead of ruling directly upon that issue, reserved their right to seek damages anew.
Despite allegations of continuing trespass to plaintiffs' land and mandamus to order removal of the water, plaintiffs' rights are encompassed by the provisions of Louisiana Civil Code, Article 508. The facts are simply that a contractor entered a contract with an adjoining landowner to remove soil from a certain portion of that landowner's property and create a lake for his enjoyment. The edge of the lake was dug in such a manner that it proceeded through the middle of the plaintiffs' tract of land and protruded into property on the other side. Plaintiffs had the perfect ownership of the violated property, and as such had the right to use and enjoy it in the most unlimited manner. Civil Code Article 491. Ownership of the land carries with it the ownership of all that is directly above and under it. Civil Code Article 505. This article accords to the owner the right of constructing below the soil all manner of works, digging as deep as he deems convenient, and to draw from these constructions *972 all the benefits which may accrue. All the constructions made within the soil are supposed to be done by the owner. Article 506.
When a third person makes such constructions, the owner of the soil has the right to keep them or compel this person to take away or demolish the same. Article 508. In accordance with that article if the owner requires the demolition or removal, this shall be accomplished at the expense of the person who made the construction without any compensation, and such person may be sentenced to pay damages, if the case require it, for the prejudice which the owner of the soil may have sustained.[1] The construction of a lake upon the property of plaintiffs is encompassed within the provisions of the above cited articles. The owners are thus accorded the right to demand its removal or compensation for the necessary expenses which may be required to remove it. The owners cannot be required to keep the construction upon their property in derogation of our Codal law. They have a right to the full enjoyment and use of the property and cannot be compelled to use a portion of it as a lake against their wishes.
The position taken by two judges herein is that the landowners are only entitled to damages commensurate with the value of the property. While tortious acts of man may require reparations under Civil Code Article 2315, which have been limited to value of replacement in fungible items, this is not such a case. Article 508 requires removal and damages, not compensation of value. To hold that an owner is entitled only to compensation to the extent of the value of the property is to require that he use his property only as someone else should dictate to him, and amounts to a taking of property in violation of Constitution of 1921, Article 1, § 2. Private property cannot be taken or damaged except for public purposes. In our 1962 decision, we pointed out that the trial court was in error in considering the market value of the property in its determination of loss. A private individual or corporation such as defendant here has no expropriation authority permitting it to pay value of real estate taken contrary to the owners' wishes. There is no basic difference between a third party coming upon an owner's property and erecting a building above ground which would deprive him of use of half of his property or constructing a lake which deprives the owner of the use of half of his property. In either case the owner has an absolute right of requiring removal or expenses of removal in the event of failure to remove.
The defendants have refused to remove the lake they have constructed, and the only apparent basis for their refusal to do so is the expense involved. The original dredging of the lake occurred some time in 1957, suit was filed in 1958, and the matter has been dragging through the courts ever since. The record reflects the enormous increase in the cost of restoring the property from that time down to the latest trial from which this appeal springs. However, the owners are prevented from obtaining present day expenses for two reasons; 1.) an injured person must mitigate his damages and thus he cannot wait a long period of time after his demand of restoration so that his damages would increase; and 2.) a large part of the elapsed time was due to voluntary negotiations between the parties, and plaintiffs may not take advantage of their voluntary granting of negotiating time. The expense of restoration in this case should be fixed at the time of the original demand.
The record discloses sufficient evidence to make this determination, there having been a vast difference between the owners and the defendants as to the amount necessary to restore the property. The owners introduced evidence to show that restoration would require the placement of 162,666 cubic yards of fill at $1.41 per cubic yard, plus $17,000 for the work required to shape the fill into place or a total cost of $246,359.04. *973 The defendants on the other hand have introduced evidence to show that 125,000 cubic yards of fill were necessary at a cost of $36,000 (presuming free fill obtainable).
The proposition put forth by T. L. James was based upon availability of its equipment in the area and its ability to obtain free fill from an adjoining landowner. Its proposition cannot be considered as a true basis for costs of a restoration that it will take no part in. Instead, the record discloses that T. L. James's contract for furnishing the excavated fill to the highway department at $1.50 per cubic yard cost it $1.4611 per cubic yard. Using these figures for yards of fill and costs, a more accurate and realistic amount of cost is $182,637.50, to which should be added the $17,000 deemed necessary by plaintiffs for handling of the fill, or a total of $199,637.50.
The major difference between these two totals is the amount of fill necessary. While there is no disagreement basically as to the amount necessary to fill the hole on plaintiffs' property, the difference arises because of the angle of slope or repose necessary to hold the fill in place against continued wave wash from the lake. There is no evidence showing the lesser protection plan of defendants to be inadequate. Thus, I would fix the amount necessary to remove the illegal structure at $199,637.50. In view of our prior decision, I would fix interest at the legal rate beginning with the judicial demand in the present suit.
SCHOTT, Judge, dissenting.
I would not allow plaintiffs to recover under either one of the theories adopted by my colleagues because the exception of res judicata bars plaintiffs from such recovery.
When this case was before this court the last time, 274 So. 2d 734, the court discussed the merits of defendants' exception of res judicata at p. 739, and declined to pass on the exception because the appeal was limited to one from a judgment on an exception of prescription and in any event there was no evidence relative to the exception of res judicata. The court said:
". . . Under these circumstances a determination of those exceptions [judicial estoppel or res judicata] at this time would require speculation on our part. Facts established on the trial of the merits might bar plaintiffs from some of the items of damages they claim and such facts are not sufficiently apparent on the record before us." (Emphasis supplied)
Two of my colleagues would award plaintiffs the cost of removal of the water from and restoration of the contour of their land. Significantly they arrive at the amount of damages based upon the evidence taken at the first trial of this case which was on appeal to this court in 1962, 148 So. 2d 795. My colleagues would now award to plaintiffs the very same amount which plaintiffs sought and which this court in 1962 declined to award.
A review of that first case shows that plaintiffs sought to recover three items of damage: First, the removal of dirt from their land; second, the destruction of vegetation and trees; and third, deprivation of the full use and enjoyment of the premises to that date. The court found that the evidence was insufficient to support an award to plaintiffs for the destruction of vegetation and trees. As to the deprivation of the full use and enjoyment of their premises, the court noted that plaintiffs did not allege that they were deprived of any of their property but only that a large portion of their property was covered by a lake. The court further noted that plaintiffs did not ask for severance damages or for damages by reason of a diminution in value of their property. They did ask that defendants be enjoined to remove the water standing on their property, but they asked for no alternative monied judgment for this item. All of the evidence as to the amount of money it would have taken to restore plaintiffs' property was then before the court, but the court declined to make the award because plaintiffs had failed to ask for this alternative relief. The court then concluded that "the only item of damages we can consider is the value of the dirt in place on plaintiffs' property at the time it was removed."
*974 By taking this action it appears to me that the court effectively adjudicated plaintiffs' rights with respect to any and all then existing and present damage which plaintiffs suffered. As a consequence, the court decreed that plaintiffs were entitled to an award of $16,005 for the value of the dirt removed, and the decree included the reservation in plaintiffs' favor "reserving plaintiffs' right to sue for future damages as prayed for in their petition."
I would paraphrase this decree as reserving to plaintiffs the right to sue for those damages which they would suffer in the future but limited to the extent that they prayed for such future damages in their petition. By reference to their petition, plaintiffs prayed as follows:
". . . and reserving the right to petitioners herein to claim future damages for the continuing trespass as set forth above, and that defendants herein be required to render and make petitioners' property safe and secure from future damage, and to remove water standing thereon, and generally undo the wrong which they have done, reserving to petitioners their right to claim damages for indemnification of necessary expenses to be incurred on account thereof, in the event of defendants' failure to do so;. . ."
In the first place, the presence of the lake on plaintiffs' property with the damage they suffered by reason of defendants' failure to remove the lake had already occurred, and it could not become a future damage when it was already in existence. The reservation in plaintiffs' petition was one to claim future damages and this reservation was recognized by this court in the first case before us. Assuming that this case is governed by LSA-C.C. Art. 508 and that the lake on plaintiffs' property is equivalent to the "works" discussed in the article it seems that plaintiffs' claim for the expense of removal of the lake had already accrued when the first case was decided. Defendants had already declined to remove the lake and plaintiffs were already entitled to a judgment for the expense of such removal. When the case was before this court the first time, under Art. 508 plaintiffs were already entitled to collect the amount which my colleagues would now award. Because plaintiffs failed to apply to the Supreme Court for a writ of review the first judgment of this court became final and the matter was res judicata. Yet my colleagues would now make an award to plaintiffs for removal of the lake.
The only item of damages which were reserved to plaintiffs by this court, and which an attempt was made to prove at the latest trial, is the claim for damages based on alleged erosion of plaintiffs' remaining land over the years since the suit was originally filed and the amount claimed to make the remaining property safe and secure. Apparently, plaintiffs did understand that this may be the result of the earlier opinions of this court because they did plead such damage and attempted to prove such. They are not entitled to recover this item, not because of res judicata since this claim was available to them under the reservation given to them by this court, but because the evidence does not support their claim.
I cannot agree with my colleagues who would award plaintiffs the value of their property as of the time of the trespass subject to the credit for the amount awarded by this court in the first case. The very issue before the court in the first case was plaintiffs' right to recover for the value of the property taken, and this court held that plaintiffs were not entitled to recover on this theory. They specifically limited plaintiffs' recovery to the value of the dirt and place as opposed to the value of the property which had been taken, and yet my colleagues would now make an award to plaintiffs based upon what plaintiffs could have purchased a similar piece of property for just after the trespass was committed. This seems inconsistent with the original case before this court and such relief would seem to be likewise precluded under the doctrine of res judicata.
Accordingly, I respectfully dissent from the decree and the opinions of my colleagues.
NOTES
[1] A similar, though less complicated, problem existed in Lowe v. Gentilly Dodge, Inc., 342 So. 2d 1231 (La.App. 4th Cir. 1977). See footnote 2 on page 1234.
[1] In this connection see Black's Law Dictionary 4th Ed. Rev. 363 "concur" and W. & P., 588, 589, "concur" and "concurrence".
[1] An expert appraiser estimated the value of the entire Grove 57 before the trespass at $17,500.00 and the value of the two parcels separated by the lake after the trespass at $11,456.00. The difference, $6,044.00, was the amount of the award.
[2] The court noted that the two other items of specified damages (destruction of trees and loss of use) were not proved.
[3] This court specifically declined to consider exceptions of res judicata and judicial estoppel, which had been overruled earlier by the trial court.
[4] Between the 1957 trespass and the 1974 trial, a national real estate developer had purchased considerable acreage in eastern New Orleans, including tracts on all sides of Grove 57. The surrounding acreage was developed into Lake Forest Estates No. 1 and No. 2, the latter including lakefront lots which sold from $25,000.00 to $38,000.00 depending upon size and location. The subdivisions contained paved streets, utilities and country club facilities. The highest priced of the fully developed lots sold for $1.88 per square foot, or about $350.00 per front foot.
[5] In the present case, where the dredging on Grove 57 took place over a number of weeks, there was a continuing tort until the dredging was concluded.
[6] In this respect we distinguish those cases in which the defendant's trespass continues because the offending object (such as a building) remains on the premises. See Prosser, Law of Torts, Ch. 3, § 13, p. 74 (4th ed. 1971). The present case involves permanent injury to the land as a consequence of a tort which was completed in 1957.
[7] This is the very basis upon which this court reversed the judgment maintaining the exception of prescription in the prior appeal in the present suit.
[8] This pleading thus violated C.C.P. art. 425's prohibition of an obligee's dividing an obligation for the purpose of bringing separate actions on different portions of the obligation. The public policy purpose of the article (and of the doctrines of res judicata and estoppel by judgment) is to avoid a multiplicity of suits and to prevent harassment, delay and undue expense caused by multiple suits.
[9] The court's recognition of plaintiffs' right to later claim recovery of this item effectively permitted an improper division of an obligation.
[10] In the prayer of their petition plaintiffs not only reserved the right to claim future damages for a continuing trespass (a claim which had no legal basis), but also reserved the right to seek indemnification of the cost of restoration (a claim which did have a legal basis and should have been asserted and determined in the prior suit).
Because of this court's discussion of both reservations in the opinion, we broadly construe the reservation in the decree to apply to both reservations in the petition, although we believe the proper procedure would have been to avoid piecemeal litigation and to decide the entire case or remand the entire case.
[11] C.C. art. 508 provides:
"When plantations, constructions and works have been made by a third person, and with such person's own materials, the owner of the soil has a right to keep them or to compel this person to take away or demolish the same.
"If the owner requires the demolition of such works, they shall be demolished at the expense of the person who erected them, without any compensation; such person may even be sentenced to pay damages, if the case require it, for the prejudice which the owner of the soil may have sustained.
"If the owner keeps the works, he owes to the owner of the materials nothing but the reimbursement of their value and of the price of workmanship, without any regard to the greater or less value which the soil may have acquired thereby.
"Nevertheless, if the plantations, edifices or works have been made by a third person evicted, but not sentenced to make restitution of the fruits, because such person possessed bona fide, the owner shall not have a right to demand the demolition of the works, plantations or edifices, but he shall have his choice either to reimburse the value of the materials and the price of workmanship, or to reimburse a sum equal to the enhanced value of the soil."
[12] We specifically do not intend to limit damages caused by trespass to the value of the property. The method of reparation used in this case will not achieve justice in all cases of tort-caused damage to land, and the total cost of restoration will sometimes be the proper method of reparation. However, the 1957 cost of restoration (which expert testimony established at almost $200,000.00) is totally unrealistic in this case. It is absolutely inconceivable that plaintiffs, if they had been awarded the cost of restoration at the time of the tort in this case, would have used an award in that amount to restore the property. This consideration alone suggests that the cost of restoration is not the proper method of restoring the tort victim to the position he enjoyed before the trespass.
If the property could have been restored for $36,000.00 (as asserted by T. L. James' unacceptable evidence in the first trial), there would be a much stronger argument for cost of restoration as the proper method of reparation, even though that cost exceeded the value of the property. If plaintiffs lived on the property, our decision might be different. But our decision as to method of reparation is based on consideration of all existing facts.
[13] For an intentional trespass plaintiffs would also be entitled to an award for mental anguish, which is considered as compensatory damages in intentional trespass cases. Fassitt v. United T. V. Rental, Inc., 297 So. 2d 283 (La.App. 4th Cir. 1974); Loeblich v. Garnier, 113 So. 2d 95 (La.App.1959); Grandeson v. International Harvester Credit Corp., 223 La. 504, 66 So. 2d 317 (1953). In this case, however, the court in the original proceeding found the trespass was unintentional, and we decline to readjudicate that issue.
[14] We note that a similar enhancement in value probably has occurred in other property in the area which could have been bought to replace this virtually destroyed property.
[15] We have doubts as to the validity of the appraisal which established this value, because market value is affected by events such as the beginning of the construction of an interstate highway in the area, and the appraisal did not reflect this anticipated increase in market value on the investment property. However, this was the only appraisal which was presented at the original hearing, and the trial court accepted this appraised value as the value of the property. We accordingly decline to reinquire into the value of the property in 1957.
[16] We also note that in the earlier decision of this court on the exception of prescription, we held that prescription was interrupted by the original demand. This consideration strengthens our conclusion that the proper method of reparation is by the reference to the 1957 value rather than the 1974 value of the property.
[1] See Esnard v. Cangelosi, 200 La. 703, 8 So. 2d 673 (1942); Barker v. Houssiere-Latreille Oil Co., 160 La. 52, 106 So. 672 (1925). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1862100/ | 747 So. 2d 701 (1999)
Vicki L. LITTLETON, Individually and Calton R. Littleton, Sr., Plaintiffs-Appellees,
v.
WAL-MART STORES, INC. and Curtis Williams, Defendants-Appellants.
No. 99-390.
Court of Appeal of Louisiana, Third Circuit.
December 1, 1999.
Rehearing Denied February 16, 2000.
*702 Chris J. Roy, Jr., Attorney At Law, Alexandria, Louisiana, Attorney for Appellees.
Vicki C. Warner, Attorney At Law, Shreveport, Louisiana, Attorney for Appellant.
BEFORE YELVERTON, SAUNDERS, WOODARD, SULLIVAN and PICKETT, Judges.
YELVERTON, Judge.
Wal-Mart Stores, Inc. appeals a judgment for damages sustained by Vicki Littleton, a customer, when a case of paper towels being stacked by store employees fell upon her. It raises three assignments of error regarding: (1) the summary judgment finding it liable; (2) the amount of general damages awarded by the trial court; and (3) the denial of its demand for a trial by jury. Finding no error, we affirm the judgment.
FACTS
On the morning of June 13, 1996, Vicki and her five-year-old son went to a Wal-Mart store in Pineville, Louisiana, to buy an item he needed for day-care. Curtis Williams, a Wal-Mart employee, was stacking cases of paper towels on a pallet in an aisle. While Vicki was walking down the aisle with her son trailing her, a case stacked on the pallet fell toward her. She reached out with her left hand to try to stop the box and push it away from herself and her son. It struck her anyway. As a result of the accident, Vicki sustained a ruptured disc in her neck which required surgery. Vicki and her husband sued Wal-Mart.
The Littletons filed a motion for summary judgment on the issue of Wal-Mart's liability. The motion was granted by the trial court. Wal-Mart requested a trial by jury as to damages. This was denied because the required cash deposit had not been posted timely. The amount of damages was tried. The trial court awarded Vicki $32,238 for lost wages, $22,291.88 for medical expenses, and $150,000 in general damages.
*703 SUMMARY JUDGMENT
Wal-Mart contends the trial court erred in granting summary judgment in favor of the Littletons on the issue of liability. It claims that there was no evidence presented that its employee, Williams, failed to make a reasonable effort to keep the premises free of a hazardous condition that reasonably might give rise to damage, the duty required of merchants by La.R.S. 9:2800.6(A). Wal-Mart also claims that there was insufficient evidence under the general negligence standard for negligence because all that was presented was evidence that a box fell. Wal-Mart admits that it did not oppose the Littletons' motion for summary judgment, but claims that the evidence presented by the Littletons in support of their motion was not sufficient to establish the absence of a genuine issue of material fact as to its liability.
Summary judgment procedure is designed to secure the just, speedy, and inexpensive determination of every action, except those disallowed by La.Code Civ.P. art. 969 and is favored in Louisiana. Taylor v. Rowell, 98-2865 (La.5/18/99); 736 So. 2d 812. Making a de novo review of the pleadings and documentation supporting the motion, we find that there is no genuine issue of material fact as to the liability of Wal-Mart and that the Littletons were entitled to judgment as a matter of law for the following reasons. Id.; La.Code Civ.P. art. 966.
We agree with the Littletons that the law of merchant liability found in La.R.S. 9:2800.6 does not apply to every accident on a merchant's premises. The burden of proof instruction found in La. R.S. 9:2800.6(B) applies when there is a claim for a fall due to a condition in or on a merchant's premises. The statute is aimed at "slip and fall" or "trip and fall" cases. It is meant to apply to customers falling in stores, not to customers being hurt by falling merchandise. Moreover, if a customer slips or trips and falls because of the direct and simultaneous negligence of a store employee, the burden of proof under ordinary negligence principles is applicable and not the burden of proof under La.R.S. 9:2800.6. Crooks v. National Union Fire Ins. Co., 620 So. 2d 421 (La.App. 3 Cir.), writs denied, 629 So. 2d 391, 392 (La. 1993); Frelow v. St. Paul Fire & Marine Ins. Co., 93-759 (La.App. 3 Cir. 2/2/94); 631 So. 2d 632.
In this case the Littletons claim that Wal-Mart became liable when Vicki was struck by a case of paper towels as the result of the negligence of its employee, Williams. Littleton did not fall, but she was injured by falling merchandise. However, Subsection A of La.R.S. 9:2800.6 provides the general duty of a merchant relating to aisles, passageways, and floors and is not a duty limited to injuries caused by falls and provides:
A. A merchant owes a duty to persons who use his premises to exercise reasonable care to keep his aisles, passageways, and floors in a reasonably safe condition. This duty includes a reasonable effort to keep the premises free of any hazardous conditions which reasonably might give rise to damage.
In order to recover in an action against a merchant, a store patron who is injured by falling merchandise must prove that a hazardous condition or defect existed, presenting an unreasonable risk of harm which caused injury and may do so by circumstantial evidence. Lopez v. Wal-Mart Stores, Inc., 94-2059 (La.App. 4 Cir. 8/13/97); 700 So. 2d 215, writ denied, 97-2522 (La.12/19/97); 706 So. 2d 457; Leonard v. Wal-Mart Stores, Inc., 97-2154 (La. App. 1 Cir. 11/6/98); 721 So. 2d 1059.
A premise hazard is a condition which causes an unreasonable risk of harm to customers under the circumstances. A plaintiff may prove the existence of a premise hazard by circumstantial evidence. Once a plaintiff makes a showing that a hazard existed, the burden shifts to the merchant to demonstrate *704 that it used reasonable care to avoid such hazards.
Lopez, 700 So.2d at 217-218 (citations omitted).
In support of their motion for summary judgment, the Littletons introduced several pages of the deposition testimony of Williams. Williams explained that he was stacking paper towels at the time of the accident. He said that on one of the back corner stacks were cases of Zee paper towels, which were a little shorter than the boxes of Bounty paper towels. Williams then described how he placed a case of Bounty paper towels on top of another case of Bounty which was sitting on top of a case of Zee paper towels. He described how one corner of the Bounty case that he was stacking was sticking out over the Zee case which caused the weight to shift, and the case of Bounty tumbled off the pallet. Williams admitted that Vicki did not do anything to cause the case to fall.
The Littletons clearly proved that a hazard existed in the manner in which the paper towel boxes were stacked. It is obvious that Williams' actions created an unreasonable risk of harm which immediately resulted in one of the boxes falling into the aisle hitting an unsuspecting patron who was shopping in the aisle and who was without fault. Wal-Mart offered no evidence that it had exercised reasonable care to avoid this type of accident. There is no question in this case but that Williams' actions caused the case of paper towels to fall. With summary judgment being favored and there being no evidence to contradict these material facts, we find the trial court did not err in granting the Littletons' motion for summary judgment on the issue of liability.
GENERAL DAMAGES
The judgment total was $204,529.88. In its reasons for judgment the trial court itemized: medical expenses of $22,291.88, lost wages of $32,238, and general damages of $150,000.
Wal-Mart claims that the award of $150,000 for general damages is excessive. It claims that Vicki's injury was not severe enough to warrant the general damage award.
Pursuant to Youn v. Maritime Overseas Corp., 623 So. 2d 1257 (La.1993), cert. denied, 510 U.S. 1114, 114 S. Ct. 1059, 127 L. Ed. 2d 379 (1994), we have reviewed the facts and circumstances pertaining to Vicki's condition and find that $150,000 in general damages was not an abuse of discretion.
A couple of hours after the incident at Wal-Mart, after she had dropped her child off at day-care and gone to work, Vicki began to feel pain in her neck, shoulder, and back. She tried to go to a clinic at noon, but it was only operating as a pediatric clinic. She then went to an out-patient care facility where she was given some medicine and told to see her family doctor on Monday.
The incident occurred on a Friday. Over the weekend her pain increased, so Vicki saw her family doctor, Dr. Robert Moore on Monday. By this time Vicki also had a large bruise on her left forearm where she had hit the box. After examining Vicki and reviewing x-rays made at the clinic, Dr. Moore ordered a cervical MRI. Based on her complaints, he suspected she had a ruptured cervical disc. Vicki had an MRI on July 2, 1996, which revealed a herniated disc at C5-6. He referred her to a neurosurgeon, Dr. John Patton.
Dr. Patton examined Vicki on August 8, 1996, and found she had restriction of movement in her neck. He agreed that the MRI demonstrated a ruptured disc at C5-6. On August 20, 1996, Dr. Patton performed surgery and removed the disc at C5-6 to relieve pressure on the nerve. He then performed a fusion.
Vicki was in the hospital for three days following the surgery. She had to use a stiff collar 24 hours a day for approximately two months. She then graduated to a soft collar. The only time she removed *705 these collars was when she bathed. She even had to sleep in the collars.
At the time of the accident Vicki was working as a secretary at Pinecrest Developmental Center. Since her job required her to look down, which was something she could not do, she had to take a disability leave of absence for a year. Dr. Patton explained that it could take up to a year for the graft in her neck to completely fuse. She finally returned to work on February 16, 1998.
Both Drs. Moore and Patton agreed that the ruptured disk was caused by Vicki's movement in attempting to block the falling box. There was no question but that this was a new injury and not something that had occurred over time.
Vicki testified that pain in her neck was intense until she had the surgery. She also explained at trial that she felt she had to be careful in her activities because of the neck surgery and her fear of damaging that area in her neck. Dr. Patton explained that the fusion restricted the movement in her neck, and she now has an increased risk of a ruptured disk above or below the area of fusion.
We find that $150,000 in general damages was an appropriate award under the circumstances of this case. The trial court did not abuse its discretion.
JURY TRIAL
Wal-Mart contends that the trial court erred in granting the Littletons' motion to strike its jury demand. Three reasons have been urged in support of this contention: (1) the trial court failed to order the amount of the bond more than 30 days prior to trial; (2) the clerk of court used part of the jury deposit funds without notice to anyone; and (3) the jury funds were deposited more than 30 days prior to the actual trial date.
The Littletons argue that we should not consider this assignment of error because Wal-Mart previously filed a writ application with this court, the application was denied, and that ruling should be the "law of the case."
The "law of the case" doctrine is not an inflexible rule. Dodson v. Community Blood Center, 633 So. 2d 252 (La.App. 1 Cir.1993), writs denied, 93-3158, 93-3174 (La.3/18/94); 634 So. 2d 850, 851. Because this matter is now before a five-judge court and one of the members of the original three-judge panel was also a member of the panel which denied writs and now wishes to reexamine the issue, we deem it appropriate to address the merits of Wal-Mart's arguments concerning its right to a jury trial. For reasons which follow, a majority finds that this court's earlier denial of the writ application was the proper decision.
Wal-Mart made a timely request for a jury trial when it answered the Littletons' petition. On March 10, 1997, the trial court scheduled the jury trial for August 18-22, 1997. It was not until July 30, 1997, that the order was signed setting the cash deposit at $3,000 which was to be posted 30 days prior to trial. The cash deposit was then filed on Aug. 11, 1997.
Louisiana Code of Civil Procedure 1734.1(A) (emphasis supplied) pertaining to a cash deposit for jury trials provides in pertinent part:
When the case has been set for trial, the court may order, in lieu of the bond required in Article 1734, a deposit for costs, which shall be a specific cash amount, and the court shall fix the time for making the deposit, which shall be no later than thirty days prior to trial. The deposit shall include sufficient funds for payment of all costs associated with a jury trial, including juror fees and expenses and charges of the jury commission, clerk of court, and sheriff. The required deposit shall not exceed three hundred dollars per day for each day the court estimates the trial will last. Notice of the fixing of the deposit shall be served on all parties. If the deposit is not timely made, any other *706 party shall have an additional ten days to make the required deposit. Failure to post the cash deposit shall constitute a waiver of a trial by jury.
This provision was in effect when the deposit was made in this case.
The supreme court analyzed a different version of Article 1734.1 in Dept. of Transp. & Develop. v. Walker, 95-0185 (La.6/30/95); 658 So. 2d 190. The supreme court held that Article 1734.1(A) gave the trial court the discretion to choose any day from 30 days before trial to the morning of, but preceding, the trial to set as the date the cash deposit is due. Also, if the trial court failed to fix an exact date within 30 days prior to the start of the trial, the deposit of a specified sum on any day within 30 days prior to trial, including the morning of trial, would be timely.
Applying that analysis, Wal-Mart's filing of the cash deposit in this case would have been timely. However, the legislature amended Article 1734.1 in 1995 to read as it is quoted above. Prior to the amendment, Article 1734.1(A) (emphasis supplied) provided that "the court shall fix the time for making the deposit, which time shall be within thirty days prior to trial." Article 1734.1 as amended (emphasis provided) provides that the deposit be "no later than thirty days prior to trial." With this change, we regard the interpretation of Article 1734.1(A) by the supreme court in DOTD v. Walker, 658 So. 2d 190, as no longer applying.
Due to the legislative change, the cash deposit must now be at least 30 days before the trial starts. Wal-Mart does not deny that the cash deposit was not made 30 days before the start of trial. The reason this happened was because an order to set the amount and date of the cash deposit was not filed with the court and therefore, not signed until July 24, 1997. This was not 30 days before the start of the trial. Wal-Mart had filed its answer in 1996. Rule X of the Rules of Court for the Thirty-Fifth Judicial District Court required that "all orders for a jury trial shall be presented to the Judge." Wal-Mart had sufficient time to file an order with the court to set the amount and date of the cash deposit to insure timely compliance with the mandates of Article 1734.1(A). Wal-Mart's failure to insure that the procedural mandates of Article 1734.1(A) were complied with was fatal to its claim for a jury trial. It cannot blame the trial court for the late signing of the order when the court was not timely presented with an order. See King v. Aetna Life & Cas., 552 So. 2d 73 (La.App. 3 Cir. 1989), writ denied, 556 So. 2d 1264 (La.1990) and Manuel v. Shell Oil Co., 94-590 (La.App. 5 Cir. 10/18/95); 664 So. 2d 470, writ denied, 96-0141 (La.3/8/96); 669 So. 2d 397, in which the courts held that the trial court was correct in denying the requested jury trial due to the parties' failure to comply with the procedural requirements for perfecting a jury trial. The law is clear that the cash deposit must be filed 30 days prior to trial.
Once Wal-Mart lost its right to a trial by jury, the right could not be revived by the continuance of the trial date to a later date. In Kimball v. Allstate Ins. Co., 97-2885, 97-2956 (La.4/14/98); 712 So. 2d 46, the supreme court stated that "the right to a jury trial in a civil case is not fundamental" and that the legislature can provide limitations upon one's ability to obtain a jury trial provided the limiting law does not violate any constitutional provision. Article 1734 was recognized as one of those non-violative limitations.
When Wal-Mart failed to timely make the cash deposit, the right to a jury trial was lost. A continuance of the date of the trial did not commence another "window of opportunity" for Wal-Mart. See generally Broussard v. Wal-Mart Stores, Inc., 96-513 (La.App. 3 Cir. 11/6/96); 682 So. 2d 894, writ granted, judgment vacated, and remanded on other grounds, 96-2931 (La.11/7/97); 703 So. 2d 29.
Wal-Mart also complains that it had no notice that the previously filed cash deposit had been depleted. That fact makes no *707 difference to this case. At the hearing on the motion to strike the jury trial, the trial court indicated that if it had been within its authority it would have given the defendant "time to re-post the bond." But it was the untimely filing of the cash deposit, and not the deficiency of the deposit, that caused Wal-Mart to lose its right to a jury trial. As this court pointed out in our earlier ruling on the writ taken by Wal-Mart, Wal-Mart admitted that the cash deposit was filed late. We therefore adhere to the earlier ruling of this court that the trial court did not err in holding that the cash deposit was not timely filed as required by Article 1734(A).
For the reasons set forth in this opinion, the judgment of the trial court is affirmed. Costs of this appeal are assessed to Wal-Mart Stores, Inc.
AFFIRMED.
WOODARD, J., DISSENTS AND ASSIGNS WRITTEN REASONS.
PICKETT, J., DISSENTS.
WOODARD, J., dissenting.
I respectfully dissent from the part of the majority's opinion which affirms the trial court's decision to strike Wal-Mart's jury trial demand.
Essentially, by its ruling, the majority rewrites that part of La.Code Civ.P. art. 1734.1(A) which designates the time limit for making the deposit for costs. The legislature wrote that the time period: "shall be no later than thirty days prior to trial." By its ruling, the majority changes the statute to read, "shall be no later than thirty days prior to [the first fixing for] trial." Reading into a statute that which is not there is contrary to La.Civ.Code art. 9 and La.R.S. 1:4. And in doing so, the majority introduces a legal technicality into the statute that deprived Wal-Mart of its fundamental right to have its case decided by a jury of its peers.
The legislature must have intended the phrase, "thirty days prior to trial," to mean exactly what it says; otherwise, it could have easily written it as the majority suggests, "prior to the first fixing for trial." Statutes are to be construed as written[1] and their words are to be given their generally prevailing meaning.[2] BLACK'S LAW DICTIONARY defines "trial" to mean:
A judicial examination and determination of issues between parties to action, whether they be issues of law or of fact, before a court that has jurisdiction.[3]
(Emphasis added.) Reading the statute with its clear meaning, as stated in BLACK'S, would not lead to absurd consequences nor prejudice either party, as a party would still have a minimum of thirty days to prepare for a jury trial no matter when that trial would occur.
In the case sub judice, on July 30, 1997, the trial court signed an order, setting the cash deposit at $3,000.00 and ordered that it be posted thirty days before trial, which was scheduled for August 18-22, 1997. Wal-Mart did not make the $3,000.00 deposit until August 11, 1997too late to be entitled to a jury trial if there had been an adjudication of the issues on August 18-22.[4] However, there was no trial on that date, as the parties agreed to a continuance, and the trial was, ultimately, rescheduled for May 11.
When the parties agreed to this continuance, the only question concerning Wal-Mart's right to a jury trial should have been whether more than thirty days would pass between the time it had made the deposit for costs and the trial. It would have. Thus, Wal-Mart met the statutory requirements and should have been given *708 a jury trial to decide quantum at the May 11, 1998 trial.
The majority writes that "[a] continuance of the date of the trial did not commence another "window of opportunity" for Wal-Mart," citing, with a See generally citation, Broussard v. Wal-Mart Stores, Inc.[5] Even though Broussard is introduced with a See generally introductory signal, in my opinion, the case is so distinguishable from this case that it is entitled to no weight for the proposition for which the majority uses it as authority. Broussard concerned the application of La.Code Civ.P. art. 1733(C), which relates to the right to request a jury trial from the date of the last pleading filed when that pleading addresses an issue triable by jury, and which, incidentally, permits more than one "window of opportunity" to request a jury trial.
I find no legal support for the majority's holding in the instant case. Further, not only is the straight forward construction, which I have offered, true to the law of statutory interpretation in the Civil Code and the Revised Statutes, but it also follows Tenpenny v. Ringuet,[6] which holds that the right to a jury trial is fundamental and that every presumption against a waiver, loss, or forfeiture of the right to a jury trial should be indulged by the courts.
I acknowledge that my dissent is inconsistent with my earlier vote to deny Wal-Mart's supervisory writ, which challenged the trial court's decision to grant the Littletons' motion to strike the jury. Since that time, I have had the opportunity for further thought. If I had to vote on the writ application today, I would vote differently than I did.
NOTES
[1] La.Civ.Code art. 9; La.R.S. 1:4.
[2] La.Civ.Code art. 11.
[3] BLACK'S LAW DICTIONARY (6th Ed.1990).
[4] Blanchet v. Miller, 96-1602 (La.App. 3 Cir. 12/5/96); 689 So. 2d 486.
[5] 96-513 (La.App. 3 Cir. 11/6/96); 682 So. 2d 894, writ granted, judgment vacated, and remanded on other grounds, 96-2931 (La.11/7/97); 703 So. 2d 29.
[6] 95-1036 (La.App. 3 Cir. 3/6/96); 670 So. 2d 644, writ denied, 96-880 (La.5/1/96); 673 So. 2d 612. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3099230/ | Opinion filed January 14, 2010
In The
Eleventh Court of Appeals
____________
No. 11-09-00069-CR
__________
RACHEL GONZALES, Appellant
V.
STATE OF TEXAS, Appellee
On Appeal from the 35th District Court
Brown County, Texas
Trial Court Cause No. CR19045
MEMORANDUM OPINION
The trial court convicted Rachel Gonzales, upon her plea of no contest, of aggravated assault
with a deadly weapon. A plea bargain agreement was not entered. The trial court assessed her
punishment at confinement for fifteen years. We dismiss the appeal.
Appellant’s court-appointed counsel has filed a motion to withdraw. The motion is supported
by a brief in which counsel professionally and conscientiously examines the record and applicable
law and states that he has concluded that the appeal is frivolous. Counsel has provided appellant
with a copy of the brief and advised appellant of her right to review the record and file a response
to counsel’s brief. A response has not been filed. Court-appointed counsel has complied with the
requirements of Anders v. California, 386 U.S. 738 (1967); In re Schulman, 252 S.W.3d 403 (Tex.
Crim. App. 2008); Stafford v. State, 813 S.W.2d 503 (Tex. Crim. App. 1991); High v. State, 573
S.W.2d 807 (Tex. Crim. App. 1978); Currie v. State, 516 S.W.2d 684 (Tex. Crim. App. 1974);
Gainous v. State, 436 S.W.2d 137 (Tex. Crim. App. 1969); and Eaden v. State, 161 S.W.3d 173
(Tex. App.—Eastland 2005, no pet.).
Following the procedures outlined in Anders, we have independently reviewed the record,
and we agree that the appeal is without merit. We note that counsel has the responsibility to advise
appellant that she may file a petition for discretionary review by the Texas Court of Criminal
Appeals. Ex parte Owens, 206 S.W.3d 670 (Tex. Crim. App. 2006). Likewise, this court advises
appellant that she may file a petition for discretionary review pursuant to TEX . R. APP . P. 66.
Black v. State, 217 S.W.3d 687 (Tex. App.—Eastland 2007, no pet.).
The motion to withdraw is granted, and the appeal is dismissed.
PER CURIAM
January 14, 2010
Do not publish. See TEX . R. APP . P. 47.2(b).
Panel consists of: Wright, C.J.,
McCall, J., and Strange, J.
2 | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1792518/ | 591 S.W.2d 263 (1979)
STATE of Missouri, Respondent,
v.
Jesse R. SMITH, Appellant.
No. KCD 30600.
Missouri Court of Appeals, Western District.
December 3, 1979.
*264 A. James Snider, former Asst. Public Defender, 13th Judicial Cir., Gregory & Snider, Montgomery City, for appellant.
John Ashcroft, Atty. Gen., Paul Robert Otto, Asst. Atty. Gen., Jefferson City, for respondent.
Before SOMERVILLE, P. J., and PRITCHARD and MANFORD, JJ.
SOMERVILLE, Presiding Judge.
Defendant was charged as a second offender with driving while intoxicated third offense. He was found guilty by a jury and in due course the trial court assessed his punishment at four years confinement in the Missouri Department of Corrections and sentence and judgment were pronounced accordingly.
A single point, sharply drawn, is relied on by defendant on appeal inapplicability of the Second Offender Act to the third offense of driving while intoxicated.
As the driving offense for which defendant stood charged occurred on May 2, 1978, and trial thereof commenced and concluded on September 6, 1978, Section 564.440, RSMo 1969 (driving while intoxicated) and Section 556.280, RSMo 1969 (Second Offender Act), must be reckoned with even though both were repealed effective January 1, 1979, by virtue of enactment of the new Criminal Code. Parenthetically, any decision construing either or both of these repealed statutory sections, for obvious reasons, is immediately destined for the backwaters of the mainstream of the law.
Section 564.440, supra, read as follows:
"564.440. Driving motor vehicle while intoxicated penalties evidence of prior convictions, how heard
No person shall operate a motor vehicle while in an intoxicated condition. Any person who violates the provisions of this section shall be deemed guilty of a misdemeanor on conviction for the first two violations thereof, and a felony on conviction for the third and subsequent violations thereof, and, on conviction thereof, be punished as follows:
(1) For the first offense, by a fine of not less than one hundred dollars or by imprisonment in the county jail for a term not exceeding six months, or by both such fine and imprisonment;
(2) For the second offense, by confinement in the county jail for a term of not less than fifteen days and not exceeding one year;
(3) For the third and subsequent offenses, by confinement in the county jail *265 for a term of not less than ninety days and not more than one year or by imprisonment by the department of corrections for a term of not less than two years and not exceeding five years.
Evidence of prior convictions shall be heard and determined by the trial court, out of the hearing of the jury prior to the submission of the case to the jury, and the court shall enter its findings thereon." (Emphasis added.)
Section 556.280, supra, read as follows:
"556.280. Second offense, how punished
If any person convicted of any offense punishable by imprisonment in the penitentiary, or of any attempt to commit an offense which, if perpetrated, would be punishable by imprisonment in the penitentiary, shall be sentenced and subsequently placed on probation, paroled, fined or imprisoned therefor, and is charged with having thereafter committed a felony, he shall be tried and if convicted punished as follows:
(1) If the subsequent offense be such that, upon a first conviction, the offender could be punished by imprisonment in the penitentiary, then the person shall receive such punishment provided by law for the subsequent offense as the trial judge determines after the person has been convicted.
(2) Evidence of the prior conviction, sentence and subsequent imprisonment or fine, parole, or probation shall be heard and determined by the trial judge, out of the hearing of the jury prior to the submission of the case to the jury, and the court shall enter its findings thereon. If the finding is against the prior conviction, sentence and subsequent imprisonment or fine, parole or probation, then the jury shall determine guilt and punishment as in other cases.
(3) If the prior conviction is appealed then this section does not apply until after the judgment is affirmed or the appeal is dismissed; except, that a subsequent offense committed after a conviction in the trial court but prior to affirmance of the conviction or dismissal of the appeal shall, after the affirmance or dismissal, be pleadable and provable as a prior conviction under the provisions of this section." (Emphasis added.)
An abundance of evidence was presented by the state from which a rational trier of fact could find the essential elements of driving while intoxicated beyond a reasonable doubt. It is also appropriate to note that prior to the submission of the case to the jury, the trial court, out of the hearing of the jury, heard, determined and entered appropriate findings that defendant had been convicted on two previous occasions of driving while intoxicated and had previously been convicted of burglary and stealing and imprisoned therefor in the penitentiary.
Defendant's single point on appeal arises in a rather unusual manner. Instruction No. 4, the state's verdict directing instruction, omitted any mention of the range of punishment for the crime of driving while intoxicated third offense. The jury appropriately responded by returning a verdict which found defendant guilty as submitted in Instruction No. 4 but omitted assessing his punishment. Defendant faults Instruction No. 4 for failing to advise the jury as to the permissible range of punishment in the event it found him guilty, thereby effectively removing the assessment of punishment from the jury and placing it in the bosom of the trial court pursuant to the Second Offender Act. As a natural corollary, defendant charges that the sentence fixed by the trial court was void because the Second Offender Act was inapplicable, State v. Myers, 470 S.W.2d 803, 805 (Mo.App.1971), and he was prejudiced thereby because the jury might have imposed a lesser punishment, State v. Wiley, 412 S.W.2d 485, 487 (Mo.1967), and State v. Myers, supra.
Because of a total absence in this state of anything which even remotely approaches being a counterpart to the Congressional Record, the construction of legislative acts in justiciable controversies becomes, simultaneously, one of the most elusive and difficult obligations borne by the judiciary. To aid in the disposition of this solemn obligation, *266 rules or canons of construction have judicially evolved. A synoptic view of the reigning rules or canons of construction, whose numbers are legion, give several a decisively applicable tone.
One particular cardinal rule or canon of construction stands out with stark clarity penal statutes are to be strictly construed against the state and liberally construed in favor of the accused. State v. Chadeayne, 323 S.W.2d 680, 685 (Mo.banc 1959); and State v. McClary, 399 S.W.2d 597, 599 (Mo.App.1966). Two other significant rules or canons of construction command positions of prominence in this case. It is presumed that every word, clause, sentence and provision of a statute was intended by the legislature to have effect and be operative. State ex rel. St. Louis Die Casting Corporation v. Morris, 358 Mo. 1170, 219 S.W.2d 359, 362 (1949); and Graves v. Little Tarkio Drainage Dist. No. 1, 345 Mo. 557, 134 S.W.2d 70, 78 (1939). Conversely, it will not be presumed that the legislature inserted idle verbiage or superfluous language in a statute. Dodd v. Independence Stove & Furnace Co., 330 Mo. 662, 51 S.W.2d 114, 118 (1932); State ex rel. Kelsey v. Smith, 335 Mo. 1125, 75 S.W.2d 832, 834 (Banc 1934); Bussmann Manufacturing Co. v. Industrial Commission, Division of Employment Security, 335 S.W.2d 456, 460 (Mo. App.1960); and State ex rel. May Department Stores Company v. Weinstein, 395 S.W.2d 525, 527 (Mo.App.1965).
Certain inroads on the construction task facing this court have already been made. State v. Wiley, 412 S.W.2d 485, 487 (Mo. 1967), holds that Section 556.280, supra, is "`highly penal and * * * must be strictly construed'". See also State v. Lucas, 520 S.W.2d 609, 611 (Mo.App.1975). State v. Pfeifer, 544 S.W.2d 317, 321 (Mo. App.1976), holds that "[t]he offense under Section 564.440 is driving while intoxicated, all of the balance of the statute being referable to the question of punishment and the degree of the offense committed."
The above comprise a legal matrix from which to determine whether a conviction for driving while intoxicated third offense, Section 564.440, supra, invoked the sentencing procedure of the Second Offender Act, Section 556.280, supra.
In the context raised by defendant, the key to construing Section 556.280, supra, lies in the following language contained in paragraph (1): "If the subsequent offense be such that, upon a first conviction, the offender could be punished by imprisonment in the penitentiary . .". (Emphasis added.) The words, "upon a first conviction", obviously qualify the preceding term, "subsequent offense", and address it in terms of a single statutorily prescribed offense even though it be an offense carrying enhanced punishment running the gamut from a jail sentence or fine, or both, to imprisonment in the penitentiary for successive convictions. Otherwise, the qualifying words are of no effect, are inoperative, and constitute idle verbiage and superfluous language. If the preceding term, "subsequent offense", had been intended by the legislature to refer to successive violations of a statutorily prescribed offense which could be punished by imprisonment in the penitentiary as opposed to a jail sentence or fine, or both, for the first violation of the same statutorily prescribed offense, then it would have been a simple matter to have achieved such a result by excluding or eliminating the words, "upon a first conviction". The crucial portion of paragraph (1) of Section 556.280, supra, could have simply read "If the subsequent offense be such that the offender could be punished by imprisonment in the penitentiary. . .". This would have excluded all misdemeanors from and included all felonies within the sentencing procedure perceived by the Second Offender Act, the widely accepted view of the range of applicability of Section 556.280, supra. See: State v. Bryant, 538 S.W.2d 340, 342 (Mo. banc 1976); and State v. Myers, 470 S.W.2d 803, 804 (Mo.App.1971). However, as previously noted, if the words, "upon a first conviction", serve any purpose and possess any meaning whatsoever one must necessarily conclude that the legislature also intended to exclude any statutorily prescribed *267 offense which might contain its own provisions for enhancing punishment ranging from jail sentences or fines, or both, to imprisonment in the penitentiary for subsequent convictions.
A literal application of the Second Offender Act (Section 556.280) precludes activation of its prescribed sentencing procedure when the "subsequent offense", as here, is driving while intoxicated in violation of Section 564.440, supra, even though a third offense is involved. A tinge of legal irony surfaces when one considers that a single event, driving while intoxicated for a third time, could otherwise have the dual effect of simultaneously (1) creating a felony where otherwise the conduct would constitute a misdemeanor and (2) invocation of the sentencing procedure of the Second Offender Act so as to substitute judicial assessment of punishment for jury assessment. Under such circumstances, the possibility of double enhancement of punishment for a single statutorily prescribed offense is more than a faint specter. It is logical to assume that the legislature chose to avoid this ironical result by excluding any statutorily prescribed offense which might contain its own provisions for enhanced punishment for subsequent violations. The view that a penal statute proscribing certain conduct and also providing for enhanced penalties for subsequent violation may be such a complete code of penalties as not to contemplate or admit of application of the Second Offender Act is not as novel as it may initially sound. See, e. g.: State v. Lujan, 76 N.M. 111, 412 P.2d 405, 408 (1966); State v. Lard, 86 N.M. 71, 519 P.2d 307, 310 (N.M.App.1974); and State v. Edwards, 317 S.W.2d 441, 448, footnote 1 (Mo.banc 1958).
Judgment reversed and cause remanded for new trial without application of Section 556.280, supra.
All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4561120/ | Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
08/28/2020 09:08 AM CDT
- 498 -
Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
STATE v. GALVAN
Cite as 306 Neb. 498
State of Nebraska, appellee, v.
Braden M. Galvan, appellant.
___ N.W.2d ___
Filed July 17, 2020. Nos. S‑19‑623, S‑19‑624.
supplemental opinion
Appeal from the District Court for Hall County: Mark J.
Young, Judge. Former opinion modified. Motion for rehear-
ing overruled.
Gerard A. Piccolo, Hall County Public Defender, for
appellant.
Douglas J. Peterson, Attorney General, and Melissa R.
Vincent for appellee.
Heavican, C.J., Miller‑Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Per Curiam.
This case is before us on a motion for rehearing filed by the
appellee, State of Nebraska, concerning our opinion in State v.
Galvan, 305 Neb. 513, 941 N.W.2d 183 (2020).
We overrule the motion, but modify the opinion as follows:
In the analysis section, under the subheading “Plain Error,”
we withdraw the first two sentences of the fifth paragraph,
including footnotes 24 and 25. State v. Galvan, 305 Neb. at
521, 941 N.W.2d at 190.
The remainder of the opinion shall remain unmodified.
Former opinion modified.
Motion for rehearing overruled. | 01-03-2023 | 08-28-2020 |
https://www.courtlistener.com/api/rest/v3/opinions/1324500/ | 225 Ga. 255 (1969)
167 S.E.2d 586
YOUNG
v.
THE STATE.
25164.
Supreme Court of Georgia.
Argued April 15, 1969.
Decided April 28, 1969.
Emery L. Duffy, for appellant.
Andrew J. Ryan, Jr., District Attorney, Andrew J. Ryan, III, Arthur K. Bolton, Attorney General, Marion O. Gordon, Assistant Attorney General, Larry H. Evans, for appellee.
ALMAND, Presiding Justice.
Harold M. Young was found guilty under an indictment charging him with robbery by the use of an offensive weapon (a pistol). A verdict of guilty with a recommendation of mercy was returned, and he was sentenced to life imprisonment. His motion for a new trial upon the general grounds and several special grounds was overruled. This appeal is from his conviction and sentence, and from the overruling of his amended motion for a new trial.
In this opinion, we will deal only with the grounds for a new trial and enumerated errors argued orally or in the brief of counsel for the appellant.
1. The general grounds. Appellant insists that the evidence was insufficient to show that the defendant was the person who robbed the two victims. The evidence discloses that the two victims of the alleged robbery, Alex Cole and Glenn Stokes, were employees of Holiday Inn in Savannah. Cole testified that at about three o'clock on the morning of June 10, 1968, a man *256 pointed a pistol with a silver barrel at his head and took his wallet and watch. Then he was pistol whipped into unconsciousness. Stokes testified that he was robbed by a man pointing a pistol at him, and taking his wallet, which contained a small sum of money. He was then forced to open the cash register, from which the thief took all the money. Both Cole and Stokes testified that the man who robbed them had on yellow trousers. Stokes identified the defendant as the thief.
The police officers, on June 13, 1968, obtained a warrant to search the premises occupied by the defendant, where they found a pair of yellow pants, a Bulova watch, which Cole identified as the watch taken from his person, and a pistol.
The defendant, in his statement, said that he knew nothing about the robbery, and that at the time the alleged robbery took place, he was on a boat, some distance away from the Holiday Inn.
The verdict of guilty is supported by the evidence.
2. The pistol, pair of yellow trousers, and the Bulova watch were sufficiently identified to authorize their introduction into evidence.
3. The court instructed the jury as follows: "I charge you that alibi as a defense involves the impossibility of the presence of the accused at the scene of the offense at the time of its commission, and the range of the evidence in respect to the time and place must be such as reasonably precludes the presence of the accused at the time and place of the offense. If you believe that a crime was committed as charged, but you do not believe that the defendant was present at the time and place of such offense, you should acquit him on that ground. Alibi, as a defense, should be established to the reasonable satisfaction of the jury but not necessarily beyond a reasonable doubt. When testimony on the subject of alibi is offered on the trial of a case it is the duty of the jury to take that testimony along with all the other evidence in the case in determining the guilt or innocence of the defendant. And if, considering the testimony alone or along with all the other evidence in the case, the jury should entertain a reasonable doubt as to the guilt of *257 the defendant it is their duty to give him the benefit of that doubt and acquit him, the law being that in order to convict you must believe the defendant guilty beyond a reasonable doubt." (Emphasis supplied). In the amended motion for a new trial and in his enumeration of errors, the defendant complains of that portion of the charge which states, "Alibi as a defense should be established to the reasonable satisfaction of the jury, but not necessarily beyond a reasonable doubt." The appellant contends that this portion of the charge violates the due process clause of the Fourteenth Amendment of the Federal Constitution in that, "... the said charge shifts to the defendant the burden of proving his alibi and deprives him of his presumption of innocence."
With this contention, we cannot agree.
The court instructed the jury as follows, "I charge you that the defendant entered upon the trial of this case with the presumption of innocence in his favor, and that presumption remains with him throughout the trial of the case until it is shown by competent evidence that he is guilty to a moral and reasonable certainty and beyond a reasonable doubt. Now a reasonable doubt is a doubt for which you can give a reason. It means just what it says. It is the doubt of a fair-minded, impartial juror honestly seeking the truth not an arbitrary or capricious doubt but a doubt arising from a consideration of the evidence, or from the lack of evidence, or from a conflict in the evidence or from the statement of the defendant himself ... If the jury should believe beyond a reasonable doubt that the defendant did wrongfully, fraudulently and violently take from the person named in the indictment the property or part thereof as charged without the consent of the owner and with the intent to steal the same and the taking of said property was accomplished by the use of, or the offer to use, an offensive weapon likely to produce death when used in its usual or customary manner, or any replica, article or device having the appearance of such weapon, then and in that event, the jury would be authorized to convict the defendant of robbery by the use of an offensive weapon."
*258 This court, in Harrison v. State, 83 Ga. 129 (3) (9 S.E. 542) held, "Touching alibi, the rule in Georgia as established by authority consists of two branches. The first is, that to overcome proof of guilt strong enough to exclude all reasonable doubt, the onus is on the accused to verify his alleged alibi, not beyond reasonable doubt but to the reasonable satisfaction of the jury. The second is that, nevertheless, any evidence whatever of alibi is to be considered on the general case with the rest of the testimony, and if a reasonable doubt of guilt be raised by the evidence as a whole, the doubt must be given in favor of innocence. In sense and substance, the charge of the court in the present case conformed to the rule, certainly to the latter branch of it." In the opinion it was said, "It seems to us that in the metaphysics of trial, there is great difficulty in distinguishing between reasonable doubt on the specific defense of alibi, and reasonable doubt of guilt upon the whole case taken together. Where presence is necessary to constitute guilt, it seems that a reasonable doubt of presence would, by irresistible logic, involve reasonable doubt of guilt."
The State in this case was required to prove beyond a reasonable doubt that the defendant was present at the time and place of the robbery, and this burden was not changed or lessened by the defendant introducing evidence that he was not present at said time and place. The defendant's evidence in support of his plea of alibi tended to weaken or disprove the testimony of the two victims.
The charge on alibi in this case, when taken in connection with the entire charge, did not shift any burden from the State to the defendant, and thus require him to prove his not being present at the scene of the crime. The burden of proving his presence remained on the State throughout the trial.
The judgment denying a new trial is not error for any of the reasons enumerated.
Judgment affirmed. All the Justices concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1406864/ | 27 Ariz. App. 728 (1976)
558 P.2d 923
David M. RAMONETT, Petitioner,
v.
The INDUSTRIAL COMMISSION of Arizona, Respondent, Magma Copper Company, Respondent Employer, State Compensation Fund, Respondent Carrier.
No. 1 CA-IC 1463.
Court of Appeals of Arizona, Division 1, Department C.
Filed November 9, 1976.
Rehearing Denied December 17, 1976.
Filed November 9, 1976.
Petition for Review Denied January 11, 1977.
Davis, Eppstein, Tretschok & Ford by Dale D. Tretschok and Bruce L. Dusenberry, Tucson, for petitioner.
*729 John H. Budd, Jr., Chief Counsel, Phoenix, for respondent Industrial Commission of Arizona.
Twitty, Sievwright & Mills by John F. Mills, Phoenix, for respondent employer.
Robert K. Park, Chief Counsel, Phoenix, State Compensation Fund, for respondent carrier.
OPINION
HAIRE, Chief Judge.
The issue in this case is whether the petitioner employee's anxiety neurosis is a compensable result of his industrially related injury.
Petitioner, David M. Ramonett, had been employed three months as an electrician's helper underground when he accidentally pricked his finger on some wires, fainted, and went into convulsions. He recovered with seemingly nothing more major than a slightly cut finger and a minor head laceration which he sustained when he fell, but because of the fainting and convulsions he embarked on a series of medical tests. It was feared he might have epilepsy. The tests eventually led to a diagnosis of "vasovagal bradycardia", a condition which would cause slowing of petitioner's heartbeat, fainting, and seizures, if he sustained even a minor injury. The exact medical etiology of vasovagal bradycardia is unknown; painful physical or mental stimuli seem to bring on the attacks. There is no contention that the condition itself is in any way work related.
Petitioner was dismissed by his employer because his tendency to faint made him dangerous to himself and his co-workers in his type of employment.
The discovery that he had this physical condition, coupled with the dismissal from employment and its resulting financial problems, led to a loss of self-esteem and the development of an anxiety neurosis, which petitioner claims is compensable as a result of the industrial injury. To support this contention petitioner constructs a causal chain: if not for the accident, however minor, he would not have fainted; had he not fainted, his underlying condition of vasovagal bradycardia would not have been discovered; had the underlying condition not been discovered, he would not have been dismissed from employment and so not suffered financial problems; without the anxiety and loss of self-esteem evoked by his physical, employment, and financial problems petitioner would not have developed his disabling anxiety neurosis.
To support this causal chain petitioner relies on testimony by a neurologist, Dr. Masland, who felt that the industrial episode was "contributory" to the anxiety, and a psychiatrist, Dr. Schorsch, who testified that the industrial episode was "a precipitant or stimulus to his loss of self-esteem and his following anxiety."
The hearing officer, however, denied compensation because he found that the only function played by the industrial episode was to focus attention on the petitioner's physical condition. The hearing officer therefore found that the compensable effects of the industrial accident were limited to the minor finger and head injuries.
If the industrial episode, however minor, is in any meaningful way a contributing cause of the petitioner's mental condition, then treatment for this mental condition should be covered under workmen's compensation. It is well established in the law that the industrial accident does not have to be the sole cause of an injurious result, it is sufficient if it can be shown to be "a producing cause". Nelson v. Industrial Commission, 24 Ariz. App. 94, at 96, 536 P.2d 215 at 217 (1975). Petitioner's predisposition toward his mental condition also would not defeat his claim; the employer "takes his employees as he finds them", Tatman v. Provincial Homes, 94 Ariz. 165, 382 P.2d 573 (1963), in mental as well as physical condition. Arizona has allowed recovery for mental disability if it is caused, precipitated, or aggravated by an industrial incident. Tatman v. Provincial Homes, supra, (fall from 15 foot scaffold, precipitating *730 preexisting mental instability); Murray v. Industrial Commission, 87 Ariz. 190, 349 P.2d 627 (1960) (hysteria following back injury); Brock v. Industrial Commission, 15 Ariz. App. 95, 486 P.2d 207 (1971), (preexisting depressive anxiety and manic-depression aggravated by incident in which truck driver caused death of pedestrian). However, the industrial incident must in some way "produce" the injurious result. As stated in Murray, supra:
"The injury need not be the sole cause of disability, if it is a producing cause." (Emphasis added). 87 Ariz. at 199, 349 P.2d at 633
* * * * * *
"In legal contemplation, if an injury, operating on an existing bodily condition or pre-disposition, produces a further injurious result, that result is caused by the injury." (Emphasis added). 87 Ariz. at 199, 349 P.2d at 633
There is no contention in this case that petitioner's industrial accident had any aggravating effect on his underlying vasovagal bradycardia, nor that the accident itself caused his unemployment. The only role played by the accident was to focus attention to initiate the investigation which eventually diagnosed the problem.
There was undisputed testimony that, while the precise stimuli, physical or mental, which will start a vasovagal bradycardia attack are unknown, petitioner had suffered similar attacks before the industrial episode and continued to experience similar fainting problems "every week" after the episode. The stimulating events seem to be so minor that it is not probable that petitioner's condition would have remained forever undiscovered absent this particular industrial accident. But, even if this accident were only "the straw that broke the camel's back", see Tatman, supra, 94 Ariz. at 169, 382 P.2d at 576, and the break otherwise probably inevitable, petitioner should recover if it could be shown that his mental condition were in any way a result or product of the accident. When the medical testimony is closely examined, however, this is not the effect or meaning of all that was said. On close analysis of all of the psychiatrist's testimony, it is apparent that Dr. Schorsch stated, not that petitioner's reaction to the injury was troubling him, but rather that he was troubled by what this reaction revealed about his body.
"Q. [By Mr. Tretschok] Doctor, based on the history that you took, your examination of Mr. Ramonett, your subsequent follow-up, and using your medical expertise, can you tell me whether or not Mr. Ramonett's diagnosis of acute situational reaction manifested by anxiety was precipitated or caused to any degree by his industrial episode of September 19, 1974?
"A. Yes, I can answer that question.
It was my impression at the time that loss of self-esteem based on Mr. Ramonett's value system, that being one, the importance he saw himself as being working, as well as his concern with his body image, seeing himself as being a strong young growing male, that the accident at work was a precipitant or stimulus to his loss of self-esteem and his following anxiety. I add that my impression that in my opinion this is based on his previous history and previous experience insofar as in his relationship with his father and the values that he placed on this.
"Q. Doctor
"A. In other words, he had a predisposed personality to such a situation. It certainly was the precipitant."
It should also be noted that, in the list of factors Dr. Schorsch gave as causing the anxiety, by far the most prominent was the loss of employment and the effect this had on petitioner's self-image.
"Mr. Ramonett reported to me that he had been doing work for approximately three months. I believe he has been doing well. He had been experiencing a considerable amount of gratification from his success at work as far as the duties he performed, which had been reported to him had been done well, as well as the *731 elevation of his own self-esteem as seeing himself acquiring reasonable financial payment for his work. He was feeling good about working and being responsible. And he also reported to me that he had concerns about his father who it is my understanding was ill and that he was sustaining his father economically to some extent which was quite important to him."
The neurologist Dr. Masland's testimony was similar to Dr. Schorsch's in that he stated that what was troubling petitioner related more to his unemployment and resulting financial worries than to the discovery in and of itself:
"A. Well, I would certainly concur with what I said and what I had in mind was that Mr. Ramonett was in a situation where there was a self-filling aspect at his mental condition. He was very nervous and anxious, he was unemployed, bills were piling up and the more the bills piled up the more anxious he got and the less able he was to get around to employment, and it was that cycle that I was using and considering as something potentially a long term and not certainly to his best interests."
Later, Dr. Masland stated that the anxiety was not primarily related to the bradycardia:
"In other words, his anxiety is something which is not related to the bradycardia?
"A. Not primarily. I think the fact that he had bradycardia and went unconscious started this whole train of events over, but I don't think the bradycardia in and of itself is the primary contributing factor. It is a contributing factor because it started the whole thing off."
Arizona law is well established that:
"... in order for a disease to be compensable as arising out of and in the course of employment, there must be a causal connection with the employment, and not a mere coincidental connection...." Crawford v. Industrial Commission, 23 Ariz. App. 578, 583, 534 P.2d 1077, 1082 (1975).
The conditions of employment must present a special exposure to the hazard, in excess of that to which everyone is commonly exposed. Treadway v. Industrial Commission, 69 Ariz. 301, at 308, 213 P.2d 373, at 377 (1950).
The evidence demonstrates that the types of stimuli which activate petitioner's vasovagal bradycardia response were common and ordinary occurrences, so that his exposure at work was no greater than it would be elsewhere. The relationship which petitioner's mental illness bears to the industrial episode seems to be the type of mere coincidental connection found insufficient in Crawford, supra. See also, Valerio v. Industrial Commission, 85 Ariz. 189, 334 P.2d 768 (1959).
There is no contention here that either the underlying condition or the dismissal from work because of it were in any way produced by the accident, except insofar as the accident revealed that Mr. Ramonett had this condition. It is our opinion that where the only role the industrial episode has played is to precipitate an investigation, the employer should not be liable for the results of what the investigation reveals, nor for the employee's emotional response to the revelation.
On this basis, the award of the Industrial Commission is affirmed.
FROEB, P.J., and JACOBSON, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1406867/ | 170 S.E.2d 140 (1969)
6 N.C. App. 401
Joyce Mann ROTHMAN
v.
Jacob ROTHMAN.
Jacob ROTHMAN
v.
Joyce Mann ROTHMAN, Israel Mann and Ruth Mann.
No. 6912DC469.
Court of Appeals of North Carolina.
October 22, 1969.
*142 Moses & Diehl, by Philip A. Diehl, Raeford, for plaintiff appellee.
Bryant, Lipton, Bryant & Battle, by James B. Maxwell, Durham, and Minor, Thompson, Savage & Smithers, by Joseph B. Beneditti, Richmond, Va., for defendant appellant.
MORRIS, Judge.
This is an alimony and child custody proceeding which raises questions of conflicts of laws. Defendant presents four assignments of error. The first is directed to the refusal of the court to grant full faith and credit to the Virginia decree, the second is directed to the refusal of the court to dismiss the action under the doctrine of res judicata, the third is to the *143 court's receiving evidence at the hearing and to the court's findings of fact and conclusions of law, and the fourth is to the signing of the order. We will consider these assignments of error collectively.
The cases are legion on the point that the primary consideration in custody cases is the welfare of the child or children involved. It is well established in North Carolina that a change in circumstances must be shown before an order relating to custody, support or alimony may be modified. Shepherd v. Shepherd, 273 N.C. 71, 159 S.E.2d 357 (1968); In Re Marlowe, 268 N.C. 197, 150 S.E.2d 204 (1966); Elmore v. Elmore, 4 N.C.App. 192, 166 S.E.2d 506 (1969) and statutes, texts and cases there cited. G.S. § 50-13.7, cited in Elmore, entitled "Modification of order for child support or custody" states:
"(b) When an order for custody or support, or both, of a minor child has been entered by a court of another state, a court of this State may, upon gaining jurisdiction, and upon a showing of changed circumstances, enter a new order for support or custody which modifies or supersedes such order for custody or support."
The facts of this case dictate that this statute must be applied and that in order for the Hoke County District Court to modify the Virginia decree, that court must gain jurisdiction and a change of circumstances must be shown.
By virtue of the physical presence of the child within the boundaries of this State, the Hoke County District Court has jurisdiction, upon a proper showing, to modify the Virginia decree as it pertains to the custody of the child. G.S. § 50-13.5(c) (2), par. a. It is apparent from the record that plaintiff neither alleges nor proves any change of circumstance which would justify the Hoke County District Court in modifying the Virginia decree as it did by awarding custody of the minor child to plaintiff. Plaintiff cites in her brief In Re Craigo, 266 N.C. 92, 145 S.E.2d 376 (1965), and Cleeland v. Cleeland, 249 N.C. 16, 105 S.E.2d 114 (1958), on the point that the full faith and credit clause of the United States Constitution, Article IV, Section 1, does not conclusively bind the North Carolina courts to give greater effect to a decree of another state than it has in that state or to treat as final and conclusive an order of a sister state which is interlocutory in nature. We agree. However, these cases are applicable only in determining that the courts of North Carolina may hear matters in a custody proceeding. There must still be a showing of changed circumstances before our courts may modify the order of a sister state, a fact which plaintiff admits in her brief.
Section 20-108, Code of Virginia (1950), provides:
"The court may, from time to time after decreeing as provided in the preceding section (power to confer custody), on petition of either of the parents, or on its own motion or upon petition of any probation officer or superintendent of public welfare, which petition shall set forth the reasons for the relief sought, revise and alter such decree concerning the care, custody, and maintenance of the children and make a new decree concerning the same, as the circumstances of the parents and the benefit of the children may require."
It is obvious that both Virginia and North Carolina permit modification of custody decrees. Whatever Virginia may do in this respect, North Carolina may do. See New York ex rel. Halvey v. Halvey, 330 U.S. 610, 67 S. Ct. 903, 91 L. Ed. 1133 (1947); Dees v. McKenna, 261 N.C. 373, 134 S.E.2d 644 (1964). For the North Carolina courts to modify a Virginia child custody decree would not give any greater effect to the laws of Virginia. In this case the full faith and credit clause requires that the Virginia decree be honored unless *144 a change of circumstance is shown which would justify our courts in modifying the decree.
We must conclude from the record before us that the Law and Equity Court of the City of Richmond, Virginia, had jurisdiction to hear the divorce action filed by Jacob Rothman, that the decree entered was valid and that said decree is entitled to full faith and credit by the courts of North Carolina in the absence of a change of circumstances.
The doctrine of res judicata is not applicable in this case since it would only bar relitigation of issues as they existed on 25 April 1969, the date of the Virginia decree, and would not bar a hearing to determine whether circumstances had changed since the date of that decree. New York ex rel. Halvey v. Halvey, supra. See also Thomas v. Thomas, 248 N.C. 269, 103 S.E.2d 371 (1958).
Professor Lee points out in his treatise on North Carolina Family Law that there must generally be a substantial change of circumstances before an order of custody is changed. 3 Lee, North Carolina Family Law, (1963), § 226. This indicates that more must be shown than a removal by one parent of a child from a jurisdiction which may enter an adverse decision to the removing parent. It must be shown that circumstances have so changed that the welfare of the child will be adversely affected unless the custody provision is modified.
For the reasons stated herein, the order of Judge Stuhl must be vacated, and the cause is remanded for the entry of an order placing custody of Charles Hyam Rothman in Jacob Rothman in accordance with the Virginia decree.
Reversed and remanded.
MALLARD, C. J., and HEDRICK, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1406865/ | 120 Ga. App. 371 (1969)
170 S.E.2d 732
CUSHWAY
v.
STATE BAR OF GEORGIA.
44461.
Court of Appeals of Georgia.
Argued May 5, 1969.
Decided September 4, 1969.
Rehearing Denied September 24, 1969.
*374 Thomas H. Antonion, for appellant.
Mallory C. Atkinson, Alexander Cocalis, for appellee.
*375 EBERHARDT, Judge.
While constitutional issues were raised in certain of the exceptions which appellant filed in the trial court to the recommendations of the Disciplinary Board of the State Bar of Georgia, none are raised in the enumerations of error filed in this court and appellant asserts in his brief that "no constitutional question is presented." The appeal is, therefore, properly before this court.
1. It was not error either to disallow the amendments to the exception to the report of the State Disciplinary Board or to deny an extension of time for the filing of additional exceptions beyond the time for filing prescribed by the rules. State Bar of Ga. v. Ellis, 116 Ga. App. 721 (4) (158 SE2d 280).
2. Although under Rule 4-215 (f) the burden of proof lies with the State Bar in establishing the charges made before the Grievance Tribunal or before the Disciplinary Board, and the quantum of proof required is that which establishes the charge "beyond a reasonable doubt," when the findings and report of the board are on judicial review before the superior court, they may, under Rule 4-213, be sustained if supported by any evidence. In its order of disbarment the court recited that there was some evidence to sustain the findings, and we find no error.
Under the rules of the State Bar the Grievance Tribunals and the Disciplinary Board are composed of members of the State Bar. Absent a clear and convincing showing to the contrary, it is to be presumed that those who served on the tribunals and on the board were familiar with the rules under which disciplinary action is instituted and tried against a member, including the quantum of proof required for the establishment of charges, and that they, as well as the judge of the superior court, followed and applied the rules in the performance of their duties. Cf. Gardner v. State, 117 Ga. App. 262, 265 (160 SE2d 271). As to the meaning of proof "beyond a reasonable doubt" in civil proceedings, see Schnell v. Toomer, 56 Ga. 168 (3).
An analogous situation is in a review of the findings of fact by the Board of Workmen's Compensation, "The finding of that body upon the facts can not be reviewed in the superior court, if there is evidence to support its finding. Such finding *376 can not be reviewed in the appellate court." Maryland Cas. Co. v. England, 160 Ga. 810, 812 (129 S.E. 75). Another is the consideration on appeal of a criminal conviction, as to which, see Waters v. State, 15 Ga. App. 342 (83 S.E. 200); Mitchell v. State, 15 Ga. App. 803 (7) (84 S.E. 205); Mathis v. State, 16 Ga. App. 381 (6) (85 S.E. 352); Williams v. State, 17 Ga. App. 724 (88 S.E. 215).
3. There is no double jeopardy as to Counts 1 and 2 or as to Counts 3 and 4. The only sanction imposed is that provided in the recommendations of the tribunal and the board as to Count 3, disbarment. The order specifically provides that the imposition of all other sanctions recommended is suspended.
This proceeding is not a criminal one. City of Atlanta v. Stallings, 198 Ga. 510 (32 SE2d 256); Gordon v. Clinkscales, 215 Ga. 843 (2) (114 SE2d 15); State of Ga. v. Walker, 88 Ga. App. 413 (76 SE2d 852). It is "an action taken by the court to protect itself from having as one of its officers one who has demonstrated a manifest unsuitability therefor, and to protect from imposition by him upon an unsuspecting public." Yarbrough v. State, 119 Ga. App. 46, 48 (166 SE2d 35). Appellant is not placed in jeopardy of life or liberty. The power of the Grievance Tribunal was limited to making finding of fact and recommendations to the court as to appropriate sanctions, and the power of the court was limited to reprimanding, suspending or disbarring. A matter is criminal only if imprisonment or the assessment of a fine may follow conviction. "A prisoner is in jeopardy within the meaning of the Constitution, and can not be tried again, when in a court of competent jurisdiction, and upon a sufficient indictment, he has been arraigned, has pleaded, and the jury has been impaneled and sworn." Peavey v. State, 153 Ga. 119 (1) (111 S.E. 420). "Jeopardy," in its constitutional and common law sense, has a strict application to criminal prosecutions only. Yoder v. State, 66 Okl. Crim. 178 (90 P2d 669); Ex parte Lewis, 152 Kan. 193 (102 P2d 981); People v. Carver, 174 Misc. 325 (20 NYS2d 533). Only actions intended to authorize criminal punishment, as distinguished from remedial actions, subject the defendant to "jeopardy." "[T]he double jeopardy clause prohibits merely punishing twice, or attempting *377 a second time to punish criminally, for the same offense. The question . . . is thus whether [the statute in question] imposes a criminal sanction." United States v. Hess, 317 U.S. 537, 549 (63 SC 379, 87 LE 443). And see Helvering v. Mitchell, 303 U.S. 391 (58 SC 630, 82 LE 917) to the same effect. In the Hess case a qui tam action was brought on behalf on the Government to invoke a forfeiture and damages in consequence of a fraudulent claim which Hess had made against the Government and for which he had already been indicted and fined.
The sanctions in a disbarment proceeding are not criminal in nature.
The requirement of proof beyond a reasonable doubt by Rule 4-215 (f) does not convert the proceeding into a criminal one. There are other instances where that quantum of proof is required in civil actions. See, e.g., Durham v. Holeman, 30 Ga. 619 (7); Muller v. Rhuman, 62 Ga. 332 (7); Beall v. Clark, 71 Ga. 818 (3); Conley v. Thornton, 81 Ga. 154 (1) (7 S.E. 127); Adkins v. Flagg, 147 Ga. 136 (la) (93 S.E. 92); Crosby v. Higgs, 181 Ga. 314 (182 S.E. 10). But, as the Supreme Court asserted in Schnell v. Toomer, 56 Ga. 168 (3), supra, "The exclusion of reasonable doubt, in some civil cases, as held requisite in 11 Ga. 160, and 30 Ga. 619, means no more than that the jury [or trior of fact] must be clearly satisfied," and further that "[t]here is certainly a difference in the strength of conviction required by the law in the two classes of cases." P. 170.
A lawyer does not have a vested interest in his status as a member of the State Bar of Georgia. "The right to practice law is not a natural or constitutional right, nor an absolute right or a right de jure, but is a privilege or franchise." 7 CJS 708, Attorney and Client, § 4 b, quoted approvingly in Gordon v. Clinkscales, 215 Ga. 843, 845, supra. "It has never been the law of this State that a lawyer holds an irrevocable license to practice law . . . The State Bar Act does not deprive the [appellant] of his freedom of contract, conscience, speech, and liberty, or deprive him of his property without due process of law." Sams v. Olah, 225 Ga. 497, 504 (169 SE2d 790).
*378 Nor does the procedure for disciplining a member of the State Bar, as provided in the rules prescribed by the Supreme Court and followed in this case deprive him of these rights.
None of the enumerations of error is meritorious, and the judgment is
Affirmed. Bell, P. J., Jordan, P. J., Hall, Pannell Deen, Quillian and Whitman, JJ., concur. Felton, C. J., dissents.
FELTON, Chief Judge, dissenting. As I understand the record, Mr. Cushway was charged by his client with charging an exhorbitant fee. The only evidence of that fact is the opinion of the client that it was exhorbitant. The evidence, in my opinion, renders the conclusion that the fee was immorally exhorbitant very, very doubtful.
As to the fact that in rendering his account Mr. Cushway reported $497.72 paid to creditors was more than was actually paid, the error in reporting the excess paid to creditors was a miscalculation. What the attorney meant by the accounting was that he paid out so much money and had so much money left in his hands and that he wrote a check for the balance to himself as a fee for services rendered. The attorney had authority from his client to issue a check to himself for his fee. The charge made against the attorney is simply that the amount of fee was unconscionably excessive. I do not think that the evidence authorizes the finding that the attorney stole the $497.72 and that the fee charged, which included the $497.72, was morally excessive. The mere opinion of the client, as against the record in this case, is simply insufficient to warrant the disbarment of the attorney in this case. This is especially true when the quantum of proof, as held by the majority, is evidence beyond a reasonable doubt. There is no assurance in this case that the proceedings were held under this theory. The rule on the subject is contradictory, in my opinion, and a presumption that the judge correctly interpreted the rule is unwarranted. Since there was no jury and no charge to a jury, the record should have shown whether the case was tried under a mere any-evidence rule or the correct rule, any evidence beyond a reasonable doubt. There is quite a difference. It is unfortunate that the evidence is not set out in more detail.
*379 As to the other sanctions it is my opinion that the rules should not be held to impose two sanctions for the same identical conduct. Think what untoward injustice that could lead to. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2462996/ | 896 S.W.2d 807 (1995)
Lavern T. BUSSE and Jeff Busse, Appellants,
v.
PACIFIC CATTLE FEEDING FUND # 1, LTD., Appellee.
No. 06-94-00052-CV.
Court of Appeals of Texas, Texarkana.
Submitted December 8, 1994.
Decided March 14, 1995.
Rehearing Denied March 14, 1995.
*811 James H. Baumgartner, Jr., David Reese, Vial, Hamilton, Koch & Knox, Dallas, for appellants.
Orrin L. Harrison, III, Vinson & Elkins, LLP, Eric R. Cromartie, Hughes & Luce, LLP, Thomas W. Mills, Jr., Mills Presby & Anderson, Dallas, for appellee.
Before CORNELIUS, C.J., and BLEIL and GRANT, JJ.
OPINION
CORNELIUS, Chief Justice.
Lavern T. Busse and his son, Jeff Busse, appeal from an adverse judgment rendered in Pacific Cattle Feeding Fund's suit against them for damages resulting from Pacific's investment in a failed cattle marketing arrangement. Pacific sued the Busses, alleging Texas Securities Act and Deceptive Trade Practices Act violations, common law fraud, and breach of contract. The court rendered summary judgment for Pacific on the Securities Act claims. The jury found in Pacific's favor on the DTPA and fraud claims. The court directed verdicts for the Busses on Pacific's breach of contract claims.
Stan Bert formed the Pacific Cattle Corporation, of which he was president and sole shareholder, in September 1985. He formed the Pacific Cattle Feeding Fund # 1, here called "Pacific," as a Texas limited partnership with Pacific Cattle Corporation as general partner in 1986-87. Pacific began investing in cattle in October 1988.
Lean and Free, an Iowa corporation, was formed in September 1987 by twenty-five investors to take advantage of a process developed in England by which Holstein bulls fed a special diet purportedly produced beef low in saturated fat, calories, and cholesterol. Lean and Free encountered financial difficulties early, and by April or May of 1988, it approached Lavern Busse about providing capital. In December of 1988, Lavern Busse made Lean and Free a loan of $150,000, and in January 1989, he increased the loan to $243,000. In April 1989, Lean and Free approached Lavern Busse about additional monies. In response, Lavern increased the amount of his loan and converted the loan into common and preferred stock, making him the major stockholder.
Pacific alleged that Bert learned about Lean and Free in 1989 from Dean Freed of Ag Dimensions International (ADI), which was locating and managing livestock enrolled in the Lean and Free Program. ADI told Bert about Lavern Busse, and Bert and Lavern Busse met on October 23, 1989, at Lavern's office in Cedar Rapids, Iowa. Present *812 at the meeting were ADI principals and Mike Knipp, a Lean and Free manager. Lavern Busse already had bulls enrolled in the Lean and Free program under what were called finishing contracts. Bert testified that Lavern Busse assured him that there was more demand for Lean and Free beef than they could satisfy, that he needed to get more investors like Pacific so he could invest more of his money to increase inventory, that Lean and Free was building inventory so it could meet demand, that it had a contract with Amway to supply it with beef, and that he was carrying Lean and Free beef on his own menus at Bonanza steakhouses. At the close of the meeting, Lavern Busse told Bert that he should deal with ADI and that ADI would put together a group of Busse's bulls that Pacific could buy and place with Lean and Free for feeding.
After the meeting, Bert received through the mail at his Texas offices some Lean and Free advertising brochures that contained analyses of the rate of return investors would receive by investing in Lean and Free.
Bert testified that before he invested he learned that an ADI officer had been convicted of fraud involving cattle contracts. Steve Knutson, a banker at Norwest Bank in Iowa, called Bert to tell him that ADI's chief executive officer, Dennis Peterson, had served some time in prison. Bert then called Jeff Busse. Jeff Busse told Bert that they knew about Peterson's history but that controls were in place at ADI to protect investors. Bert and Jeff Busse had a second phone conversation in which they discussed the difficulties Pacific was having arranging financing at Norwest Bank for the bull purchase. Bert testified that Jeff Busse told him that if the financing did not come through, Lavern Busse would sell the bulls to other buyers. Bert testified that Jeff told him he would speak to Knutson at the bank to speed the matter along.
Pacific bought 1,362 cattle from Lavern Busse on January 25, 1990. Pacific simultaneously entered into feeding and finishing contracts with Lean and Free. The contracts provided that Pacific would pay for feeding the cattle, and once the cattle were ready for slaughter, Lean and Free would repurchase them at cost plus 12% interest, reimburse Pacific for its incurred feed costs, and pay Pacific $25 per head profit.
Lean and Free failed to find enough markets to support its operations. By April 1990, it had failed to repurchase Pacific's cattle, failed to reimburse Pacific for its feed costs, and failed to pay the $25 per head profit. On June 7, 1990, Lean and Free's directors allowed Lavern Busse, as its only secured creditor, to foreclose on the company's processed inventory and trade name. From June 1990 to January 1991, Pacific continued to feed its cattle and gradually sold them off.
Pacific filed suit against Lavern and Jeff Busse in August 1991. It alleged that the Busses knew Lean and Free was failing and that they sold the bulls to Pacific as part of a scheme to liquidate the inventory before the business went under.
The trial court granted partial summary judgment in favor of Pacific on its claims against Lavern Busse under the Texas Securities Act and granted the Busses a directed verdict on Pacific's breach of contract and alter ego claims. The other issues were submitted to a jury, which found in favor of Pacific, assessing actual damages, additional damages under the DTPA, and punitive damages under the common law fraud claims. The court entered judgment for Pacific on its DTPA claim, but reduced the additional damages by $405,000.
The Busses contend in their first point of error that the trial court erred in denying their motion to dismiss based on forum selection clauses in the feeding and finishing contracts.
Forum selection clauses are valid in Texas. Greenwood v. Tillamook Country Smoker, 857 S.W.2d 654, 657 (Tex.App. Houston [1st Dist.] 1993, no writ). Parties are allowed to choose the forum in which to litigate their disputes. In this case, the feeding and finishing contracts between Pacific and Lean and Free contained the following clauses:
This agreement and the rights and obligations of the parties arising hereto shall be construed in accordance with the laws *813 of the State of Iowa, with venue in [certain Iowa counties].
A forum selection clause, however, does not apply to a tort action alleging that the plaintiff was induced by misrepresentations to enter into the contract, where construction of the rights and liabilities of the parties under the contract is not involved. See Caton v. Leach Corp., 896 F.2d 939, 942-43 (5th Cir. 1990); Pozero v. Alfa Travel, Inc., 856 S.W.2d 243, 245 (Tex.App.San Antonio 1993, no writ). Where the wrongs arise from misrepresentations inducing a party to execute the contract and not from breach of the contract, remedies and limitations specified by the contract do not apply. See Caton v. Leach Corp., supra; Decision Control Systems, Inc. v. Personnel Cost Control, Inc., 787 S.W.2d 98, 100-01 (Tex.App.Dallas 1990, no writ).
This case does not involve an interpretation or construction of the contracts but rather the misrepresentations and fraud in the inducement to sign the contracts. The rights, obligations, and cause of action do not arise from the contracts but from the Deceptive Trade Practices Act, the Texas Securities Act, and the common law.
In Pozero v. Alfa Travel, Inc., a couple purchased a cruise ticket and a ticket cancellation insurance policy. They sued the travel agent and the cruise line, as principal, when the cruise was canceled and the insurance refused to reimburse them. The ticket contract had a forum-selection clause setting California as forum for any lawsuit "arising out of or in any manner relating" to the contract. The court held that the DTPA action involved misrepresentations and nondisclosures leading to the ticket's purchase, not a construction of the ticket contract.
Likewise, in this case the causes of action are based on alleged fraud and deceptive practices that induced Pacific to enter into the contracts, not to interpret or enforce rights under the contracts. Moreover, the Busses were not even parties to the contracts. Although Pacific alleged that Lean and Free was Lavern Busse's alter ego, they failed to prove that allegation.
The Busses rely on Barnette v. United Research Co., 823 S.W.2d 368 (Tex.App. Dallas 1991, writ denied). That case, however, is distinguishable because there the issues arose from an employment contract and from the parties' employer-employee relationship that implicated the contract terms. Here, the fraud and misrepresentation allegations deal not with the terms of the contract, but predate the contract and deal with inducement to sign the contract. Similarly, the case of Brock v. Entre Computer Centers, Inc., 740 F. Supp. 428 (E.D.Tex.1990), involved a provision that applied to "any action" and was not limited to actions arising under the contract itself. Moreover, the court in Brock was construing a federal venue statute not involved here.
For the reasons stated, we conclude that the contractual forum selection clauses do not control this suit.
The Busses also contend that the court erred in denying their motion for judgment notwithstanding the verdict as to Pacific's DTPA claim because Iowa law, not Texas law, applies to the transaction.
A choice of law question is subject to de novo review on appeal. See, e.g., Huddy v. Fruehauf Corp., 953 F.2d 955, 956 (5th Cir.1992). When determining choice of law questions, a court will generally follow the statutory directives of its own state, subject to constitutional limitations. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6(1) (1971). The Texas Deceptive Trade Practices Act will be liberally construed in order to protect consumers from false, misleading, and deceptive business practices and to provide efficient and economical procedures to secure such protection. TEX.BUS. & COM.CODE ANN. § 17.44 (Vernon 1987).
The Busses do not argue that the DTPA's reach is unconstitutionally broad. Here we have a Dallas-based partnership suing a Texas resident, Lavern Busse. Jeff Busse, an Iowa resident, has waived any jurisdictional complaint and has subjected himself to the jurisdiction of the Texas court. He does not raise the issue on appeal.
If the State Legislature intends for a statute to be applied to out-of-state facts, the courts will so apply it unless constitutional *814 limitations forbid it. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6(1) cmt. b (1971). Application to out-of-state facts is permissible even when the local law of another state would be applicable under usual choice of law principles. Id.
Although the Texas DTPA does not explicitly provide or state an intention that it is to apply to out-of-state facts affecting Texas consumers, it is to be applied liberally to protect those citizens from false, misleading, and unconscionable acts, and it does not provide that its application will be limited to acts or practices occurring in Texas. Moreover, the DTPA's definition of "trade" and "commerce" includes the sale of any good or service "wherever situated" if the trade or commerce directly or indirectly affects the people of Texas. TEX.BUS. & COM.CODE ANN. § 17.45(6) (Vernon 1987); Reed v. Israel Nat'l Oil Co., 681 S.W.2d 228 (Tex.App. Houston [1st Dist.] 1984, no writ). As noted, here we have a Texas plaintiff who was solicited, in part, in Texas, suing a Texas resident and an Iowa resident. Even under a traditional choice of law analysis, Texas would have sufficient contacts to Pacific's claims so the application of Texas law would not be unreasonable or arbitrary. If construction of the Texas statute justifies the application of Texas rather than Iowa law, and that does not offend the constitution, it is not necessary to engage in the choice of law analysis based on the significant relationships set out in Restatement (Second) of Conflict of Laws § 6(2) (1971). See, e.g., Siskind v. Villa Foundation for Education, Inc., 642 S.W.2d 434 (Tex.1982). If such an analysis is proper, we find that the record reveals sufficient significant relationships to justify the application of Texas law to the controversy here. Consequently, since it does not offend constitutional principles to apply Texas law in this case, we conclude that the trial court correctly refused to apply Iowa law.
The Busses also contend that the trial court erred in granting Pacific's motion for partial summary judgment on its Securities Act claims against Lavern Busse.
A movant is entitled to a summary judgment when it shows there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. TEX.R.CIV.P. 166a(c). In deciding whether a material fact issue precludes summary judgment, the court will take as true any evidence favoring the nonmovant and will resolve any doubts and every reasonable inference in the nonmovant's favor. Nixon v. Mr. Property Management, 690 S.W.2d 546, 548-49 (Tex. 1985).
A person or corporation who offers or sells an unregistered security is liable to the buyer, who may sue for damages. TEX.REV.CIV.STAT.ANN. art. 581-33A(1) (Vernon Supp.1995). A person who directly or indirectly controls a seller or issuer of a security is liable jointly and severally under Section 33A with the seller or issuer and to the same extent as the seller or issuer. TEX. REV.CIV.STAT.ANN. art. 581-33F(1) (Vernon Supp.1995). An investment contract is a "security." Tex.Rev.Civ.Stat.Ann. art. 581-4A (Vernon Supp.1995). An investment contract involves (1) a common enterprise in which a person (2) expects profits (3) solely from the efforts of the promoter or a third party. Securities and Exchange Commission v. W.J. Howey Co., 328 U.S. 293, 66 S. Ct. 1100, 90 L. Ed. 1244 (1946); Russell v. French & Associates, Inc., 709 S.W.2d 312, 314 (Tex. App.Texarkana 1986, writ ref'd n.r.e.). A security is exempt from registration if the sale is made without public solicitation or advertisement and the issuer sold its securities during the preceding twelve months to not more than fifteen persons who bought for their own account. Tex.Rev.Civ.Stat.Ann. art. 581-51 (Vernon Supp.1995).
Pacific's summary judgment motion raised two grounds: (1) Lavern Busse sold unregistered securities to Pacific in violation of the Texas Securities Act, and (2) Lavern Busse and a corporation he controlled, Lean and Free, offered and sold securities to Pacific by means of untrue statements of material fact or misleading omissions of material fact or both, in violation of the Securities Act.
In the order granting partial summary judgment, the court found that (1) Lavern Busse was a control person for Lean and Free, (2) Pacific bought a security from Lean and Free that the Securities Act required to *815 be registered but was not registered, (3) the security was not exempt from the Act's registration requirements, (4) the sale was made through the use of materially misleading statements and omissions on which Pacific relied in purchasing the security, and (5) Lavern Busse was liable to Pacific for its damages as a result of Busse's violations of the Act.
Lavern Busse in his summary judgment response did not dispute that the securities were sold through the use of materially misleading statements and omissions, so he has waived that issue.
The Texas Securities Act does not require proof of scienter. American General Ins. Co. v. Equitable General Corp., 493 F. Supp. 721 (E.D.Va.1980). If there was adequate summary judgment proof that Lean and Free sold an unregistered security that was not exempt from registration and that Lavern Busse was a control person, the summary judgment was proper.
That Lean and Free sold the finishing-and-feeding contracts is not disputed. On appeal the Busses argue that a fact question remains as to whether the contracts are a security. The Busses in their memorandum in opposition to Pacific's summary judgment motion argue that the contracts are "forwarding" contracts. They do not argue that the elements of the forwarding contracts are different from an investment contract. We conclude that the contracts meet the statutory and case-law requirements for an investment contract.
As to whether the securities were exempt, the summary judgment evidence shows that ADI sent to Pacific two brochures: "A Profile of AG Dimensions International, Inc." and "The Lean and Free Beef Challenge to White Meat." These constituted an advertisement and public solicitation. ADI was acting for Lean and Free in arranging sales for the cattle feeding operations. Whether ADI was Lavern Busse's agent or whether Lavern Busse knew of the brochures is irrelevant. The statute requires no scienter.
As to whether Lavern Busse was a "control person," that term in the Texas statute is used in the same broad sense as in the federal statute. Tex.Rev.Civ.Stat.Ann. art. 581-33F cmt. (Vernon Supp.1995). Major shareholders, Tex.Rev.Civ.Stat.Ann. art. 581-33F cmt., and directors, Salit v. Stanley Works, 802 F. Supp. 728, 734-35 (D.Conn. 1992), are control persons. As Lavern Busse was both the majority shareholder and a director, he was a control person within the meaning of the statutes.
As all the statutory elements required to show a violation of the Texas Securities Act were established by summary judgment evidence, summary judgment for Pacific on that issue was proper.
In their fourth point of error, the Busses complain because the court allowed Pacific's attorney to advise the jury of the court's ruling on Pacific's motion for partial summary judgment. They argue that this was an impermissible comment on the weight of the evidence.
Complaint about improper comment by counsel is waived unless objection is timely made. An objection is not timely made unless it is made at the earliest practical moment. City of Corsicana v. Herod, 768 S.W.2d 805, 815-16 (Tex.App.Waco 1989, no writ). Failure to press for an instruction at the time of an allegedly erroneous jury argument operates as a waiver of any complaint which may be made as to the argument. Fowler v. Garcia, 687 S.W.2d 517, 520 (Tex.App.San Antonio 1985, no writ). Where the record fails to show that a motion for mistrial directed to the argument of counsel was not overruled by the trial court, no error is preserved for review. Biard Oil Co. v. St. Louis Southwestern Ry. Co., 522 S.W.2d 588, 590 (Tex.Civ.App.Tyler 1975, no writ).
During discussions before the court and the jury in connection with a hearsay objection, Pacific's counsel said that the court had already determined that Lavern Busse was a control person for Lean and Free. The court had already decided that question with its ruling on Pacific's motion for partial summary judgment, but the jurors had not been told. The next day, the Busses' moved for a *816 mistrial on grounds that the statement improperly informed the jury of the court's prior ruling and that the statement implied that Lavern Busse was a wrongdoer. The court reserved its ruling on the motion.
If counsel's comment was error, the Busses waived their complaint because they failed to timely object. Although there is no bright-line rule to determine the timeliness of an objection, we conclude that an objection made the day following the objectionable event is not timely. Moreover, the Busses failed to request a curative instruction. Improper argument is rarely cause for a mistrial and usually can be cured by an instruction. Standard Fire Ins. Co. v. Reese, 584 S.W.2d 835, 839-40 (Tex.1979). The Busses also failed to get a ruling on their mistrial motion, so their complaint was not preserved for review.
The Busses also allege error because the court admitted testimony and documentary evidence about statements made by employees of Lean and Free, Ag Dimensions International, and Norwest Bank. They urge that the statements were hearsay and were highly prejudicial. The Busses point to four pieces of evidence admitted over their objections. They are two pieces of Bert's testimony about what Dean Freed of ADI had told him about Lavern Busse; Bert's testimony about what Steve Knutson of Norwest Bank told him about Lavern Busse; and a brochure titled "Lean and Free Beef Challenge to White Meat."
Hearsay is an out-of-court statement offered in evidence to prove the truth of the matter asserted. Tex.R.Civ.Evid. 801(d). Evidence of an out-of-court statement is hearsay only if it is introduced to prove the truth of the matter asserted. Turner, Collie & Braden, Inc. v. Brookhollow, Inc., 642 S.W.2d 160, 167 (Tex.1982).
The statements in question were not offered for the proof of the matter asserted. In fact, Pacific argued that they were false rather than true. They were offered only to show that they were made, as elements of the fraud Pacific was trying to prove, i.e., as operative facts. See Williams v. Jennings, 755 S.W.2d 874, 885 (Tex.App.Houston [14th Dist.] 1988, writ denied); Yellow Freight System, Inc. v. North American Cabinet Corp., 670 S.W.2d 387, 390 (Tex. App.Texarkana 1984, no writ). It was not error to admit the statements.
In their sixth point of error, the Busses contend that the trial court erred in overruling their motions for judgment notwithstanding the verdict and for new trial because there was no or insufficient evidence to support the jury's findings that they had committed fraud and engaged in deceptive acts.
In reviewing a no evidence point, the reviewing court considers only the evidence and inferences, when viewed in their most favorable light, that tend to support the finding and disregards all evidence and inferences to the contrary. Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988). If there is more than a scintilla of evidence to support the finding, the no evidence challenge fails. Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex.1987).
In reviewing a factual insufficiency point, the appellate court first must examine all of the evidence, Lofton v. Texas Brine Corp., 720 S.W.2d 804, 805 (Tex.1986), and having considered and weighed all the evidence, it will set aside the verdict only if the evidence is so weak or the finding so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). The court apparently held that Iowa law controlled the common law fraud action. Neither side appeals that decision. Under Iowa law the elements of fraud are: a material misrepresentation; made knowingly; with intent to induce the plaintiff to act or refrain from acting; on which the plaintiff justifiably relies; with damages. Beeck v. Kapalis, 302 N.W.2d 90, 94 (Iowa 1981).
Bert testified that Lavern Busse made several misrepresentations: that the product demand was outstripping supply; that he was going to use the money he received from Pacific to purchase more bulls and increase the Lean and Free inventory; that he had contracts with certain buyers; and that he was personally committed to funding the project to success.
*817 Jeff Busse directly reassured both Bert and the bank that the Busses had control over the activities of ADI and drew up the documents. He signed the contracts between Lean and Free and Pacific and prepared and signed the assignment documents covering Pacific's purchase of the bulls.
There was also evidence that the Busses failed to disclose these facts: (1) because the Lean and Free program was unproven, bulls had serious health problems, had damage to their digestive tracts, had high death loss, and had high disease rates; (2) the inventory being accumulated and carried at cost on the Lean and Free books had substantial problems and most of it was not salable; (3) demand for the product was not great because of its high cost, appearance, and taste; (4) Lean and Free had a going concern qualification on its most recent audited financial statements; (5) Lean and Free had low sales for years and the Busses had no reason to believe sales would improve; (6) Lavern Busse was not only Lean and Free's majority shareholder, but also its sole secured creditor with the ability to foreclose on its assets; (7) Lean and Free had neither the funds nor the prospect of funds based on past performance, present contracts, and future promises to pay for even a significant percentage of its existing obligations to investors; (8) Lavern Busse was reducing his unsecured exposure to Lean and Free by selling bulls to investors; and (9) Lavern Busse had no long-term commitment to Lean and Free, had threatened to cut off funds before the sale to Pacific, and was seeking a buyer for the company.
There is more than a scintilla of evidence to support the jury findings. We also find, after reviewing all the evidence, that it is factually sufficient to support the jury findings.
As to deceptive acts under the DTPA, a consumer may maintain an action where a false, misleading, or deceptive act or practice constitutes a producing cause of actual damages. TEX.BUS. & COM.CODE ANN. § 17.50(a)(1) (Vernon 1987). A failure to disclose information about goods or services can be a deceptive act if the failure to disclose was intended to induce the consumer to enter into the transaction. TEX.BUS. & COM.CODE Ann. § 17.46(b)(23) (Vernon Supp.1995); see Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 541 (Tex.1981).
The evidence shows that the Busses made misrepresentations that were a producing cause of Pacific's damages. Bert testified that when he investigated to find out why the bulls were not being slaughtered and why Pacific was not being paid in compliance with the contracts, the Busses told him they had a big order coming and that Pacific should continue to hold onto the bulls and continue feeding them. Bert also testified that Jeff Busse told him that Lavern Busse still believed in the program and was buying more cattle and putting them on feed. After Bert returned to Texas and sent a demand letter to the Busses, Jeff Busse responded with a letter asking for an additional ten days, until June 8, 1990, and made representations that a big order was supposed to come in. On June 7, 1990, Jeff Busse told the Lean and Free board that, because litigation was imminent, Lavern Busse was calling his note and foreclosing on the assets.
The Busses also say there is no evidence of damages to Pacific other than breach of contract damages, which cannot be recovered in a tort action for fraud. We find, though, that most of the damages Pacific sought and supported by evidence were tort-related. In addition to seeking the difference between the value as represented and received, it sought out-of-pocket expenses, loss of credit reputation, loss of time value, and loss to business reputation. While this kind of damage could result from a breach of contract, it can also result from fraudulent inducement to enter into a transaction. Pacific did not sue to enforce the contract.
We find the evidence to be both legally and factually sufficient to support the jury findings.
The next complaint is that the trial court erred in failing to submit a requested instruction on mitigation of damages and requested issues and instructions regarding whether Pacific disposed of the bulls in a *818 commercially reasonable manner and in good faith.
A party requesting a jury instruction must do three things to preserve error: (1) tender in writing and request the proper instruction before submission, (2) make a specific objection to its omission, and (3) obtain a ruling from the court. Wright Way Construction Co. v. Harlingen Mall Co., 799 S.W.2d 415, 418-19 (Tex.App.Corpus Christi 1990, writ denied). The Busses, although they tendered a proper jury instruction that the court rejected, failed to object at the charge conference, and so waived their complaint. If they preserved their complaint, they still failed to show that the failure to give the instruction probably caused the rendition of an improper verdict.
Complaint is also made that the court erred in submitting the definition of "exemplary damages" because the definition is an erroneous statement of the law and constituted an impermissible comment on the weight of the evidence.
The court gave the following definition:
"EXEMPLARY DAMAGES" are those damages which by law may be assessed against a really stupid defendant, or a really mean defendant, or a really stupid defendant who could have caused a great deal of harm by its actions but who actually caused minimal harm, where actual damages have been found, in order to make an example of such person or persons and to deter such conduct on their part in the future.
The Busses' attorney specifically objected to the reference to a stupid and mean defendant in the definition. The court then modified the instruction as to another portion. The Busses did not renew their objection after the court modified the instruction, so they waived any complaint. Wright Way Construction Co. v. Harlingen Mall Co., supra.
Although informing the jury that exemplary damages could only be imposed against a really stupid or really mean defendant departed from the correct standard and was improper, we do not find it to be reversible, even if error had been properly preserved. Indeed, the standard used by the court placed a more onerous burden of proof on Pacific than the proper standard. We cannot see that the instruction was harmful. The court did not say that the Busses were "stupid and mean," but only that such characteristics, if found, would justify the imposition of exemplary damages.
Pacific contends in its cross-point that the court erred in reducing its damages. It argues that it is entitled to $1,620,000 in damages under the DTPA rather than the $1,215,000 awarded by the trial court. The court awarded damages of $1,215,000, three times the jury's finding of actual damages, $405,000. The jury found additional damages under the DTPA of $729,000 against Lavern Busse and $486,000 against Jeff Busse, which together also total three times actual damages.
A consumer who prevails under the DTPA under a knowing violation may recover three times the first $1,000 of actual damages plus three times the actual damages in excess of $1,000. This is equal to a trebling of actual damages. TEX.BUS. & COM.CODE Ann. § 17.50(b)(1) (Vernon Supp.1995); Jim Walter Homes, Inc. v. Valencia, 690 S.W.2d 239, 241 (Tex.1985).
Pacific argues it is entitled to $1,630,000 ($729,000 + $405,000 + $486,000), because damages allocated to Lavern Busse ($720,000 + $405,000 = $1,134,000) are under the $1,215,000 legislative cap and the damages allocated to Jeff Busse ($405,000 + $496,000 = $891,000) also are under the legislative cap.
It appears that the Legislature intended the treble damages to be a cap on the total damages recoverable in a DTPA action regardless of the number of defendants. See Jim Walter Homes, Inc. v. Valencia, 690 S.W.2d at 241; Providence Hospital v. Truly, 611 S.W.2d 127, 135 (Tex.Civ. App.Waco 1980, writ dism'd). We agree with the authorities that suggest that this was the legislative intent and hold that the trial court correctly reduced the damages to the limit provided by the DTPA.
*819 For the reasons stated, the judgment is in all things affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1805120/ | 202 Mich. App. 138 (1993)
508 N.W.2d 144
PEOPLE
v.
CROSS
Docket No. 138231.
Michigan Court of Appeals.
Submitted April 2, 1993, at Grand Rapids.
Decided October 18, 1993, at 9:25 A.M.
Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, James J. Gregart, Prosecuting Attorney, and Michael H. Dzialowski, Assistant Prosecuting Attorney, for the people.
State Appellate Defender (by Richard B. Ginsberg), for the defendant on appeal.
Before: MICHAEL J. KELLY, P.J., and WEAVER and D.E. SHELTON,[*] JJ.
WEAVER, J.
Following a jury trial, defendant was convicted of possession of less than twenty-five grams of cocaine, MCL 333.7403(2)(a)(v); MSA 14.15(7403)(2)(a)(v), and attempted resisting and obstructing a police officer, MCL 750.479; MSA 28.747. He then pleaded guilty of being an habitual offender, second offense, MCL 769.10; MSA 28.1082. Defendant was sentenced to concurrent prison terms of two to six years for the possession conviction and six months for the obstruction conviction. Defendant appeals as of right. We affirm.
On the afternoon of September 5, 1990, defendant was standing with four or five other men in front of a barber shop on East Main Street in Kalamazoo. When police officers approached the group, defendant walked away and then began to run. He was followed by two police officers. Defendant ran through a number of yards. As defendant ran through the backyard at 546 Phelps Street, *141 Officer Jay Boehme saw him bend down and make a motion like he was placing something on the ground. Officer Boehme arrived in the yard about a minute later, and saw some money and a rock of cocaine on the ground. A six-year-old girl in the yard said, "That man put that there." When the officer asked her whether it was a man wearing a blue Pistons T-shirt, which he had seen defendant wearing, she said, "Yes." Defendant fled into the basement of his grandmother's home. The officers followed him into the basement, handcuffed him, and placed him in a police car. Officer Kirk Spence testified that defendant struggled with him as he attempted to handcuff defendant.
I
Defendant contends Officer Boehme's testimony regarding what the little girl told him was inadmissible hearsay. Defendant also argues that the court's failure to compel the prosecutor to call the little girl to testify denied defendant a fair trial. Before the trial, defendant moved to preclude the prosecution from presenting the child's extrajudicial statements. In the alternative, defendant asked the court to require the prosecution to call the child as a witness. The court denied both requests.
Defendant first argues the statements were inadmissible hearsay. At trial Officer Boehme testified that while pursuing the defendant, he saw money and a rock of cocaine lying on the ground. A little girl in the yard told him "[t]hat man put that there." The officer then verified with the child the color shirt defendant was wearing. The time that elapsed between the officer seeing defendant bend down in the grass and the officer speaking to the six-year-old girl was less than one minute. Further, the initial statement was unsolicited.
*142 MRE 803(1) states:
The following [is] not excluded by the hearsay rule, even though the declarant is available as a witness:
(1) Present Sense Impression. A statement describing or explaining an event or condition made while the declarant was perceiving the event or condition, or immediately thereafter.
Defendant argues the statements do not fall within the present sense impression exception because of the time lapse between the event and the making of the statements. Our Supreme Court has ruled that a four-minute interval between an event and a statement was "immediately after" the event for purposes of the present sense impression exception. Johnson v White, 430 Mich 47; 420 NW2d 87 (1988). Here, the interval was less than a minute, and clearly falls within the exception.
Defendant also argues the child should have been sworn in as a witness so that defendant could have had the benefit of cross-examination. The child was available at trial; defendant had the opportunity to call the child as a witness and chose not to do so. Defendant cannot now claim that the lost opportunity constitutes a denial of due process. Dresselhouse v Chrysler Corp, 177 Mich App 470; 442 NW2d 705 (1989); People v Roberson, 167 Mich App 501; 423 NW2d 245 (1988).
II
Defendant next asserts that the cumulative effect of four instances of alleged misconduct by the prosecutor denied him a fair trial and due process of law.
Defendant first claims the prosecutor made a *143 false assertion of fact during closing argument, that the child declarant could not be called as a witness at trial. Although not called to testify, the child was available, not ruled incompetent to testify, and named on the prosecutor's witness list. During closing argument, defendant's counsel asserted that the child was the only eyewitness and attacked the prosecution's failure to call the child as a witness. The prosecutor, in closing, responded as follows:
A little 6-year old girl comes by, backyard [sic], sees someone go through, put something down. The reason you were allowed to hear what she had to say at the moment that she saw the officer was because she said it right then. The officer was in a position to observe much of what she saw too. Well, she's just a little tiny girl. She's even younger than Jason was. She's not someone that we can bring into a Courtroom.
We agree that the prosecutor intentionally misrepresented a material fact, because there is nothing in the record to support the idea that the young girl could not have been called to testify. However, defendant did not object to the improper remark or seek a curative instruction. The goal of a defense objection to improper remarks by the prosecutor is a curative instruction. People v Fuqua, 146 Mich App 250, 254; 379 NW2d 442 (1985). A miscarriage of justice will not be found if the prejudicial effect of the prosecutor's comments could have been cured by a timely instruction. People v Gonzalez, 178 Mich App 526; 444 NW2d 228 (1989). Thus, if defense counsel fails to object, review is foreclosed unless the prejudicial effect of the remark was so great that it could not have been cured by an appropriate instruction. People v Duncan, 402 Mich 1; 260 NW2d 58 (1977), rev'd on *144 other grounds 414 Mich 877 (1982). In the instant case, the prejudicial effect of the improper remark could have been cured by an appropriate instruction. The girl's statement was admissible under the present sense impression exception to the hearsay rule (see issue I). The court could have instructed the jury that it was possible to call the child to testify at trial, but not necessary.
Defendant next argues that in cross-examining defendant the prosecution, over defense counsel's objection, repeatedly elicited testimony establishing that defendant had frequented an area known for cocaine trafficking and improperly attempted to establish guilt by association.
Officer Boehme, a member of the police department's Tactical Response Unit, testified that he first observed defendant in the 1600 block of East Main Street, an area "where narcotics are bought, sold and used on a regular basis." The prosecutor elicited testimony from two other Tactical Response Unit officers who were on duty with Officer Boehme in the area on September 5, 1990, who attested that this area was known for narcotics trafficking. Then, over defense counsel's objection, the prosecutor cross-examined defendant with repeated questions concerning whether defendant knew the street names of his companions who had been congregating in front of the barber shop, whether defendant knew that the area was known for selling crack cocaine, whether defendant had a street name, and whether he had seen crack cocaine before. The prosecutor's questioning was in response to defendant's testimony on direct examination that he was in the 1600 block of East Main Street to buy some juice and play basketball with another individual in the group. It was also in response to defendant's testimony that he had never used or sold drugs. A defendant's false or *145 inconsistent testimony may be impeached. See Michigan v Harvey, 494 US 344; 110 S Ct 1176; 108 L Ed 2d 293 (1990). We conclude that the prosecution's cross-examination of defendant's testimony, when reviewed in the context of the trial, did not constitute misconduct so as to deprive defendant of a fair trial. Duncan, supra.
Defendant also argues that the prosecutor improperly implied that the child witness, who did not testify, had identified defendant at trial. Specifically, defendant argues that during cross-examination of defendant, the prosecutor implied that the child could identify defendant by asking the following question: "This small child, this little girl that approached Officer Boehme and said that she saw you place that piece of crack and the money on the ground, you were a figment of her imagination?" Defendant failed to object to this question, and any error could have been easily cured by a timely instruction; therefore, appellate review is precluded. Duncan, supra.
Defendant claims the prosecutor improperly implied that the jury had a duty to convict defendant. However, review of the complained-of remark persuades us that it does not rise to the level of urging the jurors to convict the defendant as part of their civic duty. People v Swartz, 171 Mich App 364; 429 NW2d 905 (1988).
Finally, defendant argues that the cumulative effect of all four instances of alleged misconduct by the prosecutor was so great that it denied defendant a fair trial and due process of law. Review of the record convinces us this argument has no merit.
III
Defendant asserts the court erred in ruling the *146 prosecutor could impeach defendant with evidence of a prior robbery conviction.
Before trial the prosecution moved to impeach defendant with evidence of a 1988 armed robbery conviction, should he choose to testify. A witness' credibility may be impeached with evidence of prior convictions, MCL 600.2159; MSA 27A.2159, but only if the convictions satisfy the criteria set forth in MRE 609. The rule provides, in part:
(a) For the purpose of attacking the credibility of a witness, evidence that the witness has been convicted of a crime shall not be admitted unless the evidence has been elicited from the witness or established by public record during cross examination, and
(1) The crime contained an element of dishonesty or false statement, or
(2) the crime contained an element of theft, and
(A) the crime was punishable by imprisonment in excess of one year or death under the law under which the witness was convicted, and
(B) the court determines that the evidence has significant probative value on the issue of credibility and, if the witness is the defendant in a criminal trial, the court further determines that the probative value of the evidence outweighs its prejudicial effect.
Because armed robbery contains an element of theft, evidence of such a conviction is admissible under MRE 609 if it satisfies the Allen balancing test. People v Allen, 429 Mich 558; 420 NW2d 499 (1988); People v Minor, 170 Mich App 731; 429 NW2d 229 (1988).
Defendant's 1988 armed robbery conviction has lower probative value with regard to the question of veracity than other theft offenses would have, but heightened probative value because defendant's prior conviction was only two years old. *147 Allen at 612. Further, theft is an element of robbery, and an indicator that defendant is of dishonest character and may not testify truthfully. However, there would be little prejudice to defendant because of the disparity between defendant's 1988 armed robbery conviction and his current convictions of possession of cocaine and attempted resisting and obstructing a police officer. Although the trial court erroneously focused upon its view that "armed robbery is a very violent crime" to determine the veracity of defendant's testimony, it did not abuse its discretion because the evidence here is more probative than prejudicial. Allen, supra.
IV
Defendant argues the court erred in denying his motion for a directed verdict on the charge of attempted resisting and obstructing a police officer. Specifically, defendant argues the prosecution failed to establish a prima facie case because it failed to prove beyond a reasonable doubt that defendant knew he was being arrested. Defendant's own testimony establishes that he knew at the time that he struggled with the officers that he was being arrested. The testimony of the arresting officers establishes that defendant intended to resist the arrest. Viewing the evidence in a light most favorable to the prosecution, we find the prima facie elements of attempted resisting and obstructing a police officer proven beyond a reasonable doubt. People v Little, 434 Mich 752; 456 NW2d 237 (1990).
V
Defendant contends the jury instruction given *148 regarding the charge of attempted resisting and obstructing a police officer was deficient to the point that reversal is required, because it did not adequately inform the jury of the elements of the charged offense.
Defendant did not object to the jury instructions given at trial and therefore has not preserved this issue for appeal. A party must object to a given jury instruction in order to preserve the issue for appellate review. People v Puroll, 195 Mich App 170, 171; 489 NW2d 159 (1992); People v Clark, 172 Mich App 407, 417; 432 NW2d 726 (1988). Failure to object to a jury instruction waives appellate review absent manifest injustice. People v Sammons, 191 Mich App 351, 372; 478 NW2d 901 (1991), lv den 439 Mich 938 (1992), cert den ___ US ___; 112 S Ct 3015 (1992). We find no such manifest error and therefore decline to address the issue.
VI
Finally, defendant argues his sentence for the possession conviction is excessive. A sentence constitutes an abuse of discretion if it violates the principle of proportionality. People v Milbourn, 435 Mich 630; 461 NW2d 1 (1990). After a thorough review of the record, we find the sentence imposed is proportionate to the seriousness of the circumstances surrounding this offense and this offender. We find no abuse of the sentencing court's discretion.
Affirmed.
MICHAEL J. KELLY, P.J., concurred.
D.E. SHELTON, J. (dissenting).
I concur in the decision of my colleagues, except with regard to issue II. I dissent with regard to that issue, and would reverse.
*149 As the majority points out, the prosecutor's statement that the child involved could not be called as a witness was an intentional misrepresentation of material fact. The intentional nature of this misconduct by the prosecutor is apparent from the fact that the prosecutor had listed the child as a witness and had just successfully opposed a motion that would have required the prosecutor to call her as a witness. She was available and had not been ruled incompetent to testify. It is clear that the prosecutor had predetermined a strategy that would allow her to admit the child's out-of-court statement of identification without having to call her as a witness. There is certainly nothing inherently unfair about that strategy. But when the prosecutor then told the jury that she could not call the child as a witness, it was a deliberate attempt to deceive the jury with regard to why the child had not testified.
The intentional misrepresentation of material fact by a prosecutor is offensive to the maintenance of a sound judicial system. People v Robinson, 386 Mich 551, 563; 194 NW2d 709 (1972). It is manifestly unjust. People v McCain, 84 Mich App 210; 269 NW2d 528 (1978); People v George, 130 Mich App 174; 342 NW2d 908 (1983).
The majority holds that the prosecutor's misconduct was waived by defendant's failure to request a curative instruction. I disagree. Such a waiver should be found only when the misconduct is not so manifest as to result in a miscarriage of justice. People v Federico, 146 Mich App 776; 381 NW2d 819 (1985); People v Williams, 114 Mich App 186; 318 NW2d 671 (1982). Where the prosecutor's misconduct goes to the essential element of the case, a failure to request a curative instruction should not prevent this Court from remedying the prosecutor's intentional misrepresentation. People *150 v Foster, 175 Mich App 311, 317-319; 437 NW2d 395 (1989); George, supra at 180.
Here, the child's statement and her alleged observation of the man who placed cocaine on the ground was the crucial evidence in the prosecution's case and was clearly instrumental in defendant's conviction. Although the jury may well have had some doubts about that evidence in light of the prosecutor's failure to call the child as a witness, any such doubt may have been alleviated when the prosecutor misled them by stating that she could not call the child to verify the identification in court. It is manifest injustice to uphold a conviction obtained by such misconduct. I would reverse on the basis of that issue.
NOTES
[*] Circuit judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1813851/ | 173 B.R. 922 (1994)
In re Ron Dean BOWMAN, Debtor.
Ron Dean BOWMAN, Appellant,
v.
BELT VALLEY BANK, Appellee.
BAP No. MT-93-1914-RAsV. Bankruptcy No. 92-40868-7. Adv. No. 92-00138.
United States Bankruptcy Appellate Panels of the Ninth Circuit.
Argued and Submitted October 21, 1994.
Decided November 3, 1994.
*923 Gary S. Deschenes, Great Falls, MT, for appellant.
Leo Graybill, Jr., Great Falls, MT, for appellee.
Before RUSSELL, ASHLAND and VOLINN, Bankruptcy Judges.
OPINION
RUSSELL, Bankruptcy Judge:
A Chapter 7[1] debtor had his discharge revoked based on fraud and concealment of insurance proceeds. The debtor appeals. We REVERSE.
I. FACTS
The debtor/appellant, Ron Dean Bowman ("Bowman") received his Chapter 7 discharge on October 1, 1992. On October 19, 1992, the appellee, Belt Valley Bank ("Belt Valley") filed a complaint to revoke Bowman's discharge *924 under § 727(d)(1) and (2), claiming that Bowman committed fraud, concealed property and conducted a continuing scheme to avoid paying Belt Valley's debt.
Belt Valley is a secured creditor of Bowman. Belt Valley holds several promissory notes and security interests in Bowman's farm machinery, tools and equipment.
The § 341(a) meeting of creditors was held on August 19, 1992. At that meeting, Bowman stated that some of his tools may have been stolen and agreed to prepare a list of any stolen tools and file a claim with his insurance company. Belt Valley's security agreement provided that Bowman would insure the collateral and designate Belt Valley as the loss payee. In addition, Bowman agreed to deliver his non-exempt tools to Belt Valley to be sold at an auction.
There is some dispute as to timing, but Bowman did change insurance companies and did not re-designate Belt Valley as the loss payee. Bowman eventually filed a claim with his insurance company. A check for $927 representing insurance proceeds for the stolen tools was sent to Bowman after he received his discharge. The check was held by Bowman's attorney.
On March 23, 1993, a trial was held on Belt Valley's complaint to revoke Bowman's discharge. The bankruptcy court entered an order revoking Bowman's discharge on May 27, 1993. Bowman promptly filed a motion for reconsideration pursuant to Fed. R.Bankr.P. 9023 on June 7, 1993. The bankruptcy court denied Bowman's motion for reconsideration. Bowman timely filed his notice of appeal.
II. ISSUE
Whether the bankruptcy court erred in revoking the debtor's Chapter 7 discharge based on fraud and concealment of insurance proceeds pursuant to §§ 727(d)(1) and (2).
III. STANDARD OF REVIEW
In reviewing a judgment following a trial, we review the bankruptcy court's findings of fact for clear error and its legal conclusions de novo. Tonry v. Security Experts, Inc., 20 F.3d 967, 970 (9th Cir.1994).
IV. DISCUSSION
The purpose of a discharge is to "release an honest debtor from his financial burdens and to facilitate the debtor's unencumbered `fresh start'". In re Pelkowski, 990 F.2d 737, 744 (3d Cir.1993) (citing Kokoszka v. Belford, 417 U.S. 642, 645-46, 94 S.Ct. 2431, 2433-34, 41 L.Ed.2d 374 (1974)). In limited circumstances, the debtor's discharge may be revoked; however, revocation is an extraordinary remedy. In re Trost, 164 B.R. 740, 743 (Bankr.W.D.Mich.1994).
The grounds for revocation of a debtor's discharge are set forth in § 727(d). That section provides:
(d) On request of the trustee, a creditor, or the United States trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if
(1) such discharge was obtained through the fraud of the debtor, and the requesting party did not know of such fraud until after the granting of such discharge;
(2) the debtor acquired property that is property of the estate, or became entitled to acquire property that would be property of the estate, and knowingly and fraudulently failed to report the acquisition of or entitlement to such property, or to deliver or surrender such property to the trustee;
....
11 U.S.C. § 727(d)(1) & (2).
The Ninth Circuit has held that revocation of discharge is construed liberally in favor of the debtor and strictly against those objecting to discharge. In re Adeeb, 787 F.2d 1339, 1342 (9th Cir.1986). "To revoke a discharge under § 727(d), the debtor must have committed a fraud in fact which would have barred the discharge had the fraud been known." In re Edmonds, 924 F.2d 176, 180 (10th Cir.1991). In order to effectuate revocation under § 727(d), such fraud must be discovered after discharge. In re Dietz, 914 F.2d 161, 163 (9th Cir.1990).
Under Fed.R.Civ.P. 9(b), "[in] all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be *925 stated with particularity." Federal Rule of Civil Procedure 9(b) is made applicable to bankruptcy proceedings through Fed. R.Bankr.P. 7009. The burden of proof for objections to discharge is the ordinary preponderance of the evidence standard. In re Lawler, 141 B.R. 425, 429 (9th Cir. BAP 1992); see also In re Serafini, 938 F.2d 1156, 1157 (10th Cir.1991).
1. Section 727(d)(1)
As a general rule, to obtain relief under § 727(d)(1), the plaintiff must prove that the debtor committed fraud in fact. Edmonds, 924 F.2d at 180. The fraud must be proven in the procurement of the discharge and sufficient grounds must have existed which would have prevented the discharge. In re Topper, 85 B.R. 167, 169 (Bankr. S.D.Fla.1988). The plaintiff must also prove that it was unaware of the fraud at the time the discharge was granted. Id.
If a creditor or any other party which might object to a debtor's discharge has knowledge of a possible fraud, the burden is on the objecting party to diligently investigate any possibly fraudulent conduct before discharge. If the party decides to wait until after discharge, that party risks dismissal of its § 727(d)(1) action. See Mid-Tech Consulting, Inc. v. Swendra, 938 F.2d 885, 888 (8th Cir.1991).
In this case, the bankruptcy court found that the fraud committed by Bowman was his failure to provide Belt Valley with a list of stolen tools or the insurance claim, and his alleged silence concerning such facts until after his discharge was granted. The debtor correctly argues that neither the list of stolen tools nor the insurance claim would have given Belt Valley reason to object to his discharge. Those items do not evidence a fraudulent intent to procure a discharge.
While the debtor's mere silence could, in some circumstances, amount to fraud, it would still fall short of the fraudulent conduct that courts have required for purposes of § 727. In re Kingsley, 162 B.R. 249, 254 (Bankr.W.D.Mo.1994) (intentional misrepresentation of assets and liabilities on bankruptcy schedules and at meeting of creditors constituted fraud under § 727(a)(4)(A)). Bowman's alleged silence does not indicate any fraudulent intent to procure a discharge.
In addition, the record is sufficiently clear that Belt Valley had ample notice prior to the granting of Bowman's discharge that tools might be missing and that an insurance claim might be filed. Counsel for Belt Valley was present at Bowman's § 341(a) meeting of creditors, at which time Bowman testified that the tools might have been stolen and that he intended to report any loss to his insurance company.
Even if Belt Valley were correct concerning Bowman's conduct, it does not have a sufficient basis to object under § 727(d)(1).[2] It might have a claim under § 523(a) for a determination as to the dischargeability of Bowman's debt to Belt Valley; however, there is absolutely no evidence that Bowman procured his discharge through fraud. In fact, the evidence produced by Belt Valley at the trial was minimal. Belt Valley's only witnesses were a vice-president of Belt Valley and Bowman's brother, who testified that Belt Valley, under the security agreement, had a right to be listed as a loss payee, and that in fact they were not so listed on Bowman's insurance. The testimony also showed that at some point Bowman received a check and turned it over to his attorney.
2. Section 727(d)(2)
As a general rule, a plaintiff must prove that the debtor acquired or became entitled to acquire property of the estate and knowingly and fraudulently failed to report or deliver the property to the trustee, in order to obtain relief under § 727(d)(2). Both elements must be met and the plaintiff must prove that the debtor acted with the knowing intent to defraud. In re Yonikus, 974 F.2d 901, 905 (7th Cir.1992).
*926 In its order revoking Bowman's discharge, the bankruptcy court stated that Belt Valley has "shown by a preponderance of the evidence that the Debtor obtained a discharge through fraud and fraudulently failed to report acquisition of property to the Trustee, thereby warranting a revocation of the discharge." There is no evidence of a failure by Bowman to report any acquisition of property to the trustee. In fact, such a failure was not even alleged in Belt Valley's complaint.
The real issue appears to be the fact that the insurance proceeds for the stolen tools were not listed on Bowman's schedules, that Belt Valley was not named by Bowman as a loss payee after he changed insurance companies, and that the insurance proceeds were eventually paid to Bowman. There is no evidence that, at the time of filing the case, any tools were stolen and Bowman had any knowledge at that time of any theft. More specifically, there is no evidence as to when Bowman received the check for the insurance proceeds or whether he attempted to conceal the check's existence from the trustee.[3] There is simply no basis for revocation of Bowman's discharge under § 727(d)(2).
V. CONCLUSION
The bankruptcy court erred in revoking Bowman's discharge. Belt Valley failed to prove fraud in the procurement of the discharge under § 727(d)(1) or any fraudulent intent under § 727(d)(2). Accordingly, we REVERSE the order and the separate judgment revoking Bowman's discharge.
NOTES
[1] Unless otherwise indicated, all Chapter, Section and Rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330 and to the Federal Rules of Bankruptcy Procedure, Rules XXXX-XXXX.
[2] Belt Valley's complaint with one exception does not state a cause of action under § 727(d). The one exception dealt with the alleged concealment of a Ford 1½ ton truck. The bankruptcy court overruled that allegation. Even if the other allegations were true, it still does not state a cause of action under § 727(d).
[3] Belt Valley's claim, if any, against the insurance proceeds, has nothing to do with revocation of Bowman's discharge under § 727(d)(2). As previously stated, the debtor turned the check over to his attorney, who is apparently still holding the check. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1924521/ | 822 So.2d 760 (2002)
Leonce CREPPEL
v.
DIXON CORRECTIONAL INSTITUTE, James LeBlanc, Warden, Leslie Perkins, Medical Coordinator and Linda Hodgin, Nurse.
No. 2001 CA 2068.
Court of Appeal of Louisiana, First Circuit.
June 21, 2002.
Opinion on Limited Grant of Rehearing July 30, 2002.
*761 Leonce Creppel, Jackson, Plaintiff/Appellant In Proper Person.
Andre Charles Castaing, Baton Rouge, Counsel for Defendants/Appellees Dixon Correctional Institute, James LeBlanc, Warden, Leslie Perkins, Medical Coordinator and Linda Hodgin, Nurse.
Before: WHIPPLE, DOWNING and KLINE[1], JJ.
KLINE, J.
This is an appeal brought by Leonce Creppel, an inmate in the custody of the Louisiana Department of Public Safety and Corrections, seeking reversal of the district court's action dismissing his suit without prejudice on the grounds of prematurity.
Creppel originally filed suit in the district court seeking judicial review of an unnamed and unnumbered administrative remedy request. This request stems from an alleged act of negligence on the part of the nurse on duty at Dixon Correctional Institute. The defendants, Dixon Correctional Institute, Warden James LeBlanc, Leslie Perkins as Medical Coordinator, and the nurse Linda Hodgin (collectively referred to hereinafter as "DCI"), filed exceptions of prematurity and vagueness. A hearing was held on the exceptions on March 29, 2001 at Dixon Correctional Institute. The testimony of Connie Bowser, CARP screening officer at Dixon, was admitted as well as a copy of Creppel's alleged request for administrative remedies, marked as DCI Exhibit No. 1. After the hearing, the Commissioner recommended that the exception of prematurity be granted because Creppel had not exhausted all administrative remedies available to him before filing his suit for judicial review. On April 17, 2001 the district court adopted the Commissioner's report in its entirety, thus dismissing the case without prejudice. Creppel now appeals to this court.
*762 Both state and federal statutory law and jurisprudence require the exhaustion of administrative remedies before suit for judicial review may be filed. This court has ruled that no state court shall entertain an offender's grievance or complaint, which falls under the purview of the administrative remedy procedure, unless and until the offender has exhausted the remedies available to him as provided under the Corrections Administrative Remedy Procedure (CARP), La. R.S. 15:1171, et seq. See King v. State, Department of Public Safety and Corrections, 98-2910 (La.App. 1st Cir.2/18/00), 754 So.2d 1119; Marler v. Petty, 94-1851 (La.4/10/95), 653 So.2d 1167; Blackwell v. Louisiana Department of Public Safety and Corrections, 96-0954 (La.App. 1st Cir. 2/14/97), 690 So.2d 137, writ denied, 97-1158 (La.9/5/97), 700 So.2d 507. It is undisputed that Creppel has not exhausted his remedies under CARP.
Creppel argues that he initiated a claim under CARP, but states that it has been ignored by DCI. A copy of an alleged request for administrative remedies (which is a duplicate of the copy attached to Creppel's petition) was introduced into evidence by DCI as Defendant's Exhibit No. 1. Mrs. Connie Bowser, the ARP screening officer at DCI, testified that the alleged request had never been filed:
MR. CASTAING: You have no record of ever having received that particular one here at Dixon as part of the ARP system?
MS. BOWSER: Right.
Creppel introduced no evidence, nor made any argument, that DCI had in fact ignored his complaint. All of the evidence points to the probability that the CARP petition, if ever actually mailed, simply was never received by the CARP office. Under CARP procedure, Creppel's complaint was properly dismissed without prejudice.
However, the jurisdiction and forum of the matter is governed by the nature of the complaint. If in fact Creppel intends to bring an action in tort, the CARP proceeding is not the proper vehicle or venue to bring such action. Recently, in Pope v. State, 99-2559, p. 13 (La.6/29/01), 792 So.2d 713, the Louisiana Supreme Court declared the provisions of La. R.S. 15:1171-1179, pertaining to CARP proceedings, to be unconstitutional to the extent that the statutes applied to an inmate's tort claims. In so finding, the supreme court stated that requiring tort actions to be brought in a CARP proceeding is in violation of Article V, Section 16(A) of the Louisiana Constitution, which provides, in pertinent part, that "a district court shall have original jurisdiction of all civil and criminal matters." Pope v. State, 792 So.2d at 721. Apparently, Creppel's claim in his CARP complaint arises from alleged negligence committed by the nurse-on-duty at DCI. A claim of negligence is a claim in tort, a civil matter. Thus, Creppel is entitled to have the district court adjudicate his tort claim under its original jurisdiction.
Accordingly, the judgment must be reversed and the case remanded to the district court in its original jurisdiction for further proceedings.[2] Assessment of the *763 costs of this appeal shall await final determination of the merits.
REVERSED AND REMANDED.
PER CURIAM.
The application for rehearing by defendants requests this Court clarify its judgment rendered on June 21, 2002 which reversed the trial court's judgment sustaining defendants' exception of prematurity. We remanded the case to the trial court for exercise of its original jurisdiction.
We now grant rehearing for the limited purpose of maintaining our original opinion and expressing, as may need be, the reasoning that necessitated the reversal and remand in this case.
We reversed the trial court's judgment that sustained defendants' exception of prematurity, reasoning that this court was required to do so based on the Louisiana Supreme Court's ruling in Pope v. State, 99-2559 (La.6/29/01), 792 So.2d 713.
The administrative remedies that were the subject of the exception of prematurity because of failure to exhaust those remedies were found to be an invalid attempt to alter the original jurisdiction of the district court by legislative acts as they relate to tort suits.
The Pope case did not, nor do we, address the constitutionality of R.S. 1171-79 with regard to non-tort actions filed by "offenders".
Defendants note that in Pope the court states that the Legislature is free to enact procedures for initial submission of tort claims by prison inmates to administrative agency for review as long as the action of the administrative agency does not constitute the exercise of original jurisdiction. We can only infer that an appropriately enacted procedure could require the exhaustion of remedies if, and only if, the original jurisdiction of the trial court is not impaired.
This court, in this cause, is not favored with that eventuality and, respectfully, we are not able to forecast.
However, for the present, screenings for frivolous suits can be done at the district court level pursuant to La. Revised Statutes 15:1184(B) or 15:1188.[1]
Defendants further contend that in Porter v. Nussle, 534 U.S. 516, 122 S.Ct. 983, 152 L.Ed.2d 12 (2002), the United States Supreme Court approved of requiring prisoners to exhaust administrative remedies prior to instituting suit. That dicta had no applicability here because, as the Louisiana Supreme Court noted in Pope, its decision was based on Article V, Section 16 of the Louisiana Constitution, and "[t]here is no counterpart to Article V, Section 16(A) in the federal Constitution." Pope, 99-2559 at p. 11, 792 So.2d at 720.
Finally, defendants question whether Pope affected the applicability of 42 USC § 1997e(a), Federal Prison Litigation Reform Act (FPLRA). The United States District Court for the middle District of Louisiana answered that question affirmatively in Reickenbacker v. Foster, 99-910 (M.D.La.3/21/02), in which the court denied the defendants' motion to dismiss for failure to exhaust administrative remedies under FPLRA, citing Pope.
*764 Thus, in direct response, this Court did express an opinion on the exception of prematurity for failure to exhaust administrative remedies, because those procedures were deemed unconstitutional as applied to tort suits.
NOTES
[1] Hon. William F. Kline Jr., retired, is serving as judge pro tempore by special appointment of the Louisiana Supreme Court.
[2] We note from the limited record before us that the appellant alleges a tort claim based on negligence (medical malpractice). We further note that the Malpractice Liability for State Services Act, La. R.S. 40:1299.39, et seq. provides that no action against the state or its agencies may be commenced in any court before the complaint has been presented to a state medical review panel. See La. R.S. 40:1299.39.1(B)(1)(a)(i). However, La. R.S. 40:1299.39.1(A)(1) specifically excludes claims by prisoners from this requirement, thereby exempting prisoner claims from review by a state medical review panel. By our holding herein, we express no view as to the effect of Pope v. State on the provisions of La. R.S. 40:1299.39.1(A)(1) and La. R.S. 40:1299.39.1(B)(1)(a)(i).
[1] The Supreme Court noted LSA-R.S. 15:1188 with approval in Pope stating that in the judicial screening stage, the court acts as a trial court rather than in a judicial review of another tribunal. Pope, 99-2559 at p. 12 n. 16, 792 So.2d at 720 n. 16. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2103842/ | 38 S.W.3d 265 (2001)
Linda GRIZZLE, as next friend of Brentley G. Grizzle, a minor; Nesbit Wehde; Guy W. Rucker, Independent Executor of the Estate of Marian Francis Ann้ Rucker; Robert Rucker and Marilyn Rucker, in their Capacity as Remaindermen of the Ann้ Rucker Trust; on Behalf of Themselves and All Others Similarly Situated, Appellants,
v.
TEXAS COMMERCE BANK, N.A.; The New Galveston Company; The Frost National Bank; and Texas Commerce Equity Holdings, Inc., Appellees.
No. 05-98-00537-CV.
Court of Appeals of Texas, Dallas.
February 14, 2001.
*270 Julia F. Pendery, R. Michael Northrup, Cowles & Thompson, P.C., Dallas, Christopher H. Rentzel, Bracewell & Patterson, L.L.P., Dallas, for Appellant.
Charles A. Gall, Jenkins & Gilchrist, P.C., Dallas, George M. Kryder, III, Vinson & Elkins, Dallas, for Appellee.
Before Chief Justice THOMAS and Justices WRIGHT and ROSENBERG.[1]
OPINION
Opinion By Justice ROSENBERG.
Linda Grizzle, as next friend of her minor daughter Brentley G. Grizzle, (Grizzle) *271 brought this action on her own behalf and on behalf of a class for damages caused to trust accounts by the merger/swap of Frost National Bank (Frost) in Dallas, Texas, with Texas Commerce Bank, N.A. (TCB) in Corpus Christi, Texas. The proposed class of plaintiffs includes the beneficiaries of the trusts managed by the two banks as of April 1994. Prior to the class certification hearing, the trial court granted summary judgment that Grizzle take nothing from the banks, TCB and its parent company, Texas Commerce Equity Holdings, Inc., (TCE) (collectively, the TCB defendants), and Frost and its parent company, the New Galveston Company (New Galveston) (collectively, the Frost defendants). Before final judgment was rendered, additional class representatives, Nesbit Wehde (Wehde), and Guy W. Rucker, independent executor of the estate of Marian Francis Ann้ Rucker, Robert Rucker and Marilyn Rucker, remaindermen of the Ann้ Rucker Trust (collectively, the Ruckers), were added to the suit. The trial court struck the pleadings of the additional plaintiffs, making its take-nothing judgment final. In eight issues, appellants appeal the summary judgment and order striking the intervention of additional class representatives, and they challenge the propriety of entering a summary judgment against an individual plaintiff prior to a hearing on class certification. We reverse the order striking the interventions, affirm the trial court's procedure of hearing the motion for summary judgment before certification, reverse the summary judgment in favor of the TCB defendants, affirm in part and reverse in part the summary judgment in favor of the Frost defendants, and remand this case to the trial court for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
In April 1994, TCB, a wholly owned subsidiary of TCE, traded its bank in Corpus Christi, Texas, for a bank in Dallas, Texas, owned by Frost, a wholly owned subsidiary of New Galveston. After the transfer, each successor bank liquidated the trust account investments in the predecessor bank's common trust and stock funds and reinvested the trust monies in the successor bank's common trust and stock funds.
In April 1996, Grizzle brought a class action, alleging the class incurred substantial losses to their trust accounts' value, unfavorable tax consequences, fees, and expenses as a result of the liquidation of the trust funds. The suit alleged claims for breach of fiduciary duty, breach of contract, tortious interference with contract, various conspiracy claims, deceptive trade practices, negligence, gross negligence and fraud and requested removal of trustee, forfeiture of trustee fees, exemplary damages, and attorney's fees. Grizzle did not make a demand for payment before bringing suit as normally required by the Deceptive Trade Practices Act (DTPA), but her petition alleged no prior demand was practical because the statute of limitations was about to expire. See TEX.BUS. & COM.CODE ANN. ง 17.505(b) (Vernon Supp.2001).
The parties proceeded with limited discovery.[2] On December 16, 1996, Frost tendered $7,712.18 to Grizzle as payment of her DTPA damages and attorney's fees. Grizzle refused to accept the purported DTPA tender. On December 27, 1996, the Frost defendants moved for summary judgment and requested dismissal of Grizzle's individual claims and the claim for class action. The TCB defendants filed a similar motion in January 1997. Grizzle filed a response that included her affidavit and the affidavit of James Bevans, her expert witness on bank trust account operations. The banks filed a motion to strike Grizzle's summary judgment affidavits. At the February 10, 1997 hearing on the motions for summary judgment, the court *272 granted the motion to strike but also granted Grizzle leave to file amended affidavits. Grizzle filed amended affidavits and an amended petition. Her second amended original petition, filed February 20, 1997, added Marian Francis Ann้ Rucker as an additional putative class representative. Grizzle filed a third amended original petition on March 21, 1997, dropping Mrs. Rucker and adding Wehde as a putative class representative.
On March 25, 1997, the court granted the banks' motions for summary judgment. In May 1997, the court struck plaintiff's third amended petition. Grizzle and Wehde appealed. This Court dismissed the appeal after determining we did not have jurisdiction because, after the court struck plaintiff's third amended petition, the second amended petition was revived and the final judgment failed to address the class action claims represented by Mrs. Rucker.[3] On remand, Grizzle filed her fourth amended petition, substituting the Ruckers in the suit as putative class representatives, because Mrs. Rucker had died. The trial court entered a final judgment, striking the second and fourth amended petitions, striking the Ruckers' and Wehde's interventions, and ordering that Grizzle take nothing by her suit. This appeal followed.
INTERVENTION IN CLASS ACTION
In their second issue, appellants complain that the court improperly struck the interventions of Wehde and the Ruckers as putative class representatives. Appellants argue it was an abuse of discretion to strike the addition of putative class members as class representatives when granting a motion for summary judgment on the sole class representative's individual claims. Appellants contend that disallowing the intervention would provide a procedure to allow the "pick off" of a class representative without any recourse for the putative class.
Under the rules of civil procedure, a person or entity has the right to intervene if the intervenor could have brought the same action, or any part thereof, on his own. See TEX.R.CIV.P. 60. An intervenor in state court is not required to secure the court's permission to intervene, and the party opposing intervention has the burden to challenge it by a motion to strike. Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 657 (Tex.1990) (op. on reh'g). Although the trial court has broad discretion in determining whether an intervention should be struck, it is an abuse of discretion to strike a plea in intervention if (1) the intervenor could have brought the action on his own, (2) the intervention will not complicate the case by an excessive multiplication of the issues, and (3) the intervention is almost essential to effectively protect the intervenor's interest. Id.
The banks argue these parties were not timely added to the lawsuit. However, a petition in intervention is not subject to the requirements of Texas Rule of Civil Procedure 63 concerning amendments and responses to pleadings, nor is it subject to the requirements of Texas Rule of Civil Procedure 166a concerning responses to motions for summary judgment. See In re Estate of York, 951 S.W.2d 122, 125 (Tex.App.-Corpus Christi 1997, no pet.); Tex. Supply Ctr., Inc. v. Daon Corp., 641 S.W.2d 335, 337 (Tex.App.-Dallas 1982, writ ref'd n.r.e.). An intervention is proper at any time before a final decision on the merits. See Citizens State Bank v. Caney Invs., 746 S.W.2d 477, 478 (Tex.1988) (per curiam); In re Estate of York, 951 S.W.2d at 125; see also Litoff v. Jackson, 742 S.W.2d 788, 789 (Tex.App.-San Antonio, 1987, no writ) (per curiam) (intervention allowed after trial was completed). Mrs. Rucker intervened before the trial court rendered its summary judgment on Grizzle's individual claims, and at *273 the time Wehde intervened, there had been no final judgment rendered with respect to Mrs. Rucker's claim or the class action. Therefore, we conclude that the interventions were timely.
The Frost defendants also argue the Ruckers cannot intervene because their action is derivative of Mrs. Rucker's claim. They argue that by omitting Mrs. Rucker from the third amended petition, appellants dismissed Mrs. Rucker from the lawsuit and that the dismissal was pursuant to a rule 11 agreement. In this Court's previous opinion, we clearly held that when the trial court struck the third amended petition that included Wehde's intervention, the second amended petition that included Mrs. Rucker's intervention was restored as the live pleading. Grizzle v. Tex. Commerce Bank, No. 05-97-01076-CV, 1997 WL 593809 (Tex.App.-Dallas Sept. 25, 1997, no. pet.) (not designated for publication);[4]see Randle v. NCNB Tex. Nat'l Bank, 812 S.W.2d 381, 384 (Tex. App.-Dallas 1991, no writ). Because our holding was not appealed to the supreme court of Texas, it constitutes the law of the case and governs subsequent proceedings. See Cockrell v. Republic Mortgage Ins. Co., 817 S.W.2d 106, 115 (Tex.App.-Dallas 1991, no writ). Because the second amended petition was restored as the live pleading, Mrs. Rucker was restored as an intervenor, and the Ruckers, who filed a suggestion of death, were able to proceed with Mrs. Rucker's claim.
Finally, the banks argue the court correctly struck Wehde's intervention because Wehde's claim had no merit. The banks' motions to strike the intervention attack the factual basis and merits of Wehde's claim, and the Frost defendants presented the court with Wehde's deposition testimony and a copy of the Wehde trust instrument. The court conducted a hearing on the motions to strike the intervention on April 11, 1997, the same day these motions were filed.
The sufficiency of a petition in intervention is tested by its allegations of fact on which the right to intervene depends.[5]Serna v. Webster, 908 S.W.2d 487, 492 (Tex.App.-San Antonio 1995, no writ); H. Tebbs, Inc. v. Silver Eagle Distribs., Inc., 797 S.W.2d 80, 84 (Tex.App.-Austin 1990, no writ). The intervenor bears the burden to show a justiciable interest in the lawsuit. Mendez v. Brewer, 626 S.W.2d 498, 499 (Tex.1982). After a motion to strike a petition for intervention is filed, the intervenor should be given an opportunity to explain, and show proof of, his interest in the lawsuit. Nat'l Union Fire Ins. Co. v. Pennzoil Co., 866 S.W.2d 248, 250 (Tex.App.-Corpus Christi 1993, no writ); see Inter-Continental Corp. v. Moody, 411 S.W.2d 578, 589 (Tex.Civ. App.-Houston 1966, writ ref'd n.r.e.) (op. on reh'g) (where intervenor pleads viable cause of action, intervenor's claim should be resolved by hearing on the merits or summary judgment proceeding). We conclude that the court abused its discretion by striking Wehde's claim without affording her an opportunity to respond to the banks' motions.
Having reviewed the record, we conclude the amended petitions allege facts which, if true, would provide Wehde and the Ruckers with standing to bring the action on their own accord and would show that their intervention will not complicate the case by an excessive multiplication of the issues. Furthermore, if the dismissal *274 of Grizzle's individual claims was proper, the Wehde and/or Ruckers' interventions would be essential to effectively protect their claims and those of the remaining class members.[6] Therefore, we conclude that the court abused its discretion by striking the intervenors' pleadings. We resolve appellants' second issue in their favor.
SUMMARY JUDGMENT BEFORE CLASS CERTIFICATION
In their first and sixth issues, appellants contend the court abused its discretion by allowing a "pick off" of the named class representative by granting the banks' motions for summary judgment and dismissing Grizzle's individual claims, based on a DTPA tender, before conducting a class certification hearing. The banks argue that the court may properly address the merits of a class representative's claim before deciding whether to certify a class and that, if Grizzle had no live individual claims, she had no right to bring suit on behalf of the putative class. See Stanley v. Wal Mart Stores, Inc., 839 F.Supp. 430, 435 (N.D.Tex.1993).
Before certification, suits brought as class actions are typically governed by rules of procedure applicable to lawsuits generally rather than rules of procedure specific to class actions.[7]See Parker County v. Spindletop Oil & Gas Co., 628 S.W.2d 765, 768-69 (Tex.1982). Until the trial court duly certifies a class, a suit brought as a class action is treated as if it was brought by the named plaintiff suing on her own behalf. Palais Royal, Inc. v. Partida, 916 S.W.2d 650, 653 (Tex.App.-Corpus Christi 1996, orig. proceeding [leave denied]). The trial court is not required to conduct the class certification hearing before considering a defendant's motion for summary judgment or before making a ruling on the merits of the plaintiff's claim. See Wright v. Schock, 742 F.2d 541, 543 (9th Cir.1984); see also Manual for Complex Litigation ง 30.11 (3d ed.1995).[8]
A class representative must be a member of the class and possess the same interest and suffer the same injury as the class. General Tel. Co. v. Falcon, 457 U.S. 147, 156, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982); Alpern v. UtiliCorp United, Inc., 84 F.3d 1525, 1539 (8th Cir. 1996). If a plaintiff does not have a claim against a defendant, then that plaintiff cannot be a representative in a class action against that defendant. Cedar Crest Funeral Home, Inc. v. Lashley, 889 S.W.2d 325, 331 (Tex.App.-Dallas 1993, no writ). In the event of a summary judgment against the plaintiff, the judgment will not be res judicata as to other individual plaintiffs, and other individuals or class members remain free to assert any claims they may have against the defendants. See Wright, 742 F.2d at 544. Nonetheless, if *275 the summary judgment against the sole class representative is proper on all the class representative's claims, then the entire case including the class claims may be dismissed.[9]See Floyd v. Bowen, 833 F.2d 529, 534 (5th Cir.1987); Stanley, 839 F.Supp. at 435. Accordingly, to the extent appellants' first issue complains of the trial court's consideration of the banks' motions for summary judgment on Grizzle's individual claims prior to conducting a class certification hearing, we resolve appellants' first issue against them.
Nevertheless, appellants contend that, because one of the bases of the summary judgment is that Frost tendered payment of Grizzle's damages and attorney's fees under section 17.506(d) of the Texas Business and Commerce Code, appellees are attempting to "buy off" a representative plaintiff to defeat a cause of action. See TEX.BUS. & COM.CODE ANN. ง 17.506(d) (Vernon Supp.2001).
When all personal claims of an individual plaintiff are settled, the substantive claim becomes moot and the trial court loses jurisdiction of the plaintiff's controversy. Deposit Guar. Nat'l Bank v. Roper, 445 U.S. 326, 332, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980). Further, the court can enter judgment against a putative class representative on a defendant's offer of payment where class certification has been properly denied and the offer satisfies the representative's entire demand for injuries and costs of suit. Alpern, 84 F.3d at 1539. However, prior to certification, an offer directed only to the damages of the representative plaintiff is not an offer for the entire relief sought by the suit. Greisz v. Household Bank (III.), N.A., 176 F.3d 1012, 1015 (7th Cir.1999) (citing Alpern, 84 F.3d at 1539 and Roper, 445 U.S. at 341, 100 S.Ct. 1166 (Rehnquist, C.J., concurring)). Complete relief includes payment of class claims and costs. See Roper, 445 U.S. at 341, 100 S.Ct. 1166 (Rehnquist, C.J., concurring); see also United States Parole Comm'n v. Geraghty, 445 U.S. 388, 401-02, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980) (confession of judgment by defendants on less than all issues will not moot entire case); Alpern, 84 F.3d at 1539 (judgment should be entered against putative class representative on defendant's offer of payment only where class certification has been properly denied and offer satisfies representative's entire demand for injuries and costs of suit).
In this suit, before any certification hearing, the attorney for the Frost defendants made a tender of $7,712.18, which included $5,508.70 in economic damages and $2,203.48 in attorney's fees, as an offer of settlement to dispose of all Grizzle's damages. Grizzle did not accept this tender. The tender did not include class claims and did not provide for her litigation costs. Accordingly, this rejection of an offer of less than complete relief could not eliminate the controversy between Grizzle and the banks prior to certification. See Greisz, 176 F.3d at 1015.
Additionally, a DTPA tender cannot be a statutory bar to other causes of action. First, section 17.506(d) provides a defense *276 to "an action brought under Section 17.50 of this subchapter." TEX. BUS. & COM.CODE ANN. ง 17.506(d). This section is a statutory defense only to claims brought as violations of the DTPA and does not establish a defense to any other cause of action. Further, there is no rationale to extend the defensive bar of a DTPA tender to non-DTPA causes of action.
However, the banks claim that even if the offer did not eliminate all Grizzle's claims, it did preclude her claims under the DTPA and her capacity to be a class representative in that cause. Under the DTPA, for a tender offer to bar a DTPA cause of action, the offer must be made pursuant to statutory requirements. See id. Under the DTPA, when a consumer gives notice of a claim sixty days before the filing of the suit, a defendant is protected from suit if he promptly tenders payment of the consumer's claimed damages. Id. งง 17.505(a)-(b), 17.506(d). Additionally, the Texas Supreme Court has stated that a representative plaintiff may present notice of the class claim under the DTPA because individual plaintiffs have the ability to negotiate settlements on behalf of putative classes. In re Alford Chevrolet-Geo, 997 S.W.2d 173, 178 (Tex. 1999) (orig.proceeding); see, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 597-98, 617-18, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997); Bloyed, 916 S.W.2d at 951-52. While the party seeking to institute a class action must be able to seek individual relief for the cause of action, Stanley, 839 F.Supp. at 433, the supreme court recognizes that the DTPA permits a consumer to provide preliminary notice on behalf of the putative class. In re Alford Chevrolet-Geo, 997 S.W.2d at 178. To permit a tender only to named representatives over their objection when there is notice of a class claim would be an impermissible "buy off" by a defendant for the DTPA claims. See Roper, 445 U.S. at 339, 100 S.Ct. 1166; Greisz, 176 F.3d at 1015; Alpern, 84 F.3d at 1539; Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030, 1050 (5th Cir.1981). Here, however, Grizzle sent no DTPA notice on behalf of the class. She did not present notice of the class claims as provided by the statute and allowed by the supreme court. Thus, the banks could take advantage of any statutory DTPA bar to her individual claims provided by the tender.
Accordingly, we conclude that although the court was authorized to consider the banks' motions for summary judgment on Grizzle's individual claims before conducting a class certification hearing, the court was not authorized to dismiss all of Grizzle's claims, including the claims on behalf of the class, based upon an unaccepted tender of Grizzle's individual damages. Nevertheless, the trial court, under the circumstances of this case, may consider the DTPA defenses presented in the motions for summary judgment for Grizzle's individual DTPA claim. Therefore, we resolve in appellants' favor their first and sixth issues to the extent they complain that the trial court determined Grizzle's claim for class action was mooted by the banks' unaccepted tender to settle Grizzle's individual claims.
SUMMARY JUDGMENT ON GRIZZLE'S INDIVIDUAL CLAIMS
We next consider whether the trial court properly granted summary judgment for the banks on the grounds stated in the motions for summary judgment, including the DTPA defense. In issues three through eight, appellants complain that the trial court erred in granting summary judgment against Grizzle on all her claims.
Standard of Review
To prevail on summary judgment under rule 166a(c), a movant must establish that there is no genuine issue as to any material fact, and that the movant is entitled to judgment as a matter of law. *277 TEX.R.CIV.P. 166a(c);[10]Cathey v. Booth, 900 S.W.2d 339, 341 (Tex.1995) (per curiam). A defendant seeking summary judgment must negate as a matter of law at least one element of each of the plaintiff's theories of recovery or plead and prove as a matter of law each element of an affirmative defense. Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282 (Tex.1996). Only after a defendant produces evidence entitling it to summary judgment as a matter of law does the burden shift to the plaintiff to present evidence creating a fact issue. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222-23 (Tex.1999).
When the trial court's judgment does not state the grounds upon which summary judgment was granted, the appellant must show that each of the independent grounds asserted in the motion is insufficient to support summary judgment. See Holloway v. Starnes, 840 S.W.2d 14, 18 (Tex.App.-Dallas 1992, writ denied). In reviewing a motion for summary judgment, we accept all evidence favorable to the nonmovant as true, indulge the nonmovant with every favorable reasonable inference, and resolve any doubt in the nonmovant's favor. Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985).
DTPA Tender
In the fifth issue, appellants contend Frost's tender of payment did not comply with the statutory requirement that would bar Grizzle's individual DTPA claims. The Banks moved for summary judgment on the ground that Frost's tender of $7,712.18 was an affirmative defense to Grizzle's DTPA claims, pursuant to section 17.506(d) of the Texas Business and Commerce Code, entitling them to summary judgment as a matter of law on those claims. See TEX.BUS. & COM.CODE ANN. ง 17.506(d). We consider whether Frost's tender met the statutory requirements.
As a prerequisite to filing a suit under the DTPA, a consumer is required to give written notice of damages to the defendant at least sixty days before filing the suit. See id. ง 17.505(a).[11] In this case, Grizzle never sent the banks a notice of damages. The notice requirement is waived if filing suit is necessary to prevent the expiration of the statute of limitations. See id. ง 17.505(b). In such event, the defendant may still tender payment of damages, but to be entitled to rely on the tender as an affirmative defense under section 17.506(d), the tender must be made within sixty days after service of the suit. See id. While the banks were served before June 3, 1996, the summary judgment evidence shows that Frost did not tender payment until December 16, 1996. Thus, Frost did not tender payment of Grizzle's damages within sixty days after service of the lawsuit, as required by the statute.
The banks contend they received notice of Grizzle's damages in her answers to interrogatories and in deposition testimony, which bear the date December 5, 1996, and tendered the amount of those damages eleven days later, within the statutory tender period. In her interrogatories, Grizzle claimed she was seeking damages "in at least the amount of $5,508.70, reflecting the loss in the value of the Grizzle Trust's holdings in the collective funds *278 of [Frost], due to the merger transaction in question ..." and attorney's fees. She restated that amount in her deposition. However, we conclude that "discovery" of any damages after suit has been filed is not a consumer's notice or demand for damages before suit is filed, pursuant to section 17.505(a). See id. ง 17.505(a). Further, the tender, more than sixty days after service of the suit, does not meet the requirements of section 17.505(b). See id. ง 17.505(b). Because Frost's tender did not meet the requirements of section 17.505, the banks may not rely on the tender as an affirmative defense to Grizzle's DTPA claim under section 17.506(d).[12] Thus, the banks are not entitled to summary judgment as a matter of law on Grizzle's DTPA claims because of Frost's tender. We resolve appellants' fifth issue in their favor.
No Damages
In the fourth issue, appellants contend the trial court could not have granted summary judgment on the basis that Grizzle suffered no damages. In their motion for summary judgment, the Frost defendants argued they did not cause Grizzle any damages because any loss to Grizzle's trust was a product of market forces and had no connection to the merger. The Frost defendants contended the undisputed facts showed Grizzle suffered no damages because, after the merger and liquidation, the Grizzle trust had the same value in cash rather than units in a collective fixed income fund and a collective common stock fund. As evidence, the Frost defendants relied on the trust transactions statements and on Grizzle's deposition testimony that, before the sale of the collective investment fund units, Grizzle owned units of securities with a value of $75,362, and, after the liquidation, the trust had that amount in cash; further, before the sale of the common stock fund, Grizzle's investment was valued at $119,840, and after the liquidation, the trust had that amount in cash. The Frost defendants asserted that Grizzle's damages of $5,508.70 was the difference in value between the funds as of the date of liquidation and the federal tax basis.
In its motion for summary judgment, TCB contended it was entitled to summary judgment on claims for breach of fiduciary duty, negligence, gross negligence, breach of contract, tortious interference with contract, removal of TCB as a trustee, and violations of the DTPA because Grizzle was not damaged. Specifically, TCB asserted that the only damage Grizzle suffered was "a small taxable loss of $5,508.70." TCB further argued that characterizing such a loss as "damages" was "misleading" because, first, the common funds were worth $195,000 when TCB became trustee and TCB obtained that amount; second, the "losses" occurred as a result of the performance of the funds before the merger and liquidation and TCB obtained the same amount Frost would have obtained had there been no merger; and, third, the liquidation did not cause the loss, rather it "merely turned the Grizzle Trust's pre-existing paper losses into actual cash losses ... creat[ing] a tax loss for the 1994 tax year" that could be used to offset income in 1994 and subsequent years.
*279 Grizzle responded that her summary judgment evidence showed the "paper losses" were "actual cash losses" and that even a "paper loss" may injure her by reducing the tax basis of her investment, requiring her to pay increased income taxes when she eventually liquidates the trust account. Grizzle acknowledged that the tendered amount equaled her long-term capital loss but contended she was forced to take the "unanticipated" loss prematurely and needlessly and the tendered amount did not include damages for lost income and reimbursement for fees and other charges incurred by or charged to the trust as a result of the liquidation.[13] In her amended affidavit, Grizzle stated that the bank's records showed the trust was damaged because of lost income that occurred when the cash was not reinvested for several days after liquidation and that audit fees were charged against the liquidation proceeds. The trust statements show that Grizzle's investments were sold on April 30, 1994. On May 6, TCB placed the funds into a short-term investment. On May 21 and June 11, TCB reinvested Grizzle's money into fixed income and common stock funds. The bank documents attached to Grizzle's amended affidavit also refer to distribution and audit fees assessed against the liquidated investments. We conclude that Grizzle's evidence raised a fact issue on whether she was damaged by untimely reinvestment of funds and by the assessment of distribution and audit fees.
TCB also moved for summary judgment on all Grizzle's claims on the ground that, after the merger, it was required by law to liquidate Grizzle's interest in the Frost common investment funds.[14] TCB contended that, under federal regulations, no funds administered by TCB as trustee could be invested in collective trust funds managed by another bank. TCB argued that section 9.18(a)(1) of title 12 of the Code of Federal Regulations allowed banks to invest funds held in a fiduciary capacity in collective funds "maintained by the bank." 12 C.F.R. ง 9.18(a)(1) (1994) (emphasis added). Further, relying on section 9.18(b)(12), TCB argued that for *280 every one of its accounts invested in collective funds, TCB must be the sole manager of those funds. 12 C.F.R. ง 9.18(b)(12) (1994) ("A national bank administering a collective investment fund shall have the exclusive management thereof.").
Appellants contend that, even if federal law required TCB to liquidate assets invested in Frost's common trust funds, this requirement did not excuse TCB from its responsibility as a fiduciary to mitigate any damages caused by the liquidation. Appellants contend the banks breached fiduciary duties by failing to promptly reinvest the liquidated fund and by charging fees and other expenses to the trust accounts after liquidation, even if liquidation was required. We note that section 9.18(b)(12) provides that "[t]he bank shall absorb the costs of establishing or reorganizing a collective investment fund." Id. We concluded above that the summary judgment evidence presents a fact issue regarding whether audit fees were assessed against the trusts; we further conclude that audit fees could come within the "costs of establishing or reorganizing a collective investment fund" referred to in section 9.18(b)(12). Thus, section 9.18 supports Grizzle's argument that federal banking regulations did not excuse TCB's failure to mitigate any damages, such as charging expenses related to the liquidation and reinvestment of the funds after the merger. Thus, TCB has failed to show that section 9.18 entitles it to summary judgment as a matter of law on Grizzle's claims. We resolve appellants' fourth issue in their favor.
In the seventh issue, appellants contend the trial court erred in refusing to reconsider its summary judgment ruling after a TCB witness recanted a previous affidavit. In her motion for reconsideration and/or for new trial, Grizzle contended that newly discovered evidence in the form of a recantation raised a fact issue as to damages because the witness's deposition testimony denying knowledge whether fees, costs, or charges were assessed against the trusts in connection with the liquidation conflicted with her affidavit testimony that no fees were charged. The trial court denied the motion. However, we have concluded above that bank documents attached to Grizzle's amended affidavit refer to audit fees being assessed against the trusts and thus raised fact issues regarding whether Grizzle suffered damages. Therefore, the deposition testimony Grizzle relied on as "newly discovered evidence" was cumulative of uncomplained-of evidence on the issue of damages. A motion for new trial on the basis of newly discovered evidence is directed to the trial court's discretion, and a party moving for new trial on the basis of newly discovered evidence bears the burden of showing, in part, that the evidence is not cumulative. See Jackson v. Van Winkle, 660 S.W.2d 807, 809 (Tex.1983). Because appellants cannot show the trial court abused its discretion in denying the motion, we resolve appellants' seventh issue against them.
Other Grounds for Summary Judgment
In the third issue, appellants contend the court erred by granting summary judgment because the motions failed to negate an essential element of each cause of action Grizzle pleaded. Therefore, we consider appellants' arguments that summary judgment cannot be supported on any other ground urged by the banks.
Exculpatory Clause
The banks moved for summary judgment on the ground that an exculpatory provision of the Grizzle Trust precluded liability. The pertinent provision states: "This instrument shall always be construed in favor of the validity of any act or omission of any Trustee, and a Trustee shall not be liable for any act or omission except in the case of gross negligence, bad faith, or fraud." The Frost defendants contended the exculpatory clause entitled them to summary judgment as a matter of law on Grizzle's tort claims for breach of fiduciary *281 duty, DTPA violations, negligence, and tortious interference with contracts but not on claims of gross negligence, bad faith, or fraud. TCB contended the exculpatory clause precluded liability because TCB cannot be held liable for any negligence unless such negligence rises to the level of gross negligence, bad faith, or fraud. TCB contended the merger was a usual and ordinary business transaction and "the resulting liquidation of the collective trust funds was mandated by Texas law."
The Texas Trust Code specifically gives to the trustor or settlor the power to relieve his trustees from any liabilities imposed by that Act, except that a corporate trustee cannot be relieved of liability for certain self-dealing transactions. See TEX. PROP.CODE.ANN. งง 111.002, 113.059(a) (Vernon 1995). Exculpatory provisions included in trust instruments are strictly construed, and the trustee is relieved of liability only to the extent that is clearly provided in the trust instrument. See Price v. Johnston, 638 S.W.2d 1, 4 (Tex. App.-Corpus Christi 1982, no writ).
Section 113.053(a)(1) of the Texas Trust Code prohibits a trustee buying from or selling trust assets to itself or a closely related entity unless an enumerated exception applies. See TEX.PROP.CODE ANN. ง 113.053(a)(1) (Vernon 1995). However, this statutory prohibition does not exhaust the possibilities of conflicts of interest by a trustee. Public policy precludes a fiduciary from limiting his liability for: (1) self-dealing; (2) bad faith; (3) intentional adverse acts; and (4) reckless indifference about the beneficiary and his best interest. McLendon v. McLendon, 862 S.W.2d 662, 676 (Tex.App.-Dallas 1993, writ denied); Grider v. Boston Co., 773 S.W.2d 338, 343 (Tex.App.-Dallas 1989, writ denied). Self-dealing means the trustee used the advantage of its position to gain any benefit for the trustee, other than reasonable compensation, or any benefit for any third person, firm, corporation, or entity, at the expense of the trust and its beneficiaries. Grider, 773 S.W.2d at 343; InterFirst Bank Dallas, N.A. v. Risser, 739 S.W.2d 882, 899 (Tex.App.-Texarkana 1987, no writ). A trust instrument's exculpatory language "purporting to relieve the trustee from liability except for gross negligence and bad faith cannot be used to excuse the trustee from the misapplication or mishandling of trust funds." Langford v. Shamburger, 417 S.W.2d 438, 444 (Tex.Civ.App.-Fort Worth 1967, writ ref'd n.r.e.). Such conduct includes the failure to reinvest "substantial sums of trust monies." Id. The duty of fidelity required of a trustee forbids the trustee from placing itself in a situation in which there is or could be a conflict between its self-interest and its duty to the beneficiaries. Slay v. Burnett Trust, 143 Tex. 621, 639-40, 187 S.W.2d 377, 387-88 (1945); Risser, 739 S.W.2d at 898.
Grizzle pleaded that the banks, rather than preserving and protecting trust assets, merged and liquidated the trust funds for their own business reasons, and as a result, the trusts suffered a loss from the liquidation, failure to reinvest the funds, investment in lower income producing funds, and allocation of audit fees and other costs against the trusts. Therefore, Grizzle maintains the merger and liquidation transaction was self-dealing by the banks and the trust's claims are not barred by the exculpatory clause. She argues that the trust instrument expressly states that nothing in the trust instrument shall be construed to limit the fiduciary obligation of the trustee. Relying on Langford, Grizzle contends the exculpatory clause does not excuse the banks' self-dealing, including misapplying or mishandling trust funds and unreasonable delay in reinvestment. See Langford, 417 S.W.2d at 444-45.
We have concluded above that there is evidence TCB failed to promptly reinvest the liquidated funds. Indulging every reasonable inference in Grizzle's favor, as we must, we further conclude that the failure to promptly reinvest liquidated funds is *282 evidence of mishandling of trust funds included within the meaning of self-dealing. See id. Because the exculpatory clause does not relieve a trustee from liability for self-dealing and a fact issue exists whether the banks engaged in self-dealing, the exculpatory clause will not support summary judgment for the banks.
No Misrepresentations
The Frost defendants moved for summary judgment on Grizzle's claims for fraud and for misrepresentation under the DTPA on grounds that neither Frost nor New Galveston ever made any misrepresentations to her. The Frost defendants contended that the sole basis of Grizzle's fraud claim was a letter sent by Richard W. Phillips, a TCB trust officer, one day after the merger and that Grizzle admitted she did not "take any action in reliance on the letter." Further, the Frost defendants contended that throughout her deposition, Grizzle admitted that no Frost representative made any representation to her regarding Frost's handling of the Grizzle Trust and that telephone conversations with Frost representatives were about "unimportant things."
In her response, Grizzle asserted that the liquidation occurred solely as a result of the swap and that each trust, with no advance warning from the trustee banks, suffered actual cash losses when there were options to liquidation.[15] On appeal, Grizzle contends the summary judgment evidence addressed only affirmative statements. She contends that a failure to disclose when a party has a fiduciary relationship requiring disclosure is a false representation. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986) ("When the particular circumstances impose on a person a duty to speak and he deliberately remains silent, his silence is equivalent to a false representation."); see also TEX.BUS. & COM.CODE ANN. ง 17.46(23) (Vernon 2001) (failure to disclose information known at time of transaction, if such failure was intended to induce consumer into transaction consumer would not have entered if information disclosed, prohibited as unlawful false, misleading, or deceptive act). In her deposition, Grizzle was asked, "Is there anything that you claim that Cullen/Frost should have told you in connection with the merger?" Grizzle responded, "That's kind of vague. I mean, if they'd have known, surely they should have told me...." Further, in her amended affidavit, Grizzle asserted that she was not provided with "advance notice of the Frost/TCB merger transaction, and the ramifications to the Grizzle Trust and to Brentley, both from a tax standpoint and otherwise, were not explained to me by either bank prior to or subsequent to the Merger." We conclude the summary judgment evidence raises a fact issue on whether the Frost defendants' failure to disclose the consequences of the merger and liquidation amounted to misrepresentation. Therefore, summary judgment for the Frost defendants on this ground is improper.
No Fraud Separate from Breach of Contract
The Frost defendants, in their motion for summary judgment, also asserted that Grizzle was not entitled to a separate recovery on a fraud cause of action because there were no damages attributed to fraud rather than the contract. Therefore, the Frost defendants contend, Grizzle pleaded nothing more than a breach of contract claim. However, if a fraud claim arises from an act separate from the failure to perform a contract, recovery for the tort is not precluded, even though the *283 damages are economic and related to the contract. See Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 45-47 (Tex. 1998). Grizzle's fraud claim arises from Phillips's letter notifying her of the merger and the change in trustee from Frost to TCB. Phillips stated that no changes were required in the administration of the trust account, no adjustments to the trust documents or agreements were necessary, and "[a]s service enhancements or other developments are planned" beneficiaries would be "notified well in advance." Thus, Grizzle's fraud claim arises from being induced to accept the change in trusteeship resulting from the merger on Phillips's assurances that no change in the trust agreements or their administration was necessary and not on the breach of the trust agreements. Therefore, because the allegedly fraudulent acts are separate from any breach of the trust agreements, even though Grizzle alleges economic damages, the Frost defendants are not entitled to summary judgment on the fraud claim.
No Claim against Frost
In their motion for summary judgment, the Frost defendants asserted they were entitled to summary judgment because Grizzle, in deposition testimony, agreed she did not claim "that any person or entity entered into some kind of conspiracy as it related to [her] daughter's trust." However, in her amended affidavit, Grizzle stated that at her deposition, she should have asked what was meant by "conspiracy" and she did not understand the legal meaning of that term. Because conflicting inferences may be drawn from the deposition and from Grizzle's affidavit, we conclude that a fact issue is presented that precludes summary judgment. See Randall v. Dallas Power & Light Co., 752 S.W.2d 4, 5 (Tex.1988) (per curiam) (fact issue presented when conflicting inferences may be drawn from deposition and affidavit filed by same party in opposition to motion for summary judgment); Green v. Unauthorized Practice of Law Comm., 883 S.W.2d 293, 297 (Tex.App.-Dallas 1994, no writ) (same). Therefore, summary judgment on Grizzle's claim for conspiracy against the Frost defendants is improper.
The Frost defendants also moved for summary judgment on grounds that Grizzle did not seek damages from Frost.[16] As summary judgment evidence, the Frost defendants relied on Grizzle's answer to an interrogatory regarding alleged damages from Frost and New Galveston, to which Grizzle responded that she was not "seeking damages directly from Frost" but was seeking damages from New Galveston. The Frost defendants also relied on Grizzle's deposition testimony in which she responded "That's correct" to the question, "So you're not seeking any recovery whatsoever... from Frost National Bank, correct?" However, in their reply brief, appellants argued that Grizzle's deposition testimony is explained and/or controverted by her affidavit testimony. In the amended affidavit submitted to support her response to the motions for summary judgment, Grizzle stated that neither TCB nor Frost explained the tax and other ramifications of the merger transaction to her and that Frost's trust documents reflected audit fees were taken out of Frost's liquidation proceeds which were wire transferred to TCB. Appellants contend this affidavit testimony contradicts Grizzle's interrogatory and deposition testimony, creating a fact issue on whether her claims were based on Frost's conduct. Because *284 conflicting inferences may be drawn from Grizzle's deposition and from her affidavit, we conclude that a fact issue is presented that precludes summary judgment. See Randall, 752 S.W.2d at 5; Green, 883 S.W.2d at 297. Therefore, summary judgment is improper on grounds that Grizzle did not seek any damages from Frost.
Frost Defendants Entitled to Summary Judgment on Civil Conspiracy Claims
Conspiracy Generally
The Frost defendants moved for summary judgment on grounds that, as a matter of law, New Galveston was incapable of conspiring with its wholly-owned subsidiary, Frost, and New Galveston was entitled to summary judgment on Grizzle's claims for breach of fiduciary duty, breach of contract, DTPA violations, negligence, gross negligence, and fraud because these claims are predicated on a finding of conspiracy. An actionable civil conspiracy requires a combination by two or more persons to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful means. See Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex.1983). The Frost defendants relied on Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771, 777, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984), to support their contention that a corporation and its wholly owned subsidiary are incapable of conspiring with each other for purposes of antitrust law because they have a complete unity of interest. Texas courts are split on whether the holding in Copperweld Corp. applies to common law conspiracies. In Metropolitan Life Insurance Co. v. La Mansion Hotels & Resorts, Ltd., 762 S.W.2d 646, 651-52 (Tex.App.-San Antonio 1988, writ dism'd w.o.j.), the Fourth Court of Appeals concluded that the Copperweld Corp. holding applies only to the antitrust context and is not applicable to common law conspiracies because the Supreme Court limited its holding to cases involving alleged violations of the Sherman Act. Other courts agree. See, e.g., Holloway v. Atlantic Richfield Co., 970 S.W.2d 641, 644 (Tex.App.-Tyler 1998, no pet.); Atlantic Richfield Co. v. Long Trusts, 860 S.W.2d 439, 447 (Tex.App.-Texarkana 1993, writ denied). However, the Fourteenth Court of Appeals ignored the antitrust context and cited Copperweld Corp. for the proposition that, "[a]s a matter of law, a parent corporation cannot conspire with its fully owned subsidiary." Atlantic Richfield Co. v. Misty Prods., Inc., 820 S.W.2d 414, 420 (Tex.App.-Houston [14th Dist.] 1991, writ denied).
This Court has held that "[n]otwithstanding the fact that a parent corporation owns the entire capital stock of the subsidiary corporation, the two corporations are separate legal entities, and, whatever may have been the motive leading to their separate existence, they can only be regarded as separate entities for the purpose of legal proceedings." Rimes v. Club Corp. of Am., 542 S.W.2d 909, 912 (Tex.Civ. App.-Dallas 1976, writ ref'd n.r.e.). We defined a subsidiary corporation as "one which is controlled by another corporation by reason of the latter's ownership of at least a majority of the shares of the capital stock," and we reiterated that "[n]otwithstanding two corporations may be so related, each is deemed to have an independent existence." Id. Following Rimes and restricting the holding of Copperweld Corp. to the antitrust context, as do the majority of our sister courts of appeals that have considered this issue, we conclude that New Galveston and Frost are two separate legal entities and are thus not entitled to summary judgment on all causes of action merely because Frost is a wholly owned subsidiary of New Galveston. Therefore, this ground does not support summary judgment for the Frost defendants.
Conspiracy to Breach Contract
The Frost defendants argue New Galveston cannot be liable for conspiracy to breach a contract because no such cause of action exists. Specifically, the Frost defendants *285 contend there is no independent liability for an alleged civil conspiracy, see, e.g., Tex. Oil Co. v. Tenneco Inc., 917 S.W.2d 826, 836 (Tex.App.-Houston [14th Dist.] 1994) (op. on reh'g), rev'd in part sub nom, Morgan Stanley & Co. v. Tex. Oil Co., 958 S.W.2d 178 (1997), and a plaintiff must thus plead and prove another substantive tort upon which to base a civil conspiracy claim. See, e.g., Ross v. Arkwright Mut. Ins. Co., 892 S.W.2d 119, 132 (Tex.App.-Houston [14th Dist.] 1994, no writ); Schoellkopf v. Pledger, 778 S.W.2d 897, 900 (Tex.App.-Dallas 1989, writ denied). Thus, they contend breach of contract is not a cause of action on which a civil conspiracy may be based. Grizzle responds that Texas courts have recognized a cause of action for conspiracy to breach a contract, citing MacDonald v. Trammell, 163 Tex. 352, 356 S.W.2d 143 (1962); Republic Bankers Life Insurance Co. v. Wood, 792 S.W.2d 768 (Tex.App.-Fort Worth 1990, writ denied); and Guynn v. Corpus Christi Bank & Trust, 589 S.W.2d 764 (Tex.Civ.App.-Corpus Christi 1979, writ dism'd w.o.j.). However, those authorities do not address a cause of action for conspiracy to breach a contract. See MacDonald, 356 S.W.2d at 144-45 (holding no cause of action can be maintained against wife for inducing or conspiring to induce husband to breach unenforceable contract); Wood, 792 S.W.2d at 776 (distinguishing allegations of tortious conduct from indirect attempts to recover from breach of unenforceable contract); Guynn, 589 S.W.2d at 771 (discussing requirements for conspiracy to interfere with contract).
Further, in Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex.1996), the Texas Supreme Court held that civil conspiracy is a derivative tort and a defendant's liability for conspiracy depends on participation in some underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable. Because breach of contract is not a tort, it will not support a civil conspiracy. See Deaton v. United Mobile Networks, L.P., 926 S.W.2d 756, 760-61 (Tex.App.-Texarkana 1996), aff'd in part & rev'd in part on other grounds, 939 S.W.2d 146 (Tex.1997). Accordingly, we affirm the summary judgment in favor of New Galveston on Grizzle's claim for conspiracy to breach a contract against New Galveston.
Conspiracy to be Negligent and Grossly Negligent
The Frost defendants also moved for summary judgment on Grizzle's claim of conspiracy to be negligent and grossly negligent on grounds that civil conspiracy requires specific intent, that is, for a conspiracy to arise, the parties must be aware of the harm or wrongful conduct at the inception of the agreement, and thus parties cannot engage in a civil conspiracy to be negligent or grossly negligent. The Frost defendants relied on Triplex Communications, Inc. v. Riley, 900 S.W.2d 716, 719, 720 n. 2 (Tex.1995), and Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp., 435 S.W.2d 854, 857 (Tex. 1968).
Appellants did not attack this ground for summary judgment, either in Grizzle's response or on appeal. Appellants did not bring a separate issue or point of error relating to this ground, nor do they direct any argument to it. See Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex.1970) (allowing challenge of summary judgment on claim by general point with argument directed to specific grounds or separate points of error as to each ground). Therefore, we affirm summary judgment in favor of the Frost defendants on Grizzle's claim for conspiracy to be negligent and grossly negligent. See Starnes, 840 S.W.2d at 23 (holding summary judgment affirmed if ground on which summary judgment may have been granted, properly or improperly, not challenged).
*286 New Galveston Entitled to Summary Judgment on Tortious Interference with Contract
The Frost defendants also moved for summary judgment on grounds that New Galveston was entitled to summary judgment on the claim for tortious interference with contracts. Grizzle pleaded that New Galveston and TCE, as parties to the merger agreement, "willfully and intentionally induced [Frost] and [TCB], respectively, to breach and violate the provisions of ... [the] trust agreements." Relying principally on Holloway v. Skinner, 898 S.W.2d 793, 795-96 (Tex.1995), and Deauville Corp. v. Federated Department Stores, Inc., 756 F.2d 1183, 1196-97 (5th Cir.1985), Frost contended that, because Frost is a wholly owned subsidiary of New Galveston, there was a complete identity of Frost's and New Galveston's financial interests, and they were the same entity for purposes of tortious interference with the other's business relations. As evidence, the Frost defendants provided the affidavit of Phillip D. Green, New Galveston's director and treasurer, who stated that Frost was a wholly owned subsidiary of New Galveston.
Tortious interference with a contract requires a third-party stranger to the contract who wrongly induces another contracting party to breach the contract. Skinner, 898 S.W.2d at 794-95. We have noted above that Frost and New Galveston are separate legal entities. See Rimes, 542 S.W.2d at 912. However, the Texas Supreme Court has held that "[w]hen there is a complete identity of interests [between two entities], there can be no interference [with a contract] as a matter of law." Skinner, 898 S.W.2d at 797. In Deauville Corp., the Fifth Circuit, applying Texas law, determined that a parent corporation's and its wholly owned subsidiary's financial interests were so closely aligned as to eliminate their separate identity because the parent controlled the subsidiary's operation and enjoyed the benefit of any profit. Deauville Corp., 756 F.2d at 1196-97.
The Frost defendants' evidence showed that Frost was the wholly owned subsidiary of New Galveston. Appellants do not point to any controverting evidence. Therefore, following the reasoning of Deauville Corp., there is no fact issue on whether New Galveston and Frost had a complete identity of financial interest and, therefore, had no separate identity for purposes of tortious interference.[17] We conclude, as a matter of law, that New Galveston, a parent corporation with a complete identity of financial interest with its wholly owned subsidiary, Frost, cannot tortiously interfere with Frost's trust agreements with Grizzle.[18] We affirm summary judgment for New Galveston on *287 the claim of tortious interference with contracts.
Therefore, we resolve appellants' third issue against them in part as follows: we affirm summary judgment in favor of (1) the Frost defendants on the claim of conspiracy to be negligent and grossly negligent, (2) New Galveston on the claims of conspiracy to breach a contract, and (3) New Galveston on the claim for tortious interference with contracts. We resolve appellants' third issue in their favor as to all other claims.
Dismissal of Class Action
In their eighth issue, appellants contend the court erred by dismissing Grizzle's claim for class action. In their motions for summary judgment, the banks, relying principally on Stanley, 839 F.Supp. at 434, asserted that, because they were entitled to summary judgment on all of Grizzle's claims as a matter of law, Grizzle had no live individual claim and, thus, no standing to bring suit on behalf of a putative class. However, we have determined that the trial court improperly granted summary judgment on most of those claims. Therefore, because Grizzle maintains claims that are "live individual claims" before the trial court, Stanley does not support summary judgment on the class claim. We conclude the trial court erred in dismissing Grizzle's claim for class action, and we resolve appellants' eighth issue in their favor.
CONCLUSION
We affirm the trial court's grant of summary judgment in favor of the Frost defendants on Grizzle's claims of conspiracy to be negligent and grossly negligent, and we affirm the summary judgment in favor of New Galveston on Grizzle's claims of conspiracy to breach a contract and tortious interference with contracts. Because we have resolved appellants' second issue in their favor, we reverse the trial court's orders striking the interventions of the Ruckers and Wehde. Because we have resolved appellants' first and third issues, in part, as well as their fourth, fifth, sixth, and eighth issues in their favor, we reverse the trial court's grant of summary judgment on all other claims and remand them to the trial court for further proceedings.
NOTES
[1] The Honorable Barbara Rosenberg, Former Justice, Court of Appeals, Fifth District of Texas at Dallas, sitting by assignment.
[2] Appellants did not request a continuance of the summary judgment proceeding to allow further discovery and do not complain on appeal concerning the limited discovery.
[3] See Grizzle v. Tex. Commerce Bank, No. 05-97-01076-CV, 1997 WL 593809 (Tex.App.-Dallas Sept. 25, 1997, no. pet.) (not designated for publication).
[4] Although generally an unpublished opinion may not be cited as authority, we take judicial notice of our own unpublished opinion from the prior appeal in this case because it contains the law of the case. See Sledge v. Mullin, 927 S.W.2d 89, 93 (Tex.App.-Fort Worth 1996, no writ); Lake v. Lake, 899 S.W.2d 737, 739 n. 3 (Tex.App.-Dallas 1995, no writ).
[5] At the class certification hearing, however, it is necessary for the court to go beyond the pleadings, to understand the claims, defenses, relevant facts, and applicable substantive law in order to make a meaningful determination of the certification issues. Southwestern Refining Co. v. Bernal, 22 S.W.3d 425, 435 (Tex. 2000).
[6] While the trial court generally plays a relatively detached role in most civil proceedings, in a class action, the court is the guardian of the class interest. Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 954 (Tex.1996).
[7] Class actions are governed by Texas Rule of Civil Procedure 42. Since rule 42 is generally patterned after Federal Rule of Civil Procedure 23, federal decisions interpreting class action procedures provide authoritative guidance for Texas courts. Bloyed, 916 S.W.2d at 954 n. 1; Am. Express Travel Related Servs. Co. v. Walton, 883 S.W.2d 703, 708 (Tex. App.-Dallas 1994, no writ).
[8] However, it is not necessary for plaintiffs to prove a prima facie case of liability to be entitled to class certification. See Graebel/Houston Movers, Inc. v. Chastain, 26 S.W.3d 24, 30 (Tex.App.-Houston [1st Dist.] 2000, pet. dism'd w.o.j.). Certification of a class action does not hinge on the resolution of disputed facts and does not depend on the merits of the litigation. Employers Cas. Co. v. Tex. Ass'n of Sch. Bds. Workers' Comp. Self Ins. Fund, 886 S.W.2d 470, 473 (Tex.App.-Austin 1994, writ dism'd w.o.j.); Clements v. League of United Latin Am. Citizens (LULAC), 800 S.W.2d 948, 951 (Tex.App.-Corpus Christi 1990, no writ); see Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 403 (Tex.2000) (class should not be defined by criteria that require analysis of merits of case).
[9] Before making a precertification ruling on the merits, the court should consider whether the interests of putative class members may be prejudiced and provide such notice as is appropriate for their protection under the circumstances of the particular case. See Manual for Complex Litigation ง 30.11 (3d ed. 1995). Rule 42(e) authorizes the court to dismiss a class action and directs the court to provide class members with such notice of the dismissal as the court deems appropriate. See TEX.R.CIV.P. 42(e). In federal class action proceedings, courts have interpreted the corresponding federal rule 23(e) to apply to a class action during the interim between filing and certification. See, e.g., Diaz v. Trust Territory of the Pac. Islands, 876 F.2d 1401, 1408 (9th Cir.1989); FED.R.CIV.P. 23(e). Even before the class action is certified, federal rule 23(e) protects the interests of those absent class members who gained knowledge of the filing of the lawsuit and may be prejudiced by the running of the statute of limitations if they are not timely notified of the dismissal of that action. See Ventura v. Banales, 905 S.W.2d 423, 426 (Tex.App.-Corpus Christi 1995, orig. proceeding [leave denied]).
[10] The motions for summary judgment were filed before the addition of Texas Rule of Civil Procedure 166a(i), which allows a defendant to merely claim there is "no evidence" of a material element of a plaintiff's case.
[11] Section 17.505(a) provides in part:
As a prerequisite to filing a suit seeking damages [for violations of the DTPA] ..., a consumer shall give written notice to the person at least 60 days before filing the suit advising the person in reasonable detail of the consumer's specific complaint and the amount of economic damages, damages for mental anguish, and expenses, including attorneys' fees, if any, reasonably incurred by the consumer in asserting the claim against the defendant.
TEX.BUS. & COM.CODE.ANN. ง 17.505(a) (Vernon Supp.2001).
[12] We also note that Frost's tender of damages states it was made as a settlement offer pursuant to section 17.5052 of the DTPA, which allows an offer of settlement for an amount other than the demand stated in the consumer's notice of damages. Under section 17.5052, if the consumer rejects the defendant's settlement offer, the settlement offer may be filed with the court with an affidavit certifying its rejection. See id. งง 17.505(f), 17.5052. If the court finds the amount tendered in the settlement offer is the same as, substantially the same as, or more than the damages found by the trier of fact, the consumer's recovery will be limited to the lesser of the amount of damages tendered in the settlement offer or the amount of damages found by the trier of fact. See id. ง 17.505(g). Section 17.5052 merely limits damages; it is not an affirmative defense to the suit and will not support the summary judgment.
[13] The Frost defendants contend Grizzle's response to the summary judgment motion did not address the ground that the loss in the trust assets' value was caused by market forces rather than Frost's conduct, and thereby Grizzle waived her complaint about summary judgment. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 679 (Tex. 1979) (holding a nonmovant who fails to expressly present, in writing, issues defeating summary judgment "may not later assign them as error on appeal"). However, in her response, Grizzle specifically referred to "market fluctuations" that result in "paper losses" and contended TCB's decision to liquidate should have been guided by the best interest of the trust customers and that "[h]ad the [m]erger not taken place, these paper losses would have evaporated once the markets turned around (which they soon did) ." We conclude these statements preserve appellants' complaints on appeal regarding this ground.
[14] TCB contends appellants never argued that TCB or Frost violated any regulation regarding the liquidation, and this failure to challenge this independent ground for summary judgment requires affirmance. See Williams v. Crum & Forster Commercial Ins., 915 S.W.2d 39, 43 (Tex.App.-Dallas 1995) (holding appellate court affirms summary judgment as to claim when appellant does not properly challenge each of the independent grounds asserted for summary judgment as to that claim), rev'd on other grounds, 955 S.W.2d 267 (Tex.1997) (per curiam). In the response to the summary judgment motions, Grizzle specifically attacked this ground. In their amended original brief, appellants acknowledge, in the statement of facts, that each bank liquidated all common trust funds of its predecessor bank after the swap because section 9.18(b)(12) of title 12 of the Code of Federal Regulations prohibited a bank, as a trustee, from holding investments that were part of another bank's proprietary common trust fund. Further, in the reply brief, appellants state that, while the banks "proclaim that they were just doing what federal law required when they liquidated all assets invested in the common trust funds, [t]his ... view fails to recognize that the banks had the responsibility to mitigate any damages" the transaction would cause the trust beneficiaries. We conclude these references are sufficient to avoid affirmance on this ground.
[15] The Frost defendants contend Grizzle did not present any argument to the trial court regarding why they were not entitled to summary judgment on the claims for fraud and misrepresentation under the DTPA and, therefore, cannot argue otherwise for the first time on appeal. See Clear Creek Basin Auth., 589 S.W.2d at 678-79. However, we conclude that Grizzle's references in her response to the trust's losses from the liquidation without advance warning preserve appellants' complaint on appeal.
[16] The Frost defendants contend summary judgment in favor of Frost should be affirmed because Grizzle did not challenge the summary judgment on this ground. See Williams, 915 S.W.2d at 43. However, Grizzle addressed this contention in her response. Further, in the amended original brief, appellants contend Grizzle suffered economic damages under the DTPA, as well as non-economic damages that support her breach of fiduciary duty claim against the Frost defendants. Therefore, we reject the Frost defendants' argument that summary judgment should be affirmed on all claims because appellants did not challenge summary judgment on this ground.
[17] Grizzle argues that tortious interference with the contract of TCB was not addressed. Grizzle, however, did not have a contract with TCB at the time of New Galveston's alleged acts. Thus, New Galveston could not have interfered with a contract between Grizzle and TCB.
[18] We note this conclusion is in accord with the conclusions in H.S.M. Acquisitions, Inc. v. West, 917 S.W.2d 872, 882-83 (Tex.App.-Corpus Christi 1996, writ denied) (no tortious interference when parent and wholly owned subsidiary had a "complete unity of interest"); Am. Med. Int'l, Inc. v. Giurintano, 821 S.W.2d 331, 337 (Tex.App.-Houston [14th Dist.] 1991, no writ) (op. on reh'g) (tortious interference impossible as a matter of law when "completely owned subsidiary" and parent were so closely aligned that they had a "complete unity of interest"); and Schoellkopf, 778 S.W.2d at 902-03 (no tortious interference when company "owned, controlled, and dominated" by two individuals had a unity of interest with the individuals and were thus "so closely aligned as to be one entity"), but it is not in accord with the conclusion in Valores Corporativos, S.A. de C.V. v. McLane Co., 945 S.W.2d 160, 167-68 (Tex.App.-San Antonio 1997, writ denied) (parent corporation is legally capable of tortious interference with its wholly owned subsidiary's contractual relations because, as a separate entity whose financial interests are usually identical with the subsidiary's, parent's interference may be privileged under circumstances where "the financial interests of neither motivate the interference"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2105658/ | 73 S.W.3d 552 (2002)
James Harlan WRIGHT, Appellant,
v.
WAL-MART STORES, INC., Appellee.
No. 01-01-00459-CV.
Court of Appeals of Texas, Houston (1st Dist.).
April 18, 2002.
*553 Harry J. Van Deilen, Houston, for Appellant.
Alan N. Magenheim, Kevin D. Jewell, Magenheim, Bateman & Helfand, P.L.L.C., Houston, J. Woodfin Jones, Scott, Douglass & McConnico, L.L.P., Austin, for Appellee.
Panel consists of Justices COHEN, HEDGES, and TAFT.
OPINION
TAFT, Justice.
Appellant, James Harlan Wright, challenges a no-evidence summary judgment rendered against him in his premises liability suit. We review whether the trial court erred in granting a no-evidence summary judgment in favor of appellee, Wal-Mart Stores, Inc. (Wal-Mart). We address whether appellant produced more than a scintilla of evidence to raise a genuine issue of material fact as to the allegedly dangerous condition that caused Wright's injuries. We affirm.
Background
On November 30, 1999, Wright was shopping at a Wal-Mart store when he slipped and fell on a single french fry near the garden center, injuring his right shoulder. Wright did not see the french fry before he fell, and he did not know how long it had been on the floor or how it came to be there. The french fry was dirty when he removed it from his shoe.
A McDonald's restaurant within the Wal-Mart store served french fries. Wal-Mart had no policy restricting patrons from carrying food and beverages throughout its store. Wal-Mart maintained no records to indicate the area of the accident was inspected or cleaned during store hours. An employee operating a cash register was located approximately 20 to 30 feet from the scene of the accident. There had been four reported customer slip and fall injuries from spilled beverages and other liquids over a three-year period at this store. There were no reported injuries from french fries.
Wright sued Wal-Mart alleging a premises defect based on Wal-Mart's negligence in failing to warn of the dangerous condition, failing to inspect and maintain the premises, and failing to properly train its employees. Wal-Mart responded that it had no knowledge of the dangerous condition, and that Wright did not bring forth a scintilla of evidence of actual or constructive *554 notice. The trial court granted Wal-Mart's motion for a no-evidence summary judgment.
No-Evidence Summary Judgment
Wright contends Wal-Mart had a duty to exercise reasonable care, had knowledge of the foreseeable harm, and had constructive notice of a dangerous condition on its store premises. Wright asserts the trial court erred by rendering a no-evidence summary judgment despite the evidence he produced.
When reviewing a no-evidence summary judgment, we must consider the evidence in the light most favorable to the non-movant and make all inferences in the non-movant's favor. TEX.R. CIV. P. 166a(i); Morgan v. Anthony, 27 S.W.3d 928, 929 (Tex.2000); Flameout Design & Fabrication, Inc. v. Pennzoil Caspian Corp., 994 S.W.2d 830, 834 (Tex.App.-Houston [1st Dist.] 1999, no pet.). A no-evidence summary judgment is properly granted if the non-movant fails to bring forth more than a scintilla of evidence to raise a genuine issue of material fact as to an essential element of the non-movant's claim on which the non-movant would have the burden of proof at trial. Flameout Design & Fabrication, Inc., 994 S.W.2d at 834.
Premises Liability
Wright was Wal-Mart's invitee, to whom Wal-Mart owed a duty to exercise reasonable care to protect him from dangerous store conditions known or discoverable to Wal-Mart. Wal-Mart Stores, Inc. v. Gonzalez, 968 S.W.2d 934, 936 (Tex. 1998) (citing Rosas v. Buddies Food Store, 518 S.W.2d 534, 536-37 (Tex.1975)). This duty, however, does not make Wal-Mart an insurer of Wright's safety on the premises. See Gonzalez, 968 S.W.2d at 936. In order to recover from Wal-Mart, Wright must prove:
(1) actual or constructive knowledge of some condition on the premises by the owner/operator;
(2) the condition posed an unreasonable risk of harm;
(3) the owner/operator did not exercise reasonable care to reduce or eliminate the risk; and
(4) the owner/operator's failure to use such care proximately caused the plaintiff's injuries.
Id. at 936 (citing Keetch v. Kroger Co., 845 S.W.2d 262, 264 (Tex.1992); Corbin v. Safeway Stores, Inc., 648 S.W.2d 292, 296 (Tex.1983)). Liability for knowledge of a potentially harmful condition can be established in one of the three following ways:
(1) proof that employees caused the harmful condition;
(2) proof that employees either saw or were told of the harmful condition prior to the plaintiff's injury therefrom; or
(3) proof that the harmful condition was present for so long that it should have been discovered in the exercise of reasonable care.
Keetch, 845 S.W.2d at 264.
Evaluating Circumstantial Evidence
Wright does not rely on any direct evidence, but contends there is circumstantial evidence that Wal-Mart had constructive notice of the dangerous condition. First, Wright contends Wal-Mart created the condition that put the french fry on the floor, specifically, the existence of a McDonald's restaurant in the Wal-Mart store. Second, Wright contends the past occurrence of spills in the store put Wal-Mart on notice of the dangerous condition. Third, Wright points to a lack of sweep records of the area in question, and the presence of an employee near the location of the accident. Wright contends these *555 facts are more than a scintilla of evidence that Wal-Mart had constructive notice of a dangerous condition.
The supreme court recently clarified the standard by which to evaluate circumstantial evidence. Lozano v. Lozano, 52 S.W.3d 141, 148 (Tex.2001) (Phillips, C.J., concurring, joined by four justices). In Lozano, the court explained how to evaluate circumstantial evidence when more than one inference can be drawn from the facts:
Properly applied, the equal inference rule is but a species of the no evidence rule, emphasizing that when the circumstantial evidence is so slight that any plausible inference is purely a guess, it is in legal effect no evidence. But circumstantial evidence is not legally insufficient merely because more than one reasonable inference may be drawn from it. If circumstantial evidence will support more than one reasonable inference, it is for the jury to decide which is more reasonable, subject only to review by the trial court and the court of appeals to assure that such evidence is factually sufficient.
Id.
Moreover, a jury may not reasonably infer an ultimate fact from meager circumstantial evidence that could give rise to any number of inferences, none more probable than another. Lozano, 52 S.W.3d at 148 (citing Hammerly Oaks, Inc. v. Edwards, 958 S.W.2d 387, 392 (Tex. 1997)). When circumstances are consistent with any possibility, and nothing shows that one is more probable than the other, no fact can be inferred. Id.
In the context of premises liability, the court has held that, when relying on circumstantial evidence to prove constructive notice, the evidence must establish that it is more likely than not that the dangerous condition existed long enough to give the proprietor a reasonable opportunity to discover the condition. Gonzalez, 968 S.W.2d at 936. In Gonzalez, the court required that circumstantial evidence establish a proposition that is more likely than not probable, rather than allow a jury to choose from two equally possible propositions. Id.
Constructive Notice
The threshold issue is whether Wal-Mart had actual or constructive notice of the allegedly dangerous condition: a french fry on the floor. Wright does not contend that Wal-Mart had actual notice of the dangerous condition. Rather, he contends that several facts raise more than a scintilla of evidence that Wal-Mart had constructive notice of the dangerous condition.
A. Proximate Employee
Wright contends the presence of an employee operating a cash register 20 to 30 feet from the accident is evidence that Wal-Mart had constructive notice of the dangerous condition. Wright cites Wal-Mart Stores, Inc. v. Reece, 32 S.W.3d 339 (Tex.App.-Waco 2000, pet. granted), for the proposition that a plaintiff can offer evidence that, when a dangerous condition was in sufficient proximity to an employee of the defendant, the condition should have been discovered and removed in the exercise of ordinary care. Id. at 343 (citing Duncan v. Black-Eyed Pea U.S.A., Inc., 994 S.W.2d 447, 449-50 (Tex.App.-Beaumont 1999, pet. denied); Furr's Super Market v. Garrett, 615 S.W.2d 280, 281-82 (Tex.Civ.App.-El Paso 1981, writ ref'd n.r.e.); Albertson's Inc. v. Mungia, 602 S.W.2d 359, 362-63 (Tex.Civ.App.-Corpus Christi 1980, no writ); H.E.B. Food Stores v. Slaughter, 484 S.W.2d 794, 797 (Tex.Civ. App.Corpus Christi 1972, writ dism'd); *556 and Stoner v. Wal-Mart Stores, Inc., 35 F.Supp.2d 958, 960 (S.D.Tex.1999)).
Because the "proximate employee" theory of constructive notice has not been decided by our supreme court, this line of cases is not binding precedent. Even if the "proximate employee" theory were viable, it would not apply in this case. All of the cases cited in Reece involved areas heavily trafficked by employees. See Reece, 32 S.W.3d at 343. Wright did not show that the location of the accident was heavily trafficked by employees. Wright showed only that an employee was operating a cash register approximately 20 to 30 feet from the location of the accident. Wright did not present any evidence that employees of Wal-Mart should have been aware of the allegedly dangerous condition, or that the proximity of the employee at a cash register 20 to 30 feet away made it likely the french fry would have been seen by that employee.
B. Restaurant and History of Accidents
The presence of the McDonald's restaurant in the Wal-Mart store, without a policy prohibiting the carrying of food and drinks in the store, coupled with the four reported slips and falls from spilled beverages on the floor over three years, does not give rise to a reasonable inference that Wal-Mart had constructive notice of the dangerous condition. Circumstantial evidence may establish a material fact, but it must transcend mere suspicion. Lozano, 52 S.W.3d at 149. The history of accidents in the store was limited to spilled beverages, not french fries. There is no evidence that the french fry even came from the McDonald's restaurant in the Wal-Mart store. The existence of a restaurant in a store, without a policy on carrying food and drinks, does not transcend mere suspicion.
C. Dirty French Fry and Lack of Cleaning Records
Finally, Wright points to the evidence that he fell on a dirty french fry, and that Wal-Mart failed to keep sweeping or cleaning records of the area. Wright did not see the french fry before he fell. He noticed the french fry was dirty only after he stepped on it and removed it from the bottom of his shoe.
Proof that the harmful condition was present for so long that it should have been discovered in the exercise of reasonable care demonstrates constructive notice. Keetch, 845 S.W.2d at 264. Wright's testimony does not identify the amount of time the french fry was on the floor. The french fry could have been there for a short period of time and become dirty when Wright stepped on it. On the other hand, the french fry could have been on the floor for a long period of time. See Gonzalez, 968 S.W.2d at 937 (holding dirty macaroni raises possibility macaroni was soiled by customers recently or over long period of time, which does not create constructive notice of dangerous condition). It is also possible that the french fry could have been on the floor any number of intermediate periods of time between a very short time and a very long time.
Although sweeping records could have provided a narrower window of time to determine when the french fry fell on the floor, Wright did not introduce any evidence of sweeping records. He argues instead that lack of any sweeping records indicates that Wal-Mart did not sweep the floors. In the absence of sweeping records, no inference can be made as to when the floors were swept, or how long the french fry had been on the floor.
Wright's meager circumstantial evidence does not rise above the level of *557 mere suspicion. Evidence so slight that any inference is purely a guess is no evidence at all. Lozano, 52 S.W.3d at 148. Consequently, Wright has failed to raise more than a scintilla of evidence that Wal-Mart had constructive notice of a dangerous condition.
We overrule appellant's sole point of error.
Conclusion
We affirm the judgment of the trial court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2167954/ | 223 Cal.App.3d 397 (1990)
273 Cal. Rptr. 7
CARL ALDERSON et al., Plaintiffs and Appellants,
v.
INSURANCE COMPANY OF NORTH AMERICA, Defendant and Respondent.
Docket No. B043798.
Court of Appeals of California, Second District, Division Three.
September 4, 1990.
*400 COUNSEL
Tweedy & Kerr, James R. Tweedy and Donald C. Lozano for Plaintiffs and Appellants.
Hagenbaugh & Murphy, William D. Stewart and Craig D. Aronson for Defendant and Respondent.
OPINION
DANIELSON, Acting P.J.
Carl Alderson (Carl) and Seiko Alderson (Seiko; collectively, Aldersons), husband and wife, appeal from a judgment in favor of Insurance Company of North America (INA) and from an order denying their motion for a new trial or to vacate the judgment and enter a different judgment.
We reverse the judgment and order.
PROCEDURAL AND FACTUAL STATEMENT
On or about October 5, 1983, Wilma Buttz Watson (Wilma) and Kelly Watson (Watson) rented an automobile from Spectrum Investment Corporation, dba Budget Rent A Car and Budget Rent A Car of San Fernando Valley (Budget). On or about October 27, 1983, the automobile, which was driven by Watson, collided with a motorcycle operated by Carl. Carl incurred medical and hospital expenses in the sum of $67,507.74 and a loss of earnings in the sum of $32,354.
In November 1987, the Aldersons and defendant Watson entered into a stipulation for entry of judgment, including a covenant not to execute, and on March 11, 1988, that stipulation was filed and a judgment based on it was entered in Los Angeles Superior Court case No. EAC 45659 against Watson, in the sum of $475,000 in favor of Carl, and the sum of $40,000 for Seiko, his wife.
Allstate Insurance Company paid its policy limits in the amount of $100,000 to Carl and $6,250 to Seiko on behalf of Wilma, its insured. Mercury Casualty Insurance Company paid the policy limits in the sum of $15,000 each to Carl and Seiko in behalf of Watson, its insured.
By letter dated April 5, 1988, the Aldersons notified INA, the insurer of Budget, of the above facts and demanded payment by INA of the sum of *401 $360,000 on behalf of Carl and the sum of $18,750 on behalf of Seiko. INA did not respond to that letter.
On May 13, 1988, the Aldersons filed a complaint for declaratory relief and to enforce a judgment against INA; Budget was not a party to this action. In sum, the Aldersons sought a declaration that Kelly Watson was an insured under the policy issued by INA to Budget and that Carl and Seiko were entitled to recover, respectively, the sums of $360,000 and $18,750 from INA pursuant to that policy.
In its first amended answer filed on December 9, 1988, INA denied generally the material allegations of the complaint.
On December 8, 1988, INA filed a motion for summary judgment on the ground that, as a matter of law, INA's policy issued to Budget expressly excluded coverage for renters (permissive users) of Budget's vehicles,[1] and that this exclusion is valid and bars the Aldersons' claim against INA. The motion was accompanied by a separate statement of undisputed facts.
In a supporting declaration Richard Shapiro (Shapiro), Budget's vice-president stated that in 1983 Budget contacted INA for insurance to cover liability arising from operation of its vehicles by employees only. It did not seek coverage for liability caused by operation of its vehicles by renters since Budget believed it already provided for such coverage by maintaining a cash deposit with the Department of Motor Vehicles (DMV) continuously from August 4, 1977. Exhibit "A" to the motion was an "Acknowledgement of Deposit," relating to section 16002 of the Vehicle Code, a part of the Financial Responsibility Laws, issued to Budget by the DMV, dated August 4, 1977.
Exhibit "C" to the motion for summary judgment was a copy of an endorsement No. 26, captioned "Agreement Re Reformation" and dated December 5, 1988, which was intended to reform the 1983 policy issued to Budget by INA, in order to avoid any uncertainty arising from the original policy regarding insurance coverage for renters of Budget's vehicles.
On December 22, 1988, the Aldersons filed opposition to the motion. In sum, they asserted that the purported exclusion of permissive users in the subject liability policy was void as contra to public policy in that there was *402 no provision in the policy, as mandated by Insurance Code section 11580.1, subdivision (a)(2), for either underlying insurance provided by the insured or a retained limit of self-insurance by the insured. The Aldersons also argued that reformation of the subject policy to provide for a retained limit of self-insurance under that statute was improper since there was no mutual mistake of fact made by INA and Budget as to the provisions of the original policy.
In their reply filed December 30, 1988, INA took the position that the absence of a provision in the policy expressly stating the policy was conditioned on Budget maintaining the requisite retained limit of self-insurance did not affect the validity of the policy and that, in any event, the policy was properly reformed to provide expressly for a retained limit of self-insurance by Budget through the DMV cash deposit.[2]
On January 6, 1989, following a hearing, the motion for summary judgment was denied without prejudice on the ground, inter alia, that triable issues of fact existed concerning whether the endorsement asserted by the reformation was always the intention of Budget and INA.
A court trial was held on March 1, 2, and 23, 1989. The uncontroverted evidence at trial established that both INA and Budget expressly intended that there would be no coverage under the subject policy for renters of Budget's vehicles except where an accident was due to a defect in the rented vehicle, e.g., faulty brakes. Moreover, both INA and Budget intended that Budget, whom INA understood to be a self-insurer, would itself provide coverage for liability caused by operation of its autos by renters in all other instances.
*403 The evidence further revealed that Budget considered itself to have been self-insured continually from 1977, including the time of the subject accident in 1983. Shapiro, Budget's President, testified at trial that Budget considered itself to be a self-insurer with respect to renters of its vehicles, because Budget maintained a letter of credit for $35,000 with DMV. For at least six years prior to the existence of the subject policy, Budget held a certificate from the DMV dated August 4, 1977, entitled "Acknowledgement of Deposit," which Shapiro considered to be the requisite certificate from DMV approving its status as a self-insurer. This certificate remained in effect through the trial here.[3]
Shapiro further testified that Budget had its own claim department which administered its program of self-insurance. Budget's self-insurance program was funded by the setting aside of a reserve for anticipated claims. The record, however, does not reveal any evidence concerning the amount or nature of such reserve.
Also undisputed was the fact that the reformation agreement was signed by Shapiro on December 5, 1988, about four years after the policy was cancelled on September 24, 1984. In consideration for entering into the reformation agreement INA agreed to indemnify or reimburse Budget for its costs in this matter. Shapiro testified that no one had ever told him that self-insurance, or maintaining a certain cash deposit, was a condition precedent to obtaining or maintaining the INA policy. Ronald Moreland, a broker for INA, testified that he did not refer to Budget's status as a self-insurer in the subject policy, because he did not think it was necessary.
At the conclusion of the trial the court concluded the reformation of the policy was proper since it reflected the true intent of INA and Budget. The court then announced that the remaining issues, e.g., standing, were moot. Judgment in favor of INA was filed on April 13, 1989.
On April 26, 1989, the Aldersons filed a motion for a new trial or, alternatively, to vacate the judgment and to enter a new judgment. INA filed opposition to the motion.
On June 1, 1989, following a hearing, the court took the motion under submission.
On June 6, 1989, the court denied the motion in its entirety. This appeal followed.
*404 ISSUES PRESENTED
This appeal presents three basic issues: (1) do the Aldersons have standing to bring the subject action against INA and to challenge the reformation of the policy, (2) does the absence of an express provision in the policy requiring Budget to maintain the requisite retained limit of self-insurance render the exclusion of coverage for permissive users in the INA policy void, and (3) if such a provision is mandatory, did the trial court correctly find that the subject policy properly contains such provision based on the endorsement which was drafted to reform the policy to insert such provision?
DISCUSSION
I. Standing of the Aldersons
Issues regarding standing were raised but not determined by the trial court. (1) Based on our review of the record and applicable law we conclude that the Aldersons have standing to challenge the subject policy and its reformation.
It is of no legal import that the Aldersons were not parties to the policy or that the policy expressly excluded permissive users, i.e., Watson. The point remains that if the policy's exclusion was void, then Watson, as a permissive user of the insured's vehicle, would have been an "additional insured" under the policy. As such, Watson would be entitled to the same rights as the insured. The Aldersons' rights, if any, under the policy are derived from the judgment it had obtained against Watson, and thus, the Aldersons, as third party beneficiaries under the policy, are entitled to bring this action and to challenge the reformation of the policy. (See, e.g., Ins. Code, § 11580, subd. (b)(2); Zander v. Texaco, Inc. (1968) 259 Cal. App.2d 793, 803 [66 Cal. Rptr. 561]; Shapiro v. Republic Indem. Co. of America (1959) 52 Cal.2d 437, 440 [341 P.2d 289]; Barrera v. State Farm Mut. Automobile Ins. Co. (1969) 71 Cal.2d. 659, 675-677, 680 [79 Cal. Rptr. 106, 456 P.2d 674]; cf. Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 941, 943-944 [132 Cal. Rptr. 424, 553 P.2d 584] [covenant of good faith and fair dealing runs only to insureds, not to third party claimants]; State Farm Mut. Auto. Ins. Co. v. Superior Court (1989) 211 Cal. App.3d 5, 8-9 [259 Cal. Rptr. 50] [a conclusive judicial determination of liability is prerequisite for third party action for damages under Ins. Code § 790.03, subd. (h)].)
*405 II. Absence From Original Policy of Express Provision for Retained Limit of Self-insurance Renders Exclusion of Permissive User Coverage Void
A. Requirement of Express Provision in Policy for Retained Limit of Self-insurance
(2a) The general statutory requirement is that an automobile liability policy must provide coverage for permissive users of the insured vehicles "to the same extent that insurance is afforded to the named insured." (Ins. Code, § 11580.1, subd. (b)(4) (section 11580.1(b)(4));[4] see also, Metz v. Universal Underwriters Ins. Co. (1973) 10 Cal.3d 45, 51 [109 Cal. Rptr. 698, 513 P.2d 922].)
There are some statutorily created exceptions to the requirement that all automobile liability policies must provide insurance coverage to permissive users of insured vehicles.
In this regard, Insurance Code section 11580.1, subdivision (a)(2) (section 11580.1(a)(2)), provides: "No policy of automobile liability insurance ... covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be issued or delivered in this state ... unless it contains the provisions set forth in subdivision (b) [e.g., insurance coverage for permissive users (§ 11580.1(b)(4)]. However, none of the requirements of subdivision (b) shall apply to the insurance afforded under any such policy ... (2) if such policy contains an underlying insurance requirement, or provides for a retained limit of self-insurance, equal to or greater than the limits specified in subdivision (a) of Section 16056 of the Vehicle Code, i.e., $35,000.]"[5]
In the case at bench the subject policy did not contain an underlying insurance requirement; thus we are concerned only with the exception based on a "retained limit of self-insurance."
*406 1. When the Policy Provides for a Retained Limit of Self-insurance the Policyholder Must Be a Self-insurer
(3) The meaning of the phrase "a retained limit of self-insurance, equal to or greater than [$35,000]" in section 11580.1(a)(2) has not been defined statutorily or judicially.
One court has pointed out that "[t]he reference to self-insurance must be read in conjunction with the requirements for self-insurance set forth in Vehicle Code sections 16052 and 16053 (formerly [Veh. Code,] §§ 16055 and 16056 respectively). Otherwise an automobile liability insurer could completely evade the requirements of ... section 11580.2 [sic, we find that reference should be to Insurance Code section 11580.1], subdivision (b) by providing for a so-called `retained limit of self-insurance' in every policy issued, regardless of the [insured] policyholder's ability to respond." (Lovy v. State Farm Insurance Co. (1981) 117 Cal. App.3d 834, 860, fn. 25 [173 Cal. Rptr. 307].)
Thus, at a minimum, what is required under section 11580.1(a)(2) is that the insured be a self-insurer under the Vehicle Code. At oral argument counsel for INA conceded that the "retained limit of self-insurance" under section 11580.1(a)(2) requires the insured to be self-insured under the Vehicle Code. He argued, however, that Budget had met this requirement by maintaining a deposit of $35,000 with DMV pursuant to Vehicle Code section 16054.2. We reject that argument as meritless. Counsel confuses the $35,000 deposit with DMV, which is an alternative means of establishing proof of financial responsibility under the Financial Responsibility Laws,[6] with the statutorily prescribed method by which one becomes a self-insurer. The two procedures, and the two purposes, are not the same.
2. "Self-insurer" Is a Status Created by Statute
Neither the Vehicle Code nor the Insurance Code defines "self-insurer" or "self-insurance"; nor do they contain a listing of the duties and obligations of a "self-insurer" other than the procedure which a person must follow in order to qualify as a self-insurer. (Veh. Code, §§ 16052-16053.)
*407 It is implicit in the term, "self-insurer," that such person maintains a fund, or a reserve, to cover possible losses, from which it pays out valid claims, and that the self-insurer have a procedure for considering such claims and for managing that reserve. By definition, "self-insurance" is "insurance of oneself or of one's own interests by the setting aside of money at regular intervals to provide a fund to cover possible losses...." (Webster's New Internat. Dict. (3d ed. 1966) p. 2060.)
The Vehicle Code, as pointed out by the Lovy court, specifies the procedure by which a person may qualify as a self-insurer. "Any person in whose name more than 25 vehicles are registered may qualify as a self-insurer by obtaining a certificate of self-insurance issued by the department as provided in this article." (Veh. Code, § 16052.)
The DMV "may, in its discretion, upon application, issue a certificate of self-insurance when it is satisfied that the applicant ... is possessed and will continue to be possessed of ability to pay judgments obtained against him in amounts at least equal to the amounts provided in Section 16056. The certificate may be issued authorizing the applicant to act as a self-insurer for either property damage or bodily injury or both...." (Veh. Code, § 16053, subd. (a), italics added.) That statute also authorizes the department to cancel a certificate of self-insurance upon reasonable grounds after notice and a hearing. (Veh. Code, § 16053, subd. (b).)
Pursuant to the authority of Vehicle Code section 1651 the DMV has adopted regulations, which are set forth in title 13, California Code of Regulations, sections 100.50 through 100.90, to implement the authority of the DMV to issue or to cancel a certificate of self-insurance. Those regulations require that an audited financial statement of the applicant for the preceding three years accompany the application for issuance of a certificate of self-insurance, and annual statements must be submitted thereafter. Such statements shall include the opinion of a certified public accountant as to the current financial condition of the applicant. The regulations also require that the audited financial statement of the applicant must reflect a net worth of not less than $575,000 on the date of the application. (Cal. Code Regs., tit. 13, §§ 100.55 & 100.60.)
3. A Cash Deposit With DMV as Proof of Financial Responsibility Does Not Qualify the Depositor as a Self-insurer
INA has cited no authority for the proposition that a cash deposit with DMV in the sum of $35,000, pursuant to Vehicle Code section 16054.2, subdivision (a), is an element in qualifying as a self-insurer or in obtaining a certificate of self-insurance, nor that such a deposit even relates to self-insurance. *408 Based on our review of the law we find that there is no such requirement and that the deposit does not relate to self-insurance. Again, the two are not the same.
The function of the $35,000 cash deposit with DMV (Veh. Code, § 16054.2, subd. (a)) is simply one method by which the driver or owner of a motor vehicle which has been involved in a reportable accident may establish proof of financial responsibility as required by the Vehicle Code. Also, financial responsibility may be established by proof that the owner of the vehicle is a self-insurer. (Veh. Code, § 16052.) Thus, if a person has a certificate of self-insurance, issued by the DMV, a $35,000 cash deposit with DMV would be redundant, duplicative, and a volunteered action on its part, i.e., not mandated by law. The two are alternative methods of establishing proof of financial responsibility.
Since a self-insurer is not required to file a cash deposit with DMV in the sum of $35,000 in order to establish proof of financial responsibility, such a cash deposit cannot be construed to constitute the "retained limit of self-insurance, equal to or greater than [$35,000]" mandated by Insurance Code section 11580.1(a)(2), which is necessary in order to exclude coverage for permissive users from Budget's INA policy, which is the basic issue in this case.
Moreover, a cash deposit with DMV in the amount specified in Vehicle Code section 16056, subdivision (a), i.e., $35,000, cannot satisfy the requirement of Insurance Code section 11580.1(a)(2) of "a retained limit of self-insurance, equal to or greater than [$35,000]" for three additional reasons. First, if the Legislature had intended for that cash deposit to be the requisite "retained limit of self-insurance," then it could easily have said so, e.g., an automobile liability policy must provide coverage for permissive users equal to that of the insured, unless the insured deposits cash with the DMV in the amount specified in Vehicle Code section 16056, subdivision (a), i.e., $35,000. The Legislature did not do that.
Second, another compelling reason why the cash deposit with DMV cannot be the "retained limit of self-insurance" is that the term "retained limit" is defined as an amount "equal to or greater than" (Ins. Code, § 11580.1(a)(2), italics added) $35,000, while the cash deposit which must be filed with DMV to establish financial responsibility is precisely $35,000, "the amount specified in Section 16056." (Veh. Code, § 16054.2.) The two are not synonymous, they are not interchangeable.
Lastly, INA has cited no authority, and we have found none, for the proposition that a $35,000 cash deposit with DMV under Vehicle Code section 16054.2 constitutes a fund from which a self-insurer may cover the *409 liability of its permissive users. To the contrary, the court in Interinsurance Exchange v. Spectrum Investment Corp. (1989) 209 Cal. App.3d 1243 [258 Cal. Rptr. 43] held that such a cash deposit does not extend coverage to permissive users, i.e., renters of the insured's vehicles.[7] (Id. at pp. 1256-1258.)
In addition to the "retained limit of self-insurance" as the basis for exclusion of permissive user coverage under an insurance policy, section 11580.1(a)(2) also provides that a policy may exclude coverage for permissive users on the alternative basis that "such policy contains an underlying insurance requirement." "`"Underlying Insurance" is any other insurance purchased by the insured which covers the same losses and which will be primarily liable therefor. [Citation.]'" (Lovy v. State Farm, supra, 117 Cal. App.3d 834, 860, italics omitted.) The underlying insurance exception in section 11580.1(a)(2) requires an underlying insurance policy which in fact affords coverage for permissive users. (Harbor Ins. Co. v. KSCH, Inc. (1989) 208 Cal. App.3d 965, 969 [256 Cal. Rptr. 499].) In this case the policy did not contain an underlying insurance requirement. Yet that exception provides guidance in construing the "retained limit of self-insurance" exception.
A statute must be construed to achieve harmony among its various provisions. (See, e.g., Estate of McDill (1975) 14 Cal.3d 831, 837 [122 Cal. Rptr. 754, 537 P.2d 874].) Mindful of this principle, "the retained limit of self-insurance" exception must be construed in conjunction with its alternative, the "underlying insurance requirement" exception. If there were underlying insurance it would be required, by law, to afford insurance coverage to permissive users. (§ 11580.1(b)(4).) Therefore, to be in harmony, its alternative, the "retained limit of self-insurance," must in fact afford coverage to permissive users. Again, the cash deposit with DMV as proof of financial responsibility does not afford such coverage. (Interinsurance Exchange v. Spectrum Investment Corp., supra, 209 Cal. App.3d at 1256, 1258.)
Thus, it is clear that the Legislature meant the "retained limit of self-insurance, equal to or greater than the limits specified in [Vehicle Code *410 section 16056, subdivision (a), i.e., $35,000]" to be something other than the $35,000 cash deposit with DMV under Vehicle Code section 16054.2.
4. The Meaning of "Retained Limit of Self-insurance" Under Section 11580.1(a)(2)
Based on our review of the applicable law we hold that the meaning of the phrase in section 11580.1(a)(2) that "the policy provides for a retained limit of self-insurance, equal to or greater than the limits specified in [Vehicle Code section 16056, subdivision (a), i.e., $35,000]" is that the policy in question must contain a recital to that effect and, in addition, that: (1) the insured must be a self-insurer as described in the Vehicle Code (Veh. Code, §§ 16052, 16053; see also, Cal. Code Regs., tit. 13, §§ 100.50, 100.90); (2) the insured agrees to maintain the status of self-insurer for the duration of the policy; and (3) the self-insurer must afford insurance coverage to its permissive users equal to the limits specified in Vehicle Code section 16056, subdivision (a).
The manner in which a proposed self-insurer can demonstrate that it is qualified to be a self-insurer, and can maintain that status, is to be determined by the DMV within statutory limits and in the exercise of its statutory discretion to issue or to cancel a certificate of self-insurance. (Veh. Code, §§ 16052, 16053; Cal. Code Regs., tit. 13, §§ 100.50-100.90.)[8]
An audited financial statement reflecting a net worth of not less than $575,000 is one factor to be considered in qualifying a self-insurer (Cal. Code Regs., tit. 13, §§ 100.55, 100.60); however, the DMV is entitled to weigh other factors as well. The DMV "may require a statement of claims and losses during the preceding three year period, a history of insolvency proceedings and any relevant additional information necessary to determine the continuing ability of the applicant to pay future claims." (Cal. Code Regs., tit. 13, § 100.65.) Such "relevant additional information" necessarily includes specifics concerning the reserve fund which a self-insurer, by definition, must maintain to act as a self-insurer.
Although neither the Vehicle Code, nor the regulations adopted by DMV with respect to self-insurers, address the maintenance of a reserve fund, we find that, implicit in its statutory authority to issue or to cancel a certificate of self-insurance, the DMV necessarily has the authority to require the applicant for or holder of such a certificate, in order to cover losses, to maintain a reserve fund in a manner which is satisfactory to the DMV. In determining whether to issue a certificate of self-insurance the DMV must *411 be "satisfied that the applicant ... is possessed and will continue to be possessed of ability to pay judgments obtained against him in amounts at least equal to the amounts provided in [Vehicle Code] Section 16056 [i.e., up to $35,000]." (Veh. Code, § 16053, subd. (a).) In determining whether to cancel a certificate of self-insurance the DMV necessarily makes a finding on that question. (Cal. Code Regs., tit. 13, § 100.90, subd. (a); see also, Veh. Code, § 16053, subd. (b).)
B. Provision for a Retained Limit of Self-insurance Was Omitted From Original Policy
(2b) Based on the foregoing it is clear that in order for the INA policy to exclude coverage for permissive users of Budget's insured vehicles, such policy must contain a provision "for a retained limit of self-insurance equal to or greater than [$35,000]" (§ 11580.1(a)(2)), as described above. It is undisputed that the policy, as originally drafted, failed to contain this provision. Accordingly, we conclude that the absence of such provision rendered the exclusion of coverage for permissive users in the original policy void as contrary to section 11580.1(b)(4).
III. Reformation of Policy to Include Provision for Retained Limit of Self-insurance Was Ineffectual
The Aldersons attack the endorsement (agreement re reformation) on two grounds: (1) the absence of a mutual mistake of fact precludes reformation; and (2) assuming, arguendo, reformation was proper, the policy as reformed still fails to satisfy the requirement of Insurance Code section 11580.1(a)(2) that the policy provide for a retained limit of self-insurance, equal to or greater than the limits specified in Vehicle Code section 16056, subdivision (a).
(1) Propriety of Reformation
"When, through ... a mutual mistake of the parties ... a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value." (Civ. Code, § 3399.)
(4) "The purpose of reformation is to correct a written instrument in order to effectuate a common intention of both parties which was incorrectly reduced to writing. [Citation.]" (Lemoge Electric v. County of San Mateo (1956) 46 Cal.2d 659, 663 [297 P.2d 638].) "It is fundamental that a written contract may be reformed by a court of equity where, due to mutual *412 mistake on the part of the parties, it fails to express their true intentions. [Citations.] Moreover, it is settled that an insurance policy may be reformed to limit or exclude coverage if such was the intention of the parties, even where the rights of third party claimants who are not parties to the insurance contract are adversely affected. [Citation.]" (Truck Ins. Exch. v. Wilshire Ins. Co. (1970) 8 Cal. App.3d 553, 559 [87 Cal. Rptr. 604]; cf. Insurance Co. of North America v. Bechtel (1973) 36 Cal. App.3d 310, 316-318 [111 Cal. Rptr. 507].)
Mindful of the foregoing principles, we conclude that the uncontroverted evidence here establishes the requisite mutual mistake justifying reformation of the policy to reflect the true intent of the parties thereto, i.e., INA and Budget. Such evidence reflects that at all relevant times Budget considered itself to be a self-insurer within the meaning of the Vehicle Code and that both INA and Budget intended to exclude coverage for renters of Budget's vehicles under the INA policy. The evidence also reveals that both INA and Budget intended that Budget, as a self-insurer, would, instead, provide such coverage.
The Aldersons concede the above factual recital to be correct. They contend, however, that such facts do not justify reformation of the policy, because there was no evidence to show that INA and Budget had intended to or agreed to include a provision in the INA policy to the effect that Budget agreed to be self-insured for the duration of the policy or that the policy was contingent on Budget's status as a self-insurer. We reject that contention as an attempt to elevate form over substance. The essential fact is that both INA and Budget intended for Budget to be self-insured for the duration of the policy with respect to coverage for renters of Budget's vehicles. Inclusion of a provision in the policy by reformation to reflect that intent was therefore proper.
(2) The Policy as Reformed Does Not Meet the Requirements of a "Retained Limit of Self-insurance" Under Section 11580.1(a)(2)
The Aldersons complain that the endorsement reforming the policy does not satisfy the requirement in Insurance Code section 11580.1(a)(2) that the policy provide for a retained limit of self-insurance, equal to or greater than the limits set forth in Vehicle Code section 16056, subdivision (a), i.e., $35,000.
Based on our analysis, ante, we agree.
Again, the meaning of the phrase "the policy provides for a retained limit of self-insurance, equal to or greater than the limits specified in [Vehicle Code section 16056, subdivision (a), i.e., $35,000]" is that the policy must *413 contain a recital to that effect and, in addition, the insured (1) must be a self-insurer, (2) must agree to maintain that status for the duration of the policy, and (3) must afford insurance coverage to its permissive users equal to the limits specified in Vehicle Code section 16056, subdivision (a).
The agreement re reformation in this case does not satisfy those requirements. Instead, it purports to equate the deposit of $35,000 with the DMV under the Financial Responsibility Law (Veh. Code, § 16054.2) as the "retained limit of self-insurance" under Insurance Code section 11580.1(a)(2).[9] As we pointed out, ante, that deposit does not constitute the requisite "retained limit of self-insurance."
(5) The bare recital in a policy that it "provides for a retained limit of self-insurance, equal to or greater than the limits specified in subdivision (a) of Section 16056 of the Vehicle Code," is not enough. There must also be full compliance with the requirements for self-insurance. "Otherwise an automobile liability insurer could completely evade the requirements of Insurance Code section [11580.1,] subdivision (b) by providing for a so-called `retained limit of self-insurance' in every policy issued, regardless of the policyholder's ability to respond." (Lovy v. State Farm Insurance Co., supra, 117 Cal. App.3d 834, 860, fn. 25.) Thus, although the elements of being a self-insurer, and of self-insurance, may be subsumed in the recital that the policy provides for a retained limit of self-insurance, those elements must in fact exist and be provable in order for the policy to exclude insurance coverage for the permissive users of the insured's vehicles.
We conclude that neither the original policy nor the policy as reformed satisfies the requirement of Insurance Code section 11580.1(a)(2) that the policy provide for "a retained limit of self-insurance, equal to or greater than the limits specified in [Vehicle Code section 16054.2, subdivision (a), i.e., $35,000]." Accordingly, the policy's exclusion of coverage for permissive users is void.
DECISION
The judgment and order are reversed. The cause is remanded for further proceedings consistent with this opinion, including further consideration by *414 the trial court of efforts, if any, by INA and Budget to reform the subject policy. Appellants to recover costs on appeal.
Croskey, J., and Hinz, J., concurred.
Respondent's petition for review by the Supreme Court was denied December 13, 1990.
NOTES
[1] In pertinent part this exclusion, endorsement 7 in the original policy and replaced by endorsement 22 in the policy, which was in effect at the time of the accident, expressly excluded coverage for liability arising out of the operation of Budget's autos while they are rented to others except where the liability is solely caused by improper inspection, servicing or repair of the autos by Budget.
[2] In pertinent part the "Agreement Re Reformation," which was executed on December 5, 1988, by Shapiro, provided:
"(The parties agree that the policy as written correctly states the intent of the parties to the agreement.)
"......................
"[I]n order to clarify their original intent, the parties hereby reform said policy by adding the following provision:
"`[Budget] owns numerous motor vehicles that are rented to the public on a continual basis. It is [Budget's] experience that at substantially all times, certain of such vehicles have been in collisions in which third parties are claiming damages against [Budget]. [Budget] acknowledges that it is required, pursuant to California law, to be able to prove its ability to respond in damages following such a collision, and now complies, and intends to comply hereafter, with the minimum requirements of California law for proving ability to respond in damages.
"`This policy provides for a retained limit of self-insurance equal to or greater than the limits specified in subdivision (a) of Section 16056 of the Vehicle Code, in the following particulars:
"`"[Budget] represents that it has cash on deposit with the Department of Motor Vehicles in the manner specified in Vehicle Code Section 16054.2 and in the amount specified in Vehicle Code Section 16056(a) and that [Budget] intends to maintain such compliance with financial responsibility during the policy period."'"
[3] The "Acknowledgement of Deposit," which was admitted into evidence, recites that Budget was "a Depositor under the Compulsory Financial Responsibility Law...." It makes no mention of "self-insurer," or "self-insurance."
[4] Section 11580.1(b)(4) provides in pertinent part: "(b) Every policy of automobile liability insurance to which subdivision (a) applies shall contain all of the following provisions: ... (4) Provision affording insurance to the named insured with respect to any motor vehicle covered by such policy, and to the same extent that insurance is afforded to the named insured, to any other person using, or legally responsible for the use of, such motor vehicle, provided such use is by the named insured or with his or her permission, express or implied, and within the scope of such permission."
[5] Vehicle Code section 16056, subdivision (a) provides in pertinent part that in the case of an accident resulting in bodily injury or death, the policy or bond must provide "a limit, exclusive of interest and costs, of not less than fifteen thousand dollars ($15,000) because of bodily injury to or death of one person in any one accident and, subject to such limit for one person, to a limit of not less than thirty thousand dollars ($30,000) because of bodily injury to or death of two or more persons in any one accident, and, if the accident has resulted in injury to, or destruction of property, to a limit of not less than five thousand dollars ($5,000) because of injury to or destruction of property of others in any one accident."
[6] Every driver or employer involved in an accident and required to report such accident by Vehicle Code section 16000 must establish proof of financial responsibility. (Veh. Code, § 16050.) "Proof may be established if the owner of the motor vehicle involved in the accident was a self-insurer...." (Veh. Code, § 16052.) A person may qualify as a self-insurer by obtaining a certificate of self-insurance from DMV. (Veh. Code, §§ 16052, 16053.)
Alternatively, proof may be established by filing with the DMV satisfactory evidence of an automobile liability policy, or a bond, affording coverage for permissive users in the minimum amount of $35,000. (Veh. Code, §§ 16054, 16056, subd. (a); Ins. Code, § 11580.1, subds. (a)(2), (b)(4).) Or proof may be established "[b]y depositing with [DMV] cash in the amount specified in Section 16056[, i.e., $35,000]." (Veh. Code, § 16054.2.)
[7] Prior to 1984, a self-insurer did not have to insure permissive users. (See, e.g., Western Pioneer Ins. Co. v. Estate of Taira (1982) 136 Cal. App.3d 174, 178-181 [185 Cal. Rptr. 887]; Interinsurance Exchange v. Spectrum Investment Corp., supra, at 1257.) Effective 1984, however, a certificate of self-insurance was considered to be a policy of automobile liability insurance, and thus, subject to the requirement of section 11580.1(b)(4) that coverage be afforded to a permissive user. (See Interinsurance Exchange v. Garcia (1984) 160 Cal. App.3d 419, 425, fn. 5 [206 Cal. Rptr. 621]; Interinsurance Exchange v. Spectrum Investment Corp., supra, 209 Cal. App.3d 1243, at p 1257.)
[8] At oral argument counsel for INA conceded that it was incumbent on INA to monitor the insured to ensure that the requisite "retained limit of self-insurance" was maintained during the policy period in order for the permissive user exclusion to remain valid.
[9] In pertinent part the "agreement re reformation" provided: "`This policy provides for a retained limit of self-insurance equal to or greater than the limits specified in subdivision (a) of Section 16056 of the Vehicle Code, in the following particulars: "`"[Budget] represents that it has cash on deposit with the Department of Motor Vehicles in the manner specified in Vehicle Code Section 16054.2 and in the amount specified in Vehicle Code Section 16056, subdivision (a) and that [Budget] intends to maintain such compliance with financial responsibility during the policy period.'" | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2313956/ | 779 F.Supp. 823 (1991)
WARD TRANSFORMER COMPANY, INC., Plaintiff,
v.
DISTRIGAS OF MASSACHUSETTS CORPORATION, Defendant.
No. 90-543-CIV-5-H.
United States District Court, E.D. North Carolina, Raleigh Division.
September 24, 1991.
Mark Elias Fogel, Raleigh, N.C., for Ward Transformer Co., Inc.
Charles A. Edwards, John R. Rittelmeyer, Graham & James, Raleigh, N.C., for Distrigas of Massachusetts Corp.
ORDER
MALCOLM J. HOWARD, District Judge.
This matter is before the court on the plaintiff's and defendant's cross-motions for summary judgment. The Honorable Charles K. McCotter, Jr., United States Magistrate Judge, entered a Memorandum and Recommendation on August 20, 1991, recommending that the motions be denied. More than ten (10) days have elapsed since the filing of the Memorandum and Recommendation, and no objections have been filed. Accordingly, this matter is ripe for adjudication.
In the absence of written objections to the Magistrate Judge's Memorandum and Recommendation, this court hereby finds *824 that the conclusions of the Magistrate Judge are, in all respects, in accordance with the law and should be approved. Therefore, the court adopts the Memorandum of the Magistrate Judge as its own.
Accordingly, it is hereby ordered that the defendant's motion for summary judgment and the plaintiff's motion for summary judgment are DENIED. The court further ORDERS that the trial of this matter be scheduled for this court's October 21, 1991, term in Raleigh and the pretrial conference be scheduled prior thereto by the clerk of this court.
MEMORANDUM AND RECOMMENDATION
Filed August 20, 1991
CHARLES J. McCOTTER, Jr., United States Magistrate Judge.
This matter has been referred to the court for memorandum and recommendation on the plaintiff's, Ward Transformer Company, Inc. (WARD) and defendant's, Distrigas of Massachusetts Corporation (DOMAC) cross-motions for summary judgment pursuant to F.R.Civ.P. 56. DOMAC filed their motion for summary judgment on March 6, 1991. On March 26, 1991 WARD filed a motion for summary judgment in opposition. On April 12, 1991 DOMAC filed a response opposing WARD's motion for summary judgment and a reply to WARD's response to DOMAC's motion for summary judgment.
PROPOSED CONCLUSIONS OF LAW
This case arises out of a contract dispute. DOMAC ordered a surplus transformer from WARD in March of 1990, at a price of $65,790.00. DOMAC first moved the court for summary judgment asserting that a prepayment demand made by WARD constituted a repudiation of the contract, and that DOMAC performed its obligations under the contract including DOMAC's obligations for acceptance of delivery.
WARD asserted in their cross-motion for summary judgment that WARD made a demand for adequate assurances to DOMAC and that DOMAC failed to give those assurances. WARD further claims that DOMAC's failure to adequately assure WARD of DOMAC's performance under the contract amounted to repudiation of the contract, thus entitling WARD to treat the contract as breached.
This action was originally filed in North Carolina state court and was removed by DOMAC to Federal Court pursuant to 28 U.S.C. § 1441(a) based on diversity. We first decide which state law is applicable. A federal court sitting in diversity must apply the choice of law rules of the forum state. Klaxon Co. v. Stentor Elect. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941). The State of North Carolina has adopted the Uniform Commercial Code (U.C.C.), including its choice of law provision, § 1-105. That statute provides, in relevant part:
[W]hen a transaction bears a reasonable relation to this State and also to another state or nation the parties may agree that the law either of this State or of such other state or nation shall govern their rights and duties. Failing such agreement this chapter applies to transactions bearing an appropriate relation to this State.
N.C.G.S. § 25-1-105. Both North Carolina (where WARD is a resident and where the transformer was held) and Massachusetts (where the transformer was to be used by DOMAC, and where DOMAC's job site was) have a reasonable relation to this transaction. Therefore, the parties may elect to have either the laws of North Carolina or Massachusetts apply to this case. Since the parties agreed that "This purchase order as accepted shall be governed by the laws of the Commonwealth of Massachusetts," Massachusetts law shall apply. (DOMAC Purchase Order, Defendant's Memorandum Exhibit 2 at p. 8.) Massachusetts has also adopted the U.C.C. Mass.Gen.Laws ch. 106, § 1-101. [Hereinafter cited as U.C.C.].
WARD contends that the contract called for delivery of the transformer no later than 8 weeks after the March 14, 1990 sale date (approximately May 14, 1990). In addition, DOMAC was to observe testing of *825 the transformer at WARD's plant in Raleigh, North Carolina prior to shipment. Immediately after the successful testing of the transformer, DOMAC began discussing the possibility of cancelling the contract. WARD kept pressing DOMAC about its plans for delivery but did not receive an adequate response. WARD then sent a letter to DOMAC announcing a cancellation charge in the range of $20,000 to $25,000 in lieu of contract performance. WARD did not receive any decision from DOMAC, so on April 27, 1990, WARD sent DOMAC an invoice for the entire purchase price of the transformer. At this time WARD felt that they had met all the terms under the DOMAC purchase order and that DOMAC was not intending to take delivery or make a cancellation charge.
WARD further contends that on May 4, 1990, DOMAC acknowledged that they would be willing to take delivery during the first week in July. WARD acknowledged that it would store the transformer for DOMAC until the first week in July, however, it required that DOMAC pay WARD the amount due on the enclosed invoice within 30 days of the invoice date. WARD later requested a 50% payment. On May 17, 1990 DOMAC declined the request for full or half payment. On May 29, 1990 DOMAC requested immediate delivery of the goods, without any payment, which WARD refused. In response, DOMAC cancelled the contract.
Summary judgment is appropriate whenever the pleadings, affidavits and other materials show that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. In other words, summary judgment is appropriate when there is no genuine dispute as to the material facts of the case; that is, when the evidence is such that no reasonable jury could return a verdict for the nonmoving party.
Duke v. Uniroyal, Inc., 719 F.Supp. 428, 430 (E.D.N.C.1989) (citations omitted).
DOMAC argues that WARD's demand for prepayment constituted a repudiation of the contract. Therefore, DOMAC's June 19, 1990 letter cancelling the contract was an appropriate action that cannot give rise to any contractual liability. WARD, however, argues that their demand for payment was a demand for adequate assurances from DOMAC.
Under the U.C.C., either party is entitled to demand adequate assurance that performance will be forthcoming when due, if there are "reasonable grounds" for insecurity with respect to the other party's performance. U.C.C. § 2-609(1). Reasonableness of grounds for insecurity and the adequacy of any assurance offered are to be determined in accordance with commercial standards. U.C.C. § 2-609(2). Courts test the grounds or assurances in a transaction between merchants by the standard of what is customary in the trade, a fact question. U.C.C. § 2-609(2).
WARD alleges several material facts that would allow a reasonable trier of fact to find for WARD on the issue of having had reasonable grounds for insecurity. First, WARD argues that it is the custom in the transformer industry that once the tests were passed, the transformer was ready to be delivered. However, immediately after the successful testing, DOMAC began discussing the possibility of cancelling the contract. WARD argues that they kept pressing DOMAC for its plans to take delivery of the subject transformer. When no such date could be determined WARD sent a letter to DOMAC announcing a cancellation charge in the range of $20,000.00 to $25,000 in lieu of contract performance. By April 27, 1990 WARD had not received a shipping date from DOMAC or a decision to pay the contract cancellation fee. These facts alleged by WARD and supported by affidavits and exhibits would allow a reasonable trier of fact to determine that WARD had reasonable grounds for insecurity.
WARD must then demand assurances from DOMAC that performance under the contract will be forthcoming at the proper time. The U.C.C. provides that [w]hen reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance ... U.C.C. *826 § 2-609(1). DOMAC argues that WARD never made an appropriate demand for adequate assurances.
DOMAC argues that WARD's invoice dated April 27, 1990, which was accompanied by a letter dated May 4, 1991, in which WARD demands the full payment for the transformer within 30 days, is not a demand for adequate assurance. However, a written demand is not always necessary to invoke Section 2-609 of the U.C.C. "While we have a substantial question as to whether [plaintiff] made a written demand as required by statute, in keeping with our concept that the U.C.C. should be liberally construed, we do not desire to rest our decision of a formalistic approach." Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co., 532 F.2d 572, 581 (7th Cir.1976); See also, Diskmakers, Inc. v. DeWitt Equipment Corp., 555 F.2d 1177, 1179 (3rd Cir.1977); AMF, Inc. v. McDonald's Corp., 536 F.2d 1167, 1171 (7th Cir.1976). In addition, the May 4, 1990 letter to DOMAC may be construed as a demand for adequate assurance. WARD's May 4, 1990 letter reads in pertinent part as follows:
This letter serves to acknowledge our telephone conversation of 5/4/90. We understand that Distrigas will take delivery of the equipment purchased by Distrigas on your P.O. # 9015-203 during the first week of July. Your purchase contract states that the delivery of the transformer must take place six to eight weeks after receipt of your purchase order.
We are more than happy to store the unit at our facilities until the first week of July; Distrigas must, however, pay Ward Transformer the amount due on the enclosed invoice # 46096 within 30 days of the invoice date.
Your signed acknowledgment of this letter is expected. Pleas find enclosed a Copy of your invoice dated 4/27/90.
A reasonable trier of fact could determine that WARD's letter of May 4, 1990 or the April 27 invoice were appropriate demands for reasonable assurances, or that a written demand was not necessary in this case. Therefore, summary judgment is not appropriate on this issue.
DOMAC contends that even if WARD had reasonable grounds for insecurity and that WARD made an appropriate demand for adequate assurances, DOMAC met that demand for adequate assurances by offering to pay 15% of the purchase price to WARD to defer any expense in refurbishing and testing the transformer. Upon receipt of demand, the recipient must furnish adequate assurances of due performance within a reasonable time not exceeding thirty days. U.C.C. § 2-609(4).
However, WARD had first requested full payment due to the fact that the delivery date was beyond that contemplated by the original purchase order. WARD later reduced this to a demand for 50% of the purchase price. What constitutes adequate assurances depends on the facts of the case. Kaiser-Francis Oil Co. v. Producer's Gas Co., 870 F.2d 563, 568 (10th Cir. 1989). WARD has raised material facts that would enable a reasonable trier of fact to find that they did not receive an adequate assurance from DOMAC during a reasonable commercial time.
Until assurance is received, the aggrieved party is entitled to suspend any performance for which he has not already received the agreed return. U.C.C. § 2-609(1). At the end of the "reasonable time" period, failure to supply assurance is a repudiation of the contract. U.C.C. § 2-609(4). If DOMAC did not meet WARD's demand for adequate assurances, WARD is entitled to treat the contract as repudiated by DOMAC. U.C.C. § 2-609(4).
Because WARD has raised sufficient material facts for a trier of fact to determine that WARD had a reasonable ground for insecurity, made an appropriate demand for assurances, and did not receive those assurances, it is possible for a rational trier of fact to find that WARD did not repudiate the contract as DOMAC claims. Therefore, DOMAC's motion for summary judgment should be DENIED. In addition, because DOMAC disputes the material facts that would allow a rational trier of fact to determine that WARD had a reasonable *827 ground for insecurity, made an appropriate demand for assurances, and did not receive those assurances, WARD's motion for summary judgment should also be DENIED.
CONCLUSION
DOMAC's motion for summary judgment and WARD's cross-motion for summary judgment should be DENIED.
THIS MEMORANDUM AND RECOMMENDATION ENTERED this day, the 19th of August, 1991. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2327483/ | 119 F.Supp.2d 1185 (2000)
UNITED STATES of America,
v.
Efrain VILLANUEVA-GAXIOLA.
No. 00-20043-01-JWL.
United States District Court, D. Kansas.
September 26, 2000.
*1186 Charles D. Dedmon, Office of Federal Public Defender, Kansas City, KS, for Efrain Villanueva-Gaxiola.
Leon J. Patton, Office of U.S. Attorney, Kansas City, KS, for U.S.
MEMORANDUM AND ORDER
LUNGSTRUM, District Judge.
On September 25, 2000, the court held a sentencing hearing in this case. At the *1187 hearing, the court sustained defendant's second objection to the Presentence Investigation Report (PSIR), relating to the applicability of a 16 level enhancement to defendant's base offense level under United States Sentencing Guideline (USSG) § 2L1.2(b)(1)(A). The court here sets out its reasons for that ruling.
The author of the PSIR applied a 16 level enhancement to defendant's base offense level pursuant to USSG § 2L1.2(b)(1)(A). That guideline states that if a defendant was previously deported after a criminal conviction (whether or not the deportation was in response to the conviction) for an aggravated felony, as defined at 8 U.S.C. § 1101(a)(43), increase by 16 levels. The PSIR contends that defendant's past conviction for unlawful possession of a short-barreled shotgun on August 25, 1992 (PSIR ¶ 28) was an aggravated felony justifying the increase. The court disagrees.
The government has argued that defendant's conviction for possession of a dangerous weapon meets the definition of an "aggravated felony" because it falls under three subsections of 8 U.S.C. § 1101(a)(43), any one of which would support the enhancement. The court will address the three proposed subsections in turn.
1. 8 U.S.C. § 1101(a)(43)(E)(ii)
Subsection (E)(ii) defines "aggravated felony" as "an offense described in section 922(g) ... (5) of title 18, United States Code." 18 U.S.C. § 922(g)(5) states that it is unlawful for an illegal alien "to ship or transport in interstate or foreign commerce, or possess in or affecting commerce, any firearm or ammunition." Defendant maintains that he was convicted of "possession of a dangerous weapon," not "possession of a firearm by an alien."
The Tenth Circuit has held that, in determining whether a prior state crime is an "aggravated felony," a district court "must only look to the statutory definition, not the underlying circumstances of the crime, to make this determination." United States v. Reyes-Castro, 13 F.3d 377, 379 (10th Cir.1993). See also, United States v. Frias-Trujillo, 9 F.3d 875 (10th Cir.1993); United States v. Manuel-Mediano, 182 F.3d 934, 1999 WL 317514 (10th Cir. May 20, 1999). While the Tenth Circuit has not compared a state weapon-possessions statute to the federal illegal alien in possession of a firearm statute, the Ninth Circuit recently has. The court is persuaded by the Ninth Circuit's analysis, and agrees that defendant's weapon-possession conviction cannot be the basis of the 16 level enhancement to his sentence.
In United States v. Sandoval-Barajas, 206 F.3d 853 (9th Cir.2000), the defendant had been previously convicted in Washington state court of "possession of a firearm by a non-citizen." Based on this conviction, the district court increased defendant's sentence by 16 levels, finding that the conviction met the definition of an "aggravated felony" found in 8 U.S.C. (A)(43)(E)(ii): an offense described in 18 U.S.C. § 922(g)(5). The issue addressed by the Circuit was whether the defendant's state law crime was "described in" 18 U.S.C. § 922(g)(5).
Addressing the language of 8 U.S.C. § 1101(a)(43), the Ninth Circuit acknowledged that, "[o]nce Congress decided to allow state (and foreign) offenses to serve as predicates for the `aggravated felony' enhancement, as a practical matter it had to use some looser standard such as `described in' rather than the more precise standard of `defined in,' if it wanted more than a negligible number of state offenses to count as aggravated felonies." Id. at 855. As the Supreme Court noted in Taylor v. United States, 495 U.S. 575, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990), most ancient felonies, such as burglary, are "defined in" different ways. Thus, the Ninth Circuit concluded that "[t]he elements need not be identical ... but the conduct has to be substantially similar enough so that the federal crime may be fairly said to be `described in' the state statute, and the conduct criminalized by the state law must *1188 be included within the conduct criminalized by the federal law." Sandoval-Barajas at 857. The Circuit noted that the Ninth Circuit (like the Tenth Circuit) only looks at the conduct encompassed by the state statute, not the defendant's actual conduct, when determining if a past crime is an "aggravated felony."
Then the Circuit compared the two statutes:
Here is the crime defined by the federal statute, 18 U.S.C. § 922(g)(5):
(g) It shall be unlawful for any person ....
(5) who, being an alien, is illegally or unlawfully in the United States;
....
to ... possess in or affecting commerce, any firearm or ammunition.
The Washington state statute under which [defendant] had been convicted defines the crime in these words:
9.41.170. Alien's license to carry firearmsException
(1) It is a class C felony for any person who is not a citizen of the United States to carry or possess any firearm, without first having obtained an alien firearm license from the director of licensing.
The Circuit concluded that the federal crime was not "described in" the state statute:
[T]he federal crime of possession of a gun by an illegal alien does not describe the crime defined by the Washington statute. One obvious difference is that the federal statute requires an interstate or foreign commerce element, but the Washington statute does not.... Another difference is that the federal statute applies only to some aliens, those who are "illegally or unlawfully in the United States," but the Washington statute applies to all aliens, "any person who is not a citizen."
Because of these differences, the Circuit held that, even if factually defendant's conduct could have fallen under both statutes, the statutes themselves were not similar enough for the court to conclude that the federal crime was "described in" the state statute. The Circuit, therefore, remanded the case for resentencing.
When the court compares the California statute under which defendant here was convicted, the court similarly does not find that the federal crime of possession of a gun by an illegal alien is "described in" the state statute. California Penal Code § 12020 states:
"Any person in this state who does any of the following is punishable by imprisonment: (1) ... possesses ... any short-barreled shotgun."
Like the Washington statute in Sandoval-Barajas, this California statute lacks the interstate or foreign commerce element found in the federal statute. More importantly, the federal statute only applies to illegal aliens, while the California statute applies to "any person" it is not even limited to all "aliens" as the Washington statute was. The court simply does not find these statutes similar enough to conclude that defendant's California state conviction described in ¶ 28 was an "aggravated felony" justifying a 16 level enhancement pursuant to USSG § 2L1.2(b)(1)(A).
2. 8 U.S.C. § 1101(a)(43)(E)(iii)
The government has also argued that defendant's conviction under California Penal Code § 12020 is an aggravated felony as defined in subsection (E)(iii) because it is an offense described in § 5861 of the Internal Revenue Code (IRC). The court's research has uncovered no Tenth Circuit case applying 8 U.S.C. § 1101(a)(43)(E)(iii) in the context of USSG § 2L1.2(b)(1)(A). Applying the Sandoval-Barajas analysis discussed above, however, the court rejects the contention that the state conviction for possession of a dangerous weapon was described in 26 U.S.C. § 5861.
The Internal Revenue Code statute, 26 U.S.C. § 5861, states:
It shall be unlawful for any person
*1189 (d) to receive or possess a firearm which is not registered to him in the National Firearms Registration and Transfer Record.
Again, the essence of the state and federal statutes are not the same. 26 U.S.C. § 5861 hinges on the fact that a person has not registered his or her short-barreled shotgun, not on the fact that a person simply possesses a short-barreled shotgun. One could thus comply with the IRC statute by registering his or her short-barreled shotgun with the National Firearms Registration and Transfer Record, but could still violate California Penal Code § 12020 by simply possessing the short-barreled shotgun (whether registered or not). The Ninth Circuit has stated that "Where conduct could comply with the relevant federal statute yet violate the state statute, the federal crime cannot be deemed to be `described in' the state statute."
3. 8 U.S.C. § 1101(a)(43)(F)
Finally, the government has raised the argument that defendant's California conviction meets the definition of "aggravated felony" found in subsection (F). Subsection (F) defines "aggravated felony" as a crime of violence (as defined in 18 U.S.C. § 16) for which the term of imprisonment is at least one year. 18 U.S.C. § 16(b) defines a crime of violence as "any other offense that is a felony and that, by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense."[1]
The court has not found, and the parties have not cited, any Tenth Circuit case holding that possession of short-barreled shotgun is a crime of violence. The government cites a Ninth Circuit case which holds that possession of an unregistered firearm is a crime of violence within the meaning of the Guideline permitting a defendant to be sentenced as a career offender. See United States v. Dunn, 946 F.2d 615 (9th Cir.1991). The court finds, however, that a recent Ninth Circuit opinion is more factually on point to the instant sentencing issue. In United States v. Villanueva-Garcia, 2000 WL 420637 (9th Cir. April 18, 2000) the court analyzed whether a violation of a California statute with a penalty provision which reads the same as the penalty provision of the California statute under which defendant was convicted could be a "crime of violence" pursuant to 18 U.S.C. § 16(b).[2] The penalty provision in both statutes provides that punishment shall be by "imprisonment in the county jail not exceeding one year or in the state prison." Under the following persuasive analysis, the Ninth Circuit concluded that the violation of a statute containing this language could not be a "crime of violence:"
California law defines a misdemeanor as a crime "punishable, at the discretion of the court, by imprisonment ... other than imprisonment in the state prison." Cal.Penal Code § 17(b)(1). Thus, [the penalty provision] gives the judge discretion to sentence either as a misdemeanor or a felony. We look only to the statute and not the circumstances underlying the particular conviction. We consider the entire range of conduct encompassed by the statute. Since [the penalty provision] encompasses misdemeanor offenses, it does not qualify as a felony under 18 U.S.C. § 16(b).
Under the above analysis, the government's argument that defendant's conviction under California Penal Code § 12020 is a conviction for a "crime of violence," as defined in 18 U.S.C. § 16(b), must fail. As previously stated, the Tenth Circuit, like the Ninth Circuit, follows the categorical approach that in determining whether a *1190 prior state crime is an aggravated felony, the court "must only look to the statutory definition, not the underlying circumstances." Reyes-Castro, 13 F.3d at 379. Because California Penal Code § 12020 encompasses misdemeanor offenses, it cannot meet the definition of "crime of violence" in 18 U.S.C. § 16(b).
Finding that defendant's previous California conviction for possession of a dangerous weapon is not described in any of the federal statutes suggested by the government, the court agrees with defendant that his base offense level should be increased by only 4 levels, not 16 levels, pursuant to USSG § 2L1.2(b)(1)(B). USSG § 2L1.2(b)(1)(B) states that if the defendant was previously deported after a criminal conviction for "any other felony," meaning a non-aggravated felony, the court must increase defendant's base offense level by 4 levels. As a side note, the court points out that the definition of "felony" for this purpose is different from the definition of "felony" for 18 U.S.C. § 16(b) purposes. While the Commentary to Guideline 2L1.2 does not define "aggravated felony," pointing instead to the numerous subsections of 8 U.S.C. § 1101(a)(43) for a definition, the commentary does define "felony." Application Note 1 states that "`felony offense' means any federal, state, or local offense punishable by imprisonment for a term exceeding one year." As defendant was ultimately sentenced to 16 months in state prison for his violation of California Penal Code § 12020, the definition of "felony" is met for the purpose of increasing defendant's base offense level 4 points under USSG § 2L1.2(b)(1)(B). Since defendant's base offense level should have only been increased by 4 points, rather than 16 points, defendant's total offense level becomes 10.[3]
IT IS SO ORDERED.
NOTES
[1] 18 U.S.C. § 16(a) defines crime of violence as "an offense that has as an element the use, attempted use, or threatened use of physical force against the person or property of another."
[2] The statute involved in Villanueva-Garcia was Cal.Penal Code § 246.3: Discharge of a Firearm with Gross Negligence. The statute involved here is Cal.Penal Code § 12020: Unlawful Carrying and Possession of Weapons.
[3] Because defendant's offense level is now calculated at less than 16, defendant does not receive the one level decrease to his offense level pursuant to USSG § 3E1.1(b). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2575495/ | 98 F.Supp.2d 757 (2000)
Russell A. JARMAN, individually and on behalf of all others similarly situated, Plaintiffs,
v.
UNITED INDUSTRIES CORP., UIC Holdings, LLC; Thomas H. Lee Equity Fund IV, LP; Thomas H. Lee Equity Advisors, IV, LLC; Thomas H. Lee Capital, LLC; Thomas H. Lee Company; David C. Pratt; Richard A. Bender; William P. Johnson; and Daniel J. Johnston, Defendants.
No. Civ.A.4:99CV40LN.
United States District Court, S.D. Mississippi, Eastern Division.
March 17, 2000.
*758 L. Gray Geddie, Jr., Mason A. Goldsmith, Jr., Ogletree, Deakins, Nash, Smoak & Stewart, Greenville, SC, Bert Miano, S. Andrew Scharfenberg, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Birmingham, AL, William S. Rutchow, Ogletree, Deakins, Nash, Smoak & Stewart, Nashville, TN, G. Richard Baker, Campbell & Baker, LLP, Birmingham, AL, Thomas F. Campbell, Campbell & Baker, LLP, Birmingham, AL, for Russell A. Jarman.
Steven D. Orlansky, Rebecca L. Wiggs, Watkins & Eager, Jackson, MS, Dudley Von Holt, J. William Newbold, Carl L. Rowley, Robert J. Wagner, Thompson Coburn, LLP, St. Louis, MO, for United Industries Corporation, UIC Holdings, LLC, Thomas H. Lee Equity Fund IV, LP, Thomas H. Lee Equity Advisors, IV, LLC, Thomas H. Lee Capital, LLC, Thomas H. Lee Company, David C. Pratt, Richard A. Bender, William P. Johnson, Daniel J. Johnston.
MEMORANDUM OPINION AND ORDER
TOM S. LEE, District Judge.
Defendants United Industries Corp., UIC Holdings, LLC, Thomas H. Lee Equity Fund IV, LP, Thomas H. Lee Equity Advisors, IV, LLC, Thomas H. Lee Capital, LLC, Thomas H. Lee Company, David C. Pratt, Richard A. Bender, William P. Johnson and Daniel J. Johnston have moved, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss for failure to state a claim upon which relief can be granted. Plaintiff Russell A. Jarman has responded in opposition to the motion and the court, having considered the parties' memoranda of authorities, concludes that defendants' motion is well taken and should be granted.
A review of the complaint in this cause discloses that on March 15, 1999, Russell A. Jarman purchased a package of Terminate, a termiticide manufactured and distributed by United Industries. He took it home and "applied the product some time thereafter." Eight days later, on March 23, purporting to act on his own behalf and all others similarly situated, he filed a twenty-one page, seven-count complaint against United and officers and alleged owners, based on allegations that statements contained in United's advertisements, package labeling and promotional materials overstate Terminate's ability to help prevent and/or eliminate termite infestation. In his complaint, which sets forth claims for common law fraud, negligent misrepresentation, unjust enrichment, breach of warranty, violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq., and civil conspiracy, Jarman alleges that he would not have purchased Terminate "but for" United's false statements regarding the product's efficacy, and specifically United's having "suppressed the fact that Terminate is not as effective as represented, and that it cannot be used in place of professional chemical barrier treatments or without proper inspections of the structure the buyer is seeking to protect." Plaintiff has demanded recovery of the $50 purchase price he paid for the product along with unspecified damages for the fewer than eight days he claims that his home was left unprotected from termites.
United, joined by the other defendants, moved to dismiss plaintiff's complaint, primarily on the basis that plaintiff's claims are all preempted entirely by the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), 7 U.S.C. § 136 et seq., and also because plaintiff has failed to allege that he has sustained damage as a result of his eight-day (or less) use of the product. United further has asserted additional independent grounds for the dismissal of *759 each of plaintiff's causes of action. However, without reaching these other grounds, the court concludes that plaintiff's complaint should be dismissed, for in the court's opinion, plaintiff's claims are preempted by FIFRA, and furthermore, plaintiff has alleged no cognizable injury resulting from his purchase and use of Terminate.[1]
FIFRA is a comprehensive federal statute that regulates the use, sale and labeling of pesticides and herbicides. Under FIFRA, all pesticides and herbicides sold or distributed in the United States must be registered with the Administrator of the Environmental Protection Agency (EPA), which is vested with primary regulatory authority by FIFRA. Andrus v. AgrEvo USA Co., 178 F.3d 395, 398 (5th Cir.1999); see also Bingham v. Terminix Int'l Co., 850 F.Supp. 516, 518 (S.D.Miss. 1994). To secure product registration, the manufacturer must submit to the EPA a "statement of all claims to be made for" the product as well as directions for its use, its ingredients and its adverse effects. Andrus, 178 F.3d at 398. Upon receipt of the requisite information, the EPA undertakes a comprehensive review of the materials and data and will register the product if it determines that
(A) its composition is such as to warrant the proposed claims for it;
(B) its labeling and other material required to be submitted comply with the requirements of [FIFRA];
(C) it will perform intended function without unreasonable effects on the environment; and
(D) when used in accordance with widespread and commonly-recognized practice it will not generally cause unreasonable adverse effects on the environment.
7 U.S.C. § 136a(c)(5). The EPA's review culminates both in product registration, and in approval of the label under which the product is to be marketed. Andrus, 178 F.3d at 398.
With respect to labeling, regulations promulgated by the EPA address the design and content of the label, see 40 C.F.R. § 156.10 and further require that the final printed labeling must be submitted before registration. Labeling is approved by the Administrator only if it is determined that the label is, "adequate to protect the public from fraud and from personal injury and to prevent unreasonable adverse effects on the environment." 40 C.F.R. § 156.10(i)(1)(i).
Bingham, 850 F.Supp. at 518-18. Once a product is registered and its label approved, the manufacturer generally may not modify the labeling approved by the EPA without EPA approval. 7 U.S.C. 136j(a)(2)(A); Hawkins v. Leslie's Pool Mart, Inc., 184 F.3d 244, 251 (3d. Cir. 1999) ("FIFRA disallows any changes to an EPA-approved label unless the EPA approves the change.").
FIFRA preempts state laws through an express preemption provision, which prohibits states from "impos[ing] or continu[ing] in effect any requirement for labeling or packaging in addition to or different from this required under [FIFRA]."[2] This provision not only prevents *760 states from enacting legislation which conflicts with FIFRA's labeling requirements, but preempts, as well, state common law actions based on an alleged failure to warn or to convey information about a product through its EPA-approved label. Andrus, 178 F.3d at 398 (citing MacDonald v. Monsanto Co., 27 F.3d 1021, 1024 (5th Cir.1994)) (holding that there is "`no doubt but that the FIFRA term "any requirements" makes no distinction between positive enactments and the common law.'"). Thus, as has been widely held, state common-law claims based on alleged inadequacies in a pesticide's label are preempted by FIFRA since such claims have the effect of imposing requirements in addition to or different from those required by FIFRA. As recently confirmed by the Fifth Circuit in Andrus, this includes claims relating to product efficacy.
The plaintiff in Andrus alleged that WHIP 360, the herbicide product he had purchased to combat a particular type of weed in his rice fields, failed to perform as specified on the product label; the product both proved ineffective in controlling the weeds and caused damage to his rice crop. The plaintiff's claims that WHIP 360 "failed to perform as specified pursuant to the label" and that he "relied to his detriment on the specifications pursuant to the Whip 360 product label" were found to be preempted, along with his breach of implied warranty claim, because these claims were "obviously based on the contents of the WHIP 360 label, and any adverse judgment would have the `undeniable practical effect' of imposing additional labeling standards on [the defendant]." Id. at 399.[3]
Likewise, in the case at bar, plaintiff's various state law claims are all ultimately grounded on his contention that United should have included additional and/or different information on its product label. Plaintiff nevertheless submits that for two reasons, none of his claims are preempted. First, he contends that even though FIFRA's prohibition on state labeling "requirements" can be said to preempt some state law claims, it cannot be construed to preempt damage claims regarding the efficacy of Terminate since the EPA was not required to, and did not review and/or evaluate United's efficacy claims about this product. He further points out that he has not limited his allegations regarding United's statements and omissions concerning Terminate's efficacy to the Terminate label; rather, according to plaintiff, he has also alleged deceptive marketing of Terminate, charging that United, in addition to information appearing on the Terminate label, has made numerous misrepresentations about the effectiveness of Terminate in advertisements directed to the public. He reasons that these claims are not based on the Terminate label, but on United's representations independent of the Terminate label, and thus do not fall within FIFRA's preemptive reach. Notwithstanding plaintiff's arguments to the contrary, the court is of *761 the opinion that all of plaintiff's state law claims are preempted by FIFRA.
Regarding efficacy-based claims in general, plaintiff inexplicably argues, in the face of Andrus, that "[t]he Fifth Circuit has never directly addressed whether efficacy claims survive FIFRA preemption." That plainly is not correct, for the very issue the court addressed in Andrus was "whether [FIFRA] preempts state law claims alleging that a herbicide failed to perform as specified on the product label. ..." Perhaps what plaintiff actually meant to say was that the Fifth Circuit has never directly addressed whether efficacy claims survive FIFRA preemption where EPA regulations do not require EPA review of product efficacy claims and the proof shows that the EPA did not, in fact, review the particular product to determine whether it met the manufacturer's efficacy claims. The court assumes this is what he meant, since this is what plaintiff contends occurred with respect to Terminate. Were that what actually did occur here, this court would indeed be called upon to address the issue without guidance from the Fifth Circuit, or from any other court, for that is an issue which no court has heretofore confronted, at least so far as the court has been able to discern. However, that is not the scenario presented in this case.
It is true, as plaintiff points out, the Administrator of the EPA, "[i]n considering an application for the registration of a pesticide, ... may waive data requirements pertaining to efficacy, in which event the Administrator may register the pesticide without determining if the pesticide's composition is such as to warrant the proposed claims of efficacy." 7 U.S.C. § 136a(c)(5). Contrary to plaintiff's urging, it does not appear that the Administrator waived such requirements with respect to Terminate, or that it registered Terminate without evaluating United's efficacy claims.
EPA regulations state, at 40 C.F.R. § 158.640(b)(1), that
[t]he Agency has waived all requirements to submit efficacy data unless the pesticide bears a claim to control pest microorganisms that pose a threat to human health and whose presence cannot readily be observed by the user including, but not limited to, microorganisms infectious to man in any area of the inanimate environment, or a claim to control vertebrates (such as rodents, birds, bats, canid, and skunks) that may directly or indirectly transmit diseases to humans.
While plaintiff has apparently assumed that this abdication of authority over pesticide efficacy claims was intended by the EPA to extend to termiticides, his assumption is belied by the EPA Label Review Manual (2d Edition), which expressly includes products intended for the control of "termites" as among those "products requiring submission of efficacy data."[4] Moreover, rebuttal evidence submitted by defendants discloses that United did submit efficacy data on Terminate to the EPA which reviewed and approved it.[5] Accordingly, *762 plaintiff's argument that no federal efficacy review was required or conducted with respect to Terminate is simply incorrect.
Furthermore, based on the allegations of his complaint, it is evident that plaintiff's further argument by which he attempts to save these claims from FIFRA preemption lacks merit. Plaintiff contends that even if his label-based claims are preempted by FIFRA, his complaint is not concerned solely with the Terminate label, but alleges as well that United, in addition to the statements on the label, made false efficacy statements or omissions of statements in its advertisements of Terminate. These claims, plaintiff submits, are not covered by FIFRA preemption.
In the court's opinion, had plaintiff alleged that United made off-label statements about Terminate that were substantially different from those contained on the label, then, as evidenced by the Fifth Circuit's opinion in Andrus, the question whether such claims were preempted by FIFRA would at least be debatable. In addressing a similar assertion by the Andrus plaintiff that his claims were saved from preemption because they were not based solely on the label but were also based on assurances by a manufacturer's representative that the product at issue would be effective to handle his weed problem, the court made it clear that a plaintiff "cannot automatically avoid FIFRA preemption simply because [he] challenge[s] alleged misrepresentations that were made separately from the label." Andrus, 178 F.3d at 400 (quoting Kuiper v. American Cyanamid Co., 131 F.3d 656, 662 (7th Cir. 1997)). The court went on to explain that
"[a]ccording to the Fourth Circuit, when advertising or promotional materials merely repeat information or language contained in the label, claims directed at the advertising necessarily challenge the label itself and are therefore preempted[,]" [while] [t]he Ninth and Eleventh Circuits go farther, holding that "any claims that point-of-sale signs, consumer notices, or other informational materials failed adequately to warn the plaintiff necessarily challenge the adequacy of warnings provided on the product's labeling or packaging" and therefore are preempted. Under both approaches, FIFRA preempts state law claims when the challenged advertising merely reiterates the label. The difference is that the Fourth Circuit holds that FIFRA allows state law claims against advertisements that "substantially differ" from the label, while the Ninth and Eleventh Circuits hold that FIFRA preempts these claims as well.
Id. at 400 (emphasis added) (quoting Kuiper, 131 F.3d at 662); Lowe v. Sporicidin Int'l, 47 F.3d 124, 129-30 (4th Cir.1995); Taylor AG Indus. v. Pure-Gro, 54 F.3d 555, 561 (9th Cir.1995); Papas v. Upjohn Co., 985 F.2d 516, 518 (11th Cir.1993) The Fifth Circuit in Andrus found it unnecessary to choose between these two approaches since the plaintiff, in response to the defendant's summary judgment motion, had failed to introduce any evidence that the defendant's representative had provided any advice not contained on the product label. Thus, the plaintiff "could not rely on [the representative's advice] to avoid preemption under FIFRA." Id.
In the case at bar, while plaintiff argues in his reply memorandum that he has "presented numerous misrepresentations made by defendants in addition to those made on the product label," he has not alleged or identified any representations by United concerning Terminate that are different in any respect from those contained on the Terminate label. On the contrary, plaintiff specifically alleges in his complaint that all of the Terminate label claims are "consistent with and substantially *763 the same as those uniformly distributed as part of the defendants [sic] wrongful marketing scheme," and that United "uniformly represented, through packaging and other advertising, that Terminate was an effective method of controlling termites, [et cetera]." Thus, regardless of whether the Fifth Circuit might ultimately select the Ninth and Eleventh Circuits' approach to off-label claims, or the Fourth Circuit's "substantially different" approach, since plaintiff herein, irrespective of what he may have argued in his brief, has not alleged that United made any representations about Terminate in its marketing of the product that were even slightly different from those contained on or omitted from the product label, then his off-label claims, like his label-based claims, are preempted.[6]
Plaintiff finally contends with respect to defendants' preemption argument that if FIFRA preemption applies in this case at all, it applies only to his claims of negligent misrepresentation and breach of implied warranties, and does not extend to any of his other claims, including in particular his fraud, unjust enrichment, breach of express warranty, RICO and conspiracy claims. As to all of plaintiff's state law claims, the court concludes otherwise.
It is true, as plaintiff urges, that "not all common law claims relating to herbicides [or pesticides] are preempted by FIFRA `[section] 136v(b) does not preempt common law that is unconcerned with herbicide [or pesticide] labeling, nor does it preempt those state laws concerned with herbicide [or pesticide] labeling that do not impose any requirement in addition to or different from the FIFRA requirements'." Andrus, 178 F.3d at 398 (quoting MacDonald, 27 F.3d at 1024). However, where the "`undeniable practical effect' of [the plaintiff's] recovering a large damage award on his claims that the manufacturer failed to meet state labeling requirements ... would be the imposition of additional labeling standards not mandated by FIFRA, ... such claims are preempted." Id. at 398-99 (citing MacDonald, 27 F.3d at 1025). In this case, regardless of the specific legal theories by which he presents these claims, it is manifest that plaintiff's fraud, unjust enrichment, breach of express warranty and conspiracy claims, based, as they are, on nothing more than plaintiff's allegation that United should have made additional and/or different representations regarding the efficacy of Terminate than those which appeared on its EPA-approved label, would, if successful, have the "undeniable practical effect" of imposing "additional labeling standards not mandated by FIFRA." That is, these claims, regardless of how characterized, all challenge the content of the label and are thus preempted. Cf. Etcheverry v. Tri-Ag Serv., Inc., 22 Cal.4th 316, 93 Cal.Rptr.2d 36, 48, 993 P.2d 366, 377 (2000) ("When a claim, however couched, boils down to an assertion that a pesticide's label failed to warn of the damage plaintiff allegedly suffered, the claim is preempted by FIFRA."). In light of the plaintiff's arguments, however, the court's conclusion as to some of these claims, namely the fraud and breach of express warranty claims, bears further elaboration.
Plaintiff argues that his intentional misrepresentation claim is not preempted, according to the reasoning of the Supreme Court in Cipollone v. Liggett Group, Inc., 505 U.S. 504, 525, 112 S.Ct. 2608, 2622, 120 L.Ed.2d 407 (1992), since his fraud claim is based not on a duty expressly prescribed by federal statute but rather on a more general duty not to deceive. However, in the court's opinion, Cipollone does not support plaintiff's conclusion. In Cipollone, which involved questions as to the preemptive scope of § 5(b) of the Public Health *764 Cigarette Smoking Act of 1969, the plaintiffs alleged two theories of fraudulent misrepresentation, one of which was held to be preempted and the other of which was not. Id. at 526, 112 S.Ct. at 2622. "First, [plaintiffs] allege[d] that [defendants], through their advertising, neutralized the effect of federally mandated warning labels." Id., 112 S.Ct. at 2622. The plurality found that this claim was ultimately predicated on "a state-law requirement that warnings be included in advertising and promotional materials," and was thus preempted. Id. at 527, 112 S.Ct. at 2623. Plaintiff's second theory, which "allege[d] intentional fraud and misrepresentation both by `false representation of a material fact [and by] conceal[ment of] a material fact,'" was held not to be preempted. Id. at 527, 112 S.Ct. at 2623. As "[t]he predicate of this claim [was] a state-law duty not to make false statements of material fact or to conceal such facts," the question was "whether such a duty is the sort of requirement or prohibition proscribed by § 5(b)." Id., 112 S.Ct. at 2623. The plurality explained that the preemptive reach of the Act was limited to state-law obligations "with respect to the advertising or promotion" of cigarettes. The plaintiffs' claims, insofar as they relied on a state-law duty to disclose facts through channels of communication other than advertising or promotion, were not preempted. Id. at 528, 112 S.Ct. at 2623. Moreover, those which did arise with respect to advertising and promotions "most notably claims based on allegedly false statements of material fact made in advertisements" were held not to be preempted, because those claims "were predicated not on a duty `based on smoking and health' but rather on a more general obligation the duty not to deceive." Id. at 528-29, 112 S.Ct. at 2623-24. Based on its review of the history and terms of the Act, the Court concluded that Congress had not intended to insulate cigarette manufacturers from longstanding rules governing fraud and had instead intended that "the phrase `relating to smoking and health' was to be construed narrowly, so as not to proscribe the regulation of deceptive advertising." Id. at 529, 112 S.Ct. at 2624.
The reasoning of the Cipollone plurality by which it arrived at the conclusion that the fraud claim was preempted carries no weight in the FIFRA context. It does not support plaintiff's assertion that his intentional misrepresentation claim is not preempted by FIFRA; if anything, it suggests a contrary conclusion. Plaintiff's claim in this case, though arguably more akin to the Cipollone plaintiffs' second theory of fraudulent misrepresentation, is subject to a preemption provision under FIFRA which differs in scope from that under consideration in Cipollone. Unlike § 5(b) of the Public Health Cigarette Smoking Act of 1969, which limits the preemptive force of that Act to state laws "based on smoking and health," FIFRA § 136v(b) broadly preempts "any requirements" that arise under state law, suggesting that Congress did intend, via FIFRA, to proscribe the regulation of deceptive advertising. Plaintiff's fraud claim is thus preempted. See Graves v. Metrex Research Corp., No. CV91 505710, 1995 WL 416292, at *6 (Conn.Super.Ct.1995) (holding plaintiff's misrepresentation claim preempted where the only alleged misrepresentations shown by plaintiff were those contained in their labeling or safety data sheet); Trinity Mountain Seed Co. v. MSD Agvet, 844 F.Supp. 597, 601 (D.Idaho 1994) (plaintiff's intentional fraud and misrepresentation claims, as they were based on statements made on the pesticide label, were preempted).
Plaintiff also argues, based on the following passage from the plurality opinion in Cipollone, that "a breach of warranty claim based upon a defendant's express warranty is not preempted":
A manufacturer's liability for breach of an express warranty derives from, and is measured by, the terms of that warranty. Accordingly, the "requirements" imposed by an express warranty claim are not "imposed under state law," but *765 rather imposed by the warrantor.... In short, a common law remedy for a contractual commitment voluntarily undertaken should not be regarded as a "requirement ... imposed under state law" [for purposes of preemption].
This language would support the plaintiff's position if the warranty alleged to have been made by United was in fact made voluntarily; however, the courts that have addressed this issue have concluded that express warranty claims based on statements on or from EPA-approved labels are not "voluntarily undertaken" by the manufacturer, but rather are imposed on the manufacturer by the EPA. See Welchert v. American Cyanamid, Inc., 59 F.3d 69, 72 (8th Cir.1995) (rejecting plaintiff's attempt to employ plurality's analysis in Cipollone to save their express warranty claim for preemption; since their express warranty claim was based entirely on statements included in the EPA-approved label, the Cipollone plurality's exception for "voluntarily undertaken" commitments could not be applied). Thus, although an express warranty claim likely would not be preempted if a plaintiff shows that the defendant conveyed information or made assurances that went beyond the product label, breach of express warranty claims are preempted to the extent they are based upon inadequacies in labeling or packaging. See id.; see also Taylor AG Indus. v. Pure-Gro, 54 F.3d 555, 562 (9th Cir.1995) (breach of express warranty claim held preempted to the extent it was "predicated upon a duty to provide information in addition to or different from that required by FIFRA"); Lowe v. Sporicidin Int'l, 47 F.3d 124, 129 (4th Cir.1995) ("[A]n express warranty claim based on EPA-approved labeling materials is preempted."); Worm v. American Cyanamid Co., 5 F.3d 744, 749 (4th Cir.1993) (breach of express warranty claims were preempted where representation at issue was not voluntary but was required and approved by the EPA); cf. Hughes v. Tennessee Seeds of Brownsville, Inc., 970 S.W.2d 471, 477 (Tenn.Ct.App.1997) (express warranty claims were not preempted where record contained evidence that defendants, through their agents, voluntarily made representations as to their product's suitability or effectiveness which representations exceeded or differed from the information contained in the product's label).
Based on the foregoing, the court concludes that plaintiff's state law claims are expressly preempted by FIFRA and thus are due to be dismissed. As defendants acknowledge, however, the same preemption analysis does not apply to plaintiff's RICO claims since FIFRA's preemption provision applies only to requirements imposed by the states and not requirements that derive from other federal statutes. Nevertheless, defendants maintain that since Congress has placed responsibility for pesticide labeling within the exclusive jurisdiction of the EPA, then RICO claims which impinge upon that field should similarly be held to be "preempted."
In People ex rel. Lungren v. Cotter & Co., 53 Cal.App.4th 1373, 1389-90, 62 Cal. Rptr.2d 368, 379-80 (1997), the court
Rather than creating a mere labeling statute, Congress in 1972, "transformed [FIFRA] into a comprehensive regulatory statute governing the use and sale of pesticides." One ... [case], [Taylor AG Indus. v. Pure-Gro, 54 F.3d 555, 560 (9th Cir.1995)], noted the "rigorous label-approval process under FIFRA." The court explained: "Although FIFRA does not prescribe the exact contents of labels, manufacturers are not free, ... to create pesticide labels in any manner they choose. Rather, ... the EPA approves each label only after a careful review of the product data and the draft label." (Ibid.)
... Not only does FIFRA define "label" expansively, but it represents a situation "in which the Federal Government has weighed the competing interests relevant to the particular requirement in question, reached an unambiguous *766 conclusion about how those competing considerations should be resolved in a particular case or set of cases, and implemented that conclusion via a specific mandate on manufacturers or producers" [Medtronic Inc. v. Lohr, (1996) 518 U.S. 470, 479, 116 S.Ct. 2240, 2258, 135 L.Ed.2d 700].
Id. (additional citations omitted). See also Welchert v. American Cyanamid, Inc., 59 F.3d at 70 (quoting Worm v. American Cyanamid Co., 5 F.3d 744, 747 (4th Cir. 1993)) ("`The objectives and purposes of FIFRA include the strengthening of federal standards, increasing EPA authority for their enforcement, and providing a comprehensive and uniform regulation of the labeling, sale, and use of pesticides.'"). Under FIFRA, responsibility for regulating allowable representations by pesticide manufacturers concerning their products, both as an initial matter via the complex review and approval process established by FIFRA and its associated regulations, and for enforcement purposes, is placed within the exclusive province of the EPA. See Cottrell, 191 F.3d at 1255 ("FIFRA is exclusively enforced by the [EPA]."); Papas v. Upjohn Co., 985 F.2d 516, 518 (11th Cir.) ("[I]t is for the EPA Administrator ... to determine whether labelling and packaging information is complete or inaccurate, and if so what label changes, if any, should be made"), cert. denied, 510 U.S. 913, 114 S.Ct. 300, 126 L.Ed.2d 248 (1993). Recognition of a RICO cause of action premised on allegations that a pesticide manufacturer intentionally misrepresented or failed to disclose pertinent information concerning its product would obviously undermine the regulatory structure constructed by Congress. This would not only be inimical to the express congressional goal of uniformity in the regulation and sale of pesticides, but to allow a plaintiff to use RICO in such fashion would be to condone direct circumvention of the EPA's regulatory authority for the accomplishment of an end otherwise prohibited by Congress. Under these circumstances, the court is of the view that plaintiff's putative RICO claim may properly be treated as "preempted", for lack of a better word. Cf. Danielsen v. Burnside-Ott Aviation Training Ctr., Inc., 941 F.2d 1220, 1228 (D.C.Cir.1991) ("[W]here it is plain that the [federal Service Contract Act] creates no private remedy[,] ... [t]o frame the action for such remedy in terms of RICO adds nothing"; "the statutory scheme for administrative relief set forth by Congress in the [SCA] leaves no room for a RICO action on the present allegations.")[7]; Cottrell, Ltd. v. Biotrol Int'l, Inc., 191 F.3d 1248, 1256 (10th Cir.1999) (refusing to limit scope of Lanham Act "absent circumstances that inherently require interpretation of FIFRA regulations and/or EPA approvals"); Braintree Labs., Inc. v. Nephro-Tech, Inc., No. 96-2459-JWL, 1997 WL 94237, at *6 (D.Kan. *767 Feb.26, 1997) (quoted in Cottrell) ("[C]laims that require direct interpretation and application of the FDCA are not properly recognized because such matters are more appropriately addressed by the FDA, especially in light of Congress's intention to repose in that body the task of enforcing the FDCA."). For this reason, the court is of the opinion that plaintiff's RICO claims should be dismissed.
In addition to their arguments for dismissal based on preemption, defendants assert that all counts of the complaint should be dismissed due to plaintiff's failure to allege that he suffered any damage as a proximate result of his use of Terminate. The court agrees.
Each cause of action set forth in plaintiff's complaint is based on allegations that Terminate was not effective as represented by defendants; yet nowhere in his complaint does plaintiff allege, other than conclusorily, either that the product actually failed to perform in the manner represented or that he suffered any damage as a consequence of his use of Terminate. Plaintiff does broadly allege that he "has incurred damages proximately caused by defendants' misconduct and concealment ... includ[ing] ... monies paid for TERMINATE and damages associated with leaving his property unprotected by a properly applied chemical treatment barrier." But as plaintiff readily acknowledges, he filed this suit a mere eight days after purchasing Terminate, despite the fact that the Terminate label specifically advised, under the heading, "IMPORTANT USAGE NOTES":
Results depend upon the species involved, weather, moisture, time of year, and may take 1-4 months or longer. Time required for effectiveness depends upon how quickly the terminates enter the stake and feed upon the bait.
While for reasons undisclosed by plaintiff in his complaint or otherwise, plaintiff may have suspected, within a mere week of his purchase of the Terminate, that the product ultimately would not perform as represented and that his property would become damaged as a consequence, there is no allegation in the complaint, nor any arguable factual support for an allegation that the product did not perform as represented within the short term of plaintiff's use or that damages were sustained by plaintiff.
In Briehl v. General Motors Corp., 172 F.3d 623 (8th Cir.1999), a case upon which defendants rely, the Eighth Circuit affirmed the district court's dismissal of the plaintiffs' complaint for the reason that the plaintiffs had not adequately pled damages. The opinion in Briehl reflects that the plaintiffs, owners of certain models of GM vehicles, had filed a class action complaint asserting claims for fraudulent misrepresentation, fraudulent concealment, breach of implied warranty, breach of express warranty and violation of state consumer protection statutes based on allegations that the braking systems in their subject vehicles, contrary to GM's representations as to their safety, were in fact unsafe and hence defective. The plaintiffs in Briehl, who admittedly had not sustained any actual personal injury or property damage due to having purchased vehicles with the allegedly defectively designed braking system, nevertheless claimed damages for lost resale value and overpayment for the vehicles at the time of purchase. Id. at 626. The court, though, held that because the plaintiffs had "failed to allege that any defect had actually manifested itself in their vehicles, [their] allegations of damages failed to meet the pleading requirements for defective products." Id. The mere allegation that the vehicles "suffer[ed] from defects" was an insufficient allegation of damages. The court specifically held that it was not enough that the product might be defective; the plaintiffs could not recover under any theory of recovery if the alleged defect did not manifest itself in the plaintiffs' vehicles. Id. In so concluding, the court identified numerous cases recognizing this basic principle, stating,
*768 Courts have been particularly vigilant in requiring allegations of injury or damages in products liability cases. Lee v. General Motors Corp., 950 F.Supp. 170, 171-74 (S.D.Miss.1996) (dismissing plaintiff's claims of inherently defective detachable fiberglass roofs for failure to plead sufficient damages); Yost v. General Motors Corp., 651 F.Supp. 656, 657-58 (D.N.J.1986) (holding that complaint alleging design defect "likely to cause" damage failed to state a claim); Feinstein v. Firestone Tire & Rubber Co., 535 F.Supp. 595, 603 (S.D.N.Y.1982) (holding no cause of action for defect which never manifests itself); Pfizer v. Farsian, 682 So.2d 405, 407 (Ala.1996) (holding that a plaintiff's belief that a product could fail in the future is not, without more, a legal injury sufficient to support plaintiff's claim); Khan v. Shiley Inc., 217 Cal.App.3d 848, 857, 266 Cal.Rptr. 106 (1990) (holding plaintiff with inherently defective heart valve failed to state a claim unless the valve malfunctioned); Zamora v. Shell Oil Co., 55 Cal.App.4th 204, 208, 63 Cal. Rptr.2d 762 (1997) (holding that, in the absence of a product malfunction, a plaintiff cannot establish that a defendant breached any duty owed); Verb v. Motorola, Inc., 284 Ill.App.3d 460, 220 Ill.Dec. 275, 672 N.E.2d 1287, 1295 (1996) (dismissing claims against cellular telephone manufacturers alleging potential safety defects because "plaintiffs' future personal injury and damages claims constitute conjecture and speculation"). As one court has stated, "[l]iability does not exist in a vacuum; there must be a showing of some damage...." Feinstein, 535 F.Supp. at 602. "It is well established that purchasers of an allegedly defective product have no legally recognizable claim where the alleged defect has not manifested itself in the product they own." Weaver v. Chrysler Corp., 172 F.R.D. 96, 99 (S.D.N.Y.1997); see also Martin v. Ford Motor Co., 914 F.Supp. 1449, 1453 (S.D.Tex.1996) (stating that where plaintiffs admittedly have not sustained any personal injuries relating to the seat belt restraint system in a vehicle, plaintiffs cannot succeed on any of their claims); Yost, 651 F.Supp. at 657-58 ("The basic problem in this case is that plaintiff Yost has not alleged that he has suffered any damages. He has not stated that the engine in his vehicle is defective in any way.").
Id. at 627-28. See also Willett v. Baxter Int'l, Inc., 929 F.2d 1094, 1097 (5th Cir. 1991) (precluding claims where the plaintiffs "provided no evidence that their particular valves ... were not performing as designed").
In his response memorandum, plaintiff completely fails to address the manifestation-of-defect line of cases upon which defendants rely, yet argues that even without having sustained actual property damage, he is still entitled to recover the loss of the benefit of his bargain on his purchase of Terminate, as well as the purchase price of the Terminate. The point of the cases cited, though, is that unless there is actually a failure in product performance, there is no basis at all for claiming that the plaintiff has been damaged in any way. Mere suspicion of a lost bargain, as defendant puts it, will not support an award of damages. See Briehl, 172 F.3d at 628 ("Where a product performs satisfactorily and never exhibits an alleged defect, no cause of action lies.").[8]
*769 For all of the foregoing reasons, the court concludes that defendants' motion to dismiss should be granted.
Accordingly, it is ordered that defendants' motion to dismiss is granted. It is further ordered that all remaining motions in this case are hereby denied as moot.
A separate judgment will be entered in accordance with Federal Rule of Civil Procedure 58.
NOTES
[1] The remaining defendants, United Industries Corp., UIC Holdings, LLC, Thomas J. Lee Equity Fund IV, LP, Thomas H. Lee Equity Advisors IV, LLC, Thomas H. Lee Capital, LLC, Thomas H. Lee Company, Richard A. Bender, William P. Johnson and Daniel J. Johnston also contended that plaintiff's complaint against them is due to be dismissed for the reason that this court lacks personal jurisdiction over them. Because the court concludes that plaintiff has failed to state a viable claim against them in any event, the court finds it unnecessary to reach this issue.
[2] The United States Supreme Court explained the concept of federal preemption in Louisiana Public Service Commission v. Federal Communications Commission, 476 U.S. 355, 368-69, 106 S.Ct. 1890, 1898, 90 L.Ed.2d 369 (1986), stating,
The Supremacy Clause of Art. VI of the Constitution provides Congress with the power to pre-empt state law. Pre-emption occurs when Congress, in enacting a federal statute, expresses a clear intent to preempt state law, when there is outright or actual conflict between federal and state law, where compliance with both state and federal law is in effect physically impossible, where there is implicit in federal law a barrier to state regulation, where Congress has legislated comprehensively, thus occupying an entire field of regulation and leaving no room for the States to supplement federal law, or where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress.
In the case of FIFRA, the preemption is express.
[3] See also Wright v. American Cyanamid Co., 599 N.W.2d 668, 673 (Iowa 1999) (where "plaintiff's claim was that defendant's application instructions were defective and that Pursuit did not work, and thus, control of tall waterhemp should not have appeared on the label, ... plaintiff's claim was a direct challenge to the information contained on the label and thus was preempted by FIFRA"); Wadlington v. Miles, Inc., 922 S.W.2d 520, 524-25 (Tenn.Ct.App.1995) (claims based on allegations that manufacturer of termiticide knew and yet failed to inform customers that its product did not provide effective protection against infestation and damage by termites constituted challenge to EPA-approved label and were preempted).
[4] The Manual states, in more detail, the following:
Efficacy Related Claims
Efficacy data (also referred to as product performance data) generally are only required to be submitted for products claiming to control pests which pose a threat to human health, either by direct action or through transmission of diseases (40 Code of Federal Regulations (CFR) 158).
...
Products Requiring Submission of Efficacy Data
...
2. Invertebrate Control Products intended for use in or on humans (or in or on pets for control of pests which attack humans) such as fleas, ticks, mosquitoes, and biting flies and in premises or in the environment to control pests of sanitary or public health significance such as the above as well as termites, wasps, scorpions, poisonous spiders, fire ants, cockroaches, centipedes and bedbugs.
(Emphasis added).
[5] Though defendants moved under Rule 12(b)(6) to dismiss for failure to state a claim, plaintiff submitted evidence in support of his claim that the EPA did not evaluate any efficacy data on Terminate. Defendants responded with their own proof, which shows that there was such review and approval. Because the court has considered the parties' evidence on this point, it would be appropriate to treat the motion as a summary judgment motion.
[6] The court would note, too, that plaintiff not only has not alleged any additional non-label misrepresentations by United but he has not "presented" or even so much as hinted at the nature of any representations that may have been different from those contained on the EPA-approved label for Terminate.
[7] While the district court in Danielsen concluded that "the SCA had `preempted' th[e] [particular] area of law to the exclusion of RICO," Danielsen, 941 F.2d at 1226, the appellate court had "a slight semantic difficulty with the use of the word `preemption' for the concepts [it was considering]," id. at 1227. The court stated,
We recognize that this use of "preempt" is not inconsistent with uses of that word in the labor law context. For example, in Amalgamated Association of Street, etc. v. Lockridge, 403 U.S. 274, 276, 91 S.Ct. 1909, 1913, 29 L.Ed.2d 473 (1971), the Supreme Court held that the NLRA "preempts state and federal court jurisdiction to remedy conduct that is arguably protected or prohibited by the Act." Most recent use of the word in federal jurisprudence, however, generally has been in the context of the "preemption doctrine," which recognizes that "certain matters are of such a national, as opposed to local, character that federal laws pre-empt or take precedence over state laws." Black's Law Dictionary 1060 (West 5th ed.1979) (emphasis added). As the present case raises a narrower question, our task is more accurately described as determining whether there is a statutory provision of an exclusive remedy rather than the preemption of an entire field. Therefore, while we agree with the District Court in its conclusion, we differ in terminology.
Id. at 1227.
[8] Of course, had plaintiff been desirous of recovering his purchase price, the Terminate product was accompanied by a limited warranty, which permitted him to return the product for a full refund if he was dissatisfied with the product "for any reason." Proof that the product did not perform satisfactorily was not a prerequisite to plaintiff's pursuing the refund offer but apparently the plaintiff elected to immediately pursue litigation rather than availing himself of this remedy. Indeed, the speed with which plaintiff managed to secure counsel, have a comprehensive class action complaint drafted and then file this lawsuit could lead one to question his motivation for purchasing the product in the first place. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2569064/ | 78 F.Supp.2d 1246 (2000)
Brenda J. KENNEDY, et al., Plaintiffs,
v.
ALABAMA STATE BOARD OF EDUCATION, et al., Defendants.
No. Civ.A. 89-T-196-N.
United States District Court, M.D. Alabama, Northern Division.
January 13, 2000.
*1247 James U. Blacksher, Birmingham, AL, Leslie Proll, Washington, DC, Joe R. Whatley, Jr., Whatley Drake, L.L.C., Birmingham, AL, Maureen Kane Berg, Whatley Drake LLC, Birmingham, AL, Andrew Clay Allen, Whatley Drake, L.L.C., Birmingham, AL, Terry G. Davis, Terry G. Davis, P.C., Montgomery, AL, Kenneth Lamar Thomas, John W. Adams, Jr., Thomas, Means, Gillis, Devlin, Robinson & Seay, PC, Montgomery, AL, Beverly P. Baker, Richard H. Walston, Michael K. K. Choy, Haskell, Slaughter, Young & Gallion, Birmingham, AL, Raymond P. Fitzpatrick, Jr., Fitzpatrick, Cooper & Clark, Birmingham, AL, John W. Adams, Jr., Thomas, Means, Gillis, Devlin, Robinson & Seay, PC, Montgomery, AL, Gregory Brent Stein, Angelique Miche Scheffler Cooper, Stein & Brewster, Mobile, AL, George Lamar Beck, Jr., David B. Byrne, P.C., Montgomery, AL, Henry H. Caddell, Vanessa Arnold Shoots, Thiry & Caddell, Mobile, AL, A. Wesley Pitters, A. Wesley Pitters, P.C., Montgomery, AL, for Plaintiffs.
J. Allen, Schreiber, Gerald Alan Templeton, Lloyd, Schreiber & Gray, P.C., Birmingham, AL, William D. Jones, III, Anthony A. Joseph, Johnston, Barton, Proctor & Powell, Birmingham, AL, William H. Pryor, Jr., Atty. General, Office of the Atty. General, Montgomery, AL, Renee Culverhouse, Office of General Counsel, State of Alabama, Montgomery, AL, Helen Kathryn Downs, Johnston, Barton, Proctor & Powell, Birmingham, AL, for Defendants.
ORDER
MYRON H. THOMPSON, District Judge.
This long-running lawsuit presents the question whether a defendant from whom *1248 front-pay relief is sought in civil-contempt proceedings and in claims brought under a number of civil rights statutes has a right to a jury trial. The court holds that such relief does not trigger the right.
This case involves class-action allegations of race and gender discrimination in the employment practices of Alabama's postsecondary educational system. This court has approved a consent decree resolving the race discrimination claims, see Shuford v. Alabama State Bd. of Educ., 846 F.Supp. 1511 (M.D.Ala.1994), and another consent decree resolving the gender discrimination claims, see Shuford v. Alabama State Bd. of Educ., 897 F.Supp. 1535 (M.D.Ala.1995). The defendants in this litigation are the Alabama State Board of Education and various institutions and officials in the postsecondary educational system.
I.
The events giving rise to the jury issue are as follows:
October 15, 1998: Humphrey L. Shuford (a named plaintiff who represented African-Americans in this litigation) and Brenda J. Kennedy (a member of the plaintiff class) filed a motion seeking to have the defendants in this litigation held in civil contempt and sanctioned for their alleged failure to comply with the 1994 consent decree resolving race discrimination claims.[1] As a part of the sanctions, Shuford and Kennedy sought injunctive relief, backpay, and front pay.
November 23, 1998: Kennedy was allowed to intervene and replace Shuford in this litigation as the representative of the African-American class. As result, the pending contempt motion is being sought by Kennedy only.
December 11, 1998: Kennedy filed a separate complaint-in-intervention seeking relief for herself personally. She based her complaint on Title VI of the Civil Rights Act of 1964, 42 U.S.C.A. §§ 2000d through 2000d-4; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.A. § 1981a, 2000e through 2000e-17; 42 U.S.C.A. § 1981; the fourteenth amendment to the United States Constitution as enforced through 42 U.S.C.A. § 1983; and the 1994 race-discrimination consent decree.[2] She properly invoked the jurisdiction of the court pursuant to 28 U.S.C.A. §§ 1443(a)(3), and 1343(a)(4). Kennedy seeks injunctive relief, backpay, and front pay.
December 28, 1998 and thereafter: The defendants filed demands for jury trial on both Kennedy's contempt motion and her complaint-in-intervention.
February 9 and June 16, 1999: Kennedy filed motions to strike the defendants' jury demand.
II.
The jury issue is presented to the court in the two motions to strike filed by Kennedy on February 9 and June 16, 1999. The defendants maintain that, because Kennedy seeks front pay in her contempt motion and in her individual complaint, they are entitled to a jury trial on the issues presented by the motion and the complaint. Kennedy responds in her motions *1249 that her front-pay request does not raise a jury issue.
A.
Before turning to whether the defendants are entitled to a jury trial on Kennedy's front-pay request, the court must first determine what this relief called front pay is. Front pay constitutes "prospective lost earnings" that a court may award, Goldstein v. Manhattan Industries, 758 F.2d 1435, 1448 (11th Cir.1985), to a complainant who has been illegally denied a position in order to make her whole. See Padilla v. Metro-North Commuter R.R., 92 F.3d 117, 125-26 (2nd Cir.1996) (stating that front-pay award "serves a necessary role in making victims of discrimination whole in cases where the factfinder can reasonably predict that the plaintiff has no reasonable prospect of obtaining comparable alternative employment"); Barbour v. Merrill, 48 F.3d 1270, 1279 (D.C.Cir.1995) (stating that purpose of front-pay award is "to make a victim of discrimination `whole' and to restore him or her to the economic position he or she would have occupied but for the unlawful conduct of his or her employer") (citation omitted); Carter v. Sedgwick County, Kan., 36 F.3d 952, 957 (10th Cir.1994) (stating that when fashioning a front-pay award, the district court should determine the amount "required to compensate a victim for the continuing future effects of the unlawful discrimination"); Smith v. World Insurance Co., 38 F.3d 1456, 1466 (8th Cir.1994) (district court may award equitable remedy of front pay under Age Discrimination in Employment Act of 1967, 29 U.S.C.A. §§ 621-634, to make party whole).
However, front pay is not a preferred remedy; it is only a substitute for instatement whereby a plaintiff is placed in the same or comparable position that she would have occupied in the absence of an unlawful act. See United Paperworkers Local 274 v. Champion International Corporation, 81 F.3d 798, 805 (8th Cir.1996) (stating that front pay is generally appropriate when reinstatement must be denied); Scarfo v. Cabletron Systems, Inc., 54 F.3d 931, 954 (1st Cir.1995) (district court has discretion to award front pay in Title VII case when reinstatement is "impracticable or impossible"); Hadley v. VAM PTS, 44 F.3d 372, 376 (5th Cir.1995) (equitable remedy of front pay appropriate when reinstatement not feasible).
Rather, instatement is the much preferred remedy because, with it, the complainant is literally made whole with the job illegally denied her, see Duke v. Uniroyal, Inc., 928 F.2d 1413, 1424 (4th Cir. 1991) (reinstatement is the "much preferred" remedy); Squires v. Bonser, 54 F.3d 168, 172 (3rd Cir.1995) ("Reinstatement advances the policy goals of makewhole relief and deterrence in a way which money damages cannot."); Woodhouse v. Magnolia Hospital, 92 F.3d 248, 258 (5th Cir.1996) (concluding that in light of recognition that reinstatement is preferred remedy, district court did not abuse its discretion in ordering plaintiff reinstated).
The general rule therefore is that a person should be instated to an illegally denied position, and front pay is an exception to that rule. And, thus, a court, in the exercise of its remedial discretion, may award front pay only if it can explain why instatement is not appropriate; if it cannot, then the complainant is entitled to instatement. A typical reason given for awarding front pay is where the position sought is no longer available or where personal antagonism between the parties has made instatement infeasible. See Goldstein v. Manhattan Industries, 758 F.2d 1435, 1449 (11th Cir.1985) ("Front pay may be particularly appropriate in lieu of reinstatement where discord and antagonism between the parties would render reinstatement ineffective as a make-whole remedy."); see also Reed v. A.W. Lawrence & Co., 95 F.3d 1170, 1182 (2nd Cir. 1996) (upholding front pay award where antagonism between the parties made reinstatement inappropriate); Starceski v. Westinghouse Electric Corporation, 54 F.3d 1089, 1103 (3rd Cir.1995) (affirming district court's denial of reinstatement, *1250 reasoning that reinstatement not feasible because of lack of available positions and animosity between the parties).
B.
It is with this understanding of front pay that the court now turns to the question of whether front pay is a type of relief to which a seventh-amendment right to a jury trial attaches. The court will first consider whether the right attaches under Title VI, Title VII, § 1981 and § 1983, and will then, in a separate and later discussion, consider if it attaches as part of the civil-contempt proceedings.
When the right to a jury trial is at issue, a court should first look to see if Congress has provided the right to a jury trial; if Congress has created a legal right, a jury trial is required. If Congress has not provided an express right, then the court must decide if a constitutionally protected right to a jury trial exists under the seventh amendment to the United States Constitution. See Tull v. United States, 481 U.S. 412, 417-27 & fn. 3, 107 S.Ct. 1831, 1835-1840 & fn. 3, 95 L.Ed.2d 365 (1987); Lorillard v. Pons, 434 U.S. 575, 585, 98 S.Ct. 866, 872, 55 L.Ed.2d 40 (1978); Waldrop v. Southern Company Services, Inc., 24 F.3d 152, 155 (11th Cir. 1994).
1.
The court will therefore consider whether Congress has provided the right to a jury trial for front-pay requests under any of the statutes relied upon by Kennedy. With regard to Title VI, § 1981, and § 1983, the answer is straightforward: none provides for jury trials at all.[3]
Title VII, in contrast, expressly provides for a jury trial; but the right to invoke trial by jury turns on the nature of the relief requested. Title VII provides that for violations a "complaining party may recover compensatory and punitive damages," 42 U.S.C.A. § 1981a(a)(1), and the court may "order such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement or hiring of employees, with or without back pay ..., or any other equitable relief as the court deems appropriate." 42 U.S.C.A. § 2000e-5(g). It further set caps on the amount of punitive damages and on the *1251 amount of compensatory damages allowable "for future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses." 42 U.S.C.A. § 1981a(b)(3). Title VII then provides that, "If a complaining party seeks compensatory or punitive damages under this section ... any party may demand a trial by jury." 42 U.S.C.A. § 1981a(c)(1). It further states, however, that "Compensatory damages awarded under this section shall not include backpay, interest on backpay, or any other type of relief authorized under section 706(g) of the Civil Rights Act of 1964 [42 U.S.C.A. § 2000e-5(g)]." 42 U.S.C.A. § 1981a(b)(2).
In McCue v. State of Kansas, Dept. of Human Resources, 165 F.3d 784 (1999), the Tenth Circuit Court of Appeals held that Title VII's authorization of jury trials did not extend to requests for front pay. The court examined the language of Title VII as follows:
"[42 U.S.C. § ] 2000e-5(g) allows the court to award `equitable relief as [it] deems appropriate,' for Title VII violations. Such relief explicitly includes back pay, although no mention is made of front pay. 42 U.S.C. § 1981a permits the award of punitive and compensatory damages as a matter of law for actions brought under Title VII. However, that same section expressly excludes from the allowed compensatory damages `backpay, interest on backpay, or any other type of relief authorized under [42 U.S.C. § 2000e-5(g) ].' Section 1981a does allow compensatory damages for, among other things, `future pecuniary loss.'
"Damages awarded under section 2000e-5(g) are equitable relief to be determined by the court, while damages awarded under section 1981a are legal damages that may be submitted to a jury. The District Court held that front pay is included in `future pecuniary loss,' and thus is a form of legal damages to be determined by the jury. The State contends this holding is in error, because front pay is an `other type of relief authorized under [section 2000e-5(g) ],' and thus expressly excluded from the available relief under section 1981a.
"The District Court held that Congress knew how to expressly exclude back pay from the available relief under section 1981a, and could have similarly expressly excluded front pay if that were its intent. Furthermore, by including `future pecuniary loss' among the available relief, section 1981a's plain language permits front pay. This analysis fails. "Although this issue has not been decided expressly, courts generally take it upon themselves to calculate front pay as an equitable remedy under section 2000e-5(g). See, e.g., Kim v. Nash Finch Co., 123 F.3d 1046, 1054 n. 3 (8th Cir.1997). As early as 1989, two years before Congress passed section 1981a, the Tenth Circuit had indicated that front pay was included among the equitable remedies available under section 2000e-5(g): `Reinstatement is one of the express affirmative actions authorized under 42 U.S.C. § 2000e-5(g) and certainly "front pay" would qualify as "other equitable relief" the court may grant if it deemed appropriate.' EEOC v. General Lines, Inc., 865 F.2d 1555, 1561 (10th Cir.1989). That such relief was available as `other equitable relief under section 2000e-5(g) in 1991when section 1981a was passed establishes that it would be included in the set of `any other type of relief authorized under [42 U.S.C. § 2000e-5(g) ].' Since courts had indicated prior to the passage of section 1981a that front pay was included among the equitable relief available under section 2000e-5(g), we hold Congress to have excluded such relief under section 1981a."
165 F.3d at 791-92.
McCue's reasoning has support in the legislative history of the Civil Rights Act of 1991 which amended Title VII to add § 1981a and allow for "compensatory damages." In announcing a compromise on the bill that was to become the 1991 Act, *1252 Senator Edward Kennedy stated that compensatory damages do not include front pay. 137 Cong.Rec. S15234 (daily ed. Oct. 25, 1991). The Sponsors' Interpretive Memorandum states that the category of compensatory damages "cannot include back pay, the interest thereon, front pay, or any other relief authorized under Title VII," a statement which conforms with 42 U.S.C.A. § 1981a(b)(2). 137 Cong.Rec. S15484 (daily ed. Oct. 30, 1991). Additionally, Representative Don Edwards declared in his section-by-section analysis that compensatory damages "cannot include remedies already available under Title VII, including back pay, the interest thereon, front pay, or any other relief authorized under Title VII." 137 Cong.Rec. H9527 (daily ed. Nov. 7, 1991).
The Equal Employment Opportunity Commission, the agency charged with enforcing Title VII, has taken the position that front pay does not fall within Title VII's definition of "compensatory damages." In an interpretive decision, the agency stated that "[f]rontpay is a type of relief authorized under Title VII and, therefore is excluded from the definition of compensatory damages." Office of Legal Counsel, EEOC, Enforcement Guidance: Compensatory and Punitive Damages Available Under § 102 of the Civil Rights Act of 1991, Decision No. 915.002 (July 14, 1992), available in, 1992 WL 189089, at *3 (internal quotation marks and citations omitted). Moreover, the decision states that "[p]ecuniary losses [as a category of compensatory damages under Title VII] include ... moving expenses, job search expenses, medical expenses, psychiatric expenses, physical therapy expenses, and other quantifiable out-of-pocket expenses that are incurred as a result of the discriminatory conduct." Id., 1992 WL 189089, at *4 (citations omitted). Notably, the list does not include front pay.
Finally, several courts of appeals, while not directly addressing whether a request for front pay triggers the right to a jury trial under Title VII's language, have weighed in on a number of related issues and reached conclusions consistent with the holding in McCue. In Williams v. Pharmacia, 137 F.3d 944 (7th Cir.1998), the defendant argued that awarding front pay is not within a district court judge's equitable powers under Title VII. The Seventh Circuit held that front pay "may be awarded where reinstatement is unavailable," and as such it "is the functional equivalent of reinstatement because it is a substitute remedy that affords the plaintiff the same benefit as the plaintiff would have received had she been reinstated." Id. at 951-52. "As the equivalent of reinstatement, front pay falls squarely within the statutory language authorizing `any other equitable relief.'" Id. at 952.
Other federal appellate courts have held that front pay is not subject to Title VII's compensatory damages' caps.[4] While these discussions are not on point, they are instructive because only compensatory damages are subject to the caps; other types of relief (other than punitive damages) *1253 are considered equitable remedies. In Gotthardt v. National Railroad Passenger Corporation, 191 F.3d 1148, 1154 (1999), the Ninth Circuit Court of Appeals concluded that Congress "understood that front pay was one of the preexisting `types of [equitable] relief authorized under section 706(g)' ... that would not fall" within the caps. Similarly, in Kramer v. Logan County School District No. R-1, 157 F.3d 620, 626 (1998), the Eighth Circuit Court of Appeals held that front pay is not subject to Title VII's caps because "front pay is not so much a monetary award for the salary that the employee would have received but for the discrimination, but rather the monetary equivalent of reinstatement, to be given in situations where reinstatement is impracticable or impossible." And similarly, the D.C. Circuit Court of Appeals stated in Martini v. Federal National Mortgage Association, 178 F.3d 1336, 1348-49 (D.C.Cir.1999), that, because "we have regarded frontpay as an equitable remedy available under" § 2000e-5(g) both before and after the 1991 Act, § 1981(b)(2) "excludes frontpay from the range of compensatory damages subject to the damages cap."[5]Cf. Hadley v. VAM PTS, 44 F.3d 372, 376 (5th Cir. 1995) ("[f]ront pay is an equitable remedy that can be employed when reinstatement is infeasible") (citation omitted); Lussier v. Runyon, 50 F.3d 1103, 1107-08 (1st Cir.) (front pay is an available equitable remedy under Title VII), cert. denied, 516 U.S. 815, 116 S.Ct. 69, 133 L.Ed.2d 30 (1995).
For the above reasons, this court agrees with the reasoning in McCue, and similarly holds that Title VII does not provide for jury trial of front-pay requests.
2.
Because neither Title VI, Title VII, § 1981, nor § 1983 expressly provides for jury trial on front-pay requests, the court will turn to whether the defendants are entitled to a jury trial under the seventh amendment.
The seventh amendment preserves the right to a jury trial "[i]n suits at common law, where the value in controversy shall exceed twenty dollars." U.S. Const. amend. VII. "The amendment extends the right to a jury trial to all suits where legal rights are involved, whether at common law or arising under federal legislation." Waldrop v. Southern Company Services, Inc., 24 F.3d 152, 156 (11th Cir. 1994). "Thus, the seventh amendment applies to actions enforcing statutory rights and requires a jury trial on demand whenever the statute creates legal rights and remedies that are `enforceable in an action for damages in the ordinary courts of law.'" Id. (quoting Curtis v. Loether, 415 U.S. 189, 194, 94 S.Ct. 1005, 1008, 39 L.Ed.2d 260 (1974)). "Compensatory damages are the classic form of legal relief." Id. (citations omitted). "In contrast, the right to a jury trial does not extend to cases in which only equitable rights are at stake." Id. (citations omitted).
To resolve the issue of the availability of a jury trial under the seventh amendment when the statute does not provide the answer on its face, the Supreme Court has established a two-pronged approach. See Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565, 110 S.Ct. 1339, 1344, 108 L.Ed.2d 519 (1990). First, the nature of the statutory action is compared to 18th-century *1254 actions brought in the English courts prior to the merger of the courts of law and equity; and, second, the remedy sought is examined to determine whether it is legal or equitable in nature. See id. The second inquiry is the "more important" of the two. Id.
As to the first prong, although there were no discrimination actions at common law, the remedies sought by Kennedy here appear comparable to actions brought before courts of law in 18th-century England. See Waldrop, 24 F.3d at 156 (backpay and reinstatement remedies sought for discharge in violation of § 504 of Rehabilitation Act were comparable to actions brought before courts of law in 18th-century England) (citing Timothy H. Heinsz, The Assault on the Employment at Will Doctrine: Management Considerations, 48 Mo.L.Rev. 855, 858-62 (1983)); see also Hill v. Winn-Dixie Stores, Inc., 934 F.2d 1518, 1524 (11th Cir.1991) (actions pursuant to the Jury System Improvements Act of 1978, 28 U.S.C.A. § 1875, which protects an employee from discharge or intimidation by her employer on account of her jury service, is analogous to (1) an action in tort to redress discrimination and (2) an action for breach of an employment contract); cf. Curtis, 415 U.S. at 196 n. 110, 94 S.Ct. at 1009 n. 110 ("An action to redress racial discrimination may also be likened to an action for defamation or intentional infliction of mental distress.").
Nonetheless, this does not mean that a jury trial is constitutionally required in all actions relying on statutes relied upon by Kennedy. "Rather, actions seeking only equitable relief are unaffected by the availability of a jury trial for plaintiffs who seek damage remedies." Waldrop, 24 F.3d at 157. Thus, the essential issue is whether Kennedy's request for front pay constitutes legal or equitable relief.
Generally, "an action for money damages was `the traditional form of relief offered in the courts of law.'" Terry, 494 U.S. at 570, 110 S.Ct. at 1347 (quoting Curtis, 415 U.S. at 196, 94 S.Ct. at 1009). "However, it does not necessarily follow that all awards of monetary damages constitute legal relief." Waldrop, 24 F.3d at 157. Over the years, the Supreme Court has outlined three possible exceptions to the general rule that monetary remedies are legal claims: (1) restitutionary awards, see, e.g., Terry, 494 U.S. at 570, 110 S.Ct. at 1348; Tull v. United States, 481 U.S. 412, 424, 107 S.Ct. 1831, 1839, 95 L.Ed.2d 365 (1987); Curtis, 415 U.S. at 196 n. 11, 94 S.Ct. at 1009 n. 11; (2) money awards incidental to equitable relief, see, e.g., Tull 481 U.S. at 424, 107 S.Ct. at 1839; Curtis, 415 U.S. at 197, 94 S.Ct. at 1010; and (3) discretionary money awards. See, e.g., Albemarle Paper Co. v. Moody, 422 U.S. 405, 442-43, 95 S.Ct. 2362, 2384, 45 L.Ed.2d 280 (1975) (Rehnquist, J., concurring); Curtis, 415 U.S. at 197, 94 S.Ct. at 1010. See also Robert L. Strayer, II, Project, Asserting the Seventh Amendment: An Argument for the Right to a Jury when Only Back Pay Is Sought under the Americans with Disabilities Act, 52 Vand.L.Rev. 795 (1999).
FIRST EXCEPTION: "Restitution is generally defined as an equitable remedy designed to cure unjust enrichment of the defendant absent consideration of the plaintiff's losses." Waldrop, 24 F.3d at 158. "For example, if the defendant misappropriates money held in trust for the plaintiff and invests the money in corporate stock, the defendant will be held liable to make restitution of the stock even though the stock's value might far exceed the money taken from the plaintiff." Id. "Additionally, restitution can mean restoration in kind of a specific thing." Id. "For example, if a defendant fraudulently purchases an automobile by conveying a check supported by insufficient funds, the plaintiff may rescind the deal and recover the vehicle." Id. It is apparent that front pay does not fall within this exception. Cf. Terry, 494 U.S. at 571, 110 S.Ct. at 1348 (backpay under the Labor Management Relations Act, 29 U.S.C.A. § 185, is not restitutionary).
*1255 SECOND EXCEPTION: In NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893 (1937), the Supreme Court stated that the seventh amendment does not apply to "cases where recovery of money damages is an incident to equitable relief." 301 U.S. at 47, 57 S.Ct. at 629. However, one commentator has noted that two circumstances raise serious questions as to whether the incident-to-equitable-relief exception is still constitutionally valid. See Robert L. Strayer, II, Project, Asserting the Seventh Amendment: An Argument for the Right to a Jury when Only Back Pay Is Sought under the Americans with Disabilities Act, 52 Vand.L.Rev. 795, 814-817 (1999). First, the Supreme Court has, since the NLRB case, consistently rejected the exception. See Curtis, 415 U.S. at 197, 94 S.Ct. at 1010 (because Title VIII of the Civil Rights Act of 1968, 42 U.S.C.A. § 3612, contains a plain authorization of actual and punitive damages, such are not incidental to the equitable relief provided under the statute); Tull, 481 U.S. at 425, 107 S.Ct. at 1839 (since civil penalties could have been sought independent of equitable relief, the right to a jury trial cannot be precluded by characterizing the legal claim as incidental to equitable relief); Terry, 494 U.S. at 571, 110 S.Ct. at 1339 ("incidental" exception does not apply because plaintiff had only money damages available to him as relief); Wooddell v. International Brotherhood of Electrical Workers, Local 71, 502 U.S. 93, 97-98, 112 S.Ct. 494, 497, 116 L.Ed.2d 419 (1991) (held that plaintiff entitled to a jury trial because lost wages, requested to pay for jobs to which a union failed to refer him, were not incidental to reinstatement). Second, the Supreme Court has made clear that a jury trial is required where both equitable and legal claims exist in the same lawsuit. See Dairy Queen, Inc. v. Wood, 369 U.S. 469, 470-73, 82 S.Ct. 894, 896-97, 8 L.Ed.2d 44 (1962) (held that intent behind modern Federal Rules of Civil Procedure not to infringe on right to a jury trial leads to conclusion that no rule exists whereby characterizing a legal issue as incidental to an equitable one will deprive one of a right to a jury trial); Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506-08, 79 S.Ct. 948, 954-55 (1959) (decision on equitable claim would not preclude a jury trial on issues common to both equitable and legal claims).
In any event, this court need not resolve whether the incident-to-equitable-relief exception is still valid, for, if it is, it does not apply to front pay in the context presented in this litigation. Front pay is given in lieu of equitable relief (instatement), and not incidental to it.
THIRD EXCEPTION: Front pay falls within the third exception, however. When the trial court has discretion to award monetary relief, the award is generally recognized as an equitable remedy, see Henry L. McClintock, Handbook of the Principles of Equity § 23, at 49 (2d ed. 1948) ("Equitable relief cannot be demanded ... but is granted in the discretion of the court"), to which no seventh-amendment right attaches. The exception was most recently articulated by Justice Rehnquist in his concurring opinion in Albemarle Paper Co. v. Moody, 422 U.S. 405, 95 S.Ct. 2362, 45 L.Ed.2d 280 (1975), which held that courts had the power to award backpay under Title VII to correct the wrongs of discrimination. In his concurrence, Justice Rehnquist noted how defining equitable actions based on whether a court has broad discretion effected the right to a jury trial. 422 U.S. at 443, 95 S.Ct at 2384. According to him, when a court has discretion as to whether to award back pay, this discretion causes the claim to be classified as equitable, and the right to a jury trial does not attach; but, if the Supreme Court were to require that district courts award backpay as a matter of course upon a finding of discrimination, backpay would lose its equitable character and would be subject to a right to a jury trial. In other words, the more restricted the discretion to award backpay, the more backpay begins to resemble a legal rather than an equitable claim for which parties *1256 could demand a jury trial. Despite his concern about a potential seventh-amendment conflict if awards of backpay followed as a matter of course, Justice Rehnquist concurred in the decision because he thought the Court's opinion still granted broad latitude to district courts in Title VII cases to decide whether to provide back pay relief.
Here, front pay is clearly not awarded as a matter of course. To the contrary, as was explained above, front pay is the exception to the rule which requires instatement as a matter of course, and is appropriate only if the court articulates sound equitable reasons for not following that rule. In this sense, front pay draws upon those classic broad principles of fairness that a trial judge would rely upon in granting or denying equitable relief in general. See McCue, 165 F.3d at 792 ("Relegating the duty of determining front pay relief to the trial judge is reasonable....").[6]
C.
The court will now turn to the issue of whether the defendants are entitled to a jury because Kennedy seeks front pay in her civil-contempt motion. Because there are no statutory provisions entitling a party to a jury trial in civil-contempt proceedings, or, at least, the parties have not pointed the court to any such provisions, the court must determine whether the right exists under the seventh amendment, and, to do this, the court must consider two factors articulated previously: first, the court must compare the action to the customary manner of trying such a cause before the merger of law and equity; and, second, it must examine the remedy sought to assess whether it is legal or equitable in nature. See Tull, 481 U.S. at 417, 107 S.Ct. at 1835.
From an historical perspective, the authority to order relief as part of a contempt proceeding has been within the chancellor's authority since the days of Richard III, see United States v. United Mine Workers, 330 U.S. at 331 n. 4, 67 S.Ct. at 714 n. 4 (Black, J., concurring and dissenting). From the moment the federal courts were created, this function was considered to be inherently within their power. See Robinson, ex parte, 19 Wall. (86 U.S.) 505, 509-10, 22 L.Ed. 205, 207 (1873). The judiciary's use of the contempt power "has been uniformly held to be necessary to the protection of the court from insults and oppression while in the ordinary exercise of its duty, and to enable it to enforce its judgments and orders necessary to the due administration of law and the protection of the rights of citizens." Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 450, 31 S.Ct. 492, 501, 55 L.Ed. 797 (1911) (quoting Bessette v. W.B. Conkey Co., 194 U.S. 324, 24 S.Ct. 665, 48 L.Ed. 997 (1904)).
In Gompers, the Supreme Court rejected the notion that contempt proceedings needed to be referred to a jury. The Court stated "that the courts are clothed with this power, and must be authorized to exercise it without referring the issues of fact or law to another tribunal or to a jury in the same tribunal." 221 U.S. at 450, 31 S.Ct. at 501. The Court then offered the following explanation for its rejection of a role for the jury in civil contempt proceedings:
"For, if there were no such authority in the first instance, there would be no *1257 power to enforce its orders if they were disregarded in such independent investigation. Without authority to act properly and independently the courts could not administer public justice or enforce the rights of private litigants."
Id. In reaching this holding in Gompers, the Supreme Court relied upon its earlier analysis in Bessette v. W.B. Conkey Co., 194 U.S. 324, 24 S.Ct. 665, 48 L.Ed. 997 (1904), which had, in turn, looked, in part, to the status of English common law prior to this country's formation. See also Cheff v. Schnackenberg, 384 U.S. 373, 377, 86 S.Ct. 1523, 1524, 16 L.Ed.2d 629 (1966) (jury trials not required in civil-contempt proceedings); Shillitani v. United States, 384 U.S. 364, 370, 86 S.Ct. 1531, 1535, 16 L.Ed.2d 622 (1966) (same).
This court will therefore next examine front pay, as sought in a civil-contempt proceeding, to assess whether it is legal or equitable in nature. A civil contempt sanction, regardless of form, is remedial in nature, and courts have traditionally imposed such sanctions without a jury. See McComb v. Jacksonville Paper Co., 336 U.S. 187, 191, 69 S.Ct. 497, 499, 93 L.Ed. 599 (1949). The sanction issued upon a finding of civil contempt is a "judicial sanction," United Mine Workers, 330 U.S. at 303, 67 S.Ct. at 701, that is considered part of a court's inherent authority to enforce its judicial orders and decrees. See Cook v. Ochsner Foundation Hospital, 559 F.2d 270, 272 (5th Cir.1977). "The measure of the court's power in civil contempt proceedings is determined by the requirements of full remedial relief." See McComb, 336 U.S. at 193, 69 S.Ct. at 500. As the Supreme Court noted in Hutto v. Finney, 437 U.S. 678, 691, 98 S.Ct. 2565, 2573-74, 57 L.Ed.2d 522 (1978), financial penalties in a civil contempt proceeding are ancillary to a federal court's power to impose injunctive relief, and are often more effective than ordering incarceration.
Thus, properly considered, an order of compensation after a finding of contempt is the imposition of a fine made payable to the complainant, and calculated on the basis of the complainant's actual loss. See United Mine Workers, 330 U.S. at 304, 67 S.Ct. at 701; Norman Bridge Drug Co. v. Banner, 529 F.2d 822, 827 (5th Cir.1976). The order of such a fine is a necessary extension of a court's power to grant whatever relief is necessary to effect compliance with its decrees. Thus, for example, in McComb v. Jacksonville Paper Co., 336 U.S. at 193-95, 69 S.Ct. at 500-01, the Supreme Court upheld a district court's order requiring a contumacious defendant, which had ignored prior court orders requiring compliance with the Fair Labor Standards Act, to make back wage payments to injured employees in order to purge itself of contempt. Indeed, the caselaw is replete with instances wherein appellate or district courts have ordered compensatory relief as part of their contempt authority. See, e.g., Badgley v. Santacroce, 800 F.2d 33, 39 (2nd Cir.1986) (in which the appellate court directed the district court to assess compensatory damages of not less than $5000 for each person admitted to county correctional facility should defendants again violate consent decree); Graves v. Kemsco Group, Inc., 676 F.Supp. 1417, 1420-21 (N.D.Ind.1988) (exercising inherent authority of United States District Court to hold party in contempt and to award compensatory damages in excess of $100,000), aff'd, 864 F.2d 754 (Fed.Cir.1988).
The front-pay relief sought by Kennedy does not warrant a procedure different from that afforded when other sanctions a court might impose are sought. When and if imposed, it would simply be a sanction made payable to the complainant to secure compliance. A jury trial is no more necessary when front pay is sought than when any other sanction is sought. Indeed, if any thing, a jury trial is less appropriate with regard to a front-pay issue than on other remedial issues. As stated, the decision whether to award front pay draws upon classic equitable notions because front pay is appropriate only if the court can articulate sound equitable reasons for varying from the general rule that makewhole relief includes instatement.
*1258 It is true that the court's power to hold an individual in contempt has been limited in the criminal context by such cases as Bloom v. Illinois, 391 U.S. 194, 88 S.Ct. 1477, 20 L.Ed.2d 522 (1968), Frank v. United States, 395 U.S. 147, 89 S.Ct. 1503, 23 L.Ed.2d 162 (1969), Baldwin v. New York, 399 U.S. 66, 90 S.Ct. 1886, 26 L.Ed.2d 437 (1970), Taylor v. Hayes, 418 U.S. 488, 94 S.Ct. 2697, 41 L.Ed.2d 897 (1974), and Codispoti v. Pennsylvania, 418 U.S. 506, 94 S.Ct. 2687, 41 L.Ed.2d 912 (1974). However, as the Supreme Court has acknowledged, these cases overruled past precedent and were a result of the Court's evolving sixth-amendment jurisprudence concerning the relationship between the potential maximum length of incarceration and criminal defendants' rights to a trial by jury. See Bloom, 391 U.S. at 195-200, 88 S.Ct. at 1478-81. In contrast, the seventh amendment, which requires that "In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved," suggests by its very terms that the historical rulings holding that contempt proceedings proceed without a jury should remain in full force.
A comparison of Shillitani v. U S, 384 U.S. 364, 86 S.Ct. 1531, 16 L.Ed.2d 622 (1966), and Bloom provides strong evidence of the Supreme Court's acknowledgment of the differences between the Court's treatment of criminal and civil contempt. In Shillitani, the Court concluded that as long as the proceeding was a civil contempt action, a defendant facing a possible term of incarceration of two years has no right to a jury trial, while in Bloom the Court held that defendants in criminal-contempt proceedings who are sentenced to a two year term of imprisonment possess the rights to a trial by jury.[7]
Finally, to the extent that Kennedy has claims also brought pursuant to Title VII, Congress has specifically preserved the court's ability to issue orders and relief in civil-contempt proceedings without a jury. See 42 U.S.C.A. § 2000h.[8] This provision was enacted as part of the original Civil Rights Act of 1964, and thus predated the Supreme Court's 1968 decision in Bloom.[9]*1259 The statute, by providing that parties charged with criminal contempt have a right to a jury trial, created an exception to what was at that time considered to be the general rule that contempt proceedings are solely within the province of the trial court. Congress made clear, however, that in enacting this provision it was carving out only a narrow exception to the general rule by explicitly stating that it was doing nothing to alter the court's authority in civil-contempt proceedings.[10]
D.
Finally, the defendants argue that Kennedy cannot now challenge their jury demand because, according to the defendants, Kennedy herself demanded a jury trial in this action and "the demand cannot be withdrawn without the consent of all parties."[11] Fed.R.Civ.P. 38(d). The defendants' argument is unsupportable.
First, the defendants err when they state that Kennedy demanded a jury trial in this action. The defendants filed a motion for the court to take judicial notice of Faulkner State Community College's compliance with the Shuford decrees' institutional goals.[12] In a response in opposition to the defendant's motion, Kennedy asserted that the court, "having placed this case on a jury docket," would violate the "plaintiffs' constitutional right to a jury trial" if it takes judicial notice of a disputable fact.[13] Contrary to the defendants' assertion, Kennedy's statement was not a written demand for a jury trial, and the court will not construe it as such. Furthermore, even if Kennedy's statement could be construed as a jury demand, the defendants would still not be entitled to a jury trial on the pending matters. The court, of its own initiative, may find that entitlement to a jury trial does not exist, see Fed.R.Civ.P. 39(a), and the court has so found here.
Accordingly, for the foregoing reasons, it is ORDERED that plaintiffs' motions to strike the defendants' jury demand, filed on February 9 and June 16, 1999 (Doc. nos. 825 and 868), are granted and the defendants' demands for jury trials in this litigation are struck.
NOTES
[1] Although plaintiff charges in both the contempt motion and the pretrial order that the defendants have violated both the 1994 and 1995 consent decrees (see Plaintiff's amended motion for order to show cause why defendants should not be held in contempt and sanctioned, filed April 12, 1999, at 2 (Doc. no. 856); Order on pretrial hearing filed October 26, 1999, at 5 (Doc. no. 913)), counsel for plaintiff subsequently made clear in a telephone conference call on January 5, 2000, that plaintiff is charging a violation of the 1994 race-discrimination consent decree only.
[2] Although Kennedy asserts in her individual complaint and the pretrial order that the defendants have violated both the 1994 and 1995 consent decrees (see Amended complaint of substituted plaintiff class representative, filed April 12, 1999, at 8 ¶ 16 (Doc. no. 855); Order on pretrial hearing, filed October 26, 1999, at 5 (Doc. no. 913)), counsel for Kennedy subsequently made clear in a telephone conference call on January 5, 2000, that she is charging a violation of the 1994 race-discrimination consent decree only.
[3] Title VI provides in part:
"No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance."
42 U.S.C.A. § 2000d. Section 1981 provides:
"(a) Statement of equal rights
All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.
"(b) `Make and enforce contracts' defined
For purposes of this section, the term `make and enforce contracts' includes the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.
"(c) Protection against impairment
The rights protected by this section are protected against impairment by nongovernmental discrimination and impairment under color of State law."
And § 1983 provides:
"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 an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia."
[4] Title VII contains the following caps on "compensatory damages":
"The sum of the amount of compensatory damages awarded under this section for future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses, and the amount of punitive damages awarded under this section, shall not exceed, for each complaining party
(A) in the case of a respondent who has more than 14 and fewer than 101 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $50,000;
(B) in the case of a respondent who has more than 100 and fewer than 201 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $100,000; and
(C) in the case of a respondent who has more than 200 and fewer than 501 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $200,000; and
(D) in the case of a respondent who has more than 500 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $300,00."
42 U.S.C.A. § 1981a(b)(3).
[5] The Sixth Circuit Court of Appeals is the only appellate court that has held that front pay falls within the compensatory damages cap of Title VII. In Hudson v. Reno, 130 F.3d 1193, 1203-04 (1997), cert. denied, ___ U.S. ___, 119 S.Ct. 64, 142 L.Ed.2d 50 (1998), the appellate court concluded that, according to the plain meaning of "future pecuniary losses" set forth in Webster's Dictionary, front pay must be a "future pecuniary loss" subject to the compensatory damages cap, and any other interpretation would render the terms meaningless. Moreover, the court noted that the Sixth Circuit has treated front pay as primarily a legal rather than equitable remedy. Id. at 1203.
After consideration of the arguments, this court rejects the holding of the Sixth Circuit and embraces the reasoning of the other federal courts of appeals.
[6] Although binding Eleventh Circuit precedent holds that backpay does not carry with it a right to a jury trial in lawsuits based on Title VII prior to the Civil Rights Act of 1991, § 1981 and § 1983, see Lynch v. Pan Am. World Airways, Inc., 475 F.2d 764, 765 (5th Cir.1973) (per curiam); Harkless v. Sweeny Independent School District, 427 F.2d at 323-24; see also Earlie v. Jacobs, 745 F.2d 342, 344 (5th Cir., 1984) (per curiam); Williams v. City of Montgomery, 742 F.2d 586, 590 (11th Cir.1984), cert. denied, 470 U.S. 1053, 105 S.Ct. 1756, 84 L.Ed.2d 819 (1985), the trend seems to be going the other way, with backpay treated more an a legal rather than a equitable relief. See Waldrop, 24 F.3d at 157 ("the recent trend of Supreme Court cases is to treat backpay awards as legal remedies"). This is because backpay, unlike front pay, has become a matter of course in awarding relief.
[7] In Bloom, the Supreme Court held that a defendant had a right to a jury trial if the maximum potential length of incarceration is such that the offense would be considered to be a "serious offense," rather than a petty offense. 391 U.S. at 210, 88 S.Ct. at 1486. Under current Supreme Court jurisprudence, an offense that carries with it a maximum prison term of six months or less is presumed to be a "petty offense" for which there is no right to a jury trial. See Blanton v. City of North Las Vegas, 489 U.S. 538, 542, 109 S.Ct. 1289, 1293, 103 L.Ed.2d 550 (1989). See generally Muniz v. Hoffman, 422 U.S. 454, 475-76, 95 S.Ct. 2178, 2190, 45 L.Ed.2d 319 (1975) (summarizing when a jury trial is mandated for a criminal contempt proceeding in which the punishment is incarceration).
[8] Section 2000h provides that:
"In any proceeding for criminal contempt arising under title II, III, IV, V, VI, or VII of this Act, the accused, upon a demand therefor, shall be entitled to a trial by jury, which shall conform as near as may be to the practice in criminal cases. Upon conviction, the accused shall not be fined more than $1,000 or imprisoned for more than six months.
"This section shall not apply to contempts committed in the presence of the court, or so near thereto as to obstruct the administration of justice, nor to the misbehavior, misconduct, or disobedience of any officer of the court in respect to writs, orders, or process of the court. No person shall be convicted of criminal contempt hereunder unless the act or omission constituting such contempt shall have been intentional, as required in other cases of criminal contempt.
"Nor shall anything herein be construed to deprive courts of their power, by civil contempt proceedings, without a jury, to secure compliance with or to prevent obstruction of, as distinguished from punishment for violations of, any lawful writ, process, order, rule, decree, or command of the court in accordance with the prevailing usages of law and equity, including the power of detention."
[9] Section 2000h provides for maximum criminal punishment of a fine of not more than $1000 dollars or imprisonment for not longer than 6 months. Thus, even under Bloom, Supreme Court jurisprudence would not dictate a jury trial absent Congressional enactment. See supra note 8.
[10] In the Civil Rights Act of 1957, Congress enacted a similar provision that created an exception to the court's inherent authority to adjudicate criminal contempts. In what is now codified at 42 U.S.C.A. § 1995, Congress provided that any party found to be in criminal contempt who the court determines should be punished by a fine in excess of $300 or imprisoned in excess of 45 days, shall have a right to a trial de novo before a jury. At the time of this Act's passage, as with § 2000h, jury trials in criminal contempt proceedings were not yet constitutionally required under any circumstances. And, similar to the provisions in § 2000h, Congress made clear its intentions that it was creating a narrow exception to a court's authority to issue contempt that in no manner was intended to limit the court's dominion in civil contempt proceedings.
[11] Defendants' supplemental brief in support of demand for a trial by jury, filed March 9, 1999, at 5 (Doc. no. 837).
[12] Defendants' motion to take judicial notice, filed November 2, 1998 (Doc. no. 771).
[13] Document No. 792, filed December 18, 1998, at 4 n. 4. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2189109/ | 97 S.W.3d 871 (2003)
MORGAN BUILDINGS AND SPAS, INC., Appellant,
v.
TURN-KEY LEASING, LTD., Appellee.
No. 05-02-00819-CV.
Court of Appeals of Texas, Dallas.
February 5, 2003.
*873 Clifton T. Hutchinson, Hughes & Luce, L.L.P., Dallas, for appellant.
Kirk E. Crutcher, Amarillo, for appellee.
Before Justices MOSELEY, LANG, and LAGARDE.[1]
OPINION
Opinion by Justice LANG.
Morgan Buildings and Spas, Inc. ("Morgan") appeals the summary judgment rendered against it in favor of Turn-Key Leasing, Ltd. ("Turn-Key"). Morgan brings forth two issues asserting the trial court erred in granting Turn-Key's motion for partial summary judgment because (1) Turn-Key's purported foreclosure on Morgan's partnership interest failed to comply with the provisions of the Texas version of Uniform Commercial Code ("U.C.C." or "the Code") Article Nine[2] and is therefore invalid and void, and (2) numerous fact issues preclude the entry of summary judgment. For reasons stated below, we resolve Morgan's first issue in its favor, reverse the trial court's decision, and remand this cause for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
In 1993, Morgan and Turn-Key formed a joint venture (the "partnership") by entering into a joint venture agreement (the "JVA") for the limited purpose of acquiring, owning, leasing, financing, and selling modular buildings. In late 2000, Morgan experienced a cash flow shortage and consulted Turn-Key about a distribution from the partnership. Michael Borger, Turn-Key's president, proposed a loan from Turn-Key to Morgan as opposed to having the partnership pay distributions. Morgan agreed to Turn-Key's proposed loan.
On January 9, 2001, Turn-Key lent Morgan $450,000. Morgan, in turn, signed a promissory note and a security agreement. The promissory note was scheduled to mature on June 15, 2001 and described the collateral securing its payment as a "security interest created in a security agreement that covers [Morgan's] right, title, and interest in and to" the partnership. The security agreement classified the collateral as "general intangibles" and described it as: "All of [Morgan's] interest in and to [the partnership] under [the JVA]... together with all income and distributions from the [partnership] (whether upon the dissolution and winding up of the [partnership] or otherwise); all of the foregoing, whether now owned or hereafter acquired and the proceeds thereof."
Contemporaneous with the execution of the promissory note and security agreement, *874 Morgan and Turn-Key executed an amendment to their 1993 JVA (the "amended agreement"). This amended agreement changed paragraph 14 of the 1993 JVA entitled "Limitation on Transfer."[3]
As the scheduled maturity date of June 15, 2001 approached, Morgan contacted Turn-Key to seek an extension of the loan until December 31, 2001. The parties discussed an extension but reached no agreement. On June 21, Turn-Key wrote a letter to Morgan notifying it of Turn-Key's decision not to renew and extend the loan. The June 21 letter stated that the $450,000 loan, which had become due and payable six days earlier, would now need to be repaid no later than June 28, 2001. Morgan claims its efforts to contact Turn-Key after receipt of the June 21 letter were unsuccessful.
On June 29, 2001, Turn-Key sent another letter to Morgan stating that it considered Morgan to be in default. The letter also notified Morgan that, in accordance with the terms of the amended agreement, the following actions had already taken place: (1) Morgan's interest in the partnership passed to Turn-Key; (2) Turn-Key reduced Morgan's capital account by the amount of the principal, interest, and attorney's fees (totaling $455,384.93); (3) Turn-Key increased its own capital account in the same amount by which it reduced Morgan's capital account; and (4) Turn-Key adjusted the distributive shares of the partnership in the same proportion as the adjusted capital accounts. Turn-Key also informed Morgan that it remained liable to Turn-Key for the deficiency of the loan in the amount of $112,124.71. Furthermore, the June 29 letter stated that, notwithstanding Turn-Key's exercise of its rights under the amended agreement, Turn-Key intended that (1) the indebtedness evidenced by the promissory note had not been cancelled or extinguished, and (2) the security interest created by the security agreement was not released and was to remain "valid and in full force against the collateral." Finally, Turn-Key informed Morgan that the security interest created by the security agreement would continue to be effective and would be reinstated if at any time payment or reduction of all or any part of the indebtedness evidenced by the promissory note was "rescinded or must otherwise be returned by Turn-Key, as though such payment or reduction had not been made."
On July 11, 2001, Morgan wrote to Turn-Key. Morgan said that Turn-Key's June 29 letter appeared to propose that *875 Turn-Key retain Morgan's partnership interest in satisfaction of all or any portion of the note. Morgan protested any such retention of Morgan's partnership interest. Rather, Morgan stated that because of its objection, Turn-Key was compelled to dispose of the interest in accordance with the applicable provisions of the Texas U.C.C. Then, Morgan reserved the right to hold Turn-Key liable for any losses caused by Turn-Key's failure to comply with the U.C.C.
Morgan filed suit on July 9, 2001, claiming, inter alia, that Turn-Key's attempted retention[4] of Morgan's partnership interest in partial satisfaction of Morgan's debt was void. Morgan alleged that both the terms of the amended agreement and Turn-Key's actions violated the advance notice and commercially reasonable disposition requirements of sections 9.504 and 9.505 of Article Nine. Turn-Key filed a motion for partial summary judgment on December 26, 2001.[5] Morgan then filed its own motion for partial summary judgment on February 22, 2002.[6] On March 21, 2002, the trial court granted Turn-Key's motion for partial summary judgment without specifying the grounds. Morgan non-suited its remaining claims,[7] and this appeal followed.
On appeal, Morgan argues the trial court erred in granting Turn-Key's motion for partial summary judgment because (1) Turn-Key's purported foreclosure on Morgan's partnership interest failed to comply with the provisions of Texas's U.C.C. Article Nine and is therefore invalid and void, and (2) numerous fact issues preclude the entry of summary judgment. Although Morgan raises two issues, both center on whether the provisions of the amended agreement and the actions in disposition or retention of the partnership account and/or its partnership interest are governed by the U.C.C. If we were to find that the U.C.C. does not govern, Morgan's contention as to the existence of fact issues would be of no merit, since any such fact issues hinge on its claim that the U.C.C. applies to this transaction. However, if we were to find that the U.C.C. does apply, then the case should be reversed and remanded *876 for further proceedings consistent with this opinion.
STANDARD OF REVIEW
The standards for reviewing summary judgment under rule 166a(c) are well established. See Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985); Orozco v. Dallas Morning News, Inc., 975 S.W.2d 392, 394 (Tex.App.-Dallas 1998, no pet.). We review a summary judgment de novo to determine whether a party's right to prevail is established as a matter of law. Dickey v. Club Corp. of Am., 12 S.W.3d 172, 175 (Tex.App.-Dallas 2000, pet. denied); West End Pink, Ltd. v. City of Irving, 22 S.W.3d 5, 7 (Tex.App.-Dallas 1999, pet. denied) (citing Keever v. Finlan, 988 S.W.2d 300, 305 (Tex.App.-Dallas 1999, pet. dism'd)).
U.C.C. ARTICLE NINE GOVERNING SECURED TRANSACTIONS
A. Applicable Law
Article Nine of the U.C.C. applies "to any transaction (regardless of its form) which is intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel paper or accounts."[8] Generally, the test for creation of a security interest is whether the transaction was intended to have the effect as security, because parties must have intended that their transaction fall within the scope of Article Nine. Superior Packing, Inc. v. Worldwide Leasing & Fin., Inc., 880 S.W.2d 67, 71 (Tex.App.-Houston [14th Dist.] 1994, writ denied) (citing John Bezdek Ins. Assocs., Inc. v. Am. Indem. Co., 834 S.W.2d 401, 403 (Tex.App.-San Antonio 1992, no writ)). Accordingly, we look to the transaction to determine if the parties intended to create a security interest in the type of property specified in section 9.102 of the Code for the purpose of securing payment or performance of an obligation. John Bezdek Ins., 834 S.W.2d at 403. No formal wording is required, and the court, in arriving at the intent of the parties, should examine the substance of the documents in light of the circumstances of the case. Id. (citing In re Miller, 545 F.2d 916, 918 (5th Cir.1977) (applying Texas law)). We determine the true intention of the parties by examining "the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless." Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983) (emphasis omitted). Finally, documents executed contemporaneously for the same purpose and as part of the same transaction should be read and construed together to determine the intent of the parties. Jones v. Kelley, 614 S.W.2d 95, 98 (Tex.1981).
Section five of Article Nine governs the rights and duties of secured parties and debtors in the event of default. Section 9.504 gives a secured party the right to sell or dispose of collateral after the debtor's default, while section 9.505 gives the secured party the right to retain the collateral in satisfaction of the debtor's obligation. However, advance notice of either means of disposition must be given by the secured party. See Tanenbaum v. Econ. Lab., Inc., 628 S.W.2d 769, 771 (Tex. 1982); Acuff v. Lamesa Nat'l Bank, 919 S.W.2d 154, 156 (Tex.App.-Eastland 1996, no writ).
*877 Section 9.504(c) governs a secured party's right to dispose of collateral after default by the debtor. It states: "Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts.... [B]ut every aspect of the disposition including the method, manner, time, place, and terms must be commercially reasonable."[9] Section 9.504 describes the "advance notice" requirement as follows:
Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor, if he has not signed after default a statement renouncing or modifying his right to notification of sale.[10]
A secured creditor, however, may elect not to dispose of the collateral. Section 9.505 allows a creditor to retain collateral in complete satisfaction of the indebtedness once it notifies the debtor of its intent. "Written notice of such proposal shall be sent to the debtor if he has not signed after default a statement renouncing or modifying his rights under this subsection.... If the secured party receives objection in writing from a person entitled to receive notification within twenty-one days after the notice was sent, the secured party must dispose of the collateral under Section 9.504."[11]
Finally, section 9.501(c) states that certain provisions relating to the disposition and retention of collateral may not be waived, but that the parties may agree to "not manifestly unreasonable" standards as to fulfillment of those rights and duties. Specifically, that section provides:
[T]he rules stated in the subsections below may not be waived or varied... but the parties may by agreement determine the standards by which the fulfillment of these rights and duties is to be measured if such standards are not manifestly unreasonable:
....
(2) Subsection (c) of Section 9.504 and Subsection (a) of Section 9.505 which deal with disposition of collateral;
(3) Subsection (b) of Section 9.505 which deals with acceptance of collateral as discharge of obligation.[12]
*878 B. Application of Law to the Facts
1. Security Agreement or Alternative Means of Payment?
Morgan claims that the substance of the amended agreement creates a security interest that is governed by Article Nine. In that regard, Morgan points to the language of the amended agreement, which, among other things, reflects the intent of the parties by authorizing a partner to "encumber" its partnership interest to "secure performance" of an obligation to that partner. The terms of such "pledge," including events of "default," must be in a writing signed by the partners. Further, the amended agreement provides that any "pledged interest" will immediately pass upon any event of default by adjusting the partners' capital accounts such that any debt is automatically offset by the defaulting party's capital account. If the amount of the debt due and unpaid exceeds the defaulting party's capital account, that partner's interest terminates, and the defaulting partner remains liable for the excess amount.
Turn-Key consistently argues its actions should not be governed by the U.C.C. The primary reason it cites is that the amended agreement authorized an alternate method of payment and, as a result, it was not limited to enforcement of its security interest under Article Nine. Thus, Turn-Key asserts it had two options after Morgan defaulted: (1) it could have foreclosed on its security interest subject to the security agreement and thus could have been subject to both the duties and protections of Article Nine, or (2) it could have simply adjusted the capital accounts by the amount of the debt and then could have sued Morgan for the deficiency, as provided under the terms of the amended agreement. As evidence of its election to pursue the latter option, Turn-Key directs us to its June 29 letter, which informed Morgan that Turn-Key reserved all its rights under the security agreement since it had elected to proceed under the amended agreement. Hence, Turn-Key concludes that its actions pursuant to the amended agreement would not be an Article Nine foreclosure.
In making its argument, Turn-Key cites us to the Texas Revised Partnership Act (TRPA),[13] which it asserts governs this transaction to the exclusion of Article Nine of the U.C.C. Specifically, Turn-Key cites article 6132b-4.01(c), which provides that a partner who makes a payment or advance on behalf of the partnership is entitled to reimbursement by the partnership. See Tex.Rev.Civ. Stat. Ann. art. 6132b-4.01(c) (Vernon Supp.2003).[14] Turn-Key informs this Court in its brief that we should not *879 apply Article Nine of the U.C.C. to this transaction unless we are "also prepared to find an irreconcilable statutory conflict between the TRPA and the U.C.C." However, article 6132b-4.01(c) of the TRPA is inapposite to this case because it clearly refers only to transactions between a partner and the partnership itself. Turn-Key conceded as much during its oral argument at the submission of this appeal. We are not cited to any applicable provision of the TRPA that references transactions between partners where the partnership interest of one partner is encumbered, in the words of the amended agreement, "to secure performance of an obligation to that partner." Therefore, we find no irreconcilable statutory conflict between the TRPA and Article Nine as it relates to the facts of this case.
Finding no applicable Texas authority to support its argument, Turn-Key cites us to a decision from the Georgia Court of Appeals in the case of Consolidated Equities Corp. v. Bird, 195 Ga.App. 45, 392 S.E.2d 276 (1990). Turn-Key argues that this Georgia case supports its position that the amended agreement is merely an alternate method of payment and not a security agreement governed by Article Nine. Turn-Key suggests that the Georgia case addresses a factual situation similar to that before us.
The court in Consolidated Equities found the offset of several defaulting partners' capital accounts to be pursuant to an agreement for "alternate methods of payment" as opposed to a transaction governed by the U.C.C. Id. at 278. Although we do find some similarities between the facts recited in the Consolidated Equities case and those in the case before us, we read Consolidated Equities as distinguishable from the case at bar and decline to follow it. In Consolidated Equities, on the one hand, the court pronounced the general rule that "[a]n agreement for an alternative form of payment does not allow for an indirect evasion by the creditor of the debtor protection provisions of Article Nine." Id. Yet, on the other hand, the Georgia court found that since the "alternative method of payment" provided that there would be no claim for deficiency, the protection provisions of Article Nine were not evaded. According to that court's reasoning, the debtor protection provisions of Article Nine were "inapplicable and irrelevant." Id. at 278-79. We do not agree with the Georgia court's sweeping statement that Article Nine protections are "inapplicable and irrelevant" in instances where secured parties do not pursue defaulting partners for post-disposition and/or post-retention deficiency claims. Regardless of the Georgia court's reasoning, the amended agreement before us clearly allows for a deficiency claim against the defaulting partner. Even if the provisions of the amended agreement were to be construed by us as an "alternate method of payment," such an agreement could not be allowed to stand if it has even the indirect effect of "evasion ... of the debtor protection provisions of Article Nine." Id. at 278.
2. Waiver of Debtor Safeguards or Reasonable Modification of Standards?
Morgan argues the amended agreement constitutes a waiver of the notice and commercially reasonable requirements for disposition or retention of collateral in violation of the prohibitions of section 9.501(c). Morgan asserts that, at the very least, the amended agreement was an impermissible "manifestly unreasonable" modification of these requirements. Morgan asserts that since the amended agreement provided for absolutely no advance notice of disposition, effectively, there was a waiver of the Article Nine notice requirements. Texas courts *880 have long prohibited waivers of the Article Nine requirements. See, e.g., Tanenbaum v. Econ. Lab., Inc., 628 S.W.2d 769 (Tex. 1982); Rabinowitz v. Cadle Co. II, Inc., 993 S.W.2d 796 (Tex.App.-Dallas 1999, pet. denied); Burton v. Nat'l Bank of Commerce of Dallas, 679 S.W.2d 115 (Tex. App.-Dallas 1984, no writ). Further, Morgan advises that Texas courts have not tolerated waiver of a secured party's obligation to dispose of collateral in a commercially reasonable manner. See United States v. Terrey, 554 F.2d 685 (5th Cir. 1977) (applying Texas law); Rabinowitz, 993 S.W.2d at 798-99; O'Neil v. Mack Trucks, Inc., 533 S.W.2d 832, 836 (Tex. Civ.App.-El Paso 1975), rev'd in part on other grounds, 542 S.W.2d 112 (Tex.1976), mandate recalled and reissued by 551 S.W.2d 32 (Tex.1977) (per curiam). Turn-Key responds by arguing that there was no waiver. Alternatively, Turn-Key argues that even if the U.C.C. were to apply, its actions were pursuant to a "modification" authorized by section 9.501(c) that could not possibly be construed as "manifestly unreasonable," since Morgan had already agreed to the "modification" as to the disposition or retention of its partnership interest when it signed the amended agreement.
It is clear from a plain reading of section 9.501(c) that debtors' rights and secured creditors' duties under sections 9.504 and 9.505 may not be waived regarding (1) commercial reasonableness of the disposition of collateral, and (2) advance notice of disposition or retention of collateral. While a debtor and creditor may enter into an agreement that establishes "the standards by which the fulfillment of these rights and duties is to be measured," there is a limit. The proposed "standards" must not be "manifestly unreasonable."[15] The term "manifestly unreasonable" is not defined in the U.C.C., and no Texas case law has addressed the specific issue raised in this case. However, Black's Law Dictionary defines "manifest" as: "Evident to the senses, especially to the sight, obvious to the understanding, evident to the mind, not obscure or hidden, and is synonymous with open, clear, visible, unmistakable, indubitable, indisputable, evident, and self-evident." Black's Law Dictionary 962 (6th ed.1990).[16]
In reasoning toward our decision, and in view of the dearth of legal authority in Texas, we are mindful of the official comments to the various sections of the U.C.C. prepared by the American Law Institute and the National Conference of Commissioners on the Uniform Commercial Code. These comments provide valuable guidance to the meaning and purpose of the Code as enacted in Texas. In particular, we note that comment four to section 9.501 makes it abundantly clear that debtors' rights after default are to be carefully protected. It states: "In the area of rights after default our legal system has traditionally looked with suspicion on agreements designed to cut down the debtor's rights and free the secured party of his duties.... The default situation offers great scope for overreaching; the suspicious attitude of the courts has been grounded in common sense."[17]
*881 CONCLUSION
Turn-Key's argument that the amended agreement is merely an alternative means of payment, exempt from the U.C.C. as found in the Consolidated Equities case, is simply not persuasive. The amended agreement does not stand alone. It simply authorizes a partner to "encumber" its partnership interest to "secure performance of an obligation" to another partner. The amended agreement imposes the requirement that a "pledge, including events of default," be in writing and authorizes "foreclosure" upon occurrence of an "event of default." Then, fitting neatly with the amended agreement, the security agreement effects a "pledge" of Morgan's partnership interest to "secure" the repayment of the sum due to be paid pursuant to the note, while the note and security agreement specify the "events of default." It is clear that the promissory note and security agreement, executed contemporaneously with the amended agreement, supply terms required for the operation of the disposition provisions in the amended agreement.
The plain intention of the parties found in the complementary provisions of the documents is that the amended agreement was created to authorize a security interest and provide an alternative means of foreclosure or disposition upon default. Hence, we conclude that Article Nine of the U.C.C. applies to the amended agreement and to Turn-Key's actions under the provisions of the amended agreement.[18]
Because Article Nine of the U.C.C. applies, we find that Turn-Key's reliance on the amended agreement is unavailing to excuse it from failing to provide advance notice. We hold that the amended agreement is not enforceable to vary the requirement of advance notice under Article Nine since any such omission is violative of section 9.501(c) and the time honored prohibition of waiver of advance notice of the disposition or retention of collateral. See Tanenbaum, 628 S.W.2d at 772. Additionally, we hold that Turn-Key is not excused from its obligations of commercially reasonable disposition of the collateral based upon the provision of the amended agreement providing for an offset of the partnership account as the sole means of disposing of or retaining the collateral. That provision of the amended agreement, in substance, effects an unlawful waiver by the debtor of the secured party's obligation to dispose of the collateral in a commercially reasonable manner.[19]
Finally, we conclude that even if the "offset provision" was intended by the parties to define the "standards" for compulsory disposition or retention of collateral, including advance notice, under sections 9.504 and 9.505, those "standards" were and are "manifestly unreasonable" in light of the prohibition of waiver of those provisions. Accordingly, the "offset provision" fails to vary the rights and obligations of the parties as a matter of law.
We reverse the trial court's judgment and remand this cause for further proceedings consistent with this opinion.
NOTES
[1] The Honorable Sue Lagarde, Justice, Court of Appeals, Fifth District of Texas at Dallas, Retired, sitting by assignment.
[2] Substantial revisions to Chapter Nine of the Texas Business and Commerce Code were made during the 76th Legislature. See Act of June 18, 1999, 76th Leg., R.S., Ch. 414, § 1.01, 1999 Tex. Gen. Laws 2639-2736. These amendments took effect on July 1, 2001. All references to the Business and Commerce Code or the Uniform Commercial Code (U.C.C.) in this opinion are to the version that existed prior to the 1999 revisions because the applicable agreements in this case were entered into before the revisions took effect. For convenience, citation in the text will refer to the relevant provisions of the sections as they existed under the previous version of Article Nine, while the correct citation of these repealed sections will be included, where appropriate, in footnotes.
[3] The 1993 JVA provided that no partner could "sell, assign, transfer, encumber, or otherwise dispose of" any interest in the partnership. The amended agreement, however, provided the following:
It is understood and agreed that a partner may encumber all or a part of its interest in the joint venture to another partner to secure performance of an obligation to that partner. The terms of such pledge, including events of default, must be in a writing signed by the partners. In the event of default which allows foreclosure on the pledged interest, title of the pledged joint venture interest shall immediately pass according to this paragraph. Title shall pass by adjusting the capital accounts defined in Paragraph 11 of this Agreement by reducing the capital account of the defaulting partner by the amount of the default and by increasing the capital account of the non-defaulting partner by the same amount. In the event such an adjustment to the capital account occurs, the distributive share of each partner pursuant to Paragraph 12 will be adjusted so that the pro rata distributive shares will be allocated in the same proportion as the capital accounts after adjustment. In the event the default amount exceeds the defaulting partner's capital account balance, the partner's joint venture interest will terminate, and the defaulting partner shall remain liable for the excess amount.
[4] By its actions in adjusting the partnership interests and capital accounts in its favor, Morgan claimed that Turn-Key had "retained" the collateral as that term is used under Article Nine. However, at oral argument of this appeal, Morgan indicated that Turn-Key had since sold (i.e., "disposed" of) a portion of the partnership to a third party. There is no evidence in the record regarding the sale of any portion of the partnership to a third party.
[5] Turn-Key moved for partial summary judgment on Morgan's claims for (1) breach of the JVA; (2) breach of the duty of loyalty; (3) usurpation of partnership opportunity; (4) wrongful foreclosure; (5) unreasonable disposition of partnership assets; (6) impermissible foreclosure; (7) impermissible winding up of the partnership; (8) injunctive relief requiring Turn-Key to continue the partnership; (9) injunctive relief preventing Turn-Key from disposing of partnership assets; and (10) injunctive relief preventing Turn-Key from using the partnership name.
[6] Morgan moved for partial summary judgment on the grounds that (1) Turn-Key's notice was untimely; (2) Turn-Key could not retain the collateral; (3) Turn-Key's disposition of the collateral was unreasonable; (4) Turn-Key could not retain the collateral and claim a deficiency; (5) the advance notice and commercially reasonable disposition requirements of the Texas U.C.C. could not be waived; and (6) Turn-Key's attempted transfer of its partnership interest was invalid.
[7] The claims Morgan non-suited were its request for an accounting, its request for a winding up of the partnership, and "other declaratory relief" regarding the applicability of the U.C.C. to the Turn-Key foreclosure. These claims are not before us, and we do not address their merits.
[8] Act of June 18, 1965, 59th Leg., R.S., ch. 721, § 9-102, 1965 Tex. Gen. Laws 151, amended by Act of June 14, 1967, 60th Leg., R.S., ch. 785, § 9.102, 1967 Tex. Gen. Laws 2520, amended by Act of June 14, 1973, 63rd Leg., R.S., ch. 400, § 5, 1973 Tex. Gen. Laws 999, amended by Act of June 18, 1997, 75th Leg., R.S., ch. 930, § 1, 1997 Tex. Gen. Laws 2926-27 (current version at Tex. Bus. & Com. Code Ann. § 9.109 (Vernon Supp.2003)).
[9] Act of June 18, 1965, 59th Leg., R.S., ch. 721, § 9-504(3), 1965 Tex. Gen. Laws 176, amended by Act of June 14, 1967, 60th Leg., R.S., ch. 785, § 9.504(c), 1967 Tex. Gen. Laws 2550, amended by Act of June 14, 1973, 63rd Leg., R.S., ch. 400, § 5, 1973 Tex. Gen. Laws 1028, amended by Act of June 19, 1975, 64th Leg., R.S., ch. 353, § 8, 1975 Tex. Gen. Laws 942-43, amended by Act of May 20, 1977, 65th Leg., R.S., ch. 163, § 4, 1977 Tex. Gen. Laws 334 (current version at Tex. Bus. & Com.Code Ann. § 9.610 (Vernon Supp.2003)) (emphasis added).
[10] Id. (emphasis added).
[11] Act of June 18, 1965, 59th Leg., R.S., ch. 721, § 9-505, 1965 Tex. Gen. Laws 177, amended by Act of June 14, 1967, 60th Leg., R.S., ch. 785, § 9.505, 1967 Tex. Gen. Laws 2551, amended by Act of June 14, 1973, 63rd Leg., R.S., ch. 400, § 5, 1973 Tex. Gen. Laws 1029, amended by Act of June 19, 1975, 64th Leg., R.S., ch. 353, § 9, 1975 Tex. Gen. Laws 943, amended by Act of May 20, 1977, 65th Leg., R.S., ch. 163, § 6, 1977 Tex. Gen. Laws 334 (current version at Tex. Bus. & Com.Code Ann. § 9.620 (Vernon Supp.2003)) (emphasis added).
[12] Act of June 18, 1965, 59th Leg., R.S., ch. 721, § 9-501(3), 1965 Tex. Gen. Laws 174, amended by Act of June 14, 1967, 60th Leg., R.S., ch. 785, § 9.501(c), 1967 Tex. Gen. Laws 2548, amended by Act of June 14, 1973, 63rd Leg., R.S., ch. 400, § 5, 1973 Tex. Gen. Laws 1026 (current version at Tex. Bus. & Com.Code Ann. § 9.602 (Vernon Supp.2003)) (emphasis added).
[13] The Texas Revised Partnership Act, Tex. Rev.Civ. Stat. Ann. art. 6132b-1.01 to -11.04 (Vernon Supp.2003), applies to partnerships formed on or after January 1, 1994 and to those partnerships formed before that date that elect to be governed by the new act. Id. art. 6132b-11.03(a)(1). In this case, the 1993 JVA specifically provides that the parties' agreement was subject to the Texas Uniform Partnership Act, which preceded the Revised Partnership Act. Although Turn-Key makes no assertion that the parties here ever elected to be governed by the Revised Partnership Act, we assume for the sake of considering Turn-Key's argument, without so deciding, that the relevant provisions of the Revised Partnership Act are applicable to the Morgan/Turn-Key partnership.
[14] Notwithstanding the applicability of the Texas Revised Partnership Act, subsection (c) of article 6132b-4.01 is drawn from and quite similar to section 18(1)(c) of the repealed Texas Uniform Partnership Act. See Act of May 16, 1961, 57th Leg., R.S., ch. 158, § 18(1)(c), 1961 Tex. Gen. Laws 294, repealed by Act of June 19, 1993, 73rd Leg., R.S., ch. 917, § 1, 1993 Tex. Gen. Laws 3896.
[15] See § 9.501(c), supra note 12 (current version at TEX. BUS. & COM.CODE ANN. § 9.603 (Vernon Supp.2003)).
[16] Dictionary definitions can be utilized by courts in construing the plain meaning of words. See Tex. Gov't Code Ann. § 311.011 (Vernon Supp.2003) ("Words and phrases shall be read in context and construed according to the rules of grammar and common usage.").
[17] See § 9.501(c), supra note 12, at cmt. 4 (current version at TEX. BUS. & COM.CODE ANN. § 9.602 cmt. 2 (Vernon Supp.2003)).
[18] See § 9.102(a), supra note 8 (current version at TEX. BUS. & COM.CODE ANN. § 9.109 (Vernon Supp.2003)); see also John Bezdek Ins., 834 S.W.2d at 403.
[19] See § 9.501(c), supra note 12 (current version at TEX. BUS. & COM.CODE ANN. § 9.603 (Vernon Supp.2003)); see also Rabinowitz, 993 S.W.2d at 798-99. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2278269/ | DAVID J. BUCHANAN, and in the interest of HEIDI N. BUCHANAN, Plaintiff Below, Appellant,
v.
THOMAS E. GAY, ESQUIRE; THALIA JOAN GAY; and the firm of STUMPF, VICKERS & SANDY, P.A., Defendants Below, Appellees.
No. 562, 2006.
Supreme Court of Delaware.
Submitted: March 8, 2007.
Decided: May 17, 2007.
Before HOLLAND, BERGER and JACOBS, Justices.
ORDER
Carolyn Berger, Justice
This 17th day of May 2007, upon consideration of the opening brief filed by the pro se appellant, David J. Buchanan ("Buchanan"), a motion to affirm filed by appellees-Thomas E. Gay, Esq. and the law firm of Stumpf Vickers & Sandy, P.A. (collectively "Attorney/Law Firm Defendants"), and a motion to affirm filed by appellee-Thalia Joan Gay ("Nurse Defendant"), it appears to the Court that:
(1) Buchanan filed a complaint seeking damages in the amount of $37 million dollars for "Breach of Fiduciary Duty, Medical Malpractice, Defamation of Character, Derivative Tort, Infliction of Severe Emotional Distress and Harm, Litigation Conducted in Malum in Se, Failure to Observe Federal Bankruptcy Laws, Violation of Civil Rights, Disadvantaging an Opposing Party by Misleading a Presiding Judge, Abuse of Process, Errors and Omissions."[1] Nurse Defendant denied the medical malpractice allegations and sought to dismiss the complaint for Buchanan's failure to file an affidavit of merit.[2] Attorney/Law Firm Defendants sought to dismiss the complaint for Buchanan's failure to state a cognizable claim, his failure to join a necessary party, and on the bases of collateral estoppel, judicial estoppel, absolute privilege, and lack of standing.[3]
(2) On June 26, 2006, the Superior Court conducted a hearing on the motions to dismiss filed by Attorney/Law Firm Defendants and Nurse Defendant (collectively "Defendants") and several motions filed by Buchanan.[4] By memorandum opinion dated September 21, 2006, the Superior Court granted Defendants' motions to dismiss and denied, deemed moot, or denied as stricken, Buchanan's motions.[5] Buchanan then filed a timely motion for reargument, which the Superior Court denied by order dated October 13, 2006.
(3) Buchanan filed this appeal from the Superior Court's September 21, 2006 and October 13, 2006 decisions. The Court has carefully considered the parties' positions on appeal and the Superior Court record, including the transcript of the June 26, 2006 hearing.[6]
(4) We find it manifest on the face of the opening brief that the appeal is without merit. The Court cannot discern an error of law or abuse of discretion on the part of the Superior Court when dismissing the complaint and otherwise denying relief. The Court concludes that the Superior Court's judgment should be affirmed on the basis of, and for the reasons set forth in, the well-reasoned decisions of September 21, 2006 and October 13, 2006.
NOW, THEREFORE, IT IS ORDERED, pursuant to Supreme Court Rule 25(a), that the motions to affirm are GRANTED. The judgment of the Superior Court is AFFIRMED.
NOTES
[1] Buchanan filed the complaint on his behalf and in the interest of his daughter, Heidi N. Buchanan ("Daughter"). To the extent Buchanan sought relief on behalf of Daughter, the Superior Court dismissed the complaint for (I) Buchanan's failure to follow the procedure for appointment as Daughter's legal representative, (ii) Daughter's age of majority at the time of the proceedings, and (iii) Daughter's affidavit requesting that she be dismissed as a party.
[2] See Del. Code Ann. tit. 18, § 6853(a)(1) (Supp. 2006) (providing that a healthcare negligence complaint must be accompanied by an affidavit of merit signed by an expert witness stating that there are reasonable grounds to believe that healthcare medical negligence has been committed).
[3] Attorney/Law Firm Defendants represented Buchanan's former wife in matters before the Family Court, the Federal Bankruptcy Court, and this Court. Nurse Defendant is a licensed nurse employed by Beebe Hospital where Buchanan was a patient and is the spouse of Attorney Defendant.
[4] Buchanan filed motions for default judgment, to strike and for protective order.
[5] Buchanan v. Gay, 2006 WL 2709401 (Del. Super. Ct.).
[6] A copy of the hearing transcript was provided to Buchanan at State expense. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1348226/ | 167 Mich. App. 779 (1988)
423 N.W.2d 355
GARB-KO, INC.
v.
LANSING-LEWIS SERVICES, INC.
Docket No. 91808.
Michigan Court of Appeals.
Decided April 18, 1988.
Honigman, Miller, Schwartz & Cohn (by Gary A. Trepod and Frederick M. Baker, Jr.), for plaintiff.
Dykema, Gossett, Spencer, Goodnow & Trigg (by John B. Curcio, James G. Fausone and Mark G. Hess), for defendants.
Before: DANHOF, C.J., and G.R. McDONALD and E.M. THOMAS,[*] JJ.
E.M. THOMAS, J.
Plaintiff appeals as of right from the trial court's order denying specific performance of a sales contract against defendants and the trial court's order denying plaintiff's motion for a new trial or to alter or amend the judgment. We affirm.
This case presents an anomalous situation in which the seller seeks to rescind a contract for the sale of land based on a defect in the property discovered after the sales agreement was entered into. Garb-Ko and Action Auto, the parent company *781 of Lansing-Lewis Services, Inc., entered into a buy-sell agreement on or about February 11, 1985, by which plaintiff was to purchase a gas station and automotive parts store in East Lansing from defendants for $320,000. The buy-sell agreement contained an "as is" clause. The site was to be used for a 7-Eleven store. The property has seven underground storage tanks which hold four thousand to six thousand gallons of gasoline each.
Garb-Ko did not inquire into the environmental condition of the property or the integrity of the gasoline tanks prior to making the offer to purchase. Action Auto subsequently learned that the gasoline storage tanks on the property might be leaking and contaminating the ground and groundwater. Neither party was aware of any contamination on the property at the time the buy-sell agreement was executed. Garb-Ko was informed of the contamination on the property in a letter dated April 5, 1985, and given the option of terminating the agreement or providing Action Auto with full indemnification for all costs and penalties arising out of any gasoline storage leakage and proceeding with the sale. Garb-Ko did not agree to indemnify the sellers for the costs and expenses arising out of the contamination and did not accept the seller's offer to terminate the agreement. Instead, Garb-Ko requested additional information before making a decision.
Negotiations between the parties were unsuccessful and in July, 1985, Garb-Ko filed suit and obtained a temporary restraining order enjoining the sellers from selling or encumbering the land. At a show cause hearing on August 7, 1985, the court refused to issue a temporary injunction and dissolved the TRO. On September 13, 1985, Garb-Ko amended its complaint to seek specific performance of the buy-sell agreement.
*782 In the meantime, Action Auto set out to determine the extent of the contamination problem and hired Horner Creative Metals to test the tanks. Horner confirmed leakage so severe that it was unable to measure the magnitude of the leakage. Action Auto also hired a hydrogeologic consulting firm, EDI Engineering and Science, to study the site's contamination and to recommend a cleanup solution. EDI confirmed the presence of gasoline constituents in the soil. However, the full extent of the contamination could not be ascertained without further costly testing.
A bench trial was held on December 23, 1985, to determine whether specific performance of the buy-sell agreement should be ordered. The court found that a mutual mistake affecting a basic, material assumption of the contract had occurred and that it would be unreasonable and unjust to enforce the terms of the buy-sell agreement. In an order dated January 24, 1986, the court denied plaintiff's request for specific performance and dismissed plaintiff's complaint. On March 31, 1986, the court denied plaintiff's request for a new trial or to alter or amend judgment.
A contract may be rescinded because of a mutual mistake of the parties; however, this equitable remedy is granted only in the sound discretion of the trial court. Lenawee Co Bd of Health v Messerly, 417 Mich. 17, 26; 331 NW2d 203 (1982). The determination whether plaintiffs are entitled to rescission involves a bifurcated inquiry: (1) was there a mistaken belief entertained by one or both of the parties to a contract? and (2) if so, what is the legal significance of the mistaken belief? Messerly, supra at 24; Dingeman v Reffitt, 152 Mich. App. 350, 355; 393 NW2d 632 (1986).
In its opinion and order, the trial court found that the parties had clearly entered into the *783 agreement under a serious mistake of fact since, at the time the agreement was signed, neither party was aware of the gasoline leakage. We agree.
A contractual mistake "is a belief not in accord with the facts." Messerly, supra at 24, citing 1 Restatement Contracts, 2d, § 151, p 383. This mistake must relate to a fact in existence at the time the contract is executed. Messerly, supra at 24. The testimony at trial clearly revealed that there had been a large gasoline leak on the property that could result in contamination of both soil and groundwater. The testimony also indicated that none of the contracting parties were aware of that fact at the time they executed the buy-sell agreement. We defer to the trial court's finding that both parties were under a mutual mistake of fact as to the environmental condition of the property at the time they entered into the buy-sell agreement.
We also agree with the trial court's ruling that rescission should be granted in the instant case. In Messerly, supra, our Supreme Court stated that legal or equitable remedies are not mandated in every case in which a mutual mistake has been established; rather, a case-by-case analysis should be done and rescission should be granted only when the mutual mistake is a legally significant mistake. Messerly, supra at 24. 1 Restatement Contracts, 2d, § 152(1), p 385, delineates the legal significance of the mistake:
[W]here a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of mistake under the rule stated in § 154.
*784 The Messerly Court adopted this Restatement approach and stated that rescission should only be granted "when the mistake relates to a basic assumption of the parties upon which the contract is made, and which materially affects the agreed performances of the parties." Messerly, supra at 29-30.
Here, the mutual mistake relates to a basic assumption of the parties upon which the contract was made. Additionally, this mistake materially affects the agreed performance of the parties. In any commercial real estate sale, the parties assume and desire that the sale will result in a complete transfer of rights, obligations, and responsibilities. The purchaser does not want the seller involved in, or disrupting, the new business in any way. Likewise, the seller desires to sever all ties with the property and any obligations. Under the common law, a sale of property resulted in such a transfer of rights and obligations. However, environmental-protection statutes have altered the common law and made previous owners of sites liable for environmental contamination. See MCL 299.601 et seq.; MSA 13.32(1) et seq.; 42 USC 9601 et seq. Under these laws, a previous owner may be required to conduct a site investigation and cleanup and would have a continuing liability after contaminated property is sold. It is this continuing responsibility for the land in question which requires us to affirm the trial court's ruling rescinding the buy-sell agreement and denying plaintiff's request for specific performance of the agreement.
We are not persuaded by plaintiff that the "as is" clause contained in the buy-sell agreement controls and bars rescission of the contract. Paragraph 11 of the buy-sell agreement states:
*785 PURCHASER HAS PERSONALLY EXAMINED THIS PROPERTY AND AGREES TO ACCEPT SAME IN ITS PRESENT CONDITION EXCEPT AS MAY BE SPECIFIED HEREIN AND AGREES THAT THERE ARE NO OTHER ADDITIONAL WRITTEN OR ORAL UNDERSTANDINGS.
Under this clause, the risk was clearly allocated to the purchaser. 1 Restatement Contracts, 2d, § 152, p 385 states that when a legally significant mutual mistake has occurred, the contract is voidable by the adversely affected party, unless he bears the risk of the mistake. However, the purchaser is not the adversely affected party; thus, the "as is" clause holds no significance. Here, due to the state and federal environmental-protection statutes which impose continuing liability after the sale of the land on defendant sellers for contamination that occurred while defendants owned the property, it is clear that they are the adversely affected party. The "as is" clause of the buy-sell agreement would not operate to relieve defendant sellers of their liability under these statutes. Had plaintiff agreed to indemnify Action Auto for all costs and penalties arising out of any gasoline storage leakage, rescission possibly would not have been granted. However, since plaintiff did not do so, defendant sellers remain the adversely affected party having incurred the "burden" imposed by law of cleaning up the contamination. The contract is voidable under § 152(1) of the Restatement.
In this case, equity requires that we affirm the trial court's ruling. Defendants have a continuing obligation and responsibility for the contaminated property. One expert estimated that the cost of cleanup could be anywhere from $100,000 to $1,000,000. In order to contain further cleanup costs and third-party claims arising from use of the contaminated land, defendants need control *786 over the use of the property. Sale to plaintiff would not give them such control.
Indeed, this case is unique since rarely does a purchaser of property, after discovering that the property is contaminated, request that the sale continue and ask the court to order specific performance of the contract. However, due to the continuing nature of the obligation and responsibilities defendants have over the environmental contamination of the property, we conclude that the trial court did not err in ordering rescission of the contract and denying plaintiff's request for specific performance.
Affirmed.
NOTES
[*] Recorder's Court judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1412546/ | 661 S.E.2d 552 (2008)
BROWNING
v.
The STATE.
No. S08A0541.
Supreme Court of Georgia.
May 19, 2008.
*553 Harold W. Wallace III, Thomson, for appellant.
Thurbert E. Baker, Attorney General, Sara Kaur Sahni, Assistant Attorney General, Dennis C. Sanders, District Attorney, for appellee.
HINES, Justice.
A jury found Robert L. Browning guilty of felony murder while in the commission of aggravated assault, aggravated assault, and possession of a firearm during the commission of a felony in connection with the fatal shooting of William Roger Bryant. Browning appeals his convictions, challenging the sufficiency of the evidence of his guilt and the effectiveness of his trial counsel. Finding *554 the challenges to be without merit, we affirm.[1]
The evidence construed in favor of the verdicts showed that on the evening of June 24, 1996, Browning shot and killed Bryant outside the home of Billy Luke ("Luke"), an employee of Bryant and a neighbor of Browning. Bryant had come to the neighborhood to speak with his wife, with whom he was having marital problems and who had been visiting Luke's girlfriend at Luke's house. Moments after Bryant's wife left Luke's home, she saw Bryant driving behind her in his "old work truck." The truck was "loud," and when Bryant stopped it, the tires squealed. The couple exited their vehicles and spoke with each other briefly before deciding to continue their discussion at Luke's house rather than in the street. Shortly after the pair arrived at Luke's driveway, Browning approached. Browning was "walking in an angry manner," and was "shaking his finger" until he was "in [Bryant's] face." Browning stated, "Let me tell you one thing, boy." Bryant replied, "Let me tell you one thing. You need to get your ass off of this property." Following this brief verbal exchange, and without any physical contact between the two men, Browning fired a .22 caliber revolver at Bryant. Bryant was unarmed and had nothing in his hands. He threw his hands up in the air, walked four steps, dropped to his knees, and "fell over." Bryant had sustained a fatal gunshot wound to the head; the bullet pierced Bryant's eye and lodged in his brain. Browning returned to his house, told his wife that he had shot Bryant, and telephoned 911.
At trial, Browning claimed that he shot Bryant in self-defense.
1. Contrary to Browning's contention, the evidence was sufficient to enable a rational trier of fact to find him guilty beyond a reasonable doubt of the crimes of which he was convicted. Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979).
2. Browning contends that his trial counsel provided ineffective assistance in several respects. However,
[t]o prevail on a claim of ineffective assistance of trial counsel, appellant must show counsel's performance was deficient and that the deficient performance prejudiced him to the point that a reasonable probability exists that, but for counsel's errors, the outcome of the trial would have been different. A strong presumption exists that counsel's conduct falls within the broad range of professional conduct.
(Citation and punctuation omitted.) Sanders v. State, 283 Ga. 372, 374, 659 S.E.2d 376 (2008).
(a) Browning first asserts that trial counsel was ineffective for failing to request a jury charge on voluntary manslaughter and for failing to request that the charge conference be recorded so that Browning could argue on appeal that the trial court erroneously refused to give such a charge.
*555 First, the record discloses that trial counsel did file a written request to charge on voluntary manslaughter in the context of mutual combat. See Walker v. State, 281 Ga. 521, 525, n. 9, 640 S.E.2d 274 (2007); Joyner v. State, 212 Ga. 269, 270(2), 91 S.E.2d 607 (1956). In any event, a jury instruction on voluntary manslaughter was not warranted. The record discloses that Browning's defense was that he shot Bryant in self-defense.
While jury charges on self-defense and voluntary manslaughter are not mutually exclusive, the provocation necessary to support a charge of voluntary manslaughter is different from that which will support a claim of self-defense. The distinguishing characteristic between the two claims is whether the accused was so influenced and excited that he reacted passionately rather than simply in an attempt to defend himself. Only where this is shown will a charge on voluntary manslaughter be warranted.
(Citations and punctuation omitted.) Walker v. State, supra at 524(6), 640 S.E.2d 274 Browning's own testimony belies the claim that he acted in the heat of passion; instead, it plainly attempted to portray that Browning shot Bryant in order to protect himself. Browning testified that at the time of the shooting, he was a part-time employee of the State Crime Lab and worked with the Georgia Bureau of Investigation; he routinely carried a gun in his pocket for "self-protection"; he witnessed the encounter between Bryant and his wife; he objected to the manner in which Bryant was driving on his street; he wanted to report Bryant to police for reckless driving; that as he approached Bryant, Bryant cursed at him; and that "something needed to be said to that boy." As to the final minutes of the fatal encounter, Browning testified,
I walked down to the edge of his driveway. I never left the street. HeWhen he got out of his truck and started towards me that scared me. I mean, the look on his face and he was coming toward me. He throwed out his hands. He was gonna get me. I knew it. This is why I carried this gun, for self-protection.
When Browning was asked "what was going through [his] mind as [Bryant] was coming at [him]," Browning responded,
To run or get out of there, which I can't run. When I got out of service I had disability on my feet. I can't run. But, I don't know, get away from there, get away from him which I couldn't do. Protect myself the best I could. I'm too old to fight. I can't fight.
When asked specifically what he then did, Browning replied, "Protect myself the best way I could." He further explained that at the time he fired the pistol, he knew that Bryant was close, was about to grab him and do him "great harm," that Bryant lunged at him, and that he was scared. Furthermore, when asked specifically whether he was angry after Bryant had cursed at him, Browning responded: "Not angry as such. I still wanted to talk to him, but he had done scared me then." Browning's version of events is unequivocal in its portrayal of the shooting as out of fear, and not because Browning was provoked. Inasmuch as the evidence at trial did not support any claim that the shooting was the result of provocation as will sustain voluntary manslaughter, a jury charge on voluntary manslaughter was not authorized. Nelson v. State, 283 Ga. 119, 121(2)(b), 657 S.E.2d 201 (2008).
Because a jury instruction on voluntary manslaughter was not warranted, any failure on the part of Browning's trial counsel to request and/or pursue its being given cannot constitute the deficient performance necessary to satisfy the first prong of the ineffective assistance of counsel test. Miller v. State, 283 Ga. 412, 658 S.E.2d 765 (2008). What is more, as this Court has determined that the evidence did not support a jury instruction on voluntary manslaughter, Browning's additional claim that trial counsel was ineffective for not requesting that the charge conference be recorded so that Browning could challenge the failure to give such instruction is moot.
(b) Browning also maintains that trial counsel was ineffective because despite leading Browning to believe that he was working on the case, counsel failed to set a hearing on Browning's motion for new trial and that the *556 delay in the post-trial proceedings was tantamount to a denial of due process, warranting the grant of a new trial.[2]
This Court has addressed the proper resolution of claims asserting due process violations based on inordinate appellate delay, and determined that the appropriate analysis is application of the four speedy trial factors set forth in Barker v. Wingo, 407 U.S. 514, 92 S. Ct. 2182, 33 L. Ed. 2d 101 (1972), which are the length of the delay, the reason for the delay, the defendant's assertion of his right, and prejudice to the defendant. Chatman v. Mancill, 280 Ga. 253, 256(2)(a), 626 S.E.2d 102 (2006). Even though Browning does not acknowledge the applicability of the Barker v. Wingo analysis, this Court will examine the circumstances of this case in light of such analysis.
At the hearing on the motion for new trial, trial counsel testified that he had been retained by Browning; that he filed a motion for new trial to protect Browning's rights; and that there was "a lot of communication" with Browning's wife about the motion for new trial, both directly by him and by his secretarial staff. Indeed, the record contains several letters from trial counsel to Browning and his wife, spanning a period of roughly two and a half years, relating, inter alia, that the trial transcript had been received and that a hearing on the motion for new trial would be set sometime in the near future. The last letter of record from the attorney, dated January 25, 2000, informed Browning that the attorney was "having a difficult time developing any reversible error," but still indicated that the motion for new trial would be pursued. However, trial counsel further testified that sometime after this last letter, he determined that he was not going to pursue post-conviction relief; that he discussed the futility of proceeding with Browning's wife; that he advised Browning's wife to communicate to Browning that Browning had the right to pursue the appeal on his own, hire other counsel, or qualify for indigent defense, and that he sent copies of the trial transcript to Browning and to Browning's wife.
As this Court noted in Chatman v. Mancill, the length of delay that will raise a constitutional inquiry is dependent upon the peculiar circumstances of the case, and not every delay in the appeal of a case, even an inordinate delay, will implicate an appellant's due process rights. Id. at 257(2)(b), 626 S.E.2d 102. Here, even though more than ten years elapsed from the time that trial counsel timely filed the motion for new trial and the resolution of the motion for new trial, as amended, there is evidence that much of this delay was caused by Browning's own inaction. As noted, there is evidence that in 2000, trial counsel made plain that he would not pursue the motion for new trial or any other phase of the appellate process because he could not discern any merit in an appeal, and that he further advised that Browning could retain or possibly be appointed new counsel to review his case. Yet, it appears that Browning made no meaningful attempt to secure relief until his partially successful pro se efforts in 2007. Thus, the factors of the length of the delay, the reason for the delay, and Browning's effort to assert his right to post-conviction relief, can be properly resolved adversely to Browning. But, even assuming that such factors are weighed in Browning's favor, he has failed to allege, much less establish, any prejudice as a result of the post-trial delay. Accordingly, application of the Barker v. Wingo analysis mandates the finding that neither the actions or inaction of trial counsel resulted in the denial of due process to Browning.[3]
Judgments affirmed.
All the Justices concur.
NOTES
[1] The crimes occurred on June 24, 1996. On August 30, 1996, a McDuffie County grand jury returned an indictment against Browning, charging him with malice murder, felony murder while in the commission of aggravated assault, aggravated assault, and possession of a firearm during the commission of a felony. Browning was tried before a jury March 17-18, 1997, and was acquitted of malice murder, but found guilty of the remaining charges. On March 18, 1997, he was sentenced to life in prison for felony murder, a consecutive 20 years in prison for aggravated assault, and five years in prison for possession of a firearm during the commission of a felony to be served consecutively to the sentences for felony murder and aggravated assault. Browning's trial counsel filed a motion for new trial on March 24, 1997. On May 23, 2007, Browning pro se filed a "motion to correct a void and/or illegal sentence," and on June 4, 2007, he pro se filed an "amended motion for new trial in the alternative motion for out of time appeal." Browning was appointed new counsel on July 10, 2007. Following a hearing on October 23, 2007, Browning's motion for new trial, as amended, was denied on November 5, 2007. Also on November 5, 2007, the trial court issued a separate order finding that as a matter of law, the aggravated assault merged with the felony murder for the purpose of sentencing, and vacated the sentence imposed for the aggravated assault. A notice of appeal to the Court of Appeals of Georgia from the judgments of conviction and sentences was filed on November 16, 2007, and an amended notice of appeal to this Court was filed on November 21, 2007. The case was docketed in this Court on December 5, 2007, and the appeal was submitted for decision on January 28, 2008.
[2] Browning is claiming the incompetency of trial counsel and not that he suffered the actual and/or constructive denial of counsel so as to relieve him of the burden of demonstrating prejudice from errors on the part of counsel. In any event, a presumption of prejudice is appropriate only in a very narrow range of cases. State v. Heath, 277 Ga. 337, 339, 588 S.E.2d 738 (2003).
[3] Browning does not claim that trial counsel was ineffective for not attempting to secure relief from the initially-imposed improper sentence for aggravated assault. Moreover, the record contains an August 11, 1998, letter from trial counsel to Browning stating, inter alia, "[a]s you know, any aggravated assault sentence should have been merged into your life sentence," and that if the trial judge did not agree, the matter could be taken to this Court. In any event, Browning secured the vacating of the improper sentence. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1774004/ | 94 S.W.3d 65 (2002)
Jackson O. GOSS and Susan Goss, Appellants
v.
Bobby D. ASSOCIATES, an Ohio General Partnership, Appellee
Johnny Green, Appellant
v.
Bobby D. Associates, an Ohio General Partnership, Appellee
Edward N. Walsh and Laura S. Walsh, Appellants
v.
Bobby D. Associates, an Ohio General Partnership, Appellee
Daniel D. Hammond, Jr., and Lisa Hammond, Appellants
v.
Bobby D. Associates, an Ohio General Partnership, Appellee
No. 12-02-00020-CV to 12-02-00023-CV.
Court of Appeals of Texas, Tyler.
August 26, 2002.
Rehearing Overruled September 18, 2002.
*67 Richard L. Ray, Canton, for appellants.
Crystal L. Landes, McCue & Lee, Addison, Gregory P. Supan, Dallas, for appellee.
Panel consisted of GOHMERT, Jr., C.J., WORTHEN, J., and GRIFFITH, J.
Appellants Jackson O. Goss and Susan Goss, Johnny Green, Edward N. Walsh and Laura Walsh, and Daniel D. Hammond and Lisa Hammond, in four separate appeals, complain of the trial court's grant of summary judgment in favor of Appellee Bobby D. Associates, an Ohio general partnership ("BDA"). We affirm. Because the outcome of these cases depends on our determination of common issues, we consider Appellants' issues together and deliver one opinion.
BACKGROUND
By four separate contracts entitled "Contract for Deed," Jackson O. Goss and Susan Goss, Johnny Green, Edward N. Walsh and Laura Walsh, and Daniel D. Hammond and Lisa Hammond (collectively "Appellants") agreed to purchase certain commercial real estate lots (the "lots") from Wild Willie II Corporation ("Wild Willie"). Under the terms of the contracts, Appellants agreed to pay the purchase price and accrued interest in monthly installments and Wild Willie agreed to convey the lots to the respective purchasers when the purchase price was paid in full. After Appellants executed the subject contracts, Wild Willie conveyed the lots to The Cadle Company, who in turn conveyed the lots to BDA. Appellants ceased making payments to BDA and went into default under the terms of their respective contracts. In order to enforce the contracts, BDA sued Appellants in four separate lawsuits, alleging breach of contract.[1]*68 Appellants, acting pro se, filed answers to BDA's allegations. BDA filed a motion for summary judgment in each case, arguing that it was entitled to judgment as a matter of law on its breach of contract claim. Appellants filed identical written responses to the motions. The trial court granted summary judgment to BDA and ordered Appellants to pay the balance owed on their respective contracts.[2]
MOTION FOR SUMMARY JUDGMENT
Standard of Review
The standard of review for a summary judgment requires that the party with the burden of proof show it is entitled to judgment by establishing each element of its claim or defense as a matter of law, or by negating an element of a claim or defense of the opposing party as a matter of law. Martin v. Harris County Appraisal Dist., 44 S.W.3d 190, 193 (Tex.App.Houston [14th Dist.] 2001, pet. denied); TEX. R. CIV. P. 166a(c). When a motion for summary judgment raises multiple grounds, we may affirm if any ground is meritorious. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex.1996); Hanson v. Republic Ins. Co., 5 S.W.3d 324, 327 (Tex. App.-Houston [1st Dist.] 1999, pet. denied). Since the burden of proof is on the movant, and all doubts about the existence of a genuine issue of material fact are resolved against the movant, we must view the evidence and its reasonable inferences in the light most favorable to the non-movant. See Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex.1965). The only question is whether or not an issue of material fact is presented. See TEX. R. CIV. P. 166a(c).
Once the movant has established a right to summary judgment, the non-movant has the burden to respond to the motion for summary judgment and present to the trial court any issues that would preclude summary judgment. See, e.g., City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex.1979). Where summary judgment does not specify the grounds on which it was granted, the non-movant on appeal must show that each ground alleged in the motion is insufficient to support it. Duran v. Furr's Supermarkets, Inc., 921 S.W.2d 778, 784 (Tex.App.-El Paso 1996, writ denied).
BDA's Right to Judgment as a Matter of Law
In its motion for summary judgment, BDA argued that it was entitled to judgment as a matter of law because it had conclusively established all of the necessary elements of its breach of contract claim against Appellants. The elements of breach of contract are (1) the existence of a valid contract, (2) the performance or tendered performance by the claimant, (3) a breach of the contract by the defendant, and (4) damages resulting from that breach. Southwell v. University of Incarnate Word, 974 S.W.2d 351, 354-55 (Tex. App.-San Antonio 1998, pet. denied).
To support its claim for breach of contract in each case, BDA attached the contract, various affidavits, and a copy of its First Requests for Admissions to Appellants, *69 which went unanswered and were deemed admitted. TEX. R. CIV. P. 198.2(c). This evidence established that valid contracts were executed by Appellants and that BDA tendered performance under the contracts after Appellants stopped making payments by offering to convey the lots to Appellants by special warranty deed in exchange for the execution of a real estate lien note and a deed of trust. However, these documents were not executed by Appellants. The evidence also established that Appellants failed to make the required payments and that BDA suffered damages in the total amount of the unpaid balances of the contracts. BDA met its burden of producing sufficient evidence on every element of its breach of contract claim against each Appellant; therefore, BDA established that it was entitled to judgment as a matter of law.
Appellants impliedly request that we disregard their deemed admissions and argue that due to their ignorance of the law, their failure to file responses to the requests for admissions should be excused. Ignorance of the law is no excuse. Cherokee Water Co. v. Forderhause, 727 S.W.2d 605, 615 (Tex.App.-Texarkana 1987), rev'd on other grounds, 741 S.W.2d 377 (Tex. 1987). The effect of Appellants' failure to file responses is that the matters admitted were conclusively established unless, on motion, the court permitted the withdrawal or amendment of the admissions. TEX.R. CIV. P. 198.3. Appellants took no action to withdraw their deemed admissions; therefore, Appellants waived any error in the trial court's consideration of the deemed admissions. TEX. R. APP. P. 33.1(a). Furthermore, a pro se litigant is held to the same standards as licensed attorneys and must comply with applicable laws and rules of procedure. Holt v. F.F. Enterprises, 990 S.W.2d 756, 759 (Tex. App.-Amarillo 1998, pet. denied); Greenstreet v. Heiskell, 940 S.W.2d 831 (Tex. App.-Amarillo 1997, no pet.). If a pro se litigant is not required to comply with the applicable rules of procedure, he would be given an unfair advantage over a litigant who is represented by counsel. Id. at 835. Therefore, Appellants' excuse for not answering BDA's requests for admissions is meritless, and the deemed admissions are part of the summary judgment record.
Once the movant establishes its entitlement to a summary judgment, the burden of proof shifts to the non-movant to present evidence raising a question of fact in support of its claim or defense. State v. Durham, 860 S.W.2d 63, 68 (Tex.1993). Mere conclusory statements do not constitute effective summary judgment proof. Id. Once BDA established that it was entitled to judgment, the burden shifted to Appellants to raise a question of fact. To support their contention that a fact issue remains, Appellants argue that BDA should not have been granted summary judgment because it lacked standing to assert its cause of action and because the signatures on the contract were procured by fraud.
Standing
Appellants assert that BDA does not have standing to bring any cause of action in Texas courts of law because it "does not exist in the state of Ohio" and has never obtained the necessary certificate of authority from the Texas Secretary of State as a prerequisite for proceeding with its cause of action in Texas state courts. In support of this argument, Appellants attached to their responses to BDA's motion for summary judgment a copy of a certification from the Ohio Secretary of State that its records were devoid of any such "Ohio corporation, Foreign Corporation, Ohio Limited Liability Company, Foreign *70 Limited Liability Company, Ohio Limited Partnership, Foreign Limited Partnership, Ohio Limited Liability Partnership, Foreign Limited Liability Partnership, Trade Name Registration, or Report of Use of Fictitious Name, either active or inactive, known as BOBBY D. ASSOCIATES." Appellants also attached a certification from the Texas Secretary of State reporting that none of its records revealed any mention of a foreign corporation, limited partnership, or limited liability company on file with the name of "BOBBY D. ASSOCIATES."
In response, BDA argues that it is a general partnership and not a corporation. BDA asserts that as a general partnership, it is not required to register with either the Texas or Ohio Secretary of State because no law in either state mandates that a general partnership register with the secretary of state.
In support of their argument that BDA lacks standing, Appellants cite article 8.18(A) of the Texas Business Corporation Act. Article 8.18(A) states that no foreign corporation that has conducted or is conducting business in Texas without a certificate of authority shall be permitted to maintain any action in any court of this state on any cause of action arising out of the transaction of business in this state until the corporation has obtained a certificate of authority. TEX. BUS. CORP. ACT ANN. art. 8.18(A) (Vernon 1980).
For Appellants' argument to have merit (and for article 8.18(A) to apply), BDA must be a "foreign corporation." A "foreign corporation" is defined as "a corporation for profit organized under the laws other than the laws of this state." TEX. BUS. CORP. ACT ANN. art. 1.02(A)(14) (Vernon 1980). The record reflects that BDA's partnership agreement describes BDA as an Ohio "general partnership"and is not "a corporation for profit organized under the laws" of Ohio. Since BDA is not a "foreign corporation," article 8.18(A) does not apply.
Even if BDA were a "foreign corporation," it would have standing to assert its cause of action. A foreign corporation is required to obtain a certificate of authority only if it is "transacting business" in Texas. TEX. BUS. CORP. ACT ANN. art. 8.01(A) (Vernon 1980). Under article 8.01(B)(8) of the Texas Business Corporation Act,
[a] foreign corporation shall not be considered to be transacting business in this state, for the purposes of [the Business Corporation Act], by reason of carrying on in this state any one or more of the following activities:
...
(8) Securing or collecting debts due to it or enforcing any rights in property securing the same.
TEX. BUS. CORP. ACT ANN. art. 8.01(B)(8) (Vernon Supp.2002). In filing its actions against Appellants, BDA is attempting to collect debts owed by Appellants. Accordingly, even if BDA were a "foreign corporation," it would have standing to bring these suits without first obtaining a certificate of authority. See In re Hibernia Nat'l Bank, 21 S.W.3d 908, 910 (Tex.App.-Corpus Christi 2000, no pet.).
Furthermore, the Texas Revised Partnership Act governs partnerships in the State of Texas, and does not require an out-of-state partnership to register with the Texas Secretary of State before filing an action in a Texas court. The law governing partnerships in Ohio also does not require a partnership to register with the Ohio Secretary of State at any time. See OHIO REV. CODE ANN. § 1775 (Anderson 2002). Appellants' sole issue, as it relates to standing, is overruled.
*71 Fraud
Appellants next argue that the signatures on the contract for deed are not genuine and were procured by fraud. To defeat BDA's motion for summary judgment, Appellants had the burden to come forth with some evidence on each element of their affirmative defense of fraud. Albritton v. Henry S. Miller Co., 608 S.W.2d 693, 695 (Tex.Civ.App.-Dallas 1980, writ ref'd n.r.e.). The elements of common-law fraud are that (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 the statement recklessly without any knowledge of truth and as a positive assertion, (4) the representation was made with the intention that it be acted upon by the other party, (5) that party acted in reliance upon the representation, and (6) that party suffered injury. Johnson & Higgins, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex.1998).
Appellants are correct in their assertion that an allegation of fraud will raise a fact issue necessary to defeat a summary judgment. They are incorrect, however, that an allegation of fraud, without more, will defeat a summary judgment. As proof of fraud, Appellants offer a document purported to be an "affidavit" of Douglas F. Martinek, the former vice-president of Wild Willie. BDA filed written objections to both the form and substance of the "affidavit," arguing inter alia that the document (1) is not made on Mr. Martinek's personal knowledge as required by rule 166a(f) of the Texas Rules of Civil Procedure, (2) does not affirmatively show that Mr. Martinek was competent to testify to the matters stated therein, (3) contains inadmissible hearsay, and (4) contains conclusory statements that lack a proper predicate. The trial court sustained BDA's objections to the "affidavit" and other summary judgment evidence in one of the cases, but did not rule on BDA's objections orally or in writing in the other three cases.[3] BDA maintains that its objections to Mr. Martinek's "affidavit" in the other three cases were "implicitly sustained" by the trial court in its grant of summary judgment. We need not decide whether BDA's objections to Martinek's "affidavit" were implicitly sustained because the document was not competent summary judgment evidence; therefore, BDA did not have to object to the "affidavit" to keep it from being considered by the trial court. See Beasley v. Burns, 7 S.W.3d 768, 770 (Tex.App.-Texarkana 1999, pet. denied).
The only piece of evidence Appellants rely on to substantiate their fraud claims is a portion of Martinek's "affidavit" where he states, "I suspect that some of the signatures on the Contract of Deeds are not genuine." However, Appellants admitted that their true and correct signatures were on the contracts for deed through their deemed admissions. The trial court cannot consider affidavits offered by the non-movant to contradict deemed admissions in cases involving summary judgments. Id. Therefore, the deemed admissions were the controlling evidence before the trial court, and the court could not properly have considered *72 Martinek's "affidavit" that attempted to controvert Appellants' deemed admissions. Id.
Appellants have not presented any evidence on any of the elements of fraud. Therefore, Appellants have not met their burden of establishing that a genuine issue of material fact exists on their affirmative defense of fraud. Appellants' sole issue, as it relates to fraud, is overruled.
CONCLUSION
Appellants failed to raise a genuine issue of material fact; therefore, the trial court did not err in granting summary judgment in favor of BDA.
The trial court's judgment is affirmed.
NOTES
[1] BDA named Appellants as defendants in the following actions: Jackson O. Goss and Susan Goss (Cause No. 00-00168); Johnny Green (Cause No. 00-00180); Edward N. Walsh and Laura Walsh (Cause No. 00-00204); and Daniel D. Hammond and Lisa Hammond (Cause No. 00-00205).
[2] Only the Gosses and Green appeared and argued at their summary judgment hearings; the Walshes and Hammonds did not attend their summary judgment hearings.
[3] The trial court sustained the objections to the affidavit at the hearing on the motion for summary judgment in Mr. Green's case and did not rule on the objections at the hearing on the motion in the Gosses' case. The court also did not rule on BDA's objections in the Walshes' or the Hammonds' case. In his brief, Mr. Green did not challenge the court's ruling striking his summary judgment evidence; therefore, we are precluded from considering the evidence on appeal. See Rayl v. Borger Economic Dev. Corp., 963 S.W.2d 109, 113 (Tex.App.-Amarillo 1998, no pet.) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2498973/ | 12 F. Supp. 2d 597 (1998)
CORPORATE HEALTH INSURANCE INC., et al.
v.
The TEXAS DEPARTMENT OF INSURANCE, et al.
Civil Action No. H-97-2072.
United States District Court, S.D. Texas, Houston Division.
September 18, 1998.
*598 *599 *600 *601 *602 John Bruce Shely, Andrews and Kurth, Houston, TX, for Corporate Health Insurance Inc., Aetna Health Plans of Texas Inc., Aetna Health Plans of North Texas Inc., Aetna Life Insurance Company.
Harry G. Potter, III, Asst. Atty. General, General Litigation, Austin, TX, George E. Pletcher, Helm Pletcher Bowen & Saunders, Houston, TX, George Parker Young, Frideman Young and Suder, Fort Worth, TX, David C. Mattax, Office of Attorney General, Austin, TX, David Keltner, Jose Henry Brantley & Keltner, Fort Worth, TX, for The Texas Department of Insurance, Elton Bomer.
GILMORE, District Judge.
ORDER
Pending before the Court are Defendants' motion to dismiss, which has been converted into a motion for summary judgment, (Instrument No. 10), and Plaintiffs' motion for summary judgment, (Instrument No. 20). Based on the parties' submissions and the applicable law, the Court finds that Defendants' and Plaintiffs' motions should be GRANTED in PART and DENIED in PART.
I. Background
Plaintiffs Corporate Health Insurance, Inc., Aetna Health Plans of Texas, Inc., Aetna Health Plans of North Texas, Inc., and Aetna Life Insurance Company bring this action against Defendants Texas Department of Insurance (the "Department") and Elton Bomer ("Bomer"), Commissioner of the Texas Department of Insurance, and Dan Morales ("Morales"), Attorney General of the state of Texas, in their official capacities, seeking declaratory and injunctive relief. Plaintiffs request a declaration that Texas Senate Bill 386, the Health Care Liability Act (the "Act"), codified as TEX. CIV. PRAC. & REM. CODE ANN. §§ 88.001-88.003 (West 1998), and which adds or amends TEX. INS. CODE ANN. arts. 20A.09, 20A.12, 20A.12A, 21.58A, and 21.58C (West 1998), is preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C.A. § 1001 et seq. (West 1985 & Supp.1998), and by the Federal Employees Health Benefit Act ("FEHBA"), 5 U.S.C.A. § 8901 et seq. (West 1967 & Supp.1996). Plaintiffs also seek, if necessary, to enjoin the enforcement of the Act as it relates to employee benefit plans covered by ERISA and FEHBA.
The Act allows an individual to sue a health insurance carrier, health maintenance organization, or other managed care entity for damages proximately caused by the entity's failure to exercise ordinary care when making a health care treatment decision. TEX. CIV. PRAC. & REM. CODE ANN. § 88.002(a) (West 1998). In addition, under the Act, these entities may be held liable for substandard health care treatment decisions made by their employees, agents, or representatives. Id. § 88.002(b).[1] The Act also *603 establishes an independent review process for adverse benefit determinations and requires an insured or enrollee to submit his or her claim challenging an adverse benefit determination to a review by an independent review organization if such a review is requested by the managed care entity. Id. § 88.003(c). Additional responsibilities for HMOs and further requirements concerning the review of an adverse benefit determination by an independent review organization are also addressed by the Act. See TEX. INS. CODE ANN. arts. 20A.09, 20A.12, 20A.12A, 21.58A, and 21.58C (West 1998).
On July 21, 1997, Defendants filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim and to dismiss Plaintiffs' suit against the Department and Bomer as improper parties. Defendants argue that dismissal is appropriate for the following reasons:
Senate Bill 386 regulates the quality of care provided by the HMO[s] operating in Texas. ERISA and FEHBA, in contrast, govern what types of regulations may be placed on an employee benefit plan. The plain meaning of the statute shows that the purpose of Senate Bill 386 is to prevent health plans from escaping liability for the medical decisions they "make," "control" or "influence." Senate Bill 386 does not seek to regulate how HMO's make benefit or coverage determinations; nor does it proscribe requirements governing the structure of a benefit plan. Accordingly, the ERISA and FEHBA preemption clauses do not apply to Senate Bill 386.
(Defendants' Summary of Argument, Instrument No. 25 at 1). If the Court were to determine that certain provisions of the Act relate to employee welfare benefit plans, Defendants ask this Court to sever any "non-liability" provisions of the Act that it finds to be preempted, saving the valid quality of care liability provisions. (Defendants' Reply, Instrument No. 24 at 8 n. 3). Defendants also contend that the Eleventh Amendment bars suit against both the Texas Department of Insurance and Bomer because the state of Texas is immune from suit. Furthermore, according to Defendants, there is "a real question" as to whether Elton Bomer is a proper party given the Plaintiffs' allegations in their complaint. (Defendants' Brief, Instrument No. 11 at 38 n. 37).
On July 29, 1997, Plaintiffs filed a motion for summary judgment, contending that the Act "impermissibly interferes with the purpose, structure and balance of ERISA and FEHBA, thereby injecting state law into an area exclusively reserved for Congress." (Plaintiffs' Summary of Argument, Instrument No. 21 at 1). Plaintiffs contend that the language in the Act expressly "refers to" ERISA plans, and that the Act has a connection with ERISA plans because it purports to impose state law liability on ERISA entities and to mandate the structure of plan benefits and their administration. Plaintiffs also maintain that the Act wrongfully binds employers and plan administrators to particular choices and impermissibly creates an alternate enforcement mechanism.
On April 24, 1998, the Court held a hearing on Defendants' motion to dismiss and Plaintiffs' motion for summary judgment. At the hearing, the Court informed the parties that Defendants' motion to dismiss would be converted into a motion for summary judgment. Then, on May 15, 1998, Plaintiffs filed their First Amended Complaint for Declaratory Judgment and Permanent Injunction, adding Morales as a defendant in this case.
II. 12(b)(6) Motion to Dismiss Standard of Review
Rule 12(b)(6) allows for dismissal if a plaintiff fails "to state a claim upon which relief may be granted[.]" FED. R. CIV. P. 12(b)(6). Such dismissals, however, are rare, *604 Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th Cir.1986), and only granted where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-6, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957). Dismissal can be based either on a lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. 851 F. Supp. 254, 259 (N.D.Tex.1994).
In determining whether a dismissal is warranted pursuant to Rule 12(b)(6), the Court accepts as true all allegations contained in the plaintiffs complaint. Gargiul v. Tompkins, 704 F.2d 661, 663 (2d Cir.1983), vacated on other grounds, 465 U.S. 1016, 104 S. Ct. 1263, 79 L. Ed. 2d 670 (1984); Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982). In addition, all reasonable inferences are to be drawn in favor of the plaintiff's claims. Kaiser Aluminum, 677 F.2d at 1050. "To qualify for dismissal under Rule 12(b)(6), a complaint must on its face show a bar to relief." Clark, 794 F.2d at 970.
If the court, in its discretion, accepts for consideration matters that are beyond the pleadings then the motion to dismiss is converted into a motion for summary judgment under Rule 12(b). Rule 12(b) states, in pertinent part, that:
[i]f, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56....
FED. R. CIV. P. 12(b). A court is more likely to consider matters outside the pleadings if the "`extra-leading material is comprehensive and will enable a rational determination of a summary judgment motion[.]'" Isquith for and on Behalf of Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 193 n. 3 (5th Cir.1988) (quoting 5 CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1366 (1969)). However, the Court is unlikely to do so when it is scanty, incomplete, or inconclusive. Id.
The court must give all parties notice of such a conversion and provide them with an opportunity both to be heard and to present further materials in support of their positions on the motion. Nowlin v. Resolution Trust Corp., 33 F.3d 498, 504 (5th Cir.1994). Following conversion, the court should permit the parties to engage in discovery as appropriate before ruling on the converted motion. Washington v. Allstate Ins. Co., 901 F.2d 1281 (5th Cir.1990).
In this case, having received for consideration matters that are beyond the pleadings of the parties such as affidavits, contracts for health benefit plans, and statistical data, the Court will convert Defendants' motion to dismiss into a motion for summary judgment. Given that Plaintiffs subsequently filed a motion for summary judgment on the same issues, Plaintiffs have received ample notice that the case may be decided at this stage on the merits. Furthermore, at the motions hearing held on April 24, 1998, the Court informed the parties of its intention to convert Defendants' motion into a motion for summary judgment. The parties also had an additional opportunity to be heard at the hearing and to present any additional evidence. Thus, both parties had sufficient notice of the conversion.
III. Summary Judgment Standard
Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56. A fact is "material" if its resolution in favor of one party might affect the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). An issue is "genuine" if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. Id. If the evidence rebutting the motion for summary judgment is only colorable or not significantly probative, summary judgment should be granted. Id. at 249-50, 106 S. Ct. at 2511; see Lewis v. Glendel Drilling Co., 898 F.2d 1083, 1088 (5th Cir.1990).
*605 Under Rule 56(c) of the Federal Rules of Civil Procedure, the moving party bears the initial burden of informing the district court of the basis for its belief that there is an absence of a genuine issue for trial and for identifying those portions of the record that demonstrate such absence. Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 1355-56, 89 L. Ed. 2d 538 (1986); Leonard v. Dixie Well Serv. & Supply, Inc., 828 F.2d 291, 294 (5th Cir.1987).
Where the moving party has met its Rule 56(c) burden, the nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts ... [T]he nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 586-87, 106 S. Ct. at 1356 (quoting FED. R. CIV. P. 56(e)) (emphasis in original); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986); Leonard, 828 F.2d at 294. To sustain the burden, the nonmoving party must produce evidence admissible at trial. Anderson, 477 U.S. at 255, 106 S. Ct. at 2514; Thomas v. Price, 975 F.2d 231, 235 (5th Cir.1992) ("To avoid a summary judgment, the nonmoving party must adduce admissible evidence which creates a fact issue ...").
IV. Improper Parties
Defendants argue that the Department and Bomer are improper parties to this suit. (Defendants' Motion, Instrument No. 10 at 10; Defendants' Reply, Instrument No. 24 at 10). First, Defendants contend that the Eleventh Amendment bars suit against both parties. The Eleventh Amendment provides that "[t]he judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state or by citizens or subject of any foreign state." U.S.CONST. amend. XI. In addition, the Eleventh Amendment "bars suit against a state entity ... regardless of whether money damages or injunctive relief is sought. In determining whether an entity is entitled to ... immunity, [the court] ... `must examine the particular entity in question and its powers and characteristics as created by state law....'" Voisin's Oyster House, Inc. v. Guidry, 799 F.2d 183, 186 (5th Cir.1986) (quoting Laje v. R.E. Thomason Gen. Hosp., 665 F.2d 724, 727 (5th Cir.1982)).
Several factors are considered in determining whether an agency is an arm of the state including: (1) whether state statutes and case law view the agency as an arm of the state; (2) the source of the entity's funding; (3) whether the entity is concerned with local or statewide problems; (4) the degree of the agency's authority which is independent from the state; (5) whether the entity can sue and be sued in its own name; and (6) whether it has the right to hold and use property. Guidry, 799 F.2d at 186-87. "Positive answers to the latter two inquiries mitigate against an entity's being an alter ego of the State and thus against Eleventh Amendment immunity." Correa v. City of Bay City, 981 F. Supp. 477, 479 (S.D.Tex. 1997).
The Department is clearly a state agency, created by the laws of the state of Texas. See TEX. INS. CODE ANN. art. 1.01 et seq. (West 1998); El Paso Elec. Co. v. Texas Dep't of Ins., 937 S.W.2d 432, 434 (Tex.1996). Its primary responsibility is "to regulate the business of insurance in this state." TEX. INS. CODE ANN. art. 1.01A (West 1998). The Department is in the executive branch of the state government, and is controlled by an executive officer, the Commissioner, who is appointed by the Department with the advice and consent of the Senate of Texas. Id. art. 1.09. Several members of the Department, such as deputies, assistants, and other personnel, are appointed by the Commissioner. Id. art. 1.02. All of the above factors favor a finding that the Department is an arm of the State of Texas and therefore entitled to Eleventh Amendment immunity. See Correa, 981 F.Supp. at 479. Consequently, the Court DISMISSES the Department from this lawsuit.
With respect to state officials, "`a gaping hole in the shield of sovereign immunity created by the [E]leventh [A]mendment and the Supreme Court' is the doctrine" of *606 Ex Parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908). Saltz v. Tennessee Dep't of Employment Sec., 976 F.2d 966, 968 (5th Cir.1992) (quoting Brennan v. Stewart, 834 F.2d 1248, 1252 (1988)). Under the Ex Parte Young doctrine, "a federal court, consistent with the Eleventh Amendment, may enjoin state officials to conform their future conduct to the requirements of federal law, even though such an injunction may have an ancillary effect on the state treasury." Quern v. Jordan, 440 U.S. 332, 337, 99 S. Ct. 1139, 1143, 59 L. Ed. 2d 358 (1979). "The essential ingredients of the Ex Parte Young doctrine are that a suit must be brought against individual persons in their official capacities as agents of the state and the relief sought must be declaratory or injunctive in nature and prospective in effect." Saltz, 976 F.2d at 968 (footnote omitted); see also CIGNA Healthplan of La. v. State of Louisiana, 82 F.3d 642, 644 n. 1 (5th Cir. 1996) (recognizing "the federal courts have jurisdiction to hear suits against state officials where, as here, the plaintiffs seek only prospective declaratory or injunctive relief to prevent a continuing violation of federal law").
In this case, Plaintiffs have sued Bomer in his official capacity and also seek prospective injunctive relief, not monetary damages. Therefore, Defendants' argument that suit against Bomer is barred by the Eleventh Amendment fails.
Second, Defendants argue that "[t]here may be a real question whether Commissioner Bomer is a proper party" based on the Plaintiffs' allegations in their complaint. (Defendants' Brief, Instrument No. 11 at 38 n. 37). According to Defendants, Plaintiffs' "only allegation ... [regarding Bomer's] official administrative capacity ... [concerns] his responsibility for enforcing state insurance law. The only role for the Commissioner in Senate Bill 386 is to approve IROs (independent review organization) and it is very unclear whether ... [Plaintiffs are] alleging [that] the IRO procedures are preempted." (Id. at 38 n. 37). In response, Plaintiffs maintain that Bomer is a proper party to this suit because as the Commissioner, Bomer "is responsible for ensuring compliance with ... the establishment and supervision of independent review organizations." (Plaintiffs' Motion, Instrument No. 20 at 5). The Court agrees with Plaintiffs' contention.
Clearly, Plaintiffs contest the inclusion of the IRO provisions in the Act. In particular, Plaintiffs state that the "IRO procedure improperly affects the administration of employee benefit plans, and is therefore an unwarranted extension into an area governed by ERISA.... As such, either directly or indirectly, HMOs and PPOs will incur costs in connection with the establishment of IROs under the Act, thereby also supporting a finding of preemption." (Plaintiffs' Motion, Instrument No. 20 at 17 n. 17). Plaintiffs elaborated on this position at the hearing held on April 24, 1998. (Transcript, Instrument No. 60 at 21). Furthermore, Defendants concede that Bomer, as the Commissioner, is responsible for approving the IRO procedure. (Defendants' Brief, Instrument No. 11 at 38 n. 37).
Moreover, Defendants do not provide the Court with any authority for their proposition that Bomer is an improper party to this suit. On the contrary, the Commissioner of the Texas Board of Insurance has been named as a defendant in other cases similar to the instant case. See NGS Am., Inc. v. Barnes, 998 F.2d 296 (5th Cir.1993) (enjoining the Commissioner of Insurance for the state of Texas from enforcing a Texas statute that was preempted by ERISA); E-Systems, Inc. v. Pogue, 929 F.2d 1100 (5th Cir.1991) (holding that the Texas Administrative Services Tax Act was preempted by ERISA and enjoining the Commissioner of Insurance from collecting the tax); Texas Commerce Bancshares, Inc. v. Barnes, 798 F. Supp. 1286 (W.D.Tex.1992) (examining plaintiff's award of attorney fees and costs in ERISA preemption action filed against the Commissioner of Insurance). Consequently, given Bomer's role with the IRO procedure and other cases where the Commissioner has been named as a defendant, the Court finds that Bomer is a proper party to this suit.
V. Insurance Savings Clause
Plaintiffs claim that the Act is preempted by ERISA. Thus, as an initial *607 matter, the Court will examine whether the Act is saved from preemption by ERISA's insurance savings clause.
ERISA provides that "nothing in this title shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking or securities." 29 U.S.C.A. § 1144(b)(2)(a) (West 1985) (emphasis added). The Supreme Court "delineated the requirements that a state statute must meet in order to come within the insurance facet of the savings clause" in Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 741-47, 105 S. Ct. 2380, 2389-93, 85 L. Ed. 2d 728 (1985). The Supreme Court in Metropolitan Life took the following conjunctive two-step approach:
First, the [C]ourt determined whether the statute in question fitted the common sense definition of insurance regulation. Second, it looked at three factors: (1) [w]hether the practice (the statute) has the effect of spreading policyholders' risk; (2) whether the practice is an integral part of the policy relationship between the insurer and the insured; and (3) whether the practice is limited to entities within the insurance industry. If the statute fitted the common sense definition of insurance regulation and the court answered "yes" to each of the questions in the three part test, then the statute fell within the savings clause exempting it from ERISA preemption.
Tingle v. Pacific Mut., Ins. Co., 996 F.2d 105, 107 (5th Cir.1993) (footnote omitted) (emphasis added). Therefore, "if a statute fails either to fit the common sense definition of insurance regulation or to satisfy any one element of the three-factor Metropolitan Life test, then the statute is not exempt from preemption by the ERISA insurance savings clause." CIGNA, 82 F.3d at 650.
When the Court begins to apply this test to the Act, it can both start and finish its analysis with the third factor of the Metropolitan Life test: on its face, the Act is obviously not "limited to entities within the insurance industry." Even though the Act lists health insurance carriers as one group covered by its terms, it also specifies that it applies to health maintenance organizations or other managed care entities for a health care plan. TEX. CIV. PRAC. & REM. CODE ANN. § 88.002(a) (West 1998). As the Act fails to meet the third factor of the Metropolitan Life test, the Court finds that the statute is not saved from preemption by the insurance exception of Section 514(b) of ERISA. See CIGNA, 82 F.3d at 650 (holding that Louisiana's Any Willing Provider statute was not exempt from preemption by ERISA's savings clause because the statute was not limited to entities within the insurance industry).
VI. ERISA Preemption
Having determined that the Act is not saved by the insurance savings clause, the Court must next examine whether the Act is preempted by Section 514(a) of ERISA.
Section 514(a) governs the preemption of state laws by ERISA. More specifically, Section 514(a) provides that ERISA "shall supersede any and all State laws insofar as they ... relate to any employee benefit plan ...." 29 U.S.C.A. § 1144(a) (West 1985) (emphasis added). Under ERISA preemption analysis, a state law relates to an ERISA plan if it has a connection with or reference to such a plan. CIGNA, 82 F.3d at 647.
If the Court determines that certain portions of a state statute are preempted by ERISA and therefore, contravene federal law, then the Court may sever those portions from the statute provided that their invalidity does not affect the remainder of the statute. Texas Pharmacy Ass'n v. Prudential Ins. Co. of Am., 105 F.3d 1035, 1039 (5th Cir.1997). The Court's decision to sever a statute is also based on whether or not that state statute has a provision for severability or nonseverability. Id.
Since pre-emption turns on Congress's intent, the court must begin "with the text of the provision in question, and move on, as need be, to the structure and purpose of the Act in which it occurs." New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655, 115 S. Ct. 1671, 1676, 131 L. Ed. 2d 695 (1995). "A facial challenge to a legislative Act is, of course, the most difficult challenge *608 to mount successfully, since the challenger must establish that no set of circumstances exists under which the Act would be valid." U.S. v. Salerno, 481 U.S. 739, 745, 107 S. Ct. 2095, 2100, 95 L. Ed. 2d 697 (1987). Thus, in this case, the Court must determine whether any claims brought under the Act would relate to an employee benefit plan and would, therefore, be preempted by Section 514(a) of ERISA.
A. What is an ERISA Plan?
First, the Court must examine what constitutes an ERISA plan. An employee welfare benefit plan (which includes health benefits plans), is defined as:
any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability....
29 U.S.C.A. § 1002(1) (West Supp.1998) (emphasis added). The first phrase plan, fund, or program has been interpreted as requiring an "ongoing administrative program" on the part of the employer. See Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S. Ct. 2211, 2217, 96 L. Ed. 2d 1 (1987). A "plan, fund, or program" under ERISA is established if "from the surrounding circumstances a reasonable person can ascertain the intended benefits, class of beneficiaries, the source of financing, and the procedures for receiving benefits." Donovan v. Dillingham, 688 F.2d 1367, 1371, 1373 (11th Cir.1982); see Peckham v. Gem State Mut. of Utah, 964 F.2d 1043, 1047-48 (10th Cir.1992). The administrative program, however, need not be elaborate. Peckham, 964 F.2d at 1048.
The second phrase of the definition established or maintained by an employer
is designed to distinguish situations in which the employer merely acts as a conduit for the marketing of an insurance policy to individual employees (in which case no ERISA plan exists), from the situation in which the employer financially pays for some or all of the plan and/or otherwise is involved in its administration (e.g. defining and administering employee eligibility, or listing the plan as a benefit of employment).
RAND ROSENBLATT, LAW AND THE AMERICAN HEALTH CARE SYSTEM 190 (Supp.1998). In particular, this second phrase is designed to "ensure that the plan is part of an employment relationship.... [This] requirement seeks to ascertain whether the plan is part of an employment relationship by looking at the degree of participation by the employer in the establishment or maintenance of the plan." Peckham, 964 F.2d at 1049.
In Meredith v. Time Ins. Co., 980 F.2d 352, 355 (5th Cir.1993), the Fifth Circuit outlined its "comprehensive test for determining whether a particular plan qualifies as an `employee welfare benefit plan'" under ERISA. Under Meredith, the test requires the full analysis of
whether a plan: (1) exists; (2) falls within the safe-harbor provision established by the Department of Labor; and (3) satisfies the primary elements of an ERISA "employee benefit plan" establishment or maintenance by an employer intending to benefit employees. If any part of the inquiry is answered in the negative, the submission is not an ERISA plan.... [The Court's] analysis is informed by reference to ERISA itself, including germane indications of congressional intent, and to the extent Congress has failed to state its intention on the precise issue in question, we refer to permissible interpretations by the agency charged with administering the statute the Department of Labor.
Id. Furthermore, ERISA does not regulate "bare purchases of health insurance where ... the purchasing employer neither directly or indirectly owns, controls, administers or assumes responsibility for the policy or its benefits." Taggart Corp. v. Life & Health Benefits Admin., Inc., 617 F.2d 1208, 1211 (5th Cir.1980). Thus, in this case, the Court must determine whether the provisions of the Act relate to any employee benefit plan as defined by Meredith.
*609 In this case, Defendants make the following argument:
[Plaintiff] AEtna blurs the distinction between an ERISA plan (established by an employer to provide benefits to an employee) and a health plan (established by health insurance entities as a vehicle for bearing the risks of health insurance and providing coverage to an ERISA plan for those employees). AEtna admits plaintiffs `offer products in the form of managed health care coverage to employees who are enrolled in ERISA and FEHBA plans in Texas.' AEtna may operate as a `health plan,' but AEtna is not an ERISA plan established by an employer.
(Defendants' Reply, Instrument No. 24 at 1). In essence, Defendants argue that Plaintiffs are operating health plans, but that they are not operating ERISA plans that would be preempted by ERISA. The Court agrees.
The Act expressly regulates health insurance carriers, health maintenance organizations and managed care entities by specifically addressing their health plans and not the ERISA plans of employers. Under the Act, "[a] health insurance carrier, health maintenance organization, or other managed care entity for a health care plan has the duty to exercise ordinary care when making health care treatment decisions and is liable for harm to an insured or enrollee proximately caused by its failure to exercise such ordinary care." TEX. CIV. PRAC. & REM. CODE ANN. § 88.002(a) (West 1998). A health insurance carrier "means an authorized insurance company that issues policies of accident and sickness" under Article 3.70-1 of the Texas Insurance Code. TEX. CIV. PRAC. & REM. CODE ANN. § 88.001(6) (West 1998). A health maintenance organization includes "organization[s] licensed under the Texas Health Maintenance Organization Act[.]" Id. § 88.001(7). A managed care entity under the Act is defined as
any entity which delivers, administers, or assumes risk for health care services with systems or techniques to control or influence the quality, accessibility, utilization, or costs and prices of such services to a defined enrollee population, but does not include an employer purchasing coverage or acting on behalf of its employees or the employees of one or more subsidiaries or affiliated corporations of the employer or a pharmacy licensed by the State Board of Pharmacy.
Id. § 88.001(8) (emphasis added).
The health plans provided by health insurance carriers, health maintenance organizations, or managed care entities, as previously defined, and the health care entities themselves cannot constitute ERISA plans because the third inquiry under the Fifth Circuit's test whether the plan satisfies the primary elements of an ERISA "employee benefit plan" must be answered in the negative. Plaintiffs admit that they "offer products in the form of managed health care coverage to employees who are enrolled in ERISA and FEHBA plans in Texas." (Plaintiffs' Motion, Instrument No. 20 at 3). Plaintiffs and the coverage provided by them, however, are not established or maintained by an employer.
Plaintiffs concede that they fall "within the term `managed care entity' as defined in the Act[.]" (Id. at 4). A managed care entity does not include "an employer purchasing coverage or acting on behalf of its employees[.]" TEX. CIV. PRAC. & REM. CODE ANN. § 88.001(8) (West 1998). Therefore, by definition, Plaintiffs and the managed health care plans that Plaintiffs offer would not satisfy the primary elements of an ERISA employee benefit plan because they are not established or maintained by an employer. Rather, Plaintiffs are medical service providers to ERISA plans and their members.[2] Plaintiffs operate health plans rather than ERISA employee benefit plans. Consequently, the Court finds that Plaintiffs and the particular arrangement or services provided by them, that are addressed under the Act, are not ERISA employee benefit plans since the coverage is not established or maintained by an employer. See CIGNA, 82 F.3d at 648 (recognizing that Plaintiffs, an HMO and a *610 health insurer, were not ERISA plans); Washington Physicians Serv. Ass'n v. Gregoire, 147 F.3d 1039, 1043 (9th Cir.1998) (stating that the statute makes it clear that the term "health plans" "refers to the plan offered by the health carrier (e.g., an HMO), not the benefit plan offered by the employer"); Dukes v. US. Healthcare, 57 F.3d 350, 356 (3d Cir.1995) (noting the Department of Labor's argument that plaintiff's claims merely attacked "the behavior of an entity completely external to the ERISA plan[,] [the HMO]").
Nonetheless, Plaintiffs argue that the fact that Aetna is not an ERISA health plan is of "no significance to the preemption analysis." (Plaintiffs' Surreply, Instrument No. 33 at 1). Plaintiffs rely on CIGNA Healthplan of La., Inc. v. State of Louisiana, 82 F.3d 642 (5th Cir.1996), for this argument.
In CIGNA, CIGNA Healthplan of Louisiana ("CIGNA"), a licensed HMO, and Connecticut General Life Insurance Company ("CGLIC"), a licensed health insurer, filed suit against Richard Ieyoub, the Attorney General of the state of Louisiana, seeking a declaratory judgment that Louisiana's Any Willing Provider statute was preempted by ERISA. 82 F.3d at 644. "The Any Willing Provider statute ... mandate[d] that [n]o licensed provider ... who agree[d] to the terms and conditions of the preferred provider contract ... [could] be denied the right to become a preferred provider.'" Id. at 645 (quoting LA. REV. STAT. ANN. § 40:2202(5)(c) (West 1992)). The Fifth Circuit concluded that the statute was preempted by ERISA both because it referred to ERISA-qualified plans by including certain enumerated entities, and because it had a connection with such plans by mandating that "certain benefits available to ERISA plans ... be construed in a particular manner." Id. at 648-49.
Since the Court found that the statute in CIGNA directly affected benefits provided under the plan, the Court did not have to examine whether or not CIGNA or CGLIC was an ERISA plan. Rather, the Court based its decision on the substantial effect that the statute had on all insured plans. Id. at 648. The Court, however, did remark that the fact that CIGNA and CGLIC were not themselves ERISA plans was inconsequential. Id. at 648. It made this statement while discussing the statute's "connection with" ERISA plans. Id. The Court further explained that CIGNA's and CGLIC's status was inconsequential because:
[b]y denying insurers, employer, and HMOs the right to structure their benefits in a particular manner, the statute [wa]s effectively requiring ERISA plans to purchase benefits of a particular structure when they contract with organizations like CIGNA and CGLIC. In that regard, the statute "b[ore] indirectly but substantially on all insured plans" and [wa]s accordingly preempted by ERISA.
Id. at 648-49 (quoting Metropolitan Life, 471 U.S. at 739, 105 S. Ct. at 2389).
In accordance with CIGNA, the Court finds that whether or not Plaintiffs in this case are ERISA plans is inconsequential because, under current Fifth Circuit law, certain severable provisions of the Act, as discussed below, "relate to" ERISA employee benefit plans.
B. "Relates To" Analysis
A state law relates to an ERISA plan "in the normal sense of the phrase if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S. Ct. 2890, 2899-2900, 77 L. Ed. 2d 490 (1983) (emphasis added). The Supreme Court has given the phrase "relates to" a "broad common-sense meaning." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S. Ct. 1549, 1553, 95 L. Ed. 2d 39 (1987). Under this definition,
A state law can relate to an ERISA plan even if that law was not specifically designed to affect such plans, and even if its effect is only indirect. If a state law does not expressly concern employee benefit plans, it will be preempted insofar as it applies to benefit plans in particular cases....
CIGNA, 82 F.3d at 647. "The most obvious class of pre-empted state laws are those that are specifically designed to affect ERISA-governed employee benefits plans." Corcoran *611 v. United HealthCare, Inc., 965 F.2d 1321, 1328 (5th Cir.1992).
In determining whether a state law "relate[s] to" an ERISA plan, the Supreme Court has adopted a pragmatic approach. See Travelers, 514 U.S. at 654-57, 115 S. Ct. at 1676-77. In Travelers, the Court stated that it "must go beyond the unhelpful text [of Section 514(a)] and the frustrating difficulty of defining its key term [`relates to'], and look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive [preemption]." 514 U.S. at 656, 115 S.Ct. at 1677.
As stated by the Court in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., in passing Section 514,
Congress intended `to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burdens of complying with conflicting directives among States or between States and the Federal Government ..., [and to prevent] the potential for conflict in substantive law ...
requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction.'
514 U.S. at 656, 115 S. Ct. at 1677 (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S. Ct. 478, 484, 112 L. Ed. 2d 474 (1990)). Therefore, "[t]he basic thrust of ... [ERISA's] pre-emption clause ... was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans." Travelers, 514 U.S. at 657, 115 S. Ct. at 1677-78.
Although the text of Section 514(a) is clearly expansive, in so far as it affects all state laws that relate to ERISA plans, the phrase "relate[s] to" does not "extend to the furthest stretch of its indeterminacy[.]" Id. at 655, 115 S. Ct. at 1677. If that were the case, "then for all practical purposes preemption would never run its course" and courts would be required "to read Congress's words of limitation as mere sham, and to read the presumption against preemption out of the law whenever Congress speaks to the matter with generality." Id. Thus, in particular, ERISA's "relate[s] to" language was not "intended to modify `the starting presumption that Congress does not intend to supplant state law'" which falls within areas of traditional state regulation. De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520 U.S. 806, ___, 117 S. Ct. 1747, 1751-52, 138 L. Ed. 2d 21 (1997) (quoting Travelers, 514 U.S. at 654-55, 115 S. Ct. at 1676).
"The historic powers of the State include the regulation of matters of health and safety." De Buono, 520 U.S. at ___, 117 S.Ct. at 1751-52 (citing Hillsborough County, Fla. v. Automated Med. Laboratories, Inc., 471 U.S. 707, 716, 105 S. Ct. 2371, 2376, 85 L. Ed. 2d 714 (1985)). The Act, in this case, regulates the medical decisions of health insurance carriers, health maintenance organizations, and other managed care entities, see TEX. CIV. PRAC. & REM. CODE ANN. § 88.002 (West 1998), and therefore, clearly operates in a field that has been traditionally occupied by the States. "[W]here federal law is said to bar state action in fields of traditional state regulation," this Court should work on the "assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Travelers, 514 U.S. at 654-55, 115 S. Ct. at 1676 (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 1152, 91 L. Ed. 1447 (1947)). Consequently, Plaintiffs "bear the considerable burden of overcoming `the starting presumption that Congress does not intend to supplant state law.'" De Buono, 520 U.S. at ___, 117 S.Ct. at 1752.
1. "Reference To"
Under the "reference to" inquiry, the Supreme Court has "held preempted a law that `impos[ed] requirements by reference to [ERISA] covered programs,' ... a law that specifically exempted ERISA plans from an otherwise generally applicable garnishment provision, ... and a common-law cause of action premised on the existence of an ERISA plan." California Div. of Labor Standards Enforcement v. Dillingham *612 Constr. N.A., Inc., 519 U.S. 316, ___, 117 S. Ct. 832, 837-38, 136 L. Ed. 2d 791 (1997) (citations omitted) (quoting District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 131, 113 S. Ct. 580, 584, 121 L. Ed. 2d 513 (1992)). Thus, "[w]here a State's law acts immediately and exclusively upon ERISA plans ... or where the existence of ERISA plans is essential to the law's operation ... that `reference' will result in pre-emption." Dillingham, 519 U.S. at ___, 117 S.Ct. at 838.
In Travelers, the Supreme Court examined New York statutes that imposed "surcharges on bills of patients whose commercial insurance coverage [wa]s purchased by employee health-care plans governed by ERISA and ... on HMOs insofar as their membership fees ... [were] paid by an ERISA plan." 514 U.S. at 649, 115 S.Ct. at 1673-74. Notably, the surcharge on HMOs was "not an increase in the rates to be paid by an HMO to a hospital, but a direct payment by the HMO to the State's general fund." Id. at 650, 115 S. Ct. at 1674. The Court held that the "surcharge statutes ... [could not] be said to make `reference to' ERISA plans in any manner" because the surcharges were "imposed upon patients and HMOs, regardless of whether the commercial coverage or membership, respectively, [wa]s ultimately secured by an ERISA plan, private purchase, or otherwise[.]" Id. at 656, 115 S. Ct. at 1677.
Similarly, in this case, the Act imposes a standard of ordinary care directly upon health insurance carriers and health maintenance organizations when making health care treatment decisions, regardless of whether the commercial coverage or membership therein is ultimately secured by an ERISA plan. See TEX. CIV. PRAC. & REM. CODE § 88.001-88.002 (West 1998). The Act also requires managed care entities to exercise ordinary care when making medical decisions. Id. § 88.002(a). However, as already mentioned, the Act specifically excludes ERISA plans from the definition of a "managed care entity." See id. § 88.001(8). Section 88.001(8) of the Texas Civil Practice and Remedies Code, as added by the Act, provides that a "managed care entity" does not include "an employer purchasing coverage or acting on behalf of its employees." Id. Consequently, as in Travelers, the Act cannot be said to make any reference to ERISA plans.
Plaintiffs, however, maintain that preemption is mandated because the Act has an express reference to ERISA plans in several other provisions. (Plaintiffs' Motion, Instrument No. 20 at 7). In particular, Plaintiffs seem to argue that the mere inclusion of certain terms that allegedly refer to ERISA plans, such as "plan," "health care plan," "health maintenance organization," and "managed care entity," warrants preemption. (Plaintiffs' Motion, Instrument No. 20 at 7-9). Plaintiffs rely on District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 113 S. Ct. 580, 121 L. Ed. 2d 513 (1992), and CIGNA for this proposition.[3]
In Greater Washington, 506 U.S. at 130, 113 S. Ct. at 583, the Supreme Court determined that "Section 2(c)(2) of the District's Equity Amendment Act specifically refer[red] to welfare benefit plans regulated by ERISA and on that basis alone [wa]s preempted." Section 2(c)(2) of the Equity Amendment Act provided the following: "Any employer who provides health insurance coverage for an employee shall provide health insurance equivalent to the existing health insurance coverage of the employee while the employee receives or is eligible to *613 receive workers' compensation benefits under this chapter." Id. at 128, 113 S. Ct. at 582 (quoting D.C. CODE ANN. § 36-307(a-1)(1) (Supp.1992) (emphasis added)). Furthermore, the employer had to provide this health insurance coverage for a maximum of 52 weeks "at the same benefit level that the employee had at the time the employee received or was eligible to receive workers' compensation benefits." Id. (quoting D.C. CODE ANN. § 36-307(a-1)(3) (Supp.1992)). Thus, the health insurance coverage required of employers was "measured by reference to `the existing health insurance coverage' provided by the employer" and had to be maintained at the same benefit level. Id. at 130, 113 S. Ct. at 583-84 (emphasis added) (quoting D.C. CODE ANN. § 36-307(a-1)(1) and (3) (Supp.1992)).
The Court then determined that "[t]he employee's `existing health insurance coverage,' in turn, [wa]s a welfare benefit plan under ERISA ... because it involv[ed] a fund or program maintained by an employer for the purpose of providing health benefits for the employee `through the purchase of insurance or otherwise.'" Id. at 130, 113 S. Ct. at 584 (quoting 29 U.S.C. § 1002(1)). Thus, since the Equity Amendment Act imposed requirements by reference to such employer-sponsored health insurance programs that were subject to ERISA regulation, the Court concluded that the Act was preempted by ERISA. Id. at 130-31, 113 S. Ct. at 584.
Contrary to Plaintiffs' contention, in Greater Washington, the Supreme Court did not conclude that the statute referred to ERISA plans simply because it contained certain terminology. Rather, as explained in California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. at ___, 117 S.Ct. at 838, the Court reasoned that the reference to ERISA plans resulted in preemption because the existence of ERISA plans was essential to the statute's operation.[4] Unlike the statute in Greater Washington, the Act is not premised on the existence of an ERISA plan. It merely requires health insurance carriers, HMOs, and other managed care entities to exercise ordinary care when making medical decisions. The Act imposes this standard on these entities without any reference to or reliance on an ERISA plan.
In CIGNA, 82 F.3d at 645-47, the Fifth Circuit held that Louisiana's Any Willing Provider statute was preempted by ERISA because it referred to ERISA-qualified plans. The statute required all licensed providers "who agre[ed] to the terms and conditions of the preferred provider contract" to be accepted as providers in the preferred provider organization ("PPO"). LA. REV. STAT. ANN. § 40:2202(5)(c) (West 1992) (emphasis added). Under the Health Care Cost Control Act, a "preferred provider contract" was defined as "an agreement `between a provider or providers and a group purchaser or purchasers to provide for alternative rates of payment specified in advance for a defined period of time.'" CIGNA, 82 F.3d at 647-48 (quoting LA. REV. STAT. ANN. § 40:2022(5)(a) (emphasis added)).
The Fifth Circuit then examined the definition of "group purchasers." Under the statute, group purchasers may have included entities "such as `Taft-Hartley trusts or employers who establish or participate in self funded trusts or programs,' which `contract [with health care providers]for the benefit of their ... employees.'" CIGNA, 82 F.3d at 648 (quoting LA. REV. STAT. ANN. § 40:2022(5)(a) (emphasis added)). Since the entities encompassed by the term "group purchasers" included ERISA plans, the Court determined that Louisiana's Health Care Cost Control Act, "and through it the Any Willing Provider statute, expressly refer[red] to ERISA plans." Id.
*614 Unlike the statute in CIGNA, the requirement imposed by the Act does not contain a reference to ERISA plans. The Act states that health insurance carriers, HMOs, and other managed care entities have a duty to exercise ordinary care when making health care treatment decisions. TEX. CIV. PRAC. & REM. CODE ANN. § 88.002 (West 1998). None of these enumerated entities constitute ERISA plans since, by definition, they are not "established or maintained by an employer or by an employee organization ... for the purpose of providing" health care benefits for employees. 29 U.S.C.A. § 1002(1) (West Supp.1998); see TEX. CIV. PRAC. & REM. CODE ANN. § 88.001 (West 1998).
In this case, the Court finds that, as in Travelers, the existence of an ERISA plan is not essential to the operation of the Act. Furthermore, the Act does not work "immediately and exclusively upon ERISA plans." Dillingham, 514 U.S. at ___, 117 S.Ct. at 838. Consequently, the Court concludes that the Act "cannot be said to make a `reference to' ERISA plans in any manner." Travelers, 514 U.S. at 656, 115 S. Ct. at 1677.
Plaintiffs also suggest that the Act explicitly refers to ERISA plans by its use of the term "health care plan" and "managed care entity." (Plaintiff's Motion, Instrument No. 20 at 8). The Act defines "health care plan" as "any plan whereby a person undertakes to provide, arrange for, pay for, or reimburse any part of the cost of any health care services." TEX. CIV. PRAC. & REM. CODE ANN. § 88.001(3) (West 1998). The Act then states that a "managed care entity for a health care plan" must exercise ordinary care when making medical decisions. Id. § 88.002(a) (emphasis added). The phrase "health care plan" cannot be isolated from the term "managed care entity" simply to create a reference to an ERISA plan. In this context, "health care plan" cannot constitute an ERISA plan because a "managed care entity ... does not include an employer purchasing coverage or acting on behalf of its employees[.]" Id. § 88.001(8).
2. "Connection With"
"A law that does not refer to ERISA plans may yet be pre-empted if it has a `connection with' ERISA plans." Dillingham, 519 U.S. at ___, 117 S.Ct. at 838. "To determine whether a state law has the forbidden connection, [the court looks] ... both to `the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive,' as well as to the nature of the effect of the state law on ERISA plans." Id. (quoting Travelers, 514 U.S. at 656, 115 S. Ct. at 1677); see De Buono, 520 U.S. at ___, 117 S.Ct. at 1750 (noting the Court's rejection of a strictly literal reading of Section 514(a) and emphasis on the objectives of the ERISA statute).
Here, Plaintiffs contend that the Act has a "connection with" ERISA plans in several ways. Plaintiffs claim that the Act improperly imposes state law liability on ERISA entities, impermissibly mandates the structure of plan benefits and their administration, unlawfully binds plan administrators to particular choices, and wrongfully creates an alternate enforcement mechanism. (Plaintiffs' Motion, Instrument No. 20 at 9-18).
i. Imposition of State Law Liability
According to Plaintiffs, the "Fifth Circuit has twice held that attempts to impose state law liability on managed care entities in `connection with' their `health care treatment decisions' fall within the scope of the preemption clause." (Plaintiffs' Response, Instrument No. 20 at 10). In particular, Plaintiffs rely on the Fifth Circuit's decisions in Corcoran v. United HealthCare, Inc., 965 F.2d 1321 (5th Cir.1992), and Rodriguez v. Pacificare of Tex., Inc., 980 F.2d 1014 (5th Cir.1993) for this argument.
In Corcoran, 965 F.2d at 1331, the Fifth Circuit held that a Louisiana tort action for the wrongful death of an unborn child was preempted by ERISA. In that case, United HealthCare ("United"), the provider of utilization review services[5] to an employee benefit *615 plan, determined that Mrs. Corcoran's hospitalization during the final months of her pregnancy was not necessary despite her doctors' repeated recommendations for complete bed rest. Id. at 1322-24. The contract between United and Mrs. Corcoran's employer provided that United would "contact the Participant's physician and based upon the medical evidence and normative data determine whether the Participant should be eligible to receive full plan benefits for the recommended hospitalization and the duration of benefits." Id. at 1331 (quotation omitted). Contrary to her doctor's requests, United only authorized ten hours per day of home nursing care for Mrs. Corcoran. Id. at 1324.
While the nurse was off-duty, the fetus went into distress and died. Id. Subsequently, the Corcorans brought suit against United for wrongful death, alleging "that their unborn child died as a result of various acts of negligence committed by" the mother's health plan and United. Id. at 1324.
United argued that the Corcorans' claims were preempted by ERISA because its "decision [was] made in its capacity as a plan fiduciary [and was] about what benefits were authorized under the [p]lan." Id. at 1329. According to United, the company simply applied previously established eligibility criteria in order to determine whether Mrs. Corcoran was qualified for the benefits provided by the plan. Id. Thus, United maintained that, under prevailing ERISA preemption law, the Corcorans could not "sue in tort to redress injuries flowing from decisions about what benefits are to be paid under a plan." Id. at 1330.
The Corcorans, on the other hand, contended that their cause of action sought "to recover benefits solely for United's erroneous medical decision that Mrs. Corcoran did not require hospitalization during the last month of her pregnancy." Id. at 1330. Therefore, the Corcorans continued, United's exercise of medical judgment fell "outside the purview of ERISA preemption." Id.
Unable to agree with either characterization, the Fifth Circuit concluded that United made "medical decisions ... in the context of making a determination about the availability of benefits under the plan." Id. at 1331. The Court reasoned that "United decide[d] `what the medical plan ... [would] pay for.' When United's actions [we]re viewed from this perspective, it ... [became] apparent that the Corcorans [we]re attempting to recover for a tort allegedly committed in the course of handling a benefit determination." Id. at 1332 (quoting the Quality Care Program ("QCP") booklet which contains a description of the QCP, a cost-containment service plan, and the services provided by United). Since United made the erroneous medical decision as a "part and parcel of its mandate to decide what benefits [we]re available under the ... plan[,]" the Court concluded that ERISA's preemption of "state-law claims alleging improper handling of benefit claims [wa]s broad enough to cover the cause of action asserted here." Id. "Although imposing liability on United ... [may] have the salutary effect of deterring poor quality medical decisions, ... [the Court found there was] a significant risk that state liability rules would be applied differently to the conduct of utilization review companies in different states." Id. at 1333.
Despite its finding of preemption, the Court acknowledged "the fact that ... [its] interpretation of the preemption clause ... [left] a gap in remedies within a statute intended to protect participants in employee benefit plans" and suggested a reevaluation of ERISA. Id. at 1333, 1338-39. Indeed, the Fifth Circuit recognized that:
[t]he result ERISA compels us to reach means that the Corcorans have no remedy, state or federal, for what may have been a serious mistake. This is troubling for several reasons. First, it eliminates an important check on the thousands of medical decisions routinely made in the burgeoning utilization review system. With liability rules generally inapplicable, there is theoretically less deterrence of substandard medical decision making. Moreover, if the cost of compliance with a standard of care ... need not be factored into utilization review companies' cost of doing business, bad medical judgments will end up being cost-free to the plans that rely on these companies to contain medical costs. ERISA plans, in turn, will have one less *616 incentive to seek companies that can deliver both high quality services and reasonable prices.
Second, in any plan benefit determination, there is always some tension between the interest of the beneficiary in obtaining quality medical care and the interest of the plan in preserving the pool of funds available to compensate all beneficiaries....
Finally, cost containment features such as the one at issue in this case did not exist when Congress passed ERISA. While we are confident that the result we have reached is faithful to Congress's intent neither to allow state-law causes of actions that related to employee benefit plans nor to provide beneficiaries in the Corcoran's position with a remedy under ERISA, the world of employee benefit plans has hardly remained static since 1974. Fundamental changes such as the widespread institution of utilization review would seem to warrant a reevaluation of ERISA so that it can continue to serve its noble purpose of safeguarding the interests of employees. Our system, of course, allocates this task to Congress, not the courts, and we acknowledge our role today by interpreting ERISA in a manner consistent with the expressed intentions of its creators.
Id. at 1338 (emphasis added).[6] Since Corcoran, the Supreme Court has reevaluated the "potentially infinite reach of `relations' and `connections'" under ERISA preemption and has rendered three decisions, namely Travelers, Dillingham, and De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520 U.S. 806, 117 S. Ct. 1747, 138 L. Ed. 2d 21 (1997), that "reveal the proper way to analyze[] ERISA preemption." American Drug Stores, Inc. v. Harvard Pilgrim Health Care, Inc., 973 F.Supp. 60,64-65 (D.Mass.1997) (quoting Travelers, 514 U.S. at 656, 115 S. Ct. at 1677).[7]
Without the benefit of these recent opinions, the Court in Corcoran stated that "the fact that states traditionally have regulated in a particular area is no impediment to ERISA pre-emption." 965 F.2d at 1334. As such, the Court did not begin, as the recent Supreme Court cases did, with the presumption against preemption where the statute at issue addresses a historic police power of the states-namely, a matter of health and safety. See Dillingham, 519 U.S. at ___, 117 S.Ct. at 838; De Buono, 520 U.S. at ___, 117 *617 S.Ct. at 1751-52; Travelers, 514 U.S. at 653-55, 115 S. Ct. at 1676-77. Instead, the Court in Corcoran reasoned that "Congress perhaps could not have predicted the interjection into the ERISA `system' of the medical utilization review process[,]" and therefore, concluded that "Congress enacted a preemption clause so broad and a statute so comprehensive that it would be incompatible with the language, structure, and purpose of the statute to allow tort suits against entities so integrally connected with a plan." Corcoran, 965 F.2d at 1334 (emphasis added). Although the fact that "the States traditionally regulated ... [certain] areas would not immunize their efforts[,]" since Corcoran, it is clear that there must be an "indication in ERISA ... [or] its legislative history of any intent on the part of Congress to preempt" a traditionally state-regulated substantive law. Dillingham, 519 U.S. at ___, 117 S.Ct. at 840-41 (emphasis added).
Furthermore, in Corcoran, the Court noted that:
[t]he cost of complying with varying substantive standards would increase the cost of providing utilization review services, thereby increasing the cost to health benefit plans of including cost containment features such as the Quality Care Program (or causing them to eliminate this sort of cost containment program altogether) and ultimately decreasing the pool of plan funds available to reimburse participants.
965 F.2d at 1333. However, the Supreme Court in Travelers emphasized that an "indirect economic influence ... does not bind a plan administrator to any particular choice and thus function as a regulation of an ERISA plan itself." 514 U.S. at 659, 115 S.Ct. at 1679. Moreover,
if ERISA were concerned with any state action such as quality of care standards or hospital workplace regulations that increased the cost of providing certain benefits, and thereby, potentially affected the choices made by ERISA plans, [then] we could scarcely see the end of ERISA's preemptive reach, and the words `relate to' would limit nothing.
Dillingham, 519 U.S. at ___, 117 S.Ct. at 840 (citing Travelers, 514 U.S. at 663-64, 115 S. Ct. at 1681).
In light of the Supreme Court's recent mandate regarding ERISA preemption analysis, perhaps the Fifth Circuit would reach a different decision in Corcoran today. Even so, this Court finds the facts in Corcoran to be distinguishable from the conduct covered by the Act.
The plaintiffs in Corcoran filed suit against their HMO regarding a medical decision made in relation to the denial of certain plan benefits. In this case, a suit brought under the Act would relate to the quality of benefits received from a managed care entity when benefits are actually provided, not denied. The Act imposes a duty of ordinary care upon certain entities when making health care treatment decisions and holds those entities liable for damages proximately caused by a failure to exercise that duty. TEX. CIV. PRAC. & REM. CODE ANN. § 88.002(a) (West 1998). Furthermore, the Act clearly states that a "health care treatment decision" is "a determination made when medical services are actually provided by the health care plan and a decision which affects the quality of the diagnosis, care, or treatment provided to the plan's insureds or enrollees." Id. § 88.001(5) (emphasis added). Thus, Corcoran is factually distinguishable from the instant case.[8]
The facts in Rodriguez v. Pacificare of Tex., Inc., the other case cited by Plaintiffs for their argument that the Act wrongfully *618 imposes state law liability on managed care entities, may be distinguished for the same reason. In Rodriguez, David Rodriguez ("Rodriguez") brought a negligence action against his HMO and his primary care physician. 980 F.2d at 1016. Rodriguez attempted to seek medical attention for himself and his children after they were involved in an automobile accident. Id. Rodriguez believed that he and his children needed to see an orthopedic surgeon, but he was unable to obtain the requisite referral letter from their primary care physician or his HMO. Id. Without obtaining the needed letter, Rodriguez and his family went to see an orthopedic surgeon who placed Rodriguez on a therapy program. Id. Rodriguez's HMO refused to cover the expenses because Rodriguez had not first obtained approval for such expenses as required by his plan. Id. Rodriguez thereafter filed suit against his HMO and primary care physician "for failing to `provide prompt and adequate medical care and coverage.'" Id. (quoting Rodriguez's complaint filed in Texas state court).
The Fifth Circuit determined that Rodriguez's state law claims were sufficiently related to the "employee benefit plan" because his "claims, at bottom, result[ed] from dissatisfaction over ... [his HMO's] handling of his medical claim." Id. at 1017. Unlike Rodriguez's claims against his HMO and primary care physician, a suit brought under the Act may challenge the quality of benefits actually received without challenging a denial of benefits or the handling of a medical claim. A suit addressing the quality of care actually received is more akin to the claims asserted by plaintiffs in Dukes v. U.S. Healthcare, Inc., 57 F.3d 350 (3d Cir.1995).[9]
In Dukes, the Third Circuit examined two separate claims. The first claim involved the death of Darryl Dukes ("Dukes"). Dukes had several ailments which prompted him to visit his primary care physician who identified a problem with his ear. Dukes, 57 F.3d at 352. Later, another doctor performed surgery on Dukes's ear and ordered blood tests to be performed. Id. For some unknown reason, when Dukes presented the prescription to the laboratory, the hospital refused to perform the blood tests. Id. On the next day, Dukes went to see a third doctor who also ordered blood tests. Id. The hospital performed the tests. Id. However, by that time, Dukes's condition had worsened and he subsequently died. At the time of his death, Dukes's blood sugar level was extremely higha condition that allegedly could have been detected through a timely blood test. Id.
The other claim, examined in Dukes, concerned Ronald and Linda Visconti and their stillborn child. Id. at 353. The Viscontis maintained that Linda's obstetrician negligently ignored symptoms that Linda exhibited during the third trimester of her pregnancy that were typical of preeclampsia. Id.
"[T]he plaintiffs in these two cases filed suit in state court against health maintenance organizations ("HMOs") organized by U.S. *619 Healthcare, Inc., claiming damages, under various theories, for injuries arising from the medical malpractice of the HMO-affiliated hospitals and medical personnel." Id. at 351. The defendant HMOs removed both cases to federal court based on the "complete preemption doctrine."[10]Id. at 351. The Court held that since plaintiffs' claims fell outside the scope of the ERISA provision granting the right to recover benefits and enforce rights due under terms of the plan or to clarify rights to future benefits then the complete preemption doctrine did not permit removal. Id. In particular, the Court held that "[q]uality control of benefits, such as health care benefits provided here, is a field traditionally occupied by state regulation." Id. at 357 (emphasis added) (citing Travelers, 514 U.S. at 657-59, 115 S. Ct. at 1678-79). The Court then "interpret[ed] the silence of Congress as reflecting an intent that it remain as such." Id.
This Court finds the discussion in Dukes to be applicable here.[11] The Court, in Dukes, made a distinction between a claim for the withholding of benefits and a claim about the quality of benefits received. The Court reasoned that "[i]nstead of claiming that the welfare plans in any way withheld some quantum of plan benefits due, the plaintiffs in both cases complain[ed] about the low quality of the medical treatment that they actually received ...." Id. at 357 (emphasis added). In particular, "Dukes d[id] not allege ... that the Germantown Hospital refused to perform blood studies on Darryl because the ERISA plan refused to pay for those studies. Similarly, the Viscontis d[id] not contend that Serena's death was due to their welfare plan's refusal to pay for or otherwise provide for medical services." Id. at 356-57. In this case, a suit may be brought under the Act that simply challenges the quality of the benefits received, not a benefit determination.
Also in Dukes, the Court distinguished the Corcoran case based on the dual roles that may be assumed by an HMO. Dukes, 57 F.3d at 360-61. The Court emphasized that in Corcoran, United "only performed an administrative function inherent in the `utilization review'" whereas the defendant HMOs in Dukes played two roles the utilization review role and the role as an arranger for the actual medical treatment for plan participants. Id. at 361. "[U]nlike Corcoran, [in Dukes] there ... [was] no allegation ... that the HMOs denied anyone any benefits that they were due under the plan. Instead, the plaintiffs [in Dukes were] ... attempting to hold the HMOs liable for their role as the arrangers of their decedents' medical treatment." Id. Likewise, a plaintiff bringing suit under the Act may seek to hold a HMO liable in its position as the arranger of poor quality medical treatment, thereby, avoiding any allegation that the HMO wrongfully denied benefits under the plan and therefore, any connection with ERISA.[12]
*620 Thus, the distinction can be summarized as follows:
Claims challenging the quality of a benefit, as in Dukes, are not preempted by ERISA. See Pacificare of Oklahoma, Inc. v. Burrage, 59 F.3d 151, 154 (10th Cir.1995) (medical malpractice claim not preempted by ERISA when issue of doctor's negligence required assessment of providing admittedly covered treatment or giving professional advice). Claims based upon a failure to treat where the failure was the result of a determination that the requested treatment wasn't covered by the plan, however, are preempted by ERISA. Corcoran v. United HealthCare, Inc., 965 F.2d 1321, 1331 (5th Cir.), cert. denied, 506 U.S. 1033, 113 S. Ct. 812, 121 L. Ed. 2d 684 (1992) (medical determinations made by an HMO preempted by ERISA because made in context of benefits determination under the plan).
Schmid v. Kaiser Found. Health Plan of Northwest, 963 F. Supp. 942, 944 (D.Or.1997).
In this case, the Act addresses the quality of benefits actually provided. ERISA "simply says nothing about the quality of benefits received." Dukes, 57 F.3d at 357. "A reading of ... [Section] 514(a) resulting in the preemption of traditionally state-regulated substantive law in ... [an] area[] where ERISA has nothing to say would be `unsettling.'" Dillingham, 519 U.S. at ___, 117 S.Ct. at 840 (quoting Travelers, 514 U.S. at 664-65, 115 S. Ct. at 1681).
Furthermore, "the Supreme Court has cautioned that `[s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law `relates to' the plan.'" CIGNA, 82 F.3d at 647 (quoting Shaw, 463 U.S. at 100 n. 21, 103 S. Ct. 2890, 2901 n. 21, 77 L. Ed. 2d 490). For example, "`run-of-the-mill state-law claims such as unpaid rent, failure to pay creditors, or even torts committed by an ERISA plan' are not pre-empted." Corcoran, 965 F.2d at 1329 (quoting Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 833, 108 S. Ct. 2182, 2187, 100 L. Ed. 2d 836 (discussing these types of claims in dicta)). In addition, "ERISA does not preempt state laws that have `only an indirect economic effect on the relative costs of various health insurance packages' available to ERISA-qualified plans" such as quality standards. CIGNA, 82 F.3d at 647 (quoting Travelers, 514 U.S. at 659-60, 115 S. Ct. at 1680); see Dillingham, 519 U.S. at ___, 117 S.Ct. at 840 (noting that if ERISA were concerned with any state action, such as medical care quality standards, that increased costs of providing certain benefits then courts could scarcely see the end of ERISA's preemptive reach); Pacificare, 59 F.3d at 154 ("As long as a state law does not affect the structure, the administration, or type of benefits provided by an ERISA plan, the mere fact that the [law] has some economic impact on the plan does not require that the [law] be invalidated."). As such, the Court finds that "[q]uality control of benefits, such as the health care benefits provided [by HMOs and other managed care entities], is a field traditionally occupied by state regulation and ... interprets the silence of Congress as reflecting an intent that it remain such." Dukes, 57 F.3d at 357 (emphasis added).
Accordingly, the Court concludes that the Act does not constitute an improper imposition of state law liability on the enumerated entities.[13]
*621 ii. Mandating the Structure and Administration of Plan Benefits
Next, the Court will examine Plaintiffs' argument that the Act has a connection with ERISA plans because it improperly mandates the structure of plan benefits and their administration in violation of clear Supreme Court authority. In Travelers, the Court noted that, given the objectives of ERISA and its preemption clause, Congress intended for ERISA to preempt "state laws that mandate[] employee benefit structures or their administration." 514 U.S. at 658, 115 S.Ct. at 1678. For example, in Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S. Ct. 2890, 2900, 77 L. Ed. 2d 490 (1983), the Court held that a New York statute "which prohibit[ed] employers from structuring their employee benefit plans in a particular manner that discriminate[d] on the basis of pregnancy ... [and another statute] which require[d] employers to pay employees specific benefits ... clearly `relate[d] to' benefit plans." ERISA preempted these New York statutes because their "mandates affecting coverage could have been honored only by varying the subjects of a plan's benefits whenever New York law might have applied, or by requiring every plan to provide all beneficiaries with a benefit demanded by New York law if New York law could have been said to require it for any one beneficiary." Travelers, 514 U.S. at 657, 115 S. Ct. at 1678. Therefore, "absent preemption, benefit plans would have been subjected to conflicting directives from one state to the next." Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1468 (4th Cir.1996) (citing Shaw, 463 U.S. at 99, 103 S. Ct. at 2901).
Plaintiffs claim that the Act "imposes a `negligence' standard of review on HMOs and PPOs ... in contravention of the federally mandated abuse of discretion standard of review of a factual benefit determination under ERISA[,]" and "purports to re-define the standard for `appropriate and medically necessary' as it pertains to ERISA plans." (Plaintiffs' Motion, Instrument No. 20 at 15).
With respect to Plaintiffs' first contention, the Court reiterates its conclusion that a suit may only be brought under the Act that challenges the quality of care received, not a benefit determination. Such a claim would not implicate the abuse of discretion standard required under ERISA for factual benefit determinations. See Pierre v. Connecticut Gen. Life Ins. Co., 932 F.2d 1552, 1562 (5th Cir.1991) (holding that "for factual determinations under ERISA plans, the abuse of discretion standard of review is the appropriate standard"). Whether a claim brought under the Act seeks a review of a plan administrator's factual benefit determination rather than a review of a medical decision should be examined by the Court on a case-by-case basis. At that time, the Court could determine whether or not the particular claim conflicts with the standard of review provided under ERISA.
Plaintiffs also claim that the Act wrongfully purports to redefine the standard for "appropriate and medically necessary" as it pertains to ERISA plans. (Plaintiffs' Motion, Instrument No. 20 at 15). Section 88.001(1) of the Texas Civil Practice and Remedies Code, which was added by the Act, defines "appropriate and medically necessary" as "the standard for health care services as determined by physicians and health care providers in accordance with the prevailing practices and standards of the medical profession and community." TEX. CIV. PRAC. & REM. CODE ANN. § 88.001(1) (West 1998). Plaintiffs contend that "[t]his imposed definition of medical necessity is different from that contained in many ERISA plans." (Plaintiffs' Motion, Instrument No. 20 at 15). *622 Since Plaintiffs' health care plans purportedly confer authority upon the plan administrator to make coverage determinations in accordance with the terms of the plan, Plaintiffs argue that the Act's definition of "appropriate and medically necessary" changes "the terms of employee benefit plans and restrict[s] the ability of plans to deny claims based upon medical necessity or other terms defined in the plan." (Id. at 16).
With respect to the Act's definition of when a health care benefit is "appropriate and medically necessary," the Court must examine this term in conjunction with the procedure provided by the Act for the review of claims relating to an adverse benefit determination by an independent review organization ("IRO"). Section 88.003 of the Texas Civil Practice and Remedies Code, as added by the Act, provides the following:
(a) A person may not maintain a cause of action under this chapter against a health insurance carrier, health maintenance organization, or other managed care entity that is required to comply with the utilization review requirements of Article 21.58A, Insurance Code, or the Texas Health Maintenance Organization Act (Chapter 20A Vernon's Insurance Code), unless the affected insured or enrollee or the insured's or enrollee's representative:
(1) has exhausted the appeals and review applicable under the utilization review requirements; or
(2) before instituting the action:
(A) gives written notice of the claim as provided by Subsection (b); and
(B) agrees to submit the claim to a review by an independent review organization under Article 21.58A, Insurance Code, as required by Subsection (c).
(b) the notice required by Subsection (a)(2)(A) must be delivered or mailed to the health insurance carrier, health maintenance organization, or other managed care entity against whom the action is made not later than the 30th day before the date the claim is filed.
(c) The insured or enrollee or the insured's or enrollee's representative must submit the claim to a review by an independent review organization if the health insurance carrier, health maintenance organization, or managed care entity against whom the claim is made requests the review not later than the 14th day after the date notice under Subsection (a)(2)(A) is received by the health insurance carrier, health maintenance organization, or other managed care entity. If the health insurance carrier, health maintenance organization, or other managed care entity does not request the review within the period specified by this subsection, the insured or enrollee or the insured's or enrollee's representative is not required to submit the claim to independent review before maintaining the action.
(d) Subject to Subsection (e), if the enrollee has not complied with Subsection (a), an action under this section shall not be dismissed by the court, but the court may, in its discretion, order the parties to submit to an independent review or mediation or other nonbinding alternative dispute resolution and may abate the action for a period of not to exceed 30 days for such purposes. Such orders of the court shall be the sole remedy available to a party complaining of an enrollee's failure to comply with Subsection (a).
(e) The enrollee is not required to comply with Subsection (c) and no abatement or other order pursuant to Subsection (d) for failure to comply shall be imposed if the enrollee has filed a pleading alleging in substance that:
(1) harm to the enrollee has already occurred because of the conduct of the health insurance carrier, health maintenance organization, or managed care entity or because of an act or omission of an employee, agent, ostensible agent, or representative of such carrier, organization, or entity for whose conduct is liable under Section 88.002(b); and
(2) the review would not be beneficial to the enrollee, unless the court, upon motion by a defendant carrier, organization, or entity finds after that such pleading was not made in good faith, in which *623 case the court may enter an order pursuant to Subsection (d).
(f) If the insured or enrollee or the insured's or enrollee's representative seeks to exhaust the appeals and review or provides notice, as required by Subsection (a), before the statute of limitations applicable to a claim against a managed care entity has expired, the limitations period is tolled until the later of:
(1) the 30th day after the date the insured or enrollee or the insured's or enrollee's representative has exhausted the process for appeals and review applicable under the utilization review requirements; or
(2) the 40th day after the date the insured or enrollee or the insured's or enrollee's representative gives notice under Subsection (a)(2)(A).
(g) This section does not prohibit an insured or enrollee from pursuing other appropriate remedies, including injunctive relief, a declaratory judgment, or relief available under law, if the requirement of exhausting the process for appeal and review places the insured's or enrollee's health in serious jeopardy.
TEX. CIV. PRAC. & REM. CODE ANN. § 88.003 (West 1998) (emphasis added).
In addition, the Act amended and added several provisions to the Texas Insurance Code that address specific responsibilities of an HMO and further explain and define the procedure for independent review of an adverse benefit determination by an IRO. See TEX. INS. CODE ANN. arts. 20A.09, 20A.12, 20A.12A, 21.58A, and 21.58C (West 1998). Article 20A.09, which was amended by the Act, now requires an HMO to issue evidence of coverage to an enrollee that describes "the enrollee's right to appeal denials of an adverse determination ... to an independent review organization." TEX. INS. CODE ANN. art. 20A.09(e)(4) (West 1998).
Under the amendments to Article 20A.12 of the Texas Insurance Code, every HMO must establish a complaint system that provides for the "resolution of oral and written complaints initiated by enrollees concerning health care services." Id. art. 20A.12(a). The complaint system mandated by Article 20A.12 has several requirements that reference the IRO procedure. Specifically, Article 20A.12A, which was also added by the Act, states that the complaint system must include:
(1) notification to the enrollee of the enrollee's right to appeal an adverse determination to an independent review organization;
(2) notification to the enrollee of the procedures for appealing an adverse determination to an independent review organization; and
(3) notification to an enrollee who has a life-threatening condition of the enrollee's right to immediate review by an independent review organization and the procedures to obtain that review.
Id. arts. 20A.12A(a) and (b). Article 20A.12A then defines "adverse determination," "independent review organization," and "life-threatening condition." Id. art. 20A.12A(c).
The Act also amends Article 21.58A Section 6 of the Texas Insurance Code. If the appeal of an adverse determination is denied, Section 6 now requires the utilization review agent to submit a clear and concise statement to the appealing party informing him of his "right to seek review of the denial by an independent review organization under Section 6A ... and the procedures for obtaining that review." Id. art. 21.58A(6)(b)(5)(C). Furthermore, if the enrollee is faced with a life threatening condition then he "is entitled to an immediate appeal to an independent review organization as provided by Section 6A[.]" Id. art. 21.58A(6)(c).
Furthermore, the Act adds a new section 6A to Article 21.58A of the Texas Insurance Code which outlines the utilization review agent's responsibilities with respect to the independent review of adverse determinations. Id. art. 21.58A(6A). In particular, Section 6A of Article 21.58A provides that:
A utilization review agent shall:
(1) permit any party whose appeal of an adverse determination is denied by the utilization review agent to seek review of that determination by an independent review organization assigned to the appeal in *624 accordance with Article 21.58C of this code;
(2) provide to the appropriate independent review organization not later than the third business day after the date that the utilization review agent receives a request for review a copy of:
(A) any medical records of the enrollee that are relevant to the review;
(B) any documents used by the plan in making the determination to be reviewed by the organization;
(C) the written notification described in Section 6(b)(5) of this article;
(D) any documentation and written information submitted to the utilization review agent in support of the appeal; and
(E) a list of each physician or health care provider who has provided care to the enrollee and who may have medical records relevant to the appeal;
(3) comply with the independent review organization's determination with respect to the medical necessity or appropriateness of health care items and services for an enrollee; and
(4) pay for the independent review.
Id. art. 21.58A(6A). Notably, under Article 20A.12A, the provisions in Article 21.58A that relate to independent review, namely Section 6A, apply to an HMO as if the HMO were a utilization review agent. Id. art. 20A.12A(b). Moreover, given the addition of the IRO procedure by the Act, Section 8 of Article 21.58A now provides that "[c]onfidential information in the hands of a utilization review agent may be provided to an independent review organization" subject to the rules and standards already in effect under the Texas Insurance Code. Id. art. 21.58A(8)(f).
Lastly, the Act added Article 21.58C to the Texas Insurance Code. This section outlines the standards for independent review organizations, such as certification requirements. Id. art. 21.58C. For example, Article 21.58C explains the Commissioner of the Texas Insurance Board's responsibilities for the certification and designation of independent review organizations and how an entity may be certified as an independent review organization. Id.
Plaintiffs argue that an administrator's determination as to "whether a claim for benefits is covered under the medical necessity definition contained in the plan implicates an interpretation of a plan's term." (Plaintiffs' Motion, Instrument No. 20 at 16). Therefore, Plaintiffs continue, the Act which contains these procedures for an independent review of a benefit determination is preempted because it mandates the structure and administration of benefits.
In response, Defendants maintain that "the IRO is geared solely to corporate determinations of `medical necessity,' the practice of medicine admittedly being a non-preempted traditional area of state regulation." (Defendants' Response, Instrument No. 46 at 11). Defendants also explain, and Plaintiffs do not dispute, that "[o]nly when AEtna, or another managed care entity, makes adverse determinations that benefits are not medically necessary [do] the IRO provisions [become applicable]." (Id. at 14). According to Defendants, "the only possible HMO action that could be called a `benefit determination' which could ever be grounds for action under the IRO provisions of ... [the Act] are `adverse determinations.' Adverse determinations are necessarily limited to `medical necessity' decisions[.]" (Id. at 12).
In Travelers, the Supreme Court provided guidance as to the scope of plan administration that Congress intended to protect from state interference. 514 U.S. at 657-68, 115 S.Ct. at 1678. The Court discussed
earlier decisions which held various state statutes preempted for "mandat[ing] employee benefit structures or their administration." ... The Court [also] explained that ERISA preempted the statutes at issue in Shaw because they imposed "mandates affecting coverage" which directly affected the benefit structures which ERISA plans could offer.... The law at issue in FMC Corp. v. Holliday[, 498 U.S. 52, 111 S. Ct. 403, 112 L. Ed. 2d 356 (1990)] interfered with benefit calculations; by prohibiting plans from obtaining subrogation, the law frustrated any attempt at providing uniform national benefits.... In Alessi v. Raybestos-Manhattan, Inc., [451 U.S. 504, 101 S. Ct. 1895, 68 L.Ed.2d *625 402 (1981)] ... ERISA preempted a statute which prohibited plans from using a method of calculating benefits permitted by federal law.... In each of these cases, the [Supreme] Court was concerned with administrative and structural matters central to the administration of ERISA plans themselves.
American Drug, 973 F.Supp. at 68 (emphasis added) (quoting Travelers, 514 U.S. at 657-58, 115 S. Ct. at 1677-78). The Act's use of independent review process implicates the "limited range of administrative functions which are part of operating an employee benefit plan[,]" namely determining the eligibility of claimants. American Drug, 973 F.Supp. at 66; see Fort Halifax, 482 U.S. at 8-9, 107 S. Ct. 2211, 2216, 96 L. Ed. 2d 1 (1987).
Furthermore, the Act's definition of "appropriate and medically necessary" along with the provisions under Section 88.003 for reviewing an adverse determination by an IRO and the further clarification of the IRO procedure and requirements in Articles 20A.09(4), 20A.12A,21.58A(6), (6A), and (8)(f) and 21.58C[14] are akin to the situation addressed by the Fifth Circuit in Corcoran. In Corcoran, the Court recognized that United gave medical advice, but emphasized that such advice was made or given while administering the benefits under the plan. 965 F.2d at 1331. Consequently, since ERISA preempts state law causes of action alleging the improper handling of benefit claims, the Corcorans' state law claims were preempted by ERISA because part of "United's actions involve[d] benefit determinations." Id. at 1332. As in Corcoran, by participating in the separate review process provided for under the Act, an insured or enrollee is seeking a review of a benefit determination. Moreover, under Article 21.58A of the Texas Insurance Code, a utilization review agent must comply with the IRO's determination and must pay for the review. TEX. INS. CODE ANN. arts. 21.58A(6A)(3) and (4) (West 1998).
Allowing state based procedures for independent review of an adverse benefit determination, like the one at issue here, "would subject plans and plan sponsors to burdens not unlike those that Congress sought to foreclose through ... [Section] 514(a). Particularly disruptive is the potential for conflict in state law.... Such an outcome is fundamentally at odds with the goal of uniformity that Congress sought to implement." Ingersoll-Rand, 498 U.S. at 142, 111 S. Ct. at 484.
Consequently, as explained by the Supreme Court in Travelers, 514 U.S. at 657, 115 S. Ct. at 1677-78, the Court finds that the provisions for an independent review improperly mandate the administration of employee benefits and therefore, have a connection with ERISA plans. See Coyne, 98 F.3d at 1468 (indicating that state laws which mandate employee benefit structures or their administration have a connection with ERISA plans). "Congress intended ERISA to preempt state laws[,] [such as the IRO provisions in the Act,] that `mandate[] employee benefit structures or their administration.'" Id. (quoting Travelers, 514 U.S. at 658, 115 S. Ct. at 1678). However, the Court finds that the relevant language in Section 88.003 of the Texas Civil Practice and Remedies Code, the relevant language added by the Act in Articles 20A.09(e)(4), 21.58A(6)(b)(5), and 21.58A(6)(c) of the Texas Insurance Code, and that Articles 20A.12A, 21.58A(6A), 21.58A(8)(f), and 21.58C of the Texas Insurance Code, all addressing the IRO procedure, can be severed from the Act without affecting the other provisions or conflicting with the legislative intent.
"Whether portions of a state statute found to contravene federal law are severable is a question of state law." Texas Pharmacy, 105 F.3d at 1039. The Texas Code Construction Act provides that:
[i]n a statute that does not contain a provision for severability or nonseverability, if any provision of the statute or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the statute that can be given effect without the invalid *626 provision or application, and to this end the provisions of the statute are severable.
TEX. GOV'T CODE ANN. § 311.032(c) (West 1988); see also TEX. GOV'T CODE ANN. § 312.013(a) (West 1988) (providing the same standard). Thus, "[u]nder the Texas Code Construction Act, a Texas statute should be deemed severable if the invalidity of one provision does not affect the other provisions, unless it has an express provision for severability or nonseverability." Texas Pharmacy, 105 F.3d at 1039; see In re Johnson, 554 S.W.2d 775, 787 (Tex.Civ.App. Corpus Christi 1977, writ ref'd n.r.e.) (noting that where invalid sections on an act may be separated, the court "must do so and not permit the invalid part to destroy the whole law"). However, the court should "sustain the remainder only if the result is consistent with the original legislative intent." Black v. Dallas County Bail Bond Bd., 882 S.W.2d 434, 437 (Tex.Civ.App. Dallas 1994, no writ); see Anderson v. Wood, 137 Tex. 201, 152 S.W.2d 1084, 1087 (1941) (concluding that the whole statute was void because the remainder, by reason of its generality, would have given the act a broader scope than was intended by the legislature).
In this case, the Act does not have an express provision for severability or nonseverability of the statute. Furthermore, an examination of the legislative history of the Act reveals the dual purpose that the legislature sought to achieve with the passage of the Act. Specifically, the legislature sought to address two distinct issues: quality of care and denial of care. With respect to quality of care, the Act establishes a standard of care for HMOs and other managed care entities and allows participants to sue an HMO or a managed care entity for negligent medical decisions. (Index of Legislative History-Testimony of Rep. Smithee, Instrument No. 17, Exh. A at AG01585 and Exh. B at AGO1607). With regard to denial of care, the Act creates an independent review process that reviews adverse benefit determinations by an HMO or a managed care entity. (Id.) In particular, as a prerequisite to filing a lawsuit under the Act, a participant would "be able to get an independent review [of his or her HMO's denial of coverage] by a doctor [in order] to try and get the care" that he or she needs. (Index of Legislative History-Testimony of Rep. Smithee, Instrument No. 17, Exh. B at AG01607). Thus, the Court finds that it was clearly the intent of the legislature to address both the quality of care issue and the denial of care issue under the Act.
The Court has already determined that the IRO provisions concern the review of an adverse benefit determination and are therefore, an improper mandate of benefit administration. As such, the IRO provisions and, in particular, the relevant language in Section 88.003 of the Texas Civil Practice and Remedies Code, the relevant language added by the Act in Articles 20A.09(e)(4), 21.58A(6)(b)(5), and 21.58A(6)(c) of the Texas Insurance Code, and Articles 20A.12A, 21.58A(6A), 21.58A(8)(f), and 21.58C of the Texas Insurance Code would have no effect on lawsuits that may be brought under the Act challenging the quality of a benefit that an individual has actually received. The Court can still give effect to the provisions of the Act that only address quality of care. In other words, even without these sections which address the IRO procedure, suits addressing the quality of a benefit may still be brought under the Act against an HMO or other managed care entity. This goal under the Act quality of care is separate and distinct from the independent review process which solely addresses adverse benefit determinations by a plan administrator or utilization review agent. Thus, upholding the other provisions of the Act is consistent with the legislative intent. Moreover, where the invalid sections of an act may be separated, the Court "must do so and not permit the invalid part to destroy the whole." In re Johnson, 554 S.W.2d at 787. Therefore, since the Act can still be given effect without these sections, the Court finds that they may be severed from remainder of the Act.
iii. Binding Employers or Plan Administrators to Particular Choices
The Court agrees with Plaintiffs' next argument that, under existing Fifth Circuit authority, certain provisions in the Act bind employers or plan administrators to *627 particular choices. In CIGNA, the Fifth Circuit held that the statute had a connection with ERISA plans because it required "ERISA plans to purchase benefits of a particular structure when they contracted with organizations like CIGNA and CGLIC." 82 F.3d at 648. The Court reasoned that:
ERISA plans that choose to offer coverage by PPOs are limited by the statute to using PPOs of a certain structure i.e., a structure that includes every willing, licensed provider. Stated another way, the statute prohibits those ERISA plans which elect to use PPOs from selecting a PPO that does not include any willing, licensed provider. As such, the statute connects with ERISA plans.
Id. Furthermore, the Court found that it was "sufficient for preemption purposes that the statute eliminate[d] the choice of one method of structuring benefits." Id.; cf. Dillingham, 519 U.S. at ___, 117 S.Ct. at 842 (holding that prevailing wage statute is not preempted by ERISA because statute merely "alters the incentives ... but does not dictate the choices, facing ERISA plans").
Later, in Texas Pharmacy Ass'n v. Prudential Ins. Co. of Am., the Fifth Circuit relied on its opinion in CIGNA and determined that Texas's Any Willing Provider statute was preempted by ERISA. 105 F.3d at 1037. The Court explained that "[a]s with the Louisiana statute at issue in CIGNA, the Texas statute relates to ERISA plans because it `eliminates the choice of one method of structuring benefits,' by prohibiting plans from contracting with pharmacy networks that exclude any willing provider." Id. (citing CIGNA, 82 F.3d at 648).
Based on the Fifth Circuit's holding in CIGNA and Texas Pharmacy, the Court finds that the Act creates two provisions that bind employers or plan administrators to particular choices-Sections 88.002(f) and (g) of the Texas Civil Practice and Remedies Code.[15] Section 88.002(f) provides that:
[a] health insurance carrier, health maintenance organization, or managed care entity may not remove a physician or health care provider from its plan or refuse to renew the physician or health care provider with its plan for advocating on behalf of an enrollee for appropriate and medically necessary health care for the enrollee.
TEX. CIV. PRAC. & REM. CODE ANN. § 88.002(f) (West 1998) (emphasis added). Section 88.002(g) states that:
[a] health insurance carrier, health maintenance organization, or managed care entity may not enter into a contract with a physician, hospital, or other health care provider or pharmaceutical company which includes an indemnification or hold harmless clause for the acts or conduct of the health insurance carrier, health maintenance organization, or other managed care entity. Any such indemnification or hold harmless clause in an existing contract is hereby declared void.
Id. § 88.002(g) (emphasis added).
Thus, in the instant case, ERISA plans that choose to offer coverage by either a health insurance carrier, HMO, or other managed care entity are limited by the Act to using an entity of a certain structure i.e., a structure that does not remove a physician or health care provider from its plan for advocating on behalf of an enrollee for appropriate and medically necessary health care and a structure that does not include a prohibited indemnification or hold harmless clause. In other words, the Act prohibits *628 ERISA plans from using a managed care entity that does not conform to the requirements in these provisions. By denying health insurance carriers, HMOs, and other managed care entities the right to structure their benefits in a particular manner, the Act effectively requires ERISA plans to purchase benefits of a particular structure when they contract with organizations like Plaintiffs. See CIGNA, 82 F.3d at 648.
Since these provisions require ERISA plans to purchase benefits of a particular structure they essentially cause the Act to have a "connection with" such plans.[16] However, the Court finds that these provisions may be severed from the remainder of the statute.
Although these provisions at issue would clearly serve to enhance the quality of care that could be provided, the absence of these sections from the Act does not affect the otherwise valid provisions concerning quality of care. A suit may still be brought under the Act challenging the quality of a benefit actually received. Moreover, upholding the validity of the remainder of the Act is in accord with the legislative intent. The floor debates as well as the testimony, in support of the Act, given before the Senate Interim Committee on Managed Care and Consumer Protections and the Senate Economic Development Committee reveal the proponents' and the legislature's concern over managed care entities and the lack of quality care. (Index of Legislative History, Instrument Nos. 14, 16). Even though these provisions clearly were designed to promote quality medical care, this goal care be given effect without these invalid provisions and accordingly, the Court finds that they may be severed from the Act.
iv. Alternate Enforcement Mechanism
Lastly, Plaintiffs argue that the liability sections created by the Act, Sections 88.002(a) and (b) of the Texas Civil Practice and Remedies Code, purport to create an alternate enforcement mechanism. (Plaintiffs' Surreply, Instrument No. 53 at 6).
State laws that provide "alternate enforcement mechanisms [for employees to obtain ERISA plan benefits] also relate to ERISA plans, triggering pre-emption." Travelers, 514 U.S. at 658, 115 S. Ct. at 1678; Coyne, 98 F.3d at 1468 (noting Congress' intent to preempt state laws that provide alternate enforcement mechanisms for employees to obtain ERISA plan benefits). In *629 this case, the Court has already determined that the liability sections of the Act, namely Sections 88.002(a) and (b) of the Texas Civil Practice and Remedies Code, provide a cause of action for challenging the quality of benefits received. Such a lawsuit would not create an alternate enforcement mechanism for employees to obtain ERISA benefits. See Dukes, 57 F.3d at 360-361 (distinguishing between an HMO's denial of plan benefits and an HMO's role as the arranger of a participant's medical treatment which implicates the quality of care that a participant receives). Rather, it would ensure the quality of care that employees actually receive. Whether a claim seeks a review of an adverse benefit determination or to secure quality coverage should be determined by the Court on a case-by-case-basis. See Schmid, 963 F.Supp. at 945 n. 1 (noting that a "determination of whether or not a particular claim is preempted by ERISA must be made on a case-by-case basis"). It is not apparent to the Court that every claim that may be asserted under the Act would establish an alternate enforcement mechanism for benefit determinations.
Based on the foregoing analysis, the Court holds that Plaintiffs have not met their burden of proving that every claim brought under the Act would be preempted by ERISA. Even though some economic impact may result, a claim concerning the quality of a benefit actually received would remain valid.
VII. FEHBA Preemeption
Plaintiffs finally argue that the Act is preempted by FEHBA. In response, Defendants maintain that "FEHBA preemption applies only when there exists a conflict between the particular state law being relied upon in litigation and contractual provisions in a FEHBA policy `which relate to the nature or extent of coverage of benefits.'" (Defendants' Brief, Instrument No. 11 at 36). According to Defendants, Plaintiffs fail "to set forth any facts alleging any particular FEHBA policy or contract language conflicting with" the Act. (Id.).
Conversely, Plaintiffs argue that FEHBA preemption is required given the Fifth Circuit's decision in Burkey v. Gov't Employees Hosp. Ass'n, 983 F.2d 656 (5th Cir.1993). Plaintiffs contend that Defendants' argument, raised by the plaintiffs in Burkey, was clearly rejected by the Fifth Circuit.
As with ERISA, FEHBA provides that state law may be preempted. However, "FEHBA preemption is far more narrow than that of" ERISA. Arnold v. Blue Cross & Blue Shield of Texas, Inc., 973 F. Supp. 726, 732 (S.D.Tex.1997). Congress expressed its intent to pre-empt state law under FEHBA in 5 U.S.C.A. § 8902(m)(1) (West Supp. 1996), which states that:
[t]he provisions of any contract under this chapter which relate to the nature or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or regulation issued thereunder, to the extent that such law or regulation is inconsistent with such contractual provisions.
This language makes it clear "that Congress did not intend for state law to be entirely preempted." Arnold, 973 F.Supp. at 731.
By expressly limiting the FEHBA's preemptive effect to those laws or regulations that are inconsistent with insurance carrier [or health plan] contracts, Congress indicated that courts may not assume that the FEHBA preempts all related state law claims but must instead conduct a case-by case analysis to determine whether a plaintiff's state law claim conflicts with a contractual provision.
Id. at 732 (citing Transitional Hospitals Corp. v. Blue Cross & Blue Shield of Texas, Inc., 924 F. Supp. 67, 70 (W.D.Tex.1996)). "The policy underlying § 8902(m)(1) is to ensure nationwide uniformity of the administration of FEHBA benefits." Burkey, 983 F.2d at 660.
In Burkey, a federal employee and her son brought an action against the Government Employees Hospital Association ("GEHA") under Louisiana law "which authorize[d] damages and attorneys' fees for unreasonable delay in paying health and accident insurance claims." 983 F.2d at 657. The Burkeys claimed that GEHA breached its contractual obligation to pay the son's medical bills.
*630 The Fifth Circuit held that "Louisiana's penalty provision [wa]s inconsistent with and therefore preempted by the federal law regulating federal employee health benefits." Id. at 657-58. Although the Burkeys argued that their state law claim related to remedies, not the "nature or extent of coverage or benefits[,]" the Court reasoned that "tort claims arising out of the manner in which a benefit claim is handled are not separable from the terms of the contract that governs benefits ... [Therefore] such claims `relate to' the plan under § 8902(m)(1) as long as they have a connection with or refer to the plan." Id. at 660. "Insofar as the Burkeys' claim for statutory delay damages necessarily refer[red] to GEHA's plan to determine coverage and whether the proper claims handling process was followed, it refer[red] to the plan, `relate[d] to' it and [wa]s therefore preempted." Id.
Unlike the claim asserted by the Burkeys, an individual may file suit under the Act seeking damages for the substandard quality of care actually received. As articulated by the Court under the ERISA preemption analysis, such a suit would not arise out of the manner in which a benefit claim was handled and would not refer to Plaintiffs' plan to determine coverage or whether the proper claims handling process was followed. Therefore, even under Burkey, a claim addressing the quality of a benefit received would not "relate to" a FEHBA plan. Moreover, with respect to other claims that one may bring under the Act, a court should conduct a case-by-case analysis to determine whether that claim conflicts with a contractual provision. See Arnold, 973 F.Supp. at 732.
VIII. Conclusion
Accordingly, the Court finds that Defendants' and Plaintiffs' motions for summary judgment are GRANTED in part and DENIED in part. (Instrument Nos. 10 and 20).
The Court ORDERS that the Department is dismissed from the lawsuit.
The Court also finds that the following provisions are preempted by ERISA and accordingly, the Court ORDERS them to be severed: Section 88.002(f), Section 88.002(g), Section 88.003(a)(2), Section 88.003(b), Section 88.003(c), the relevant language in Section 88.003(d), Section 88.003(e), and the relevant language in Sections 88.003(f) and (g) of the Texas Civil Practice and Remedies Code, the language added by the Act in Article 20A.09(e)(4), Article 20A.12A, the amendments to Articles 21.58A(6)(b)(5) and 21.58A(6)(c), Article 21.58A(6A), Article 21.58A(8)(f), and Article 21.58C of the Texas Insurance Code.[17]
The Court finds that the remaining provisions of the Texas Civil Practice and Remedies Code and the Texas Insurance Code, as added and amended by the Act, are not preempted by ERISA.
The Clerk shall enter this Order and provide a copy to all parties.
NOTES
[1] The Act provides, in pertinent part, the following:
§ 88.002. Application
(a) A health insurance carrier, health maintenance organization, or other managed care entity for a health care plan has the duty to exercise ordinary care when making health care treatment decisions and is liable for damages for harm to an insured or enrollee proximately caused by its failure to exercise such ordinary care.
(b) A health insurance carrier, health maintenance organization, or other managed care entity for a health care plan is also liable for damages for harm to an insured or enrollee proximately caused by the health care treatment decisions made by its:
(1) employees;
(2) agents;
(3) ostensible agents; or
(4) representatives who are acting on its behalf and over whom it has the right to exercise influence or control or has actually exercised influence or control which result in the failure to exercise ordinary care.
TEX. CIV. PRAC. & REM. CODE ANN. §§ 88.002(a) and (b) (West 1998).
[2] At the hearing held on April 24, 1998, Mr. John B. Shely, counsel for Plaintiffs, argued that Plaintiffs "provide various services to employee benefit plans that are ERISA plans." (Transcript, Instrument No. 60 at 6).
[3] Plaintiffs also claim that the Fifth Circuit's opinion in Texas Pharmacy Ass'n v. Prudential Ins. Co. of Am., 105 F.3d 1035 (5th Cir.1997), mandates a finding that the Act "refers to" ERISA plans. However, in Texas Pharmacy, the Court never discussed the "reference to" or "refers to" analysis. See id. at 1037. Rather, the Court simply concluded that the "Texas statute relate[d] to ERISA plans because it `eliminate[d] the choice of one method of structuring benefits,' by prohibiting plans from contracting with pharmacy networks that exclude any willing provider." Id. Thus, the Court found that Texas's Any Willing Provider statute had a "connection with" ERISA plans. Id.
The Court also mentioned that the statute applied to ERISA benefits plans themselves because it defined "managed care providers to include HMOs, PPOs or `another organization' that provide[d] health care benefits." Id. at 1038. Notably, the Court emphasized the phrase "another organization" as the entity that could conceivably constitute an ERISA plan. Id.
[4] The Supreme Court reached the same conclusion in Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S. Ct. 478, 112 L. Ed. 2d 474 (1990). In Ingersoll-Rand, the Court held that a Texas wrongful discharge claim made "specific reference to, and indeed [wa]s premised on, the existence of a pension plan." Id. at 140, 111 S. Ct. at 483 (emphasis added). In order to prevail on this wrongful discharge claim, plaintiff had to plead and the court had to find "that an ERISA plan exist[ed] and the employer had a pension-defeating motive in terminating the employment." Id. Therefore, since the Court's inquiry had to be "directed to the [ERISA] plan," the Court found that the cause of action "relat[ed] to" an ERISA plan. Id.
[5] "Utilization review" is a form of cost-containment service that "refers to `external evaluations that are based on established clinical criteria and are conducted by third-party payors, purchasers, or health care organizers to evaluate the appropriateness of an episode, or series of episodes, of medical care.'" Corcoran, 965 F.2d at 1323 (quoting Blum, An Analysis of Legal Liability in Health Care Utilization Review and Case Management, 26 HOUS. L. REV. 191, 192-93 (1989)).
[6] The Fifth Circuit also requested further clarification from the Supreme Court and further legislative action from Congress in Texas Pharmacy, 105 F.3d at 1039-40. In Texas Pharmacy, the Court "conclude[d] that the result in that case [wa]s compelled by the unmistakable breadth of ERISA preemption recognized by the Supreme Court[.]" Id. at 1040. The Court, however, emphasized that "[a] different result ... [would] require further guidance from the Supreme Court or further action from Congress." Id.
[7] Indeed, in light of the fundamental changes that have taken place in the health care delivery system, it may be that the Supreme Court has gone as far as it can go in addressing this area and it should be for Congress to further define what rights a patient has when he or she has been negatively affected by an HMO's decision to deny medical care. Congress has begun to examine the "cost containment" objectives of health plans, referenced in Corcoran, to determine whether their original intent to disallow state causes of action related to the denial of benefits is still reasonable. See Larry Lipman & Rebecca Carr, Rival Bills Aim to Heal HMO Issues, ATLANTA J. & ATLANTA CONST., July 17, 1998, at A1. "A House Republican task force outlined a bill that seeks to give patients ... an appeals process for managed care decisions. ...." Id.
However, in a recent statement regarding H.R. 4250, the Patient Protection Act, Congressman Pete Sessions indicated the legislature's desire to have the judiciary define the scope of ERISA preemption. 144 CONG. REC. E1471-04 (daily ed. July 30, 1998) (speech of Representative Pete Sessions). Regrettably, Rep. Sessions sought to "ensure that the Patient Protection Act neither broaden[ed] nor change[d] the current scope of ERISA preemption as it [wa]s being developed in the courts." Id. at E1472. This statement clearly exemplifies the legislature's misunderstanding as to the role of the judiciary. The courts can neither narrow nor broaden the scope of ERISA preemption in a vacuum. Rather, the courts can only attempt to interpret the scope of the ERISA preemption clause, as enacted by Congress some 24 years ago, in light of the congressional intent. Defining the scope of ERISA preemption is a responsibility delegated to the legislative branch of government. Interpreting the legislative intent concerning the scope of ERISA preemption can only be accomplished by the courts after the legislature has done its job. If Congress wants the American citizens to have access to adequate health care, then Congress must accept its responsibility to define the scope of ERISA preemption and to enact legislation that will ensure every patient has access to that care.
[8] The Court in Corcoran recognized a similar distinction. The Court discussed Independence HMO, Inc. v. Smith, 733 F. Supp. 983 (E.D.Pa. 1990), a case in which the district court held that a malpractice action brought against an HMO was not preempted by ERISA, and acknowledged that the Smith case initially appeared to support the Corcorans' position since "the plaintiff was attempting to hold an ERISA entity liable for medical decisions." Corcoran, 965 F.2d at 1333 n. 16. However, the Court distinguished the facts in Smith from the Corcorans' situation because "the medical decisions at issue ... [in Smith did] not appear to have been made in connection with a cost containment feature of the plan or any other aspect of the plan which implicated the management of plan assets, but were instead made by a doctor in the course of treatment." Id.
[9] As an additional argument, Defendants suggest that "AEtna is barred by res judicata from asserting ERISA preemption as a defense to the quality of care claims embodied in Senate Bill 386." (Defendants' Response, Instrument No. 46 at 19). According to Defendants, the Dukes case is "res judicata as to AEtna because AEtna is the successor in interest to the defendant in Dukes, U.S. Healthcare." (Id.). "As the successor in interest to U.S. Healthcare after Dukes was decided, [Defendants continue] AEtna was in essence the HMO that lost in Dukes, wherein the court clearly limited and expressly distinguished the holding of Corcoran from cases in which the claims are based on the quality of care provided by the HMOs." (Id.).
The Fifth Circuit's "test for res judicata requires that: (1) The parties be identical in both suits, (2) A court of competent jurisdiction rendered the prior judgment, (3) There was a final judgment on the merits in the previous decision, and (4) The plaintiff raises the same cause of action or claim in both suits." In re Howe, 913 F.2d 1138, 1143-44 (5th Cir.1990). In this case, Defendants' res judicata argument clearly fails to meet the fourth requirement. Plaintiffs seek a declaration that the Act is preempted by Section 514(a) of ERISA whereas, in Dukes, 57 F.3d at 351, U.S. Healthcare, Inc. sought a determination that removal of the plaintiffs' claims to federal court was proper under the complete preemption doctrine. Furthermore, in Dukes, the Third Circuit did not address whether the plaintiffs' state law claims were preempted under Section 514(a) the exact issue in this case. Id. at 361. Rather, the Court left this issue open for resolution by the state courts on remand. Id. Consequently, the Court finds that Aetna is not by barred by res judicata from arguing that the Act is preempted by ERISA.
[10] The "complete preemption" exception provides that "Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S. Ct. 1542, 1546, 95 L. Ed. 2d 55 (1987). "The Supreme Court has determined that Congress intended the complete-preemption doctrine to apply to state causes of action which fit within the scope of ERISA's civil-enforcement provisions." Dukes, 57 F.3d at 354 (quoting Metropolitan Life, 481 U.S. at 64-66, 107 S. Ct. at 1547-48).
[11] Plaintiffs claim that this Court cannot rely on the discussion in Dukes because it is a removal case. (Plaintiffs' Motion, Instrument No. 20 at 31). The Court recognizes that a determination that a claim is not completely preempted under Section 502(a) of ERISA does not necessarily mean that that claim is not preempted under Section 514. See Dukes, 57 F.3d at 352 (holding that plaintiffs' claims are not completely preempted under Section 502, but remanding the case to the state court for a determination of whether plaintiffs' claims are preempted under Section 514(a)); Rice v. Panchal, 65 F.3d 637, 646 n. 10 (7th Cir.1995). However, the Court finds the Third Circuit's discussion of state regulation of "quality of care" to be quite relevant to the instant case.
Notably, despite their supposed opposition to removal cases, Plaintiffs also request this Court to rely heavily on two other removal cases, Corcoran and Rodriguez.
[12] The Third Circuit cautions that "the distinction between quantity of benefits due under a welfare plan and the quality of those benefits will not always be clear ... where the benefit contracted for is health care services rather than money to pay for such services." Dukes, 57 F.3d at 358. In some cases, "it may be appropriate to conclude that the plan participant or beneficiary has been denied benefits under the plan." Id. Such a determination should be made on a case-by-case basis. See Schmid v. Kaiser Found. Health Plan of Northwest, 963 F. Supp. 942, 945 n. 1 (D.Or.1997).
[13] Plaintiffs also argue that Section 88.002(b) of the Texas Civil Practice and Remedies Code, as added by the Act, improperly imposes vicarious liability on the enumerated entities for the negligent health care treatment decisions of their employees, agents, ostensible agents, or other representatives. (Plaintiff's Motion, Instrument No. 20 at 14). Plaintiffs claim that the Seventh Circuit's decision in Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482 (7th Cir.1996), calls for this conclusion. In Jass, the HMO's agent determined that physical therapy to rehabilitate the plaintiff's knee after her surgery was not necessary. Id. at 1485. After suffering permanent damage to her knee, the plaintiff filed a negligence claim against the agent and a vicarious liability claim against the HMO and surgeon. Id. The Court dismissed the plaintiff's claim against her HMO for vicarious liability based on the agent's conduct because her cause of action was held to be a Section 502(a) denial of benefits claim, not a quality of care suit. Id. at 1491. Thus, the Jass case is inapposite since this Court has already determined that a suit may be brought under the Act that challenges the quality of a benefit received.
Furthermore, whether a suit brought under the Act against an HMO for vicarious liability based on the actions of a doctor would be preempted should be determined on a case-by-case basis and would be dependent upon the provisions of the plan and the claims asserted by the plaintiffs. The Court may or may not be required to examine the plan to determine the nature of the relationship between the parties. See e.g., Jass, 88 F.3d at 1493 (dismissing vicarious liability claim against HMO based on doctor's conduct because agency relationship was solely a result of HMO's health care plan and because claim required examination of the plan).
[14] As mentioned, Article 20A.12 of the Texas Insurance Code requires HMOs to maintain both an oral and a written complaint system. TEX. INS. CODE ANN. art. 20A.12 (West 1998). This article does not discuss the IRO procedure that is addressed by the other amendments.
[15] Plaintiffs also argue that Section 88.002(b) of the Texas Civil Practice and Remedies Code, as added by the Act, "purports to transform the independent contractor relationship [it has with certain providers] into one of agency, express or implied, in contravention of the express terms of the contract." (Plaintiffs' Motion, Instrument No. 20 at 17). Under Section 88.002(b), the named entities are held liable for a negligent health care treatment decision made by its employees, agents, ostensible agents, or other representatives. TEX. CIV. PRAC. & REM. CODE ANN. § 88.002(b) (West 1998). To the extent that certain providers are independent contractors, not agents of the HMO, then the court should address that concern on a case-by-case basis. Other suits against a managed care entity for vicarious liability, such as those based on the conduct of an HMO's employee, are still viable. Furthermore, even assuming that Plaintiffs' argument is valid, this consequence does not deny the named entities the right to structure their benefits in a particular manner they still have the option to employ providers only as independent contractors.
[16] The decisions in CIGNA and Texas Pharmacy clearly hold that these type of provisions have a connection with ERISA plans. Thus, as stated by the Fifth Circuit in Texas Pharmacy, this Court notes that "a different result will require further guidance from the Supreme Court or further action from Congress." 105 F.3d at 1040.
A recent district court case from Massachusetts, however, noted that "where a third-party, such as a carrier, provides administrative services for a plan, it is critical to distinguish between the carrier's administration of the ERISA plan and `its own administration of its business.'" American Drug, 973 F.Supp. at 68. In American Drug Stores, Inc. v. Harvard Pilgrim Health Care, Inc., the Court determined that Massachusetts' Any Willing Provider statute did not have a connection with ERISA plans because it did not mandate employee benefit structures or administration. Id. at 69. The Court, therefore, found that the statute was not preempted by ERISA. Id. The Court reasoned that "the organization and offering of restricted pharmacy networks should be seen as part of the carrier's own administration rather than its administration of ERISA plans." Id. at 68. The Massachusetts statute, the Court continued, "did not concern administrative and structural matters central to the administration of ERISA plans themselves." Id. Furthermore, even more recently, in Washington Physicians Serv. Ass'n v. Gregoire, 147 F.3d 1039, 1045 (9th Cir.1998), the Ninth Circuit stated that:
[t]he mere fact that many ERISA plans choose to buy health insurance for their plan members does not cause a regulation of health insurance to automatically `relate to' an employee benefit plan just as a plan's decision to buy an apple a day for every employee, or to offer employees a gym membership, does not cause all state regulation of apples and gyms to `relate to' employee benefit plans.
Although the Courts in both American Drug and Washington Physicians present convincing arguments, this Court must find that Sections 88.002(f) and 88.002(g) of the Texas Civil Practice and Remedies Code have a connection with ERISA plans in light of current Fifth Circuit authority. A different result will require Congress to act on the promise to ensure that "`[n]o human being in need of legitimate care should be stopped from getting it.'" Larry Lipman & Rebecca Carr, Rival Bills Aim to Heal HMO Issues, ATLANTA J. & ATLANTA CONST., July 17, 1998, at A1 (quoting a statement made by House Speaker Newt Gingrich at the George Washington University Medical Center).
[17] The Court did not sever Section 88.001(1), the definition of appropriate and medically necessary, from the Act. Given the severance of the mentioned provisions, the inclusion of this definition does not cause the statute to relate to an ERISA plan. It is simply an unnecessary definition because the term was only referenced in Section 88.002(f), which was removed. As such, it could be easily removed without effecting any other provisions in the Act. However, Texas law provides for severance of invalid provisions, not unnecessary provisions. So, the Court declined to remove that section simply because it would produce a clearer, more concise statute. This matter will be left to the decision of the legislature. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2446019/ | 366 S.W.2d 844 (1963)
ASSOCIATED SAWMILLS, INC., Appellant,
v.
L. A. PETERSON et al., Appellees.
No. 16156.
Court of Civil Appeals of Texas, Dallas.
March 22, 1963.
*845 Palmer & Palmer and Walter N. Vernon, Dallas, for appellant.
Gragg, Storey & Griffith, Dallas, for appellees.
WILLIAMS, Justice.
L. A. Peterson, W. A. Brannon and B. R. Brannon, brought this suit against Don Cameron Lumber Company, Interstate Lumber Company, Associated Sawmills, Inc., and James H. Harper, seeking to cancel and cause to be removed as a cloud on the title to real estate certain materialmen's liens which had been filed by defendants individually against L. A. Peterson, as the result of delivery to and subsequent nonpayment by one Guy LaRue of various building materials for an apartment project being constructed by plaintiffs on the real estate in question. The defendants answered, denying that the liens should be cancelled, and, by counterclaim, sought to establish the validity of and to enforce said liens. Following a jury trial the court submitted the case upon special issues and based upon the answer of the jury to these issues the trial court rendered judgment for the plaintiffs and cross-defendants canceling the liens and removing the cloud from title. The defendant Associated Sawmills is the only defendant that appeals from such judgment.
At the outset we are confronted with a complaint by appellees concerning the validity of the statement of facts filed herein by appellant. Appellees contend that they had no opportunity to examine the statement of facts prior to its filing; that it was not approved by appellees' counsel and therefore no valid statement of facts exists. Rule 404, Texas Rules of Civil Procedure provides that all motions relating to informalities in the matter of bringing a case into court shall be filed in this court within thirty days after filing of the transcript, otherwise, the objection shall be considered as waived. Appellees filed no such motion in this court, being content to raise the question for the first time in its brief filed long after the thirty day period referred to in Rule 404, T.R.C.P. Accordingly, any objection by appellees to the sufficiency of the statement of facts is waived. Looney v. Wing, Civ.App., 195 S.W.2d 557; Pacific Fire Ins. Co. v. Smith, 145 Tex. 482, 199 S.W.2d 486.
We have carefully considered this entire record in the light of appellant's points of error, and finding no reversible error reflected therein, we affirm the judgment.
In its original brief appellant's first point was: "The court erred in overruling appellant's motion for judgment non obstante veredicto." Appellees objected to our consideration of this point, contending same to be too general as well as multifarious. The point fails to comply with Rule 418, T. R.C.P. and may not be considered. Tindall *846 v. Tacconelly, Tex.Civ.App., 328 S.W.2d 909.
Appellant, realizing the inadequacy of its point, during oral argument before this court requested leave, pursuant to Rule 431, T.R.C.P., to withdraw its original point No. 1 and to substitute therefor eight substitute points of error. We granted permission to appellant to file its amended brief. Rule 431, T.R.C.P.; Minneapolis-Moline Co. v. Purser, Tex.Civ.App., 361 S.W.2d 239.
By its substituted points one through eight, inclusive, appellant says that the trial court erred in overruling appellant's motion for judgment non obstante veredicto because (1) there was no evidence to support the jury's findings to special issues Nos. 1, 2, 7 and 8, and (2) that the jury's answers to special issues Nos. 1, 2, 7 and 8 are contrary to the great weight and preponderance of the evidence.
We have considered said substituted points Nos. 1 through 8, inclusive, and find that same are without merit and must be overruled. It must be noted that all of these substituted points purportedly relate to an order overruling the motion for judgment non obstante veredicto and, of necessity must constitute "no evidence" points of error. Rule 301, T.R.C.P. provides that the trial court may render judgment non obstante veredicto "if a directed verdict would have been proper." A directed verdict is only proper where there is no evidence to support the submission of an issue to the jury. These substituted points, being "no evidence" only, preclude our consideration of the "contrary to the great weight and preponderance of the evidence" points. Also in our consideration of the "no evidence" points we weigh the question presented by considering only evidence favorable to the verdict and disregarding all other evidence. We not only give full credit to all evidence supporting such findings, but we indulge every legitimate conclusion in their favor. Todd v. Bruner, Tex.Civ.App., 349 S.W.2d 260; Shield Co. v. Cartwright, Tex.Civ.App., 172 S.W.2d 108; Dallas Railway & Terminal Co. v. Bosher, Tex.Civ.App., 278 S.W.2d 357; Pickens v. Harrison, 151 Tex. 562, 252 S.W.2d 575. Governed by these rules we must inspect the record to determine if there is any evidence of probative force to justify the answers of the jury to Special Issues Nos. 1, 2, 7 and 8.
Issue No. 1 inquired whether Guy LaRue was an original contractor under the contract with L. A. Peterson, to which the jury answered "yes". Issue No. 2 inquired what was the reasonable and necessary costs for plaintiffs to complete that part of the contract awarded to Guy LaRue after Guy LaRue abandoned said project, to which the jury answered "$33,277.20." By Issue No. 7 the court inquired whether L. A. Peterson, in dealing with Bill Brannon and Ben Brannon in connection with the construction of the apartment house in question, was acting as an original contractor or as an owner, to which the jury answered "as an owner". In Special Issue No. 8 the court asked if Guy LaRue was acting as a subcontractor under his contract with L. A. Peterson, to which the jury answered "no".
A statement is necessary. L. A. Peterson, W. A. Brannon, and B. R. Brannon entered into an oral agreement to build an apartment house in Dallas, Texas. The land was selected and purchased, each owning one-third interest therein. The project was financed by the three by a loan of $90,000. Each agreed to contribute equally any additional sums that might be required to finish the job. Each man agreed that he would contribute his particular skill or reputation to the undertaking. Peterson testified that since he had more experience in the field of construction that he would generally watch that part of it. W. A. Brannon was to be the contractor for interior design and furnishings and B. R. Brannon was to lend his financial strength or reputation. Peterson testified that the three men were to build the building jointly but that since he had a company in operation, known as "L. A. Peterson, General Contractor", it *847 was agreed that the forms, the checks, and all other necessary paper work would be handled through his office. He testified that the three men spent a lot of time getting prices together, checking material prices, and checking subcontract prices with various contractors. He said that three contractors wanted to build the apartment house for them and they finally decided they would let the contract for the basic building to Guy LaRue, d/b/a Jade Construction Company. Separate contracts were to be let for the air conditioning, electrical work, and other phases of the work. Peterson entered into a written contract with Guy LaRue for the construction of the apartment house in which the said LaRue was to furnish all labor, material and equipment to perform all work necessary to complete the building, except for a certain list of exclusions, for a total price of $39,600. Peterson also entered into agreements, some oral and some written, with contractors for tile work, kitchen ranges, refrigerators, plumbing, heating and air conditioning, electrical fixtures, swimming pools, and utilities. Brannon entered into agreements with the landscaping company, with carpeting and floor covering companies, draperies and furnishings. During the progress of the work Peterson, on occasion, would, with LaRue, co-ordinate the work being done by the other contractors. Appellant supplied the materials to Guy LaRue for use in the project of a total value of $3,099.40. After the job had progressed about two months LaRue apparently suffered a mental and financial breakdown and Peterson, and the Brannons, took over the project to complete the work, all in accordance with the terms of the contract with LaRue. In order to complete the job in accordance with the plans and specifications, it was necessary for appellees to expend an additional sum of $33,277.20, being $15,069.25 in excess of the original contract price with LaRue. When appellant discovered that LaRue would probably not pay for the materials it had supplied, demand was made upon L. A. Peterson only, and eventually a materialmen's lien was filed against the property. At the time of the default and abandonment by LaRue, appellees had no knowledge or notice of any unpaid bills by any parties.
It is uncontradicted in this record that Peterson and the Brannons were the owners of the property in question. The deed to the property revealing this fact was in evidence. Peterson and the Brannons were sued by appellant as owners of the property. Appellee, L. A. Peterson, testified that when he entered into the contract with LaRue, being the principal contract for the construction of the apartment house, that he acted only in the capacity of an owner and that LaRue was the general contractor. Furthermore, he testified that had he been the general contractor that he would have necessarily had a superintendent on the job to run the job and see that the materials were delivered when they were needed, and that as general contractor he would have purchased and furnished all of the materials going into the work, such being the obligation of a general contractor.
When we consider this record and apply the rule of our Supreme Court announced above, we are unable to say that there was no evidence of probative force to either justify the submission of the disputed issues to the jury or the answers of the jury thereto. The evidence was obviously conflicting on each of the material issues, but the jury, hearing the testimony and evaluating the witnesses, and giving the weight thereto which they were authorized and required to do, answered the issues contrary to appellant's contention. Finding, as we do, some evidence to support these answers we are unable to agree with appellant's contention that there was "no evidence" and, accordingly, overrule appellant's substituted points Nos. 1 through 8, inclusive.
By its second, third and fourth points in its original brief, appellant complains of the action of the trial court (1) in admitting into evidence appellees' exhibit No. 1, being *848 a contract between L. A. Peterson and Guy LaRue, because the instrument had been materially altered; (2) because, appellees' exhibit No. 1, was in conflict with defendant Don Cameron's Exhibit No. 1, due to the alteration; and (3) in overruling appellant's motion to strike the testimony of L. A. Peterson which was in conflict with appellant Don Cameron's Exhibit No. 1, since such testimony amounted to an attempt to vary the terms of said written agreement.
Appellees' Exhibit No. 1, the original of which appears in the record, is a printed form headed "Subcontract Agreement" and recites that "L. A. PetersonGeneral Contractor owner, hereinafter called contractor, has agreed to perform and/or is engaged in the performance of such construction work at Marsalis & Eleventh Streets, Dallas, Texas * * *" and also says "this agreement made the 16th day of November 1959, by and between L. A. Peterson, hereinafter called contractor, and Guy E. LaRue, hereinafter called subcontractor * * *." The contract concludes with the signatures: Guy E. LaRue, d/b/a Jade Construction Company, subcontractor by Guy LaRue and L. A. Peterson, General ContractorOwner, by L. A. Peterson." This contract provides that Guy LaRue agreed to furnish all labor, material and equipment, and perform all work necessary to complete the apartment building (except for certain exclusions to be performed by others).
Don Cameron's Exhibit No. 1, appears to be an identical copy of appellees' Exhibit No. 1, with the exception that the word "owner" is omitted in Don Cameron's Exhibit No. 1, following the name of L. A. Peterson as it appears in two places in appellees' Exhibit No. 1.
During the trial of the case L. A. Peterson identified both appellees' Exhibit No. 1 and Don Cameron's Exhibit No. 1, whereupon objection was made to plaintiff's Exhibit No. 1 because "it has a material alteration on its face". Thereupon counsel for appellees stated that they would be willing to use Don Cameron's Exhibit No. 1, or either one of the instruments. The court overruled the objection to appellees' Exhibit No. 1, and it appears that both Exhibits went to the jury. At one stage of the proceedings appellant's counsel moved the court to instruct the jury to disregard the testimony of Mr. Peterson which conflicts with the Cameron Exhibit No. 1, whereupon the court said: "The testimony reveals that both of these contracts were signed at the same time; there is some variance in the contract, but I think it is up to the jury to resolve the conflict in that, so I will overrule the objection and you can have your exceptions."
Appellant's contention that the word "owner" typed in two places in appellees' Exhibit No. 1, completely destroyed such contract, as being a fatal alteration, is not tenable. The only testimony concerning this word being added to the Exhibit was from L. A. Peterson who testified that he could not say how or when the word was typed on such instrument; that he knew he did not do it himself nor did anyone do it under his direction. The court did not submit any issue to the jury concerning any such alteration. It is significant to note that the instrument contains the name of L. A. Peterson in several places but in only two places, as above recited, is the word "owner" added. In Don Cameron's Exhibit No. 1 the word "owner" does not appear at all.
The alteration to a written instrument, to render it void, must affect the liability of the parties, and must materially change the instrument, causing it to fail to reflect the meaning and intent of the parties to the agreement. Elder Mfg. Co. v. The Leader, Inc., Tex.Civ.App., 25 S.W.2d 274; Tyler v. Bauguss, Tex.Civ.App., 148 S.W.2d 912; Duvall v. Clark, Tex.Civ.App., 158 S.W.2d 565 and Oehler v. Scammel, Tex.Civ.App., 242 S.W.2d 403.
We are of the opinion that the liability of the parties under this contract *849 is not affected by the unexplained addition of the word "owner" following Mr. Peterson's name in two places on appellees' Exhibit No. 1. Appellant is in no position to contend that L. A. Peterson was not one of the owners of the property in question. They sued L. A. Peterson as an owner and sought to foreclose a lien on the interest which he owns in said property. L. A. Peterson was the only one of the three owners ever served with any notice of any kind prior to the filing of such affidavit in support of the materialmen's lien. This being true it cannot be said that the addition of the word "owner" constituted a material alteration to the instrument in question. Furthermore, Don Cameron's Exhibit No. 1, admitted freely by appellees was before the jury, and as stated by the court in his remark, it was for the jury to resolve any differences between the two instruments. This the jury did in its findings.
Moreover, an alteration of an instrument which is merely "descripto personae" is not a material alteration. 3 C.J.S. Alteration of Instruments § 30, p. 939.
Finally, appellant is not a party to this contract, nor is it claiming thereunder, and therefore it is difficult to understand how appellant could be affected by such alleged alteration. 3 C.J.S. Alteration of Instruments § 17, p. 920.
Even if it could be said that the court committed error in admitting both instruments into evidence before the jury, under the circumstances here related, we cannot say that such error was such as to probably result in the rendition of an improper verdict in this case. Rule 434, T.R.C.P. Appellant's original points two, three and four are overruled.
During oral argument before this Court appellant's counsel admitted that its original points five, six and seven were fatally defective and requested us to not consider same.
The judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1821651/ | 81 B.R. 119 (1987)
In re MARILL ALARM SYSTEMS, INC., and Marill Security Services, Inc., Debtors.
MARILL ALARM SYSTEMS, INC., Marill Security Services, Inc., Eddy Marill and Mirtha Marill, Plaintiffs/Appellees,
v.
EQUITY FUNDING CORPORATION, Theodore Moss and Donald Braverman, Defendants/Appellants.
Nos. 87-6450-CIV, 85-02033-BKC-SMW, 85-02034-BKC-SMW.
United States District Court, S.D. Florida, Miami Division.
December 1, 1987.
*120 Michael Winer, Ft. Lauderdale, Fla., for plaintiffs/appellees.
Chad P. Pugatch, P.A., Ft. Lauderdale, Fla., for defendants/appellants.
MEMORANDUM OPINION AND ORDER INVALIDATING FINAL JUDGMENT OF BANKRUPTCY COURT, PARTIALLY ADOPTING PROPOSED FINDINGS AND CONCLUSIONS AND ENTERING FINAL JUDGMENT FOR PLAINTIFFS
SPELLMAN, District Judge.
This adversary proceeding is before the Court on defendants/appellants' appeal from a final judgment of the United States Bankruptcy Court for the Southern District of Florida, awarding plaintiffs/appellees $260,500.44 in damages, 68 B.R. 399. The bankruptcy court held that defendants/appellants violated the Florida RICO statute, Fla.Stat. §§ 895.01 et seq., by their scheme to charge usurious interest on a loan to plaintiffs/appellees.
I. BACKGROUND
Plaintiffs/appellees Marill Security Services, Inc., Marill Alarm Systems, Inc., and owners Eddy and Mirtha Marill (hereinafter collectively referred to as "Marill") provide security systems and protection to condominiums, shopping centers and industrial parks. Defendant/appellant Donald Braverman ("Braverman") acted as Marill's accountant since shortly after the inception of the business. In 1982 Marill began to experience the first of a series of financial difficulties. Braverman met with defendant/appellant Theodore Moss ("Moss") and arranged for financing from an organization known as Open Door Corporation ("Open Door") and Open Door's owner, Richard Stein, defendants below, procuring an initial loan of $20,000 at a stated interest rate of 18%. On the same date that this initial loan transaction was closed, Braverman created Equity Funding Corporation ("Equity Funding"), another defendant/appellant herein. Braverman represented to the Marills that they were required to make additional payments on the loan in order to secure a relationship with Open Door and to keep open the possibility of additional financing. These "additional loan payments" were paid to Equity Funding and collected by Braverman. Over the next three years, Open Door loaned additional funds to Marill until, ultimately, Marill had borrowed a total of approximately $175,000 from Open Door. Throughout that time period, a pattern developed whereby the amount collected by and paid to Equity Funding in "additional loan payments" increased each time Open Door loaned more funds to Marill. Ultimately, Marill paid a total of $86,833.48 to Equity Funding in additional payments.[1]
Marill Alarm Systems and Marill Security Services filed a voluntary petition for bankruptcy under Chapter 11 in the United States Bankruptcy Court for the Southern District of Florida on September 9, 1985. On October 11, 1985, Eddy and Mirtha Marill also filed for voluntary bankruptcy under Chapter 11 in the same court. On February 3, 1986, this adversary proceeding was filed. The Complaint alleges that Open Door and Equity Funding, through Moss and Braverman, conspired to charge and/or collect usurious interest from Marill on the Open Door loans. Count I claims that appellants violated Fla.Stat. § 687.071 (the Florida usury statute) and prays that Open Door's notes be cancelled and that all principal and interest paid be returned to *121 Marill. Count II alleges that appellants' conduct constitutes a "pattern of racketeering activity" pursuant to Fla.Stat. § 895.02(1)(a) (Florida RICO) and prays for treble damages thereunder. Count III prays for a determination as to the validity and priority of Open Door's liens. Count IV seeks an order enjoining appellants from collecting the debt. On October 3, 1986, Marill amended its complaint by adding two counts. Count V alleges that the funds paid to Equity represent a fraudulent conveyance under 11 U.S.C. § 548 and Count VI makes a similar claim under Florida's fraudulent transfer statute (as made applicable through 11 U.S.C. § 544(b)). Marill settled with Open Door and Richard Stein prior to trial.
On November 3 and November 6, 1986, a trial was held before the Honorable Sidney M. Weaver in the United States Bankruptcy Court for the Southern District of Florida. After trial, the Court permitted Marill to amend its complaint to conform to the evidence by adding a claim under Fla.Stat. § 817.035 (obtaining property under false pretenses).
On December 30, 1986, Judge Weaver entered his Findings of Fact and Conclusions of law and entered Final Judgment on the adversary complaint for Marill in the amount of $260,500.44 (representing $86,833.48 in damages, trebled). This appeal followed.
II. THE BANKRUPTCY JUDGE'S FINDINGS OF FACT AND CONCLUSIONS OF LAW
The bankruptcy judge based his findings and conclusions solely on Marill's Florida RICO claim. The judge found that the facts and circumstances surrounding the financial arrangement between appellants and Marill indicated that appellants were in fact charging Marill interest at a usurious rate. He also found that there was a fraudulent practice here because Braverman collected the payments under false pretenses, thus violating Fla.Stat. § 817.035.
Specifically, the judge doubted the credibility of Braverman's testimony that the payments to Equity Funding represented "consulting fees" and not additional interest. The judge did find Marill's testimony to be credible in light of the circumstantial evidence presented at trial. The payment history, presented at trial, as to both Open Door and Equity Funding, reflected a tie-in as to amounts and dates of payments which he believed to be more than coincidental. Equity Funding, with its purported consulting arrangement, was incorporated on the very same date that the first loan was made by Open Door. Braverman's testimony as to the consideration for the "consulting arrangement" contradicted the actual payments. There was no comprehensive billing arrangement, engagement letter or other documentation reflecting the basis for the purported consulting arrangement. Moreover, there was no satisfactory explanation of services provided to warrant the amount of fees claimed in excess of charges for normal accounting services.
Accordingly, the judge concluded that either of these violations (usury or obtaining property under false pretenses) would support liability under Florida's RICO statute as a pattern of racketeering activity. Because he awarded treble damages in the amount of $260,500.44, the judge further concluded that this award encompassed all damages sustained by Marill and found it unnecessary to reach the remainder of Marill's claims.
III. DISCUSSION
Appellants argue that the bankruptcy judge was without jurisdiction to enter a dispositive judgment in this action because it is a related, "non-core" proceeding and his jurisdiction was limited by 28 U.S.C. § 157(c)(1).[2] Pursuant to this section, the *122 bankruptcy judge must determine, on his own motion or by the motion of a party, whether an adversary proceeding is core or non-core. See 28 U.S.C. § 157(b)(3). In the case at bar, the bankruptcy judge did not make this critical determination. On March 25, 1986, Open Door filed its Motion for Determination of Nature of Proceedings with the bankruptcy judge, which requested that he determine whether the proceeding was core or non-core. The judge denied Open Door's Motion without prejudice on April 16, 1986.[3] Therefore, this action proceeded to trial without a determination as to the nature of the proceedings.
It is a critical and mandatory duty of the bankruptcy judge to determine the nature of an adversary proceeding pursuant to 28 U.S.C. § 157(b)(3). If the bankruptcy judge enters a final judgment without having made such a determination, it must be invalidated. In In re Nell, 71 B.R. 305 (D.Utah 1987), the court held that even if the parties do not move for a determination as to the nature of the proceedings, the ultimate responsibility to do so lies with the bankruptcy judge, and stated:
Section 157(b)(3) of title 28 requires the bankruptcy judge to initially determine whether the proceeding is core or non-core; it does not prescribe when that determination is to be made. When parties fail to timely move the bankruptcy court for an early determination of whether the proceeding is core or non-core, they waive their right to object to the reference of a non-core matter to the non-article III tribunal. The parties' failure to so move the court, however, does not alter the statutory limits on the bankruptcy court's jurisdiction. Section 157(b)(3) still requires the bankruptcy judge to determine the nature of the proceeding, and section 157(c)(1) still places limits on the bankruptcy judge's jurisdiction in non-core matters. Rather, failure to timely move the court places the timing of that determination entirely within the discretion of the bankruptcy judge. The bankruptcy judge need not make the sua sponte determination until the time when either the final order or proposed findings are to be prepared.
In re Nell, 71 B.R. at 311 (emphasis added). See also In re STN Enterprises, Inc., 73 B.R. 470, 479 (Bankr.D.Vt.1987); In re Nanodata Computer Corp., 52 B.R. 334, 341 (Bankr.W.D.N.Y.1985).
The reason this function is so critical stems from the Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S. Ct. 2858, 73 L. Ed. 2d 598 (1982). In Marathon, a plurality held that Congress' Bankruptcy Reform Act of 1978 involved an unconstitutional grant of power because it empowered an article I bankruptcy court to hear controversies required by the constitution to be heard by an article III court. Id. at 60-61, 102 S.Ct. at 2865-66; see also Commodity Futures Trading Commission v. Schor, ___ U.S. ___, 106 S. Ct. 3245, 3256, 92 L. Ed. 2d 675 (1986).[4] It was partly in response to the Marathon holding that Congress enacted the 1984 amendments to the Bankruptcy Act, including section 157, which limited the bankruptcy court's jurisdiction. In re I.A. Durbin, Inc., 62 B.R. 139, 143 (S.D.Fla.1986); In re Nanodata Computer Corp., 52 B.R. at 339. Accordingly, the Final Judgment entered by the bankruptcy judge in the case at bar is invalid because it was rendered outside of his jurisdiction. Cf. Matter of Kubly, 818 F.2d 643, 645 (7th Cir.1987) (bankruptcy court's "power must be conferred, and it may not be enlarged by the judiciary because the judge believes it wise to resolve *123 the dispute").[5]
Marill argues that, notwithstanding the possible lack of jurisdiction of the bankruptcy court, the Final Judgment is valid because appellants impliedly consented to the full jurisdiction of the bankruptcy court, pursuant to 28 U.S.C. § 157(c)(2),[6] by their failure to raise a timely objection. See, e.g., Rainey v. International Harvester Credit Corp., 59 B.R. 987, 990 (N.D.Ill.1986); Energy Savings Center, Inc. v. Council, 54 B.R. 100, 102 (Bankr.E.D.Pa.1985). To accept this argument here, however, where the bankruptcy judge has not even made an initial determination as to the nature of the proceedings, would be absurd because there is nothing to which any party could object in the first place. Cf. In re Nell, supra. Moreover, to hold that any party impliedly consented here would be tantamount to obliterating the critical distinction between article I and article III courts underlying the Court's decision in Marathon. Therefore, a party in a related proceeding pursuant to 28 U.S.C. §§ 157 et seq. cannot be held to have consented, impliedly or otherwise, to the full jurisdiction of the bankruptcy court until the bankruptcy judge, by his own motion or by the motion of a party, explicitly determines that the proceeding is noncore. See 28 U.S.C. §§ 157(b)(3) and (c)(2); In re Lombard-Wall Inc., 48 B.R. 986, 990 (S.D.N.Y.1985) ("Only after determining that a proceeding is not a core proceeding should a court consider whether the parties consented to the bankruptcy court's jurisdiction").[7] The Final Judgment entered by the bankruptcy judge, therefore, is invalid. See In re Nell, 71 B.R. 305, 310 (D.Utah 1987).[8]
*124 Appellant is now entitled to a de novo review of the proceedings below. This court will therefore view the bankruptcy judge's findings of fact and conclusions of law as proposed findings and conclusions and will view the parties' appellate briefs as the objections thereto. See 28 U.S.C. § 157(c)(1). In so doing, this court may disregard the bankruptcy judge's findings completely. Matter of Ferris, 764 F.2d 1475, 1478 (11th Cir.1985); Matter of Emergency Beacon Corp., 52 B.R. 979, 987 (S.D.N.Y.1985); In re G & L Packing Co., Inc., 41 B.R. 903, 913 (N.D.N.Y.1984); but see 28 U.S.C. § 157(c)(1) (district court should enter final order "after reviewing de novo those matters to which any party has timely and specifically objected") (emphasis added).
The bankruptcy judge found that appellants' scheme to collect usurious interest from Marill provided the predicate "racketeering activity" upon which to base a violation of Florida's RICO statute, Fla. Stat. §§ 895.01 et seq.[9] Appellants object to the bankruptcy judge's conclusion that Equity Funding and/or Open Door collected a usurious rate of interest from Marill pursuant to the Open Door loans. They argue that the payments to Braverman and Equity Funding were merely commissions paid by a borrower to its agent and, as such, do not amount to additional interest payments. See Investment Funds Corp. v. Bomar, 303 F.2d 592, 596 (5th Cir.1962). But upon a de novo review, it appears to this Court that Braverman was not acting as an agent solely on Marill's behalf. Indeed, Braverman testified that he was the "go-between" on the loans. Trial transcript at 246. Braverman may have initially procured the loans for Marill, but his relationship with Open Door developed in such a way that it could appear that Braverman was Open Door's agent as well. Accordingly, appellants' "commission" argument must fail. See North American Mortgage Investors v. Cape San Blas Joint Venture, 378 So. 2d 287 (Fla.1979) (court held that fees paid to an agent who represents both the borrower and the lender could be usurious interest payments).
It is well settled that a court must look to the substance of a transaction and not the form to determine whether a transaction not cast in the form of a loan nevertheless constitutes a usurious loan transaction. Beausejour Corp., N.V. v. Offshore Development Co., Inc., 802 F.2d 1319, 1320 (11th Cir.1986); In re Mickler, 50 B.R. 818 (Bankr.M.D.Fla.1985); Growth Leasing, Ltd. v. Gulfview Advertiser, Inc., 448 So. 2d 1224 (Fla. 2nd DCA 1984). From the facts and circumstances surrounding the transactions between Marill and appellants, the payments to Equity Funding pursuant to the Open Door loans could certainly be viewed as usurious interest payments. Equity Funding was created on the very same date that the first loan from Open Door was arranged. The payments to Equity Funding were usually made on the same date as the payments to Open Door and the amounts were curiously tied-in to the amount of the actual loan payment. This Court finds these circumstances to be more than coincidental, as did the bankruptcy court. See Findings and Conclusions at 5. Moreover, the amount of the payments to Equity Funding increased each time Open Door loaned more funds to Marill. Braverman *125 exerted a great deal of control over Marill as its sole accountant, and the relationship between Braverman and Open Door, according to much of the testimony at trial, is suspiciously vague.[10] Therefore, this Court adopts the findings and conclusions of the bankruptcy judge with respect to appellants' liability under the Florida Usury Statute, Fla.Stat. §§ 687 et seq.
IV. CONCLUSION
This Court has independently found that Marill met its burden of proof in establishing that the pattern of activities engaged in by appellants constitutes a violation of the Florida RICO statute. Appellants' charging and collecting what appears to be usurious interest constitutes a sufficient pattern of racketeering activity as contemplated by Fla.Stat. § 895.02. Accordingly, it is hereby
ORDERED AND ADJUDGED that the Final Judgment of the bankruptcy court is invalidated for having been entered without jurisdiction. It is further ORDERED that the proposed findings and conclusions of the bankruptcy judge are adopted insofar as those findings and conclusions base appellants' liability on their violation of the Florida usury and RICO statutes.[11] In addition, the proposed findings and conclusions of the bankruptcy judge are adopted with respect to Marill's civil remedy pursuant to Fla.Stat. § 895.05(7), which mandates an award of treble damages in the amount of $260,500.44. Marill is also entitled to recover attorneys' fees and costs. See Banderas v. Banco Central del Ecuador, 461 So. 2d 265 (Fla. 3d DCA 1985). Marill is hereby directed to submit to this Court, within 15 calendar days, a Final Judgment in accordance with this Opinion and Order.
NOTES
[1] The amount of these payments is not in dispute. The parties agree that the amount in controversy is the $86,833.48 in payments. See Trial Transcript at 9.
[2] 28 U.S.C. § 157(c)(1) provides:
A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.
(West supp.1987).
[3] The bankruptcy judge denied the Motion "without prejudice to its reconsideration at a later date." The Motion was never reconsidered, however.
[4] Former sections 1471(a)-(c), Title 28 U.S.C., conferred the full jurisdictional authority of the district court over bankruptcy cases and proceedings to the bankruptcy court.
[5] In the case at bar, the bankruptcy judge's failure to determine the nature of the proceeding is innocuous because this Court ultimately adopts his findings and conclusions. See infra. The failure to make this determination in other cases, however, could result in the unconstitutional final adjudication of a non-core adversary proceeding by an article I bankruptcy court.
[6] 28 U.S.C. § 157(c)(2) provides, in pertinent part:
Notwithstanding the provisions of paragraph (1) of this subsection, the district court, with the consent of all the parties to the proceeding, may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments. . . .
(West supp.1987) (emphasis added).
[7] It should be noted that effective August 1, 1987, Bankruptcy Rule 7008, pertaining to pleading requirements, was amended to read: "In an adversary proceeding before a bankruptcy judge, the complaint . . . shall contain a statement that the proceeding is core or non-core and, if non-core, that the pleader does or does not consent to entry of final orders or judgment by the bankruptcy judge." The Advisory Committee Note to that Rule provides that "Only express consent in the pleadings or otherwise is effective to authorize entry of a final order or judgment by the bankruptcy judge in a non-core proceeding." Accordingly, in any adversary proceeding in a bankruptcy court which was filed after August 1, 1987, the parties cannot impliedly consent to a final judgment by the bankruptcy court.
The case at bar was filed approximately two years ago and is not subject to the new bankruptcy rules. Yet this subsequent amendment bears out this Court's analysis and exemplifies Congress' concern over the power to be exercised by an article I court, discussed at length in Marathon.
[8] Had the judge determined the nature of this proceeding, he would have found it to be noncore. Numerous courts have noted the necessity of defining core proceedings narrowly so as to conform to the constitutional proscription of Marathon. E.g., Matter of Wood, 825 F.2d 90, 95 n. 25 (5th Cir.1987); Piombo Corp. v. Castlerock Properties, 781 F.2d 159, 162 (9th Cir.1986); In re Satelco, Inc., 58 B.R. 781, 788 (Bankr.N.D. Tex.1986). Moreover, in determining the nature of a proceeding for purposes of determining core status, the court must look to both the form and the substance of the proceeding. Matter of Wood, supra, 825 F.2d at 97. The substance of this proceeding does not support a finding of core status. While Marill sets forth six causes of action in its complaint, two of which arguably "arise under" title 11, the essential issue in this proceeding is whether appellants are liable under Florida law for their alleged scheme to collect usurious interest from and defraud Marill. Accordingly, the bankruptcy judge's jurisdiction was limited pursuant to 28 U.S.C. §§ 157 et seq. See, e.g., In re Counts, 54 B.R. 730, 735 (Bankr.D.Colo.1985) (court held claims for "breaches of contract, fraud, and usury, are related proceedings, and . . . this Court is without jurisdiction to finally determine them"); Matter of Shell Materials, Inc., 50 B.R. 44, 46 (Bankr.M.D.Fla.1985) (same).
The only arguable basis for conferring core status to this proceeding would be pursuant to the "catch-all" provision of section 157 (28 U.S.C. § 157(b)(2)(O)) because Marill's claim "affects the liquidation of the assets of the estate." If this Court conferred core jurisdiction on that basis, however, virtually any claim which could increase the assets in the estate would entitle the bankruptcy court to ignore the constitutional proscription set forth in Marathon. This Court will not interpret section 157 so broadly. See In Re STN Enterprises, Inc., 73 B.R. 470, 481-82 (Bankr.D.Vt.1987).
[9] Section 895.02(1)(a)(8) provides that a violation pursuant to Fla.Stat. §§ 687 et seq. is a "racketeering activity" for purposes of that statute. Fla.Stat. § 687.071(3) provides, in pertinent part:
. . . any person making an extension of credit to any person, who shall willfully and knowingly charge, take or receive interest thereon at a rate exceeding forty-five percent per annum or the equivalent rate for a longer or shorter period of time, whether directly or indirectly or conspire so to do, shall be guilty of a felony of the third degree. . . .
(West supp.1987). The judge found that the payments to Equity Funding in conjunction with those to Open Door reflected a total interest rate greater than 74 percent when figured on an annual basis. See Findings and Conclusions 68 B.R. at 401.
[10] Many of the bankruptcy judge's findings are based upon the fact that he simply did not believe a good portion of appellants' testimony at trial. See Findings and Conclusions 68 B.R. at 401-02. Therefore, this Court should accord those findings the deference to which they are entitled. E.g., In re Chalik, 748 F.2d 616, 619 (11th Cir.1984) ("the trial judge is best able to assess the credibility of the witnesses before him and thus the evidentiary content of their testimony").
[11] Appellants also object to the bankruptcy judge's conclusion that their conduct was a fraudulent practice pursuant to Fla.Stat. § 817.035(1). This Court need not reach that objection, however. Appellants have independently violated the Florida RICO statute by their scheme to collect usurious interest from Marill on the Open Door Loans. See Fla.Stat. § 895.02(1)(a)(8). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1857250/ | 678 So. 2d 797 (1996)
Larry Glenn HINKLE
v.
BURGREEN CONTRACTING COMPANY, INC., and Benjamin Townsend.
2950334.
Court of Civil Appeals of Alabama.
June 14, 1996.
*798 Robert E. Patterson, Huntsville, for Appellant.
Byrd R. Latham, Athens, for Appellees.
L. CHARLES WRIGHT, Retired Appellate Judge.
Larry Glenn Hinkle filed an action against Burgreen Contracting Company (Burgreen) and Benjamin Townsend, seeking damages resulting from an automobile accident. In his complaint he alleged negligence, negligence per se, and wanton misconduct. In answering the complaint, Burgreen and Townsend asserted the affirmative defense of contributory negligence.
Burgreen and Townsend filed a motion for a summary judgment, with supporting evidence. Hinkle opposed the motion, with supporting evidence. Following a hearing, the trial court granted Burgreen and Townsend's motion. The trial court found as a matter of law that Hinkle was contributorily negligent. Hinkle filed a post-judgment motion, which was denied. Hinkle appeals. This case is before us pursuant to § 12-2-7(6), Code 1975.
Viewing the evidence in a light most favorable to Hinkle, Specialty Container Mfg., Inc. v. Rusken Packaging, Inc., 572 So. 2d 403 (Ala.1990), we find that the record reflects the following: On June 10, 1993, Hinkle was injured when his car collided with an asphalt roller owned by Burgreen and operated by Townsend. Hinkle was travelling eastbound on a divided, four-lane highway when the accident occurred shortly before *799 noon. He was travelling 40 or 45 miles per hour at the time of the accident in an area where the posted speed limit was 55 miles per hour. Hinkle did not see the roller until just before impact. He was rendered unconscious and suffered cracked ribs, closed head trauma, a deep cut on his left leg, and a pinched nerve in his wrist.
Prior to the accident Burgreen had completed construction work on private property along the divided, four-lane highway, involving about 12 workers and several pieces of equipment. Around noon Burgreen commenced to move its men and equipment to another site, approximately 3/4 miles down the highway. Townsend was instructed to move the roller. The roller travels at a speed of 5 to 8 miles per hour. It has a triangular reflective marker attached to the back of the machine, but has no other lights, flashers, signs, or warning devices.
Townsend testified that he travelled in the right eastbound lane for a distance and then moved to the left eastbound lane. Townsend stated that prior to changing lanes, he looked behind him and did not see any cars in the left lane. He did not give a turn signal because there were no signals on the roller. Townsend testified that prior to the accident, he was looking straight ahead in the direction which he was travelling, he did not see Hinkle's automobile before impact, and he did not hear any brakes or screeching tires before impact.
Joyce Brewer, a witness to the accident, averred that she was looking out the window and "saw an asphalt roller on U.S. 72 eastbound in the inside lane, and it moved to the right lane and then I saw a brown automobile collide with the asphalt roller. I did not see any escorts at all in the front or rear of the roller."
Townsend testified that he did not have an escort on the route. An employee of Burgreen stated that a Burgreen truck was attempting to escort the equipment, but it was stopped by a traffic light. Burgreen did not have set regulations concerning when to use escorts or when to transport the equipment via trucks or trailers.
In entering a summary judgment in favor of Burgreen and Townsend, the trial court found that "there is no way that a reasonable jury could conclude that [Hinkle] exercised due care when he did not see [Burgreen's] vehicle." It concluded that Hinkle was contributorily negligent as a matter of law. The trial court did not address the wanton misconduct claim. Therefore, the only issue before us is whether the trial court erred in entering a summary judgment on Burgreen and Townsend's affirmative defense of contributory negligence.
A motion for a summary judgment may be granted when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. McDonald v. Servpro, 581 So. 2d 859 (Ala.Civ.App.1991). If the moving party makes a prima facie showing that no genuine issue of material fact exists and that it is entitled to a judgment as a matter of law, the burden shifts to the nonmovant to go forward with evidence demonstrating the existence of a genuine issue of fact. Grider v. Grider, 555 So. 2d 104 (Ala.1989). In order to defeat a properly supported summary judgment motion, the nonmovant must create a genuine issue of material fact by presenting substantial evidence. McDonald. Substantial evidence is "evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So. 2d 870 (Ala.1989).
As a general rule, the issue of whether one is contributorily negligent is a question for the jury. Adams v. Coffee County, 596 So. 2d 892 (Ala.1992). It may be found to exist as a matter of law, however, when the evidence is such that reasonable people must reach the same conclusion that the plaintiff was negligent and that such negligence was the proximate cause of the injury. Gulledge v. Brown & Root, 598 So. 2d 1325 (Ala.1992). "Unless the evidence submitted on a summary judgment motion is wholly without adverse inferences or is free from any doubt, summary judgment must not be entered, but the issues must be submitted *800 to the jury." Gossett v. Twin County Cable T.V., Inc., 594 So. 2d 635 (Ala.1992).
Viewing the evidence in favor of Hinkle, we conclude that reasonable minds may differ on the question of whether Hinkle was guilty of contributory negligence. Townsend's testimony that he did not see Hinkle before the impact creates a factual question as to whether Townsend was negligent in failing to keep a proper lookout before making a lane change. Hinkle's testimony that he did not see the roller before the impact creates a factual question as to whether Townsend was actually in the lane ahead of Hinkle as Townsend claimed, or had just turned into the right lane prior to impact. Joyce Brewer's statement similarly creates a question of fact concerning the cause of the accident.
A genuine issue of material fact clearly exists. The entry of a summary judgment was error. The judgment is reversed and the cause remanded for proceedings consistent with this opinion.
The foregoing opinion was prepared by Retired Appellate Judge L. CHARLES WRIGHT while serving on active duty status as a judge of this court under the provisions of § 12-18-10(e), Code 1975.
REVERSED AND REMANDED.
ROBERTSON, P.J., and YATES and CRAWLEY, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2459719/ | 919 S.W.2d 86 (1996)
The STATE of Texas, Appellant,
v.
Vincent Edward MANCUSO and Justin Aaron Greenhaw, Appellees.
Nos. 604-95, 811-95.
Court of Criminal Appeals of Texas, En Banc.
February 21, 1996.
*87 William K. Goode, Houston, for appellant.
Calvin A. Hartmann, Assist. Dist. Atty., Robert A. Huttash, Houston, State's Atty., Austin, for State.
Before the court en banc.
OPINION ON STATE'S PETITIONS FOR DISCRETIONARY REVIEW
BAIRD, Judge.
Appellees were charged with two separate state jail felonies. Each charge was enhanced with two prior felony convictions. Appellees pled guilty to each offense.[1] The trial judge accepted the guilty pleas and, as the provisions of Tex.Penal Code Ann. § 12.35(c) were not applicable, the trial judge assessed punishment at two years confinement in a state jail. Imposition of the sentences was suspended and appellees were placed on community supervision probation for a period of five years. Tex.Code Crim. Proc.Ann. art. 42.12, § 15. The State appealed each case, contending the sentences were illegal. Tex.Code Crim.Proc.Ann. art. 44.01(b). The Court of Appeals affirmed.[2] We granted the State's petitions for discretionary review to determine whether the Court of Appeals erred in holding the trial judge properly sentenced appellees under Tex.Penal Code Ann. § 12.35 and art. 42.12, § 15, rather than Tex.Penal Code Ann. § 12.42(d).[3] We will affirm.
I.
It is the duty of the Legislature to make laws, and it is the function of the Judiciary to interpret those laws. See, Tex. Const. art. II, § 1; and, Boykin v. State, 818 S.W.2d 782, 785 (Tex.Cr.App.1991). "When we interpret statutes we seek to effectuate the `collective' intent or purpose of the legislators who enacted the legislation." Boykin, 818 S.W.2d at 785; and, Camacho v. State, 765 S.W.2d 431 (Tex.Cr.App.1989). Consequently, we focus on the text of the statute and interpret it in a literal manner attempting to discern the fair, objective meaning of the text. Boykin, 818 S.W.2d at 785. It is our duty while interpreting the statute to give the ordinary and plain meaning to the language of the Legislature. Id.; and, Smith v. State, 789 S.W.2d 590, 592 (Tex.Cr. App.1990). "Where the statute is clear and unambiguous, the Legislature must be understood to mean what it has expressed, and it is not for the courts to add or subtract from such a statute." Coit v. State, 808 *88 S.W.2d 473, 475 (Tex.Cr.App.1991). Only when the application of a statute's plain language is ambiguous or would lead to absurd consequences which the Legislature could not possibly have intended, should we look to extratextual factors. Tex.Gov't Code Ann. § 311.023 (Vernon 1995). See, Boykin, 818 S.W.2d at 785; and, Faulk v. State, 608 S.W.2d 625, 630 (Tex.Cr.App.1980). These extratextual factors include, but are not limited to executive and/or administrative interpretations, consequences of construction, goal of legislation, circumstances under which the statute was enacted and legislative history. Tex.Gov't Code Ann. § 311.023; and, Boykin, 818 S.W.2d at 786. This exception to the general rule is not intended to, nor should it, intrude upon the lawmaking powers of the legislative branch and it should not be construed as an invasion of legislative authority. Failing an absurd consequence or ambiguous language this Court need not delve into the extratextual factors affecting a statute. Id.
Moreover, it is presumed in the enactment of a statute that the entire statute and all words in the statute are intended to be effective, and the language therein will create a just and reasonable result. See, Gov't Code § 311.021 (Vernon 1995). If a general provision conflicts with a specific provision, the provisions shall be construed, if possible, so that effect is given to both. Gov't Code § 311.026(a); Dillehey v. State, 815 S.W.2d 623, 632 (Tex.Cr.App.1991); and, Cheney v. State, 755 S.W.2d 123, 126 (Tex.Cr.App.1988). If the statutes are unable to be reconciled, the specific statute will prevail as an exception to the general statute, unless the general statute is the later enactment and the manifest intent is that the general provision prevail. Gov't Code § 311.026(b).
II.
With the foregoing in mind, we turn our attention to the enactment of the relevant state jail felony laws, namely Tex.Penal Code Ann. §§ 12.35 and 12.42 and Tex.Code Crim.Proc.Ann. art. 42.12, § 15.[4] Section § 12.35 provides:
(a) Except as provided by Subsection (c), an individual adjudged guilty of a state jail felony shall be punished by confinement in a state jail for any term of not more than two years or less than 180 days.[5]
(b) In addition to confinement, an individual adjudged guilty of a state jail felony may be punished by a fine not to exceed $10,000.
(c) An individual adjudged guilty of a state jail felony shall be punished for a third degree felony if it is shown on the trial of the offense that:
(1) a deadly weapon ... was used or exhibited during the commission of the offense or during immediate flight following the commission of the offense...; or
(2) the individual has previously been finally convicted of any felony:
(A) listed in Section 3g(a)(1), Article 42.12, Code of Criminal Procedure; or
(B) for which the judgment contains an affirmative finding under Section 3g(a)(2), Article 42.12, Code of Criminal Procedure.
The mandatory language of subsection (a) governs all state jail felonies. The only exception to subsection (a) is subsection (c) which specifically provides for situations where a state jail felony shall be punished as a third degree felony. Consequently, under the plain language of § 12.35, in all nonsubsection (c) situations the defendant shall be punished under subsections (a) and (b). In this latter context Tex.Code Crim.Proc. Ann. art. 42.12, § 15 comes into play and provides in pertinent part:
(a) On conviction of a state jail felony, the judge shall suspend the imposition of *89 the sentence of confinement and place the defendant on community supervision....
* * * * * *
(d) A judge may impose as a condition of community supervision that a defendant submit at the beginning of the period of community supervision to a term of confinement in a state jail felony facility for a term not to exceed ... one year if the defendant ... previously has been convicted of two or more felonies.
Art. 42.12, § 15, commonly known as the community supervision law, specifically provides for the enhancement of punishment for offenses under § 12.35(a) when there are two or more prior felony convictions.
The 73rd Legislature revised the repeat and habitual offender statute, § 12.42, to provide, in pertinent part, as follows:
(a) If it is shown on the trial of a state jail felony punishable under Section 12.35(c) or on the trial of a third degree felony that the defendant has been once before convicted of a felony, on conviction he shall be punished for a second-degree felony.
* * * * * *
(d) If it is shown on the trial of a felony offense that the defendant has previously been finally convicted of two felony offenses, and the second previous felony conviction is for an offense that occurred subsequent to the first previous conviction having become final, on conviction he shall be punished by imprisonment in the institutional division of the Texas Department of Criminal Justice for life, or for any term of not more than 99 years or less than 25 years.
The State argues that 12.42(d) encompasses all felonies, including State jail felonies. Consequently, the State contends § 12.42(d) applies to the instant cases and the Court of Appeals erred in holding the trial court was required to sentence appellees under § 12.35 and art. 42.12, § 15. For the following reasons, we disagree.
III.
Prior to the 73rd Legislature, there were four classes of felonies: capital felonies, and felonies of the first, second and third degree. However, the 73rd Legislature created a new class of felony, the state jail felony. In connection with the creation of state jail felonies, the Legislature enacted § 12.35 and art. 42.12 § 15 and amended § 12.42(a). These statutes deal specifically with state jail felonies and prescribe the range of punishment therefor. Under § 12.35(a) and (b), the range of punishment for a state jail felony is confinement in a state jail for any term of not more than two years or less than 180 days and a fine not to exceed $10,000.00. Under art. 42.12, § 15(a), that sentence must be suspended and the defendant placed on community supervision probation. Art. 42.12, § 15(d) deals specifically with state jail felonies committed by one who has two or more prior felony convictions and provides that the trial judge may impose as a condition of community supervision probation a term of confinement in a state jail facility for a term not to exceed one year. Art. 42.12, § 15(d) controls the specific circumstances presented by the instant cases. Consequently, we hold the Court of Appeals correctly held the trial judge's assessment of punishment in these cases was proper, i.e., legal.[6]
*90 By the same token, we hold that under the law in effect at the time of the commission of the instant offenses, the only way a defendant's punishment could be enhanced under the provisions of § 12.42 was if the defendant committed a state jail felony under the circumstances described in § 12.35(c) which mandates the defendant shall be punished for a third degree felony. For example, had appellees used or exhibited a deadly weapon while committing their state jail felonies, such conduct would have been punished as a third degree felony. That third degree felony offense could have been properly enhanced under § 12.42(a). However, the instant cases do not impact either § 12.35(c)(1) or (2).
Therefore, we hold the Court of Appeals correctly held that the instant state jail felonies could not be enhanced under § 12.42(d).[7] The judgments of the Court of Appeals are affirmed.
WHITE, J., dissents.
McCORMICK, Presiding Judge, dissenting on State's Petition for Discretionary Review.
I dissent to the majority's holding that "the instant jail felonies could not be enhanced under [V.T.C.A., Penal Code, Section] 12.42(d)."
These cases require this Court to interpret several statutory provisionsthe state jail felony law in V.T.C.A., Penal Code, Section 12.35(a), the community supervision law in Article 42.12, Section 15, V.A.C.C.P., and the habitual offender law in Section 12.42(d). The 1993 Legislature enacted Section 12.35(a) and Article 42.12, Section 15, as part of the overall revision of the 1973 Penal Code. See State v. Mancuso, 903 S.W.2d 386, 387 (Tex.App.Houston [1st Dist.] 1995). The 1993 Legislature also revised V.T.C.A., Penal Code, Section 12.42. See id. Section 12.35(a) and the community supervision law in Article 42.12, Section 15, were enacted primarily to ease prison overcrowding.
Section 12.35(a), in relevant part, provides that a defendant convicted of a state jail felony shall be punished by confinement in a state jail for not more than two years or less than 180 days. However, Article 42.12, Section 15(a), requires the trial court to suspend imposition of the foregoing sentence and to place the defendant on community supervision. Except, Article 42.12, Section 15(d), provides a trial court with discretion to require the defendant, as a condition of community supervision, to serve up to one year jail time in a state jail facility if the defendant "previously has been convicted of two or more felonies." Article 42.12, Section 15(d), expressly provides that "a defendant previously has been convicted of a felony regardless of whether the sentence for the previous conviction was actually imposed or was probated and suspended." The habitual offender law in Section 12.42(d) provides for imprisonment in the institutional division of the Texas Department of Criminal Justice for life, or for any term of not more than 99 years or less than 25 years, if it is shown on the trial for "a felony offense" that the defendant "has previously been finally convicted of two felony offenses, and the second previous felony conviction is for an offense that occurred subsequent to the first previous conviction having become final."[1] A "state jail felony" is expressly classified as a "felony" in V.T.C.A., Penal Code, Section 12.04. See *91 also V.T.C.A., Penal Code, Section 1.07(23) (definition of "felony").
The issue in these cases is whether an habitual offender convicted of a state jail felony may have his sentence enhanced under Section 12.42(d) of the Texas Penal Code. Or, are habitual offenders convicted of state jail felonies, like those here, always required to be sentenced under Section 12.35(a) and Article 42.12, Section 15? The State argues that if it can prove a defendant is an habitual offender, then the "plain" language of Section 12.42(d) requires the defendant to be sentenced as an habitual offender.
When interpreting statutes, our duty as judges is to give effect to the collective intent of those who enacted the statutes at the time of their enactment. See Boykin v. State, 818 S.W.2d 782, 785 (Tex.Cr.App.1991). We are not required to "strictly construe" the applicable statutory provisions; instead, we are required to "liberally" construe them "according to the fair import of their terms, to promote justice and effect the objectives of the code." See V.T.C.A., Penal Code, Section 1.05; Article 1.03, V.A.C.C.P., Stine v. State, 908 S.W.2d 429, 435 fn. 4 (Tex.Cr.App. 1995) (McCormick, P.J., dissenting). In interpreting the applicable statutes here, we presume the Legislature intended for the entire statutory scheme to be effective. See Tex.Gov't Code, Section 311.021(2); Mancuso, 903 S.W.2d at 387. If possible, we should interpret the applicable statutes so that effect may be given to each and avoid any interpretation that would render any parts of the statutes irreconcilable or meaningless. See Mancuso, 903 S.W.2d at 387. We should strive to give effect to all the provisions to make them stand together and have concurrent efficacy. See Cheney v. State, 755 S.W.2d 123, 126 (Tex.Cr.App.1988).
To resolve these cases, the majority apparently relies on the applicability of the doctrine of in pari materia which is a rule of statutory interpretation. But see State v. Perry, 912 S.W.2d 244 (Tex.App.Houston [14th Dist.] 1995, pet. filed October 27, 1995) (concluding that the relevant statutes are not in pari materia); see also Cheney, 755 S.W.2d at 126-27. My understanding of how this doctrine is applied is that statutes that deal with the same general subject, have the same general purpose, or relate to the same person or thing or class of persons or things, are considered as being in pari materia. See id. If possible, effect should be given to all the provisions of each act so they can be made to stand together. See id. However, where a general statute and a more detailed enactment irreconcilably conflict, the latter will control, regardless of whether it was passed prior or subsequently to the general statute, unless it appears the Legislature intended to make the general act controlling. See id; see also Tex.Gov't Code, Section 311.026.
This rule is not applicable to irreconcilable enactments that cover different situations and that were apparently not intended to be considered togetheri.e., irreconcilable enactments not in pari materia. See id. If statutes are not found to be in pari materia, analysis should still focus on whether effect can be given to all the provisions of each statute. When two irreconcilable statutes not in pari materia are at issue, other rules of statutory construction will dictate which statute controls. See id; see also Texas Government Code, Section 311.025.
Therefore, the threshold determination is whether the statutes in question irreconcilably conflict or whether they can be harmonized. If they can be harmonized to stand together and have concurrent efficacy, then the analysis ends. If they irreconcilably conflict, then the applicable rule of statutory construction to determine which statute controls will depend on whether the statutes are in pari materia. See Cheney, 755 S.W.2d at 126-27; compare Texas Government Code, Section 311.025 with Texas Government Code, Section 311.026.
The basis of the majority's opinion seems to be that Article 42.12, Section 15(d), and Section 12.42(d) are irreconcilable; therefore, the specific provisions of Article 42.12, Section 15(d), will control over the general provisions of Section 12.42(d).[2] See Texas Government *92 Code, Section 311.026; Mancuso, 903 S.W.2d at 387-88. As I understand the majority opinion, if the sentence of an habitual offender convicted of a state jail felony can be enhanced under Section 12.42(d), then that would nullify Article 42.12, Section 15(d). In other words, the sentence of an habitual offender convicted of a state jail felony would always be enhanced under Section 12.42(d) making the provisions of Article 42.12, Section 15(d), meaningless.
However, I agree with the Fourteenth Court of Appeals that Article 42.12, Section 15(d), and Section 12.42(d) do not conflict and that Article 42.12, Section 15, "applies only to convicted state jail felons whose sentence has been assessed within the punishment range specified in [Section] 12.35(a)." See Perry, 912 S.W.2d at 250. Where the State has "indicted and proven" that a defendant is an habitual offender as defined in Section 12.42(d), punishment must be assessed in accordance with that statute and Section 12.35(a) and Article 42.12, Section 15, have no application. See id.
In addition, this interpretation does not make Article 42.12, Section 15(d), and Section 12.42(d) irreconcilable or render Article 42.12, Section 15(d), meaningless. In its brief, the State claims Section 12.42(d) and Article 42.12, Section 15(d), "can live in harmony." The State claims:
"Furthermore, applying section 12.42(d) to habitual state jail felons does not offend article 42.12, [section] 15(d). Section 12.42(d) provides for the enhancement of punishment for felony offenses. To use prior felony convictions for enhancement, the State must provide notice to the defendant. Furthermore, the prior convictions must be alleged in the proper sequence; that is, the second previous felony conviction must be for an offense that occurred subsequent to the first previous conviction becoming final.
"However, article 42.12, [section] 15(d) merely provides for a defendant to serve up-front time in the state jail as a condition of the state jail community supervision. This is done by showing that the defendant has previous felony offenses. The defendant's sentence, which has been suspended, is in no way affected by this condition on his community supervision. The State is not required to provide notice of its intent to use the prior felony or felonies. Moreover, there is no sequencing requirement and no requirement of finality. In fact, the prior convictions could have occurred on the same day, and could still be pending on appeal. In addition, unlike section 12.42(d), a prior felony may be used under article 42.12, [section] 15(d) even if the sentence for that conviction was probated and suspended.
"Therefore, it is clear that article 42.12, [section] 15(d) and section 12.42(d) are to be used in very different circumstances. Section 12.42(d) is to be used only where the State provides notice to the defendant that it will prove he has two prior final felony convictions, which are properly sequenced. Section 42.12, [section] 15(d) applies when the State shows only that a defendant has previously been convicted of one or more felony offenses, and he either served out his sentence or was placed on community supervision. Because these provisions can be used in harmony, it is not necessary to find that one trumps the other." (Emphasis Supplied).[3]
*93 The majority opinion does not address these contentions. And, I find these contentions persuasive since they show how Section 12.42(d) and Article 42.12, Section 15(d), can be harmonized and have concurrent efficacy. This Court can and should give effect to the "plain," objective meaning of both statutes. See Boykin, 818 S.W.2d at 785. In addition, the State's interpretation of how and when these provisions apply do not conflict with any of the other provisions of Sections 12.35, 12.42 or Article 42.12, Section 15. And, this interpretation is consistent with the purposes of the community supervision law of easing the prison overcrowding problem and with the stated purposes of the code. See V.T.C.A., Penal Code, Section 1.02; Article 1.03.
Under the State's interpretation of the relevant statutory provisions, a state jail felon, who does not fall under V.T.C.A., Penal Code, Section 12.35(c), with no prior felony convictions will receive community supervision under Article 42.12, Section 15(a). The same defendant, who "previously has been convicted of two or more felonies," will still receive community supervision under Article 42.12, Section 15(a), but the trial court will have discretion to impose up to a year of incarceration in a state jail "as a condition of community supervision" pursuant to Article 42.12, Section 15(d). However, the same defendant, who "has previously been finally convicted of two felony offenses, and the second previous felony conviction is for an offense that occurred subsequent to the first previous conviction having become final," will be sentenced under Section 12.42(d). All of these statutory provisions can stand together and have concurrent efficacy. Therefore, it is unnecessary to apply any rule of statutory construction to "find that one [of these statutory provisions] trumps the other."
Appellees argue it is not "plain" from the face of Section 12.42(d) that the Texas Legislature intended for it to apply to state jail felonies. They further argue that extratextual sources clarify the ambiguity in Section 12.42(d) by making it plain that the Legislature did not intend for it to apply to state jail felonies. They support these contentions with a discussion of the legislative history of the applicable statutes. However, this Court has rejected this sort of approach to statutory interpretation when, as here, the "plain" language of the statutes can be given effect without leading to "absurd" consequences. See Boykin, 818 S.W.2d at 785-86; but see Boykin, 818 S.W.2d at 789 (Miller, J., dissenting) (ambiguity in a statute often is not apparent until the legislative history is researched and the true legislative intent is discerned); Garcia v. State, 829 S.W.2d 796, 801 fn. 1 (Tex.Cr.App.1992) (Miller, J., concurring).
The appellees also argue the State's interpretation of the applicable statutes leads to absurd consequences. They argue:
"In closing, it is interesting to say the least that under the State's proposed construction of section 12.42(d), an habitual offender with a prior `3g' felony conviction could be assessed from 2-20 years in prison under section 12.42(a) after being subjected to the built-in enhancements of section 12.35(c)[4] and 12.42(a).[5] (Citation Omitted).
"Meanwhile, an habitual offender such as appellee[s], whose two prior felonies were non-violent (at least as far as section 12.35(c) is concerned) could be assessed *94 from 25 years to life in prison. (Citation Omitted).
"This is absurd. It is presumed that a just and reasonable result is intended in enacting a statute. (Citation Omitted).
"Moreover, in construing a statute a court may consider the consequences of a particular construction. (Citation Omitted).
"The State's construction of section 12.42(d) would lead to the illogical result that violent habitual offenders would be eligible to receive a maximum punishment which is less than the minimum punishment for non-violent habitual offenders."
However, under the State's interpretation of Section 12.42(d), "an habitual offender [convicted of a state jail felony] with a prior `3g' felony conviction," will be sentenced as an habitual offender under Section 12.42(d) and not under the provisions of Sections 12.35(c) or 12.42(a). Therefore, the State's construction of Section 12.42(d) does not lead to the absurd results envisioned by the appellees.
Because the majority holds the Legislature did not intend for state jail felonies to be enhanced under Section 12.42(d), I dissent.
MEYERS, J., joins this dissent.
MANSFIELD, Judge, dissenting on State's Petition for Discretionary Review.
I join the dissenting opinion of the Presiding Judge and write separately to explain my disagreements with the majority opinion.
The 1993 Legislature enacted Texas Penal Code Section 12.35, revised Section 12.42, and added Section 15 to Texas Code of Criminal Procedure Article 42.12, creating a new category of crimethe state jail felonyand a punishment range for same. The effective date of those sections is September 1, 1994. Many offenses (e.g., possession of less than one gram of cocaine) that, if committed prior to September 1, 1994, were third degree felonies, were reclassified as state jail felonies. Except as provided for in Section 12.35(c), the maximum term of confinement upon conviction of an unenhanced state jail felony is two years in a state jail; the maximum term of confinement upon conviction of an unenhanced third degree felony is ten years in TDCJInstitutional Division.
The 1993 Legislature did not, however, make any change to Section 12.42(d), generally known as the habitual offender statute. Section 12.42(d), in its entirety, provides:
(d) If it is shown on the trial of a felony offense that the defendant has previously been finally convicted of two felony offenses, and the second previous felony conviction is for an offense that occurred subsequent to the first previous offense having become final, on conviction he shall be punished by imprisonment in the institutional division of the Texas Department of Criminal Justice for life, or for any term of not more than 99 years or less than 25 years.
The Legislature, given the plain language of section 12.42(d), did not exempt an individual charged with a state jail felony, with two prior felony convictions, from also being charged as an habitual offender. Indeed, to hold, as the majority does, the Legislature intended to do so, in my opinion, disregards Section 12.42(e) enacted effective September 1, 1995. Section 12.42(e) provides:
(e) A previous conviction for a state jail felony may be used for enhancement purposes under this section only if the defendant was punished for the offense under Section 12.35(c).
The Legislature's intent was to limit, for enhancement purposes under the habitual offender statute, the use of prior state jail felonies to those described in Section 12.35(c), i.e., those in which an affirmative finding of use of a deadly weapon has been made or where the defendant has been previously convicted of an offense described in Art. 42.12, § 3(g)(a)(1) or § 3(g)(a)(2). This is consistent with the Legislature's intent to treat more harshly violent state jail felons and less harshly those convicted of nonviolent state jail felonies. Sections 12.42(d) and (e), therefore, provide for treating individuals such as appellants, with two or more prior non-state jail felony convictions (as well as prior convictions for state jail felonies punished under Section 12.35(c)), to be punished as habitual offenders upon conviction of a subsequent state jail felony (or any felony) *95 provided the state jail felony was committed prior to January 1, 1996.
The 1995 Legislature made significant changes to Section 12.42. First, Section 12.42(d), now Section 12.42(d)(1), was amended to bar its application to an individual charged with a state jail felony punishable under Section 12.35(a). Second, a previous conviction for a state jail felony punished under Section 12.35(a) cannot be used for enhancement purposes under Sections 12.42(b), 12.42(c), or 12.42(d)(1) per Section 12.42(e) as amended effective January 1, 1996. Third, new Sections 12.42(a)(1) and (a)(2) describe the enhancements applicable to an individual convicted of a state jail felony punished under 12.35(a) who has prior convictions for one or more felonies, including state jail felonies. Fourth, new Section 12.42(a)(3) establishes a separate enhancement for an individual convicted of a state jail felony under 12.35(c) who has a prior felony conviction.
The changes to Section 12.42 described above are effective January 1, 1996.
Appellants in the present case were charged by indictment with state jail felonies punishable under Section 12.35(a); the offenses were committed prior to January 1, 1996 in each case. Both appellants had two prior final felony convictions, none of which were state jail felonies. Both appellants pled guilty to the charged offenses, and both appellants pled "true" to the enhancement paragraphs in the indictments regarding the prior felony convictions, which were alleged to have been committed in the proper sequential order per Section 12.42(d).
Under the plain language of Sections 12.42(d) and (e) then in effect, appellants were habitual offenders and were subject to be sentenced as such. Had the Legislature intended a different result, it would have amended Section 12.42(d). Further evidence of legislative intent that state jail felons with two or more prior non-state jail felony convictions be subject to punishment as habitual offenders is shown by the Legislature's enactment of 12.42(e). Section 12.42(e) exempts only nonviolent state jail felonies described in Section 12.35(a) from being used for enhancement purposes under Section 12.42(d), meaning that any felon with two or more prior felony convictions, including convictions for section 12.35(c) "violent" state jail felonies, may be punished as habitual offenders. Where the intent of the Legislature is clear, we should not go beyond the plain meaning of the statute. Boykin v. State, 818 S.W.2d 782 (Tex.Crim.App.1991).[1]
Because the State did provide proper notice in the indictments that it intended to prosecute appellants as habitual offenders, the applicable statute is Section 12.42(d), not Art. 42, § 15 which properly applies only to state jail felons sentenced in accordance with Section 12.35(a). As the Presiding Judge demonstrates in his dissent, Art. 42.12, § 15 and § 12.42(d) do not conflict; they apply to different circumstances as follows:
(1) Defendant convicted of a state jail felony punished under Section 12.35(a), no prior convictions: Article 42.12, § 15(a) applies and he will receive community supervision.
(2) Defendant convicted of a state jail felony, with two or more prior felony convictions (assuming enhancement is not sought under Section 12.42(a)(2)), punished under Section 12.35(a): still receives community supervision under Article 42.12, § 15(a) but may be sentenced to up to one year of incarceration in a state jail at the trial court's discretion under Article 42.12, § 15(d).
(3) Any defendant (except as of January 1, 1996 a defendant charged with a state jail felony punished under Section 12.35(a)) with at least two final felony convictions and the convictions occurred in the sequential order described in Section 12.42(d) and the convictions and proper sequential order are alleged in the indictment and proven by the State at trial: Section 12.42(d) applies and he is subject to sentencing as an habitual offender.[2]
*96 As described in the preceding paragraph, the habitual offender statute places on the State a higher burden of pleading and proof before the defendant may be sentenced as an habitual offender. Should the State elect not to pursue this avenue or if it fails to meet its burden of pleading and proof, a defendant convicted of a state jail felony, committed before January 1, 1996 and punishable under Section 12.35(a), will be sentenced under Art. 42.12, § 15, even if he has been convicted of two or more prior non-state jail felonies.
The First Court of Appeals affirmed the judgment and sentence of the trial court on the ground that Section 12.42(d) is not applicable to defendants such as appellants convicted of state jail felonies committed before January 1, 1996. Because I believe the First Court of Appeals erred, I would reverse.
I respectfully dissent.
NOTES
[1] Mancuso was charged with the state jail felony of burglary of a building with the intent to commit theft alleged to have occurred on November 23, 1994. The information alleged two prior felony convictions for theft, neither of which fell under art. 42.12(3)(g) nor alleged affirmative findings of a deadly weapon. Mancuso pled guilty to the alleged offense and "true" to the enhancement paragraphs. The trial judge admonished appellee as to the range of punishment for a state jail felony, over the State's objection. Tex.Penal Code Ann. § 12.35(a). The trial judge found appellant guilty and the enhancement allegations "true" and assessed punishment at two years confinement in a state jail facility, probated for five years with a condition that Mancuso serve one year in state jail. The State unsuccessfully sought to have appellant punished as an habitual offender under Tex.Penal Code Ann. § 12.42(d).
Greenhaw was charged with the state jail felony of theft of property, valued at more than $1,500 but less than $20,000.00, alleged to have occurred on November 14, 1994. The indictment alleged prior felony convictions for delivery of a controlled substance and burglary of a building, neither of which fell under § 42.12(3)(g) offense nor alleged affirmative findings of a deadly weapon. Appellee pled guilty to the alleged offense and "true" to the enhancement paragraphs. The trial judge found appellant guilty and the enhancement allegations "true" and assessed punishment at two years confinement in a state jail facility, probated for five years with a condition that Greenhaw serve one year in state jail. § 12.35(a). The State unsuccessfully sought to have appellant punished as an habitual offender under § 12.42(d).
[2] State v. Mancuso, 903 S.W.2d 386 (Tex.App. Houston [1st Dist.] 1995); and, State v. Greenhaw, No. 01-95-00150-CR, 1995 WL 348238 (Tex.App.Houston [1st Dist.] June 8, 1995) (not published).
[3] The sole ground for review in Mancuso states:
The court of appeals erred in its statutory construction by concluding that the trial court was required to sentence Respondent under the terms of the community supervision law rather than the terms of the habitual offender law.
The sole ground for review in Greenhaw states:
The court of appeals erred by holding that the trial court properly punished appellant pursuant to the state jail punishment provision, rather than the habitual offender punishment provision.
[4] These enactments and amendments were only a part of the major revisions to the 1973 Penal Code under Senate Bill 1067 commonly referred to as the Penal Code Revision Bill. The Bill was passed by the 73rd Legislature and, in relevant part, became effective September 1, 1994, prior to the commission of the instant offenses. See, n. 1, supra.
[5] All emphasis is supplied unless otherwise indicated.
[6] We note that this holding is consistent with the legislative history. On April 20, 1993, prior to voting on Senate Bill 1067, which created the state jail felony offense and punishment laws, Senator Armbrister, questioned Senator Whitmire, author of S.B. 1067, regarding the proposed punishment range for habitual offenders who commit state jail felonies:
SENATOR ARMBRISTER: ... could you go with us just briefly what the effect on the old habitual criminal would be, he's got two priors and then he commits one of these which is now a state, can that still be used for enhancement for a third time loser or habitual. How's that going to be handled?
SENATOR WHITMIRE: The fourth degree or the state jail felon will remain a state jail felon as long as he or she is committing state jail felonies. If you've committed a (3)g offense previously, you're not eligible for a state jail.
SENATOR ARMBRISTER: Okay.
SENATOR WHITMIRE: Or if you commit a state jail offense with a weapon you're not eligible, those two will enhance you. Otherwise, as long as you're in the loop so to speak in committing state jail felonies, you will remain a candidate for the state jail.
(Tape 1, side 1).
[7] As we conclude, we pause to note that the Legislature has amended § 12.42(a) and (d) and art. 42.12, § 15(a) and (d) to eliminate any confusion in the application of §§ 12.35, 12.42 and art. 42.12, § 15.
[1] The majority opinion sets out the relevant text of these statutes. It also should be noted the 1995 Legislature amended Section 12.42 and Article 42.12, Section 15, with the amendments becoming effective January 1, 1996. See Acts 1995, 74th Leg., ch. 318, Section 1; Acts 1995, 74th Leg., ch. 256, Section 7. Effective January 1, 1996, Section 12.42(a)(2) provides that a defendant adjudged guilty of a state jail felony punishable under Section 12.35(a) shall be punished for a second-degree felony if it is shown "the defendant has previously been finally convicted of two felonies, and the second previous felony conviction is for an offense that occurred subsequent to the first previous conviction having become final." (Emphasis Supplied). And, effective January 1, 1996, Section 12.42(d) expressly excepts from its operation "a state jail felony punishable under Section 12.35(a)."
[2] The majority opinion states:
"Art. 42.12, [section] 15(d), deals specifically with state jail felonies committed by one who has two or more prior felony convictions and provides that the trial judge may impose as a condition of community supervision probation a term of confinement in a state jail facility for a term not to exceed one year. Art. 42.12, [section] 15(d) controls the specific circumstances presented by the instant cases."
[3] Unlike Section 12.42(d), Article 42.12, Section 15(d), expressly provides that "a defendant previously has been convicted of a felony regardless of whether the sentence for the previous conviction was actually imposed or was probated and suspended." Therefore, the State appears to be correct in arguing that Article 42.12, Section 15(d), and Section 12.42(d) "are to be used in very different circumstances." Accord Perry, 912 S.W.2d at 247:
"Section 12.42(d), when read in conjunction with [Section] 12.42(e), applies only to those persons who have been finally convicted of two prior non-state jail felonies, where the second offense was committed subsequent to the first conviction having become final. On the other hand, article 42.12 [section] 15(d) applies regardless of when, or if, the sentence was actually imposed, was probated, or was for a previous state jail or non-state jail felony."
[4] V.T.C.A., Penal Code, Section 12.35(c), in relevant part, provides that a defendant convicted of a state jail felony shall be punished for a third degree felony if it is shown on the trial of the offense that the defendant, either as a principal or as a party, used or exhibited a deadly weapon during the offense, or the defendant has previously been convicted of a "3g" offense. See Article 42.12, Section 3g(a)(1), V.A.C.C.P. Under the State's interpretation of Section 12.42(d), the provisions of Section 12.35(c) are not applicable if the State can prove "the defendant has previously been finally convicted of two felony offenses, and the second previous felony conviction is for an offense that occurred subsequent to the first previous conviction having become final."
[5] V.T.C.A., Penal Code, Section 12.42(a) provides:
"If it is shown on the trial of a state jail felony punishable under Section 12.35(c) or on the trial of a third-degree felony that the defendant has been once before convicted of a felony, on conviction he shall be punished for a seconddegree felony."
[1] I note that had appellants committed the present offenses on or after January 1, 1996, they could have been punished for a second degree felony under Section 12.42(a)(2), the term of imprisonment for which is two to twenty years in the penitentiary. Tex.Penal Code § 12.33.
[2] The Fourteenth Court of Appeals came to the same conclusion, in effect, in State v. Perry, 912 S.W.2d 244 (Tex.App.Houston [14th] 1995), finding that a defendant convicted of a state jail felony who has two or more prior felony (other than state jail felony) convictions may be sentenced as an habitual offender provided the State gives notice of its intent to prosecute the defendant as an habitual offender in the indictment and pleads and proves defendant was convicted of two (or more) felonies and the convictions became final in the proper sequential order as provided in Section 12.42(d). As the Court of Appeals held, "Defendants who are not enhanced pursuant to the specific requirements of 12.42(d) still fall within the Art. 42.12, § 15 restrictions. Nor does our interpretation of the statute lead to `absurd consequences that the legislature could not possibly have intended,' as argued by appellees. We find nothing remotely absurd about a legislative intent to punish habitual ex-convicts more severely than first offenders." Perry, supra, at 253. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2544562/ | 127 Cal. Rptr. 2d 329 (2002)
29 Cal. 4th 262
58 P.3d 2
Matthew PAVLOVICH, Petitioner,
v.
The SUPERIOR COURT of Santa Clara County, Respondent;
DVD Copy Control Association, Inc., Real Party in Interest.
No. S100809.
Supreme Court of California.
November 25, 2002.
*332 Ornah Levy; Huber Samuelson; HS Law Group; Hopkins & Carley, Arthur V. Plank, San Jose, and Allonn E. Levy for Petitioner.
Richard S. Wiebe, San Francisco, for the Computer & Communications Industry Association and the Student Press Law Center as Amici Curiae on behalf of Petitioner.
Ann Brick and Stephen McG. Bundy for the American Civil Liberties Union of Northern California as Amicus Curiae on behalf of Petitioner.
Weil, Gotshal & Manges, Jared Ben Bobrow, Christopher J. Cox, Robert G. Sugarman, Jeffrey L. Kessler, Geoffrey D. Berman, and Gregory S. Coleman for Real Party in Interest.
BROWN, J.
"The Internet is an international network of interconnected computers" which "enable[s] tens of millions of people to communicate with one another and to access vast amounts of information from around the world." (Reno v. American Civil Liberties Union (1997) 521 U.S. 844, 849-850, 117 S. Ct. 2329, 138 L. Ed. 2d 874.) "The best known category of communication over the Internet is the World Wide Web, which allows users to search for and retrieve information stored in remote computers, as well as, in some cases, to communicate back to designated sites. In concrete terms, the Web consists of a vast number of documents stored in different computers all over the world." (Id. at p. 852, 117 S. Ct. 2329.) On the Web, "documents, commonly known as Web `pages,' are ... prevalent." (Ibid.) These pages are located at Web sites and have addresses marking their location on the Web. (See ibid.) If a Web page is freely accessible, then anyone with access to a computer connected to the Internet may view that page. With its explosive growth over the past two decades, the Internet has become "`a unique and wholly new medium of worldwide human communication.'" (Id. at p. 850, 117 S. Ct. 2329.)
Not surprisingly, the so-called Internet revolution has spawned a host of new legal issues as courts have struggled to apply traditional legal frameworks to this new communication medium. Today, we join this struggle and consider the impact of the Internet on the determination of personal jurisdiction. In this California court exercised personal jurisdiction over a defendant based on a posting on an Internet Web site. Under the particular facts of this case, we conclude the court's exercise of jurisdiction was improper.
*333 I
Digital versatile discs (DVD's) "provide high quality images, such as motion pictures, digitally formatted on a convenient 5 inch disc...." Before the commercial release of DVD's containing motion pictures, the Content Scrambling System (CSS), a system used to encrypt and protect copyrighted motion pictures on DVD's, was developed. The CSS technology prevents the playing or copying of copyrighted motion pictures on DVD's without the algorithms and keys necessary to decrypt the data stored on the disc.
Real party in interest DVD Copy Control Association, Inc. (DVD CCA) is a nonprofit trade association organized under the laws of the State of Delaware with its principal place of business in California. The DVD industry created DVD CCA in December 1998 to control and administer licensing of the CSS technology. In September 1999, DVD CCA hired its staff, and, in December 1999, it began administering the licenses. Soon thereafter, DVD CCA acquired the licensing rights to the CSS technology and became the sole licensing entity for this technology in the DVD video format.
Petitioner Matthew Pavlovich is currently a resident of Texas and the president of Media Driver, LLC, a technology consulting company in Texas. During the four years before he moved to Texas, he studied computer engineering at Purdue University in Indiana, where he worked as a systems and network administrator. Pavlovich does not reside or work in California. He has never had a place of business, telephone listing, or bank account in California and has never owned property in California. Neither Pavlovich nor his company has solicited any business in California or has any business contacts in California.
At Purdue, Pavlovich was the founder and project leader of the LiVid video project (LiVid), which operated a Web site located at "livid.on.openprojects.net." The site consisted of a single page with text and links to other Web sites. The site only provided information; it did not solicit or transact any business and permitted no interactive exchange of information between its operators and visitors.
According to Pavlovich, the goal of LiVid was "to improve video and DVD support for Linux and to ... combine the resources and the efforts of the various individuals that were working on related things...." To reach this goal, the project sought to defeat the CSS technology and enable the decryption and copying of DVD's containing motion pictures. Consistent with these efforts, LiVid posted the source code of a program named DeCSS on its Web site as early as October 1999. DeCSS allows users to circumvent the CSS technology by decrypting data contained on DVD's and enabling the placement of this decrypted data onto computer hard drives or other storage media.
At the time LiVid posted DeCSS, Pavlovich knew that DeCSS "was derived from CSS algorithms" and that reverse engineering these algorithms was probably illegal. He had also "heard" that "there was an organization which you had to file for or apply for a license" to the CSS technology. He did not, however, learn that the organization was DVD CCA or that DVD CCA had its principal place of business in California until after DVD CCA filed this action.
In its complaint, DVD CCA alleged that Pavlovich misappropriated its trade secrets by posting the DeCSS program on the LiVid Web site because the "DeCSS program ... embodies, uses, and/or is a substantial derivation of confidential proprietary information which DVD CCA licenses...." *334 The complaint sought injunctive relief but did not seek monetary damages. In response, Pavlovich filed a motion to quash service of process, contending that California lacked jurisdiction over his person. DVD CCA opposed, contending that jurisdiction was proper because Pavlovich "misappropriated DVD CCA's trade secrets knowing that such actions would adversely impact an array of substantial California business enterprisesincluding the motion picture industry, the consumer electronics industry, and the computer industry." In a brief order, the trial court denied Pavlovich's motion, citing Calder v. Jones (1984) 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (Calder,) and Panavision Intern., L.P. v. Toeppen (9th Cir.1998) 141 F.3d 1316 (Panavision.)
Pavlovich petitioned the Court of Appeal for a writ of mandate. After the Court of Appeal summarily denied the petition, we granted review and transferred the matter back to the Court of Appeal with directions to vacate its denial order and issue an order to show cause. The Court of Appeal then issued a published opinion denying the petition. Because Pavlovich knew that posting DeCSS on the LiVid Web site would harm the movie and computer industries in California and because "the reach of the Internet is also the reach of the extension of the poster's presence," the court found that he purposefully availed himself of forum benefits under the Calder effects test. The court also concluded that the exercise of jurisdiction over Pavlovich was reasonable.
We granted review to determine whether the trial court properly exercised jurisdiction over Pavlovich's person based solely on the posting of the DeCSS source code on the LiVid Web site. We conclude it did not.
II
California courts may exercise personal jurisdiction on any basis consistent with the Constitutions of California and the United States. (Code Civ. Proc., § 410.10.) The exercise of jurisdiction over a nonresident defendant comports with these Constitutions "if the defendant has such minimum contacts with the state that the assertion of jurisdiction does not violate `"traditional notions of fair play and substantial justice."'" (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal. 4th 434, 444, 58 Cal. Rptr. 2d 899, 926 P.2d 1085 (Vons), quoting Internal Shoe Co. v. Washington (1945) 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (Internat. Shoe).)
Under the minimum contacts test, "an essential criterion in all cases is whether the `quality and nature' of the defendant's activity is such that it is `reasonable' and `fair' to require him to conduct his defense in that State." (Kulko v. California Superior Court (1978) 436 U.S. 84, 92, 98 S. Ct. 1690, 56 L. Ed. 2d 132, quoting Internat. Shoe, supra, 326 U.S. at pp. 316-317, 319, 66 S. Ct. 154.) "[T]he `minimum contacts' test ... is not susceptible of mechanical application; rather, the facts of each case must be weighed to determine whether the requisite `affiliating circumstances' are present." (Kulko, at p. 92, 98 S. Ct. 1690, quoting Hanson v. Denckla (1958) 357 U.S. 235, 246, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (Hanson).) "[T]his determination is one in which few answers will be written `in black and white. The greys are dominant and even among them the shades are innumerable.'" (Kulko, at p. 92, 98 S. Ct. 1690, quoting Estin v. Estin (1948) 334 U.S. 541, 545, 68 S. Ct. 1213, 92 L. Ed. 1561.)
In making this determination, courts have identified two ways to establish *335 personal jurisdiction. "Personal jurisdiction may be either general or specific." (Vons, supra, 14 Cal.4th at p. 445, 58 Cal. Rptr. 2d 899, 926 P.2d 1085.) In this case, DVD CCA does not contend that general jurisdiction exists. We therefore need only consider whether specific jurisdiction exists.
When determining whether specific jurisdiction exists, courts consider the "`relationship among the defendant, the forum, and the litigation.'" (Helicopteros Nacionales ale Colombia v. Hall (1984) 466 U.S. 408, 414, 104 S. Ct. 1868, 80 L. Ed. 2d 404, quoting Shaffer v. Heitner (1977) 433 U.S. 186, 204, 97 S. Ct. 2569, 53 L. Ed. 2d 683.) A court may exercise specific jurisdiction over a nonresident defendant only if: (1) "the defendant has purposefully availed himself or herself of forum benefits" (Vons, supra, 14 Cal.4th at p. 446, 58 Cal. Rptr. 2d 899, 926 P.2d 1085); (2) "the `controversy is related to or "arises out of [the] defendant's contacts with the forum'" (ibid., quoting Helicopteros, supra, 466 U.S. at p. 414, 104 S. Ct. 1868); and (3) "`the assertion of personal jurisdiction would comport with "fair play and substantial justice"'" (Vons, supra, 14 Cal.4th at p. 447, 58 Cal. Rptr. 2d 899, 926 P.2d 1085, quoting Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 472-473, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (Burger King)).
"The purposeful availment inquiry ... focuses on the defendant's intentionality. [Citation.] This prong is only satisfied when the defendant purposefully and voluntarily directs his activities toward the forum so that he should expect, by virtue of the benefit he receives, to be subject to the court's jurisdiction based on" his contacts with the forum. (U.S. v. Swiss American Bank, Ltd. (1st Cir.2001) 274 F.3d 610, 623-624 (Swiss American Bank).) Thus, the "`purposeful availment' requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts [citations], or of the `unilateral activity of another party or a third person.' [Citations.]" (Burger King, supra, 471 U.S. at p. 475, 105 S. Ct. 2174.) "When a [defendant] `purposefully avails itself of the privilege of conducting activities within the forum State,' [citation], it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State." (World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 297, 100 S. Ct. 559, 62 L. Ed. 2d 490 (World-Wide Volkswagen).)
In the defamation context, the United States Supreme Court has described an "effects test" for determining purposeful availment. (Noonan v. Winston Co. (1st Cir.1998) 135 F.3d 85, 90 (Noonan).) In Calder, a reporter in Florida wrote an article for the National Enquirer about Shirley Jones, a well-known actress who lived and worked in California. The president and editor of the National Enquirer reviewed and approved the article, and the National Enquirer published the article. Jones sued, among others, the reporter and editor (individual defendants) for libel in California. The individual defendants moved to quash service of process, contending they lacked minimum contacts with California. (Calder, supra, 465 U.S. at pp. 785-786, 104 S. Ct. 1482.)
The United States Supreme Court disagreed and held that California could exercise jurisdiction over the individual defendants "based on the `effects' of their Florida conduct in California." (Calder, supra, 465 U.S. at p. 789, 104 S. Ct. 1482.) The court found jurisdiction proper because "California [was] the focal point both of the story and of the harm suffered." *336 (Ibid.) "The allegedly libelous story concerned the California activities of a California resident. It impugned the professionalism of an entertainer whose television career was centered in California ... and the brunt of the harm, in terms both of [Jones's] emotional distress and the injury to her professional reputation, was suffered in California." (Id. at pp. 788-789, 104 S. Ct. 1482, fn. omitted.) The court also noted that the individual defendants wrote or edited "an article that they knew would have a potentially devastating impact upon [Jones]. And they knew that the brunt of that injury would be felt by [Jones] in the State in which she lives and works and in which the National Enquirer has its largest circulation." (Id. at pp. 789-790, 104 S. Ct. 1482.)
Although Calder involved a libel claim, courts have applied the effects test to other intentional torts, including business torts. (See IMO Industries, Inc. v. Kiekert AG (3d Cir.1998) 155 F.3d 254, 259-260, 261 (IMO) [courts must consider Calder in intentional tort cases]; Far West Capital, Inc. v. Towne (10th Cir.1995) 46 F.3d 1071, 1077 (Far West) ["Courts have also applied Calder to business torts"].) Application of the test has, however, been less than uniform. (See Swiss American Bank, supra, 274 F.3d at p. 624, fn. 7 ["we note that several circuits do not appear to agree as to how to read Calder"]; IMO, supra, 155 F.3d at p. 261 [courts applying Calder to nondefamation cases have adopted "a mixture of broad and narrow interpretations"].) Indeed, courts have "struggled somewhat with Calder's import, recognizing that the case cannot stand for the broad proposition that a foreign act with foreseeable effects in the forum state always gives rise to specific jurisdiction." (Bancroft & Masters, Inc. v. Augusta Nat. Inc. (9th Cir.2000) 223 F.3d 1082, 1087 (Bancroft).)
Despite this struggle, most courts agree that merely asserting that a defendant knew or should have known that his intentional acts would cause harm in the forum state is not enough to establish jurisdiction under the effects test. (See IMO, supra, 155 F.3d at p. 265 ["we ... agree with the conclusion reached by the First, Fourth, Fifth, Eighth, Ninth and Tenth Circuits that jurisdiction under Calder requires more than a finding that the harm caused by the defendant's intentional tort is primarily felt within the forum"]; Griffis v. Luban (Minn.2002) 646 N.W.2d 527, 534 [the United States Supreme Court "did make it clear that foreseeability of effects in the forum is not itself enough to justify long-arm jurisdiction"].) Instead, the plaintiff must also "point to contacts which demonstrate that the defendant expressly aimed its tortious conduct at the forum...." (IMO, supra, 155 F.3d at p. 265.) For example, the Third Circuit Court of Appeals has held that, to meet the effects test, "the plaintiff must show that the defendant knew that the plaintiff would suffer the brunt of the harm caused by the tortious conduct in the forum, and point to specific activity indicating that the defendant expressly aimed its tortious conduct at the forum." (IMO, supra, 155 F.3d at p. 266.) Similarly, in the Ninth Circuit Court of Appeals, the plaintiff must show not only that the defendant "caused harm, the brunt of which is suffered and which the defendant knows is likely to be suffered in the forum state," but also that the defendant "committed an intentional act ... expressly aimed at the forum state." (Bancroft, supra, 223 F.3d at p. 1087.) Indeed, virtually every jurisdiction has held that the Calder effects test requires intentional conduct expressly aimed at or targeting the forum state in addition *337 to the defendant's knowledge that his intentional conduct would cause harm in the forum.[1]
At least one exception does, however, exist. In Janmark, Inc. v. Reidy (7th Cir.1997) 132 F.3d 1200, the plaintiff, an Illinois corporation, and the defendants, California residents, were competitors who sold minishopping carts worldwide. The defendants claimed that they owned a copyright in their cart design and threatened the plaintiffs New Jersey customer with contributory copyright infringement. Because of the threat, the customer stopped buying shopping carts from the plaintiff. Based on this incident, the plaintiff sued the defendants for tortious interference with prospective economic advantage. (Id. at p. 1201.) Although the defendants had no other contacts with Illinois, the Seventh Circuit Court of Appeals found that Illinois could exercise jurisdiction over the defendants solely because "the injury and thus the tort occurred in Illinois." (Id. at p. 1202.) In doing so, the Seventh Circuit apparently concluded that the state where the injury occurred in this case, the plaintiffs residence could always exercise jurisdiction over a nonresident defendant in the intentional tort context.
Like most of our sister courts, we do not find Janmark persuasive. By making the location of the harm dispositive, Janmark ignores "the defendant's knowledge and intent in committing the tortious activity"the very focus of the *338 purposeful availment requirement. (IMO, supra, 155 F.3d at p. 264.) Even if Janmark merely stands for the proposition that a defendant's knowledge that its tortious acts would cause the plaintiff injury in the forum state satisfies the effects test (see IMO, supra, 155 F.3d at p. 264, fn. 6), it is still problematic. "[F]oreseeability of causing injury in another State ... is not a `sufficient benchmark' for exercising personal jurisdiction." (Burger King, supra, 471 U.S. at p. 474, 105 S. Ct. 2174.) Rather, "the foreseeability that is critical to due process analysis ... is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." (World Wide Volkswagen, supra, 444 U.S. at p. 297, 100 S. Ct. 559.) The knowledge that harm will likely be suffered in the forum state, "when unaccompanied by other contacts," is therefore "too unfocused to justify personal jurisdiction." (ESAB, supra, 126 F.3d at p. 625.) Thus, we decline to follow Janmark and its progeny[2] and join with those jurisdictions that require additional evidence of express aiming or intentional targeting. In doing so, we are in accord with those California decisions applying the effects test.[3]
We now consider whether Pavlovich's contacts with California meet the effects test. "[T]he plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction." (Vons, supra, 14 Cal.4th at p. 449, 58 Cal. Rptr. 2d 899, 926 P.2d 1085.) If the plaintiff meets this initial burden, then the defendant has the burden of demonstrating "that the exercise of jurisdiction would be unreasonable." (Ibid.) In reviewing a trial court's determination of jurisdiction, we will not disturb the court's factual determinations "if supported by substantial evidence." (Ibid.) "When no conflict in the evidence exists, however, the question of jurisdiction is purely one of law and the reviewing court engages in an independent review of the record." (Ibid.) Applying these standards, we conclude that the evidence in the record fails to show that Pavlovich expressly *339 aimed his tortious conduct at or intentionally targeted California.
In this case, Pavlovich's sole contact with California is LiVid's posting of the DeCSS source code containing DVD CCA's proprietary information on an Internet Web site accessible to any person with Internet access. Pavlovich never worked in California. He owned no property in California, maintained no bank accounts in California, and had no telephone listings in California. Neither Pavlovich nor his company solicited or transacted any business in California. The record also contains no evidence of any LiVid contacts with California.
Although we have never considered the scope of personal jurisdiction based solely on Internet use, other courts have considered this issue, and most have adopted a sliding scale analysis. "At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. [Citation.] At the opposite end are situations where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions. A passive Web site that does little more than make information available to those who are interested in it is not grounds for the exercise [of] personal jurisdiction. [Citation.] The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site." (Zippo Mfg. Co. v. Zippo Dot Com, Inc. (W.D.Pa.1997) 952 F. Supp. 1119, 1124.)
Here, LiVid's Web site merely posts information and has no interactive features. There is no evidence in the record suggesting that the site targeted California. Indeed, there is no evidence that any California resident ever visited, much less downloaded the DeCSS source code from, the LiVid Web site. Thus, Pavlovich's alleged "conduct in ... posting [a] passive Web site[ ] on the Internet is not," by itself, "sufficient to subject" him "to jurisdiction in California." (Jewish Defense Organization, Inc. v. Superior Court (1999) 72 Cal. App. 4th 1045, 1060, 85 Cal. Rptr. 2d 611 (JDO), fn. omitted [refusing to exercise jurisdiction under the effects test even though the defendant had "passive Web sites on the Internet"]; Cybersell, Inc. v. Cybersell, Inc. (9th Cir.1997) 130 F.3d 414, 419-420 [refusing to exercise jurisdiction under the effects test even though the defendant posted infringing material on its Web site]; but see Bunn-O-Matic I, supra, 46 U.S.P.Q.2d at p. 1377 [suggesting that the operation of a Web site, by itself, is sufficient to establish express aiming at the forum state].) "`Creating a site, like placing a product into the stream of commerce, may be felt nationwideor even worldwidebut, without more, it is not an act purposefully directed toward the forum state.'" (Cybersell, at p. 418, quoting Bensusan Restaurant Corp. v. King (S.D.N.Y.1996) 937 F. Supp. 295, 301, affd. (2d Cir.1997) 126 F.3d 25.) Otherwise, "personal jurisdiction in Internet-related cases would almost always be found in any forum in the country." (GTE New Media Services Inc. v. BellSouth Corp. (D.C.Cir.2000) 199 F.3d 1343, 1350.) Such a result would "vitiate long-held and inviolate principles of personal jurisdiction. (Ibid.)
Nonetheless, DVD CCA contends posting the misappropriated source code on an Internet Web site is sufficient to establish *340 purposeful availment in this case because Pavlovich knew the posting would harm not only a licensing entity but also the motion picture, computer and consumer electronics industries centered in California. According to DVD CCA, this knowledge establishes that Pavlovich intentionally targeted California and is sufficient to confer jurisdiction under the Calder effects test. Although the question is close, we disagree.
As an initial matter, DVD CCA's reliance on Pavlovich's awareness that an entity owned the licensing rights to the CSS technology is misplaced. Although Pavlovich knew about this entity, he did not know that DVD CCA was that entity or that DVD CCA's primary place of business was California until after the filing of this lawsuit. More importantly, Pavlovich could not have known this information when he allegedly posted the misappropriated code in October 1999, because DVD CCA only began administering licenses to the CSS technology in December 1999 approximately two months later. Thus, even assuming Pavlovich should have determined who the licensor was and where that licensor resided before he posted the misappropriated code, he would not have discovered that DVD CCA was that licensor.[4] Because Pavlovich could not have known that his tortious conduct would harm DVD CCA in California when the misappropriated code was first posted, his knowledge of the existence of a licensing entity cannot establish express aiming at California.[5]
Thus, the only question in this case is whether Pavlovich's knowledge that his tortious conduct may harm certain industries centered in California-i.e., the motion picture, computer, and consumer electronics industries-is sufficient to establish express aiming at California. As explained below, we conclude that this knowledge, by itself, cannot establish purposeful availment under the effects test.
First, Pavlovich's knowledge that DeCSS could be used to illegally pirate *341 copyrighted motion pictures on DVD's and that such pirating would harm the motion picture industry in California does not satisfy the express aiming requirement. As an initial matter, we question whether these effects are even relevant to our analysis, because DVD CCA does not assert a cause of action premised on the illegal pirating of copyrighted motion pictures. (See Comelison v. Chaney (1976) 16 Cal. 3d 143, 148, 127 Cal. Rptr. 352, 545 P.2d 264 [specific jurisdiction "depends upon the quality and nature of [the defendant's] activity in the forum in relation to the particular cause of action" (italics added) ].) In any event, "the mere `unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State.'" (World-Wide Volkswagen, supra, 444 U.S. at p. 298, 100 S. Ct. 559, quoting Hanson, supra, 357 U.S. at p. 253, 78 S. Ct. 1228.) "[T]he fact that a defendant's actions in some way set into motion events which ultimately injured a California resident" cannot, by itself, confer jurisdiction over that defendant. (Wolfe, supra, 217 Cal.App.3d at p. 547, 265 Cal. Rptr. 881.) Thus, the foreseeability that third parties may use DeCSS to harm the motion picture industry cannot, by itself, satisfy the express aiming requirement. Because nothing in the record suggests that Pavlovich encouraged Web site visitors to use DeCSS to illegally pirate copyrighted motion pictures, his mere "awareness" they might do so does not show purposeful availment. (See Asahi Metal Industry Co. v. Superior Court, (1987) 480 U.S. 102, 112, 107 S. Ct. 1026, 94 L. Ed. 2d 92 (plur. opn. of O'Connor, J.) [the mere awareness that third parties will sweep the defendant's product into the forum state does not convert its act of selling the product to third parties "into an act purposefully directed toward the forum State"].)
Second, Pavlovich's knowledge of the effects of his tortious conduct on the consumer electronics and computer industries centered in California is an even more attenuated basis for jurisdiction. According to DVD CCA, Pavlovich knew that posting DeCSS would harm the consumer electronics and computer industries in California, because many licensees of the CSS technology resided in California. The record, however, indicates that Pavlovich did not know that any of DVD CCA's licensees resided in California. At most, the record establishes that Pavlovich should have guessed that these licensees resided in California because there are many consumer electronic and computer companies in California. DVD CCA's argument therefore boils down to the following syllogism: jurisdiction exists solely because Pavlovich's tortious conduct had a foreseeable effect in California. But mere foreseeability is not enough for jurisdiction. (See Bancroft, supra, 223 F.3d at p. 1087.) Otherwise, the commission of any intentional tort affecting industries in California would subject a defendant to jurisdiction in California, We decline to adopt such an expansive interpretation of the effects test. (See Callaway Golf Corp. v. Royal Canadian Golf Ass'n (C.D.Cal.2000) 125 F. Supp. 2d 1194, 1200 ["Merely knowing a corporate [plaintiff] might be located in California does not fulfill the effects test" (italics added) ].)
Cases citing a defendant's knowledge of the effects of its tortious conduct on an industry centered in the forum state to support a finding of jurisdiction under the effects test are inapposite. In exercising jurisdiction, those courts concluded that the defendant's knowledge of industry-wide effects in the forum state in conjunction with other evidence of express aiming at the forum state established purposeful *342 availment under the effects test.[6] Thus, those cases merely hold that such knowledge is relevant to any determination of personal jurisdiction. They do not establish that such knowledge, by itself, establishes express aiming. Indeed, DVD CCA does not cite, and we have not found, any case where a court exercised jurisdiction under the effects test based solely on the defendant's knowledge of industry-wide effects in the forum state.
This dearth of supporting case law is understandable when we consider the ramifications of a contrary holding. According to DVD CCA, California should exercise jurisdiction over Pavlovich because he should have known that third parties may use the misappropriated code to illegally copy movies on DVD's and that licensees of the misappropriated technology resided in California. In other words, DVD CCA is asking this court to exercise jurisdiction over a defendant because he should have known that his conduct may harmnot a California plaintiffbut industries associated with that plaintiff. As a practical matter, such a ruling makes foreseeability of harm the sole basis for jurisdiction in contravention of controlling United States Supreme Court precedent. (See Burger King, supra, 471 U.S. at p. 474, 105 S. Ct. 2174.)
Indeed, such a broad interpretation of the effects test would effectively eliminate the purposeful availment requirement in the intentional tort context for select plaintiffs. In most, if not all, intentional tort cases, the defendant is or should be aware of the industries that may be affected by his tortious conduct. Consequently, any plaintiff connected to industries centered in Californiai.e., the motion picture, computer, and consumer electronics industriescould sue an out-of-state defendant in California for intentional torts that may harm those industries. For example, any creator or purveyor of technology that enables copying of movies or computer softwareincluding a student in Australia who develops a program for creating backup copies of software and distributes it to some of his classmates or a store owner in Africa who sells a device that makes digital copies of movies on videotapewould be subject to suit in California because they should have known their conduct may harm the motion picture or computer industries in California.[7] Indeed, DVD CCA's interpretation would subject any defendant who commits an intentional tort affecting the motion picture, computer, or consumer electronics industries to jurisdiction in California even if the plaintiff was not a California resident. Under this logic, plaintiffs connected to the auto industry could sue any defendant in Michigan, plaintiffs connected to the financial industry could sue any defendant in New York, and plaintiffs connected to the potato industry could sue any defendant in Idaho. Because finding jurisdiction under the facts in this case would effectively subject all intentional tortfeasors whose conduct *343 may harm industries in California to jurisdiction in California, we decline to do so.[8]
We, however, emphasize the narrowness of our decision. A defendant's knowledge that his tortious conduct may harm industries centered in California is undoubtedly relevant to any determination of personal jurisdiction and may support a finding of jurisdiction. We merely hold that this knowledge alone is insufficient to establish express aiming at the forum state as required by the effects test. Because the only evidence in the record even suggesting express aiming is Pavlovich's knowledge that his conduct may harm industries centered in California, due process requires us to decline jurisdiction over his person.
In addition, we are not confronted with a situation where the plaintiff has no other forum to pursue its claims and therefore do not address that situation. DVD CCA has the ability and resources to pursue Pavlovich in another forum such as Indiana or Texas. Our decision today does not foreclose it from doing so. Pavlovich may still face the musicjust not in California.
III
Accordingly, we reverse the judgment of the Court of Appeal and remand for further proceedings consistent with this opinion.
WE CONCUR: KENNARD, WERDEGAR, MORENO, JJ.
DISSENTING OPINION BY BAXTER, J.
I respectfully dissent. That this case involves a powerful new medium of electronic communication, usable for good or ill, should not blind us to the essential facts and principles. The record indicates that, by intentionally posting an unlicensed decryption code for the Content Scrambling System (CSS) on their Internet Web sites, defendant and his network of "open source" associates sought to undermine and defeat the very purposes of the licensed CSS encryption technology, i.e., copyright protection for movies recorded on digital versatile discs (DVD's) and limitation of playback to operating systems licensed to unscramble the encryption code. The intended targets of this effort were not individual persons or businesses, but entire industries. Defendant knew at least two of the intended targetsthe movie industry and the computer industry involved in producing the licensed playback systemseither were centered in California or maintained a particularly substantial presence here. Thus, the record amply supports the trial court's conclusion, for purposes of specific personal jurisdiction, that defendant's intentional act, even if committed outside California, was "expressly aimed" at California. (See Calder v. Jones (1984) 465 U.S. 783, 788-790, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (Calder).)
In the particular circumstances, it cannot matter that defendant may not have known or cared about the exact identities or precise locations of each individual target, or that he happened to employ a so-called passive Internet Web site, or whether any California resident visited the site. By acting with the broad intent to harm industries he knew were centered or substantially present in this state, defendant forged sufficient "minimum contacts" with California "that he should reasonably anticipate being haled into court [here ]" (World-Wide Volkswagen Corp. v. *344 Woodson (1980) 444 U.S. 286, 297, 100 S. Ct. 559 (World-Wide Volkswagen)) for litigation "`arising] out of" his forum-related conduct (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal. 4th 434, 451, 58 Cal. Rptr. 2d 899, 926 P.2d 1085 (Vons)).
Moreover, defendant has made no "compelling case" (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 477, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (Burger King)) that California's assertion of personal jurisdiction for this purpose otherwise fails to "comport with `fair play and substantial justice.'" (Burger King, supra, at p. 476, 105 S. Ct. 2174, quoting Internal Shoe Co. v. Washington (1945) 326 U.S. 310, 320, 66 S. Ct. 154, 90 L. Ed. 95 (Internal Shoe Co.). Quite the contrary. Defendant identifies no unconscionable burden of defending the suit here, nor does he suggest California litigation would infringe any significant sovereignty interests of other jurisdictions.
But California has a substantial interest in the subject matter, and California appears a fair, convenient, and effective forum for California-centered industries to obtain relief. Moreover, this action seeks injunctions against a large number of persons, geographically dispersed, who are alleged to have participated with defendant in an organized effort to infringe and defeat DVD encryption. Thus, so long as the defendants' due process rights are not compromised, the interests of both the plaintiff and the interstate judicial system "in obtaining the most efficient resolution of controversies" (World-Wide Volkswagen, supra, 444 U.S. 286, 292, 100 S. Ct. 559) strongly favor suit against all in a single forum, rather than a multiplicity of suits in the defendants' individual domiciles. Accordingly, I conclude the Court of Appeal's judgment should be affirmed.
Facts
As the majority opinion indicates, DVD's are a means of storing digitally formatted information, including video information, on convenient 5 inch discs. One major use of DVD's, probably the best known to the consuming public, is as a medium for storing and viewing copyrighted motion pictures. Before the commercial release of movies on DVD's, the motion picture and DVD industries developed CSS. This encryption technology was designed to protect DVD movies against unauthorized copying and to allow playback of CSS-encrypted DVD's only on operating systems with CSS decryption capability. To protect the trade secret represented by CSS, the technology and its descrambling codes were disclosed only subject to licensing agreements.
Plaintiff DVD Copy Control Association, Inc. (DVD CCA) is a nonprofit trade association organized under Delaware law, but with its principal place of business in Morgan Hill, California. DVD CCA was created by the motion picture and DVD industries to administer the licensing of CSS. No later than December 1999, DVD CCA took over administration of the licenses.
DVD CCA immediately filed suit in California superior court against defendant Matthew Pavlovich, 20 other named individuals, and 500 Does for misappropriation of trade secrets. The complaint alleges the following: As early as October 25, 1999, Jon Johansen, a resident of Norway, posted on the Internet a computer program, dubbed DeCSS, that defeats CSS encryption. DeCSS was derived by "willfully `hacking' and/or improperly reverse engineering software created by" a CSS licensee. Around the time Johansen posted the DeCSS program, the same information appeared on a Web site "operated by" Pavlovich. Thereafter, many other Web sites "in at least 11 states and 11 countries" *345 either posted the code directly or provided links to the sites where it appeared directly. The defendants who posted or provided Web site links to this information knew or should have known DeCSS was derived from the misappropriation of proprietary information, because DeCSS was specifically designed to defeat CSS and was aimed at infringing movie copyrights by permitting the "pirating" of movies on DVD's. The motion picture industrycentered in Californiaand the computer and electronics businesses involved in DVD development and productionincluding 73 companies in Californiahave been harmed because the wholesale copying and distribution of DVD's destroys both the movies' copyrights and the market for DVD-based products. The breach of CSS has also delayed the introduction of DVD audioa new technology in which these industries have invested substantiallywhile a new copyright protection system is developed.
The complaint further asserts: The Motion Picture Association sent cease-and-desist notices to some 66 Web sites and Internet service providers, including Pavlovich and all but one of the other named defendants. Some who received notices had voluntarily removed the DeCSS information, but Pavlovich and all the other named defendants who were notified had refused.
The complaint asks for a declaratory judgment that defendants have willfully misappropriated the CSS trade secret. It seeks to enjoin the defendants, singly or in combination, from distributing, via the Internet or otherwise, any proprietary information or trade secrets relating to the CSS technology, and from copying, marketing, licensing, publishing, selling, leasing, or renting the DeCSS program and any other product substantially derived from CSS proprietary property or trade secrets.
Pavlovich moved to quash summons, alleging that California courts lacked personal jurisdiction over him. The motion, and DVD CCA's opposition, attached considerable documentary evidence, including excerpts from Pavlovich's depositions. Much is fiercely disputed between the parties, but the record discloses the following facts that are either uncontroverted, or are fairly inferable in support of the trial court's jurisdiction order:
Pavlovich is the president of a startup technology consulting company. He currently lives and works in Texas, and he has no direct business or personal ties with California. While a computer engineering student in Indiana, he was the founder and project leader of the LiVid video project. The project operated a Web site at livid.on.openprojects.net, which posted the DeCSS source code.[1]
*346 According to Pavlovich, LiVid was "an organization of software developers and computer programmers from around the world that were interested in ... developing ... video and DVD-related applications" for the Linux computer operating system. The project's goal, according to Pavlovich, was to "improve video and DVD support" for Linux and, in particular, "to develop an open source DVD player for Linux" so "we could play ... DVDs ... on the systems that we had bought that had DVD drives...." In other DeCSS-related litigation, Pavlovich himself has testified as an expert witness "relating to computers, primarily Linux DVD technology," specifically including "various projects in Linux including the Linux video and DVD project."
By the time the LiVid Web site posted the DeCSS source code, Pavlovich had heard there was an entity that licensed CSS technology. As Pavlovich explained, "[i]n the course of the development of the ... Linux video and DVD project, there was a lot of discussion regarding the decryption piece of the full length of decoding of DVD," and people on the LiVid mailing list were advising that "you've got to apply for a license." A CSS licensee posted on the site a friendly warning that CSS was a licensed trade secret which licensees were forbidden to disclose, that its purpose was to prevent the pirating of movies from DVD's, that Hollywood was "paranoid" about pirating, and that if CSS were "cracked," there was a "good chance" no new movie titles would be released on DVD. Nonetheless, the project declined to seek a license because, as Pavlovich indicated, "more than likely a license would not allow us to release the source code and things like that that didn't follow the same development path as open source followed."
Pavlovich also understood that DeCSS had been "reverse engineered from another [CSS-equipped] DVD player like a Windows player." In an e-mail dated October 1, 1999, he advised that "[r]everse engineering is illegal in most (if not all) of the countries that developers in this project live in." Nonetheless, Pavlovich's e-mail predicted that although "[t]his is a very nasty thing and a lot is on the line for those involved," "DVD (everything non-free) will be hacked before the end of time."
In his deposition, Pavlovich insisted the LiVid project was not directly concerned with the unauthorized reproduction and distribution of copyrighted materials contained on DVD's. However, Pavlovich admitted he was aware that DeCSS could facilitate the process of transferring the information stored on the discs to computer hard drives, whence it could be copied into new playback mediums.[2] Indeed, Pavlovich insisted that one who buys a DVD with copyrighted material should have the freedom to duplicate it, at least for personal use, and to transfer its information *347 to any other playback format he or she wishes.
Pavlovich insists he did not know the identity or location of the CSS licensing entity until this lawsuit was filed. However, he did know that the movie industry was centered in California and that computer companies of the kind involved in producing components for DVD players had a substantial presence here. Specifically, Pavlovich admitted, "the general common idea is that Hollywood is the area" where the movie industry is centered, that several major movie studios are located or have substantial presences in Hollywood, that Silicon Valley is one of the "top three technology hot spots in the United States," that computer hardware manufacturers are involved in the production of DVD player components such as "video boards" or "DVD boards," and that "a lot" of hardware manufacturers are located in California.
In a brief order, the trial court denied the motion, citing Calder, supra, 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804, and a Ninth Circuit Court of Appeals case applying Calder, Panavision Intern., L.P. v. Toeppen (9th Cir.1998) 141 F.3d 1316 (Panavision). Pavlovich petitioned the Court of Appeal for a writ of mandate. The petition was summarily denied. On review, we retransferred the matter to the Court of Appeal with directions to vacate its denial order and issue an order to show cause. After briefing and argument, the Court of Appeal wrote an opinion denying the writ.
The Court of Appeal reasoned that (1) Pavlovich knew or should have known his Internet activities were having injurious effects on the California movie and computer industries, (2) he also necessarily knew the misappropriated material posted on his Web site was instantly accessible to a wide range of Internet users and consumers, including those in California, (3) his use of the Internet, rather than older mass communications media, as the means of inflicting harm was irrelevant, and (4) the instant access afforded by an Internet Web site is the equivalent of the site operator's personal presence wherever the site's material is accessed and appropriated. Hence, the Court of Appeal concluded, though physically absent from California, Pavlovich had established minimum jurisdictional contacts with this state under a theory of "purposeful availment" of its benefits and privileges, because, by his intentional conduct, he had caused harmful effects in the state.
The Court of Appeal further concluded that personal jurisdiction over Pavlovich was reasonable under all the circumstances. It stressed that (1) the degree of Pavlovich's personal interjection was substantial, because his knowing activity posed substantial harm for industries centered in California; (2) the burden of defending the suit in California was substantial, but not so great as to deny Pavlovich due process; (3) Pavlovich identified no conflict with the sovereignty of his home state; (4) California had a substantial interest in the subject matter; (5) California offered a logical forum for convenient, efficient, and effective resolution of the dispute; and (6) no other forum could claim a greater interest.
Discussion
The majority correctly state the broad principles. California may assert personal jurisdiction over a foreign defendant on any basis consistent with the state and federal Constitutions. (Code Civ. Proc., § 410.10.) Such jurisdiction is constitutionally permissible only "if the defendant has such minimum contacts with the state that the assertion of jurisdiction does not violate `"traditional notions of fair play and substantial justice."'" (Vons, supra, 14 *348 Cal.4th 434, 444, 58 Cal. Rptr. 2d 899, 926 P.2d 1085, quoting Internal Shoe Co., supra, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95; see Burger King, supra, 471 U.S. 462, 471-478, 105 S. Ct. 2174, 85 L. Ed. 2d 528.)
The "minimum contacts" rule protects both the defendant's "liberty interest in not being subject to the judgments of a forum with which he or she has established no meaningful `contacts, ties, or relations'" (Vons, supra, 14 Cal. 4th 434, 445, 58 Cal. Rptr. 2d 899, 926 P.2d 1085; Burger King, supra, 471 U.S. 462, 471-72, 105 S. Ct. 2174, 85 L. Ed. 2d 528) and the mutual territorial limits of coequal sovereigns in a federal system (Vons, supra, at p. 445, 58 Cal. Rptr. 2d 899, 926 P.2d 1085; see World Wide Volkswagen, supra, 444 U.S. 286, 292, 100 S. Ct. 559, 62 L. Ed. 2d 490). The rule also "`gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.'" (Burger King, supra, at p. 472, 105 S. Ct. 2174, quoting World-Wide Volkswagen, supra, at p. 297, 100 S. Ct. 559.)
But the test of minimum contacts is necessarily flexible, and, as the majority concede, subtle shades of grays predominate. (Maj. opn., ante, at 127 Cal.Rptr.2d at p. 334, 58 P.3d at p. 6; see Kulko v. California Superior Court (1978) 436 U.S. 84, 92, 98 S. Ct. 1690, 56 L. Ed. 2d 132 (Kulko).) "[T]he question of jurisdiction cannot be answered by the application of precise formulas or mechanical rules. Each case must be decided on its own facts." (Integral Development Corp. v. Weissenbach (2002) 99 Cal. App. 4th 576, 583, 122 Cal. Rptr. 2d 24 (Integral Development Corp.); see Cornelison v. Chancy (1976) 16 Cal. 3d 143, 150, 127 Cal. Rptr. 352, 545 P.2d 264 (Cornelison).)
For particular litigation, the "fair warning" standard that underlies the minimum contacts rule "is satisfied if the defendant has `purposefully directed' his activities at residents of the forum [citation], and the litigation results from alleged injuries that `arise out of or relate to' those activities [citation]." (Burger King, supra, 471 U.S. 462, 472, 105 S. Ct. 2174, 85 L. Ed. 2d 528; see also Helicopteros Nacimiales de Colombia v. Hall (1984) 466 U.S. 408, 414, 104 S. Ct. 1868, 80 L. Ed. 2d 404; Vons, supra, 14 Cal. 4th 434, 446, 58 Cal. Rptr. 2d 899, 926 P.2d 1085.) As Burger King explained, there are several reasons why personal jurisdiction is appropriate in such cases. A state generally has a manifest interest in providing its residents a forum for redressing injuries inflicted by out-of-state actors. When such persons "purposefully derive benefit" from their interstate activities (Kulko, supra, 436 U.S. 84, 96, 98 S. Ct. 1690, 56 L. Ed. 2d 132), it may well be unfair to allow them to raise a territorial shield against efforts to hold them to account where injury proximately resulted. Also, modern transportation and communications have made it much less burdensome, and thus less unfair, to require one to litigate in another forum for disputes relating to such activity. (Burger King, supra, at pp. 473-474, 105 S. Ct. 2174; see also Keeton v. Hustler Magazine, Inc. (1984) 465 U.S. 770, 776, 104 S. Ct. 1473, 79 L. Ed. 2d 790 (Keeton); McGee v. International Life Ins. Co. (1957) 355 U.S. 220, 223, 78 S. Ct. 199, 2 L. Ed. 2d 223; Vons, supra, at p. 447, 58 Cal. Rptr. 2d 899, 926 P.2d 1085.)
The necessary purposeful direction toward the forum has sometimes been described as requiring "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum [s]tate, thus invoking the benefits and protections of its laws." (Hanson *349 v. Denckla (1958) 357 U.S. 235, 253, 78 S. Ct. 1228, 2 L. Ed. 2d 1283, italics added.) But purposeful availment in this literal sense is not the only form of purposeful direction that will permit the exercise of personal jurisdiction over a foreign defendant.
Thus, in Calder, supra, 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804, the court concluded that California actress Shirley Jones could bring a California suit against Florida residents who wrote and edited an allegedly defamatory article about her which appeared in a nationally circulated tabloid newspaper. The court concluded that, despite their lack of any direct personal or business ties to California, the individual defendants had "expressly aimed" their intentional conduct at this state. (Calder, supra, at p. 789, 104 S. Ct. 1482.) Calder stressed that the defendants' newspaper had prominent circulation in California, and that California was the focal point of the story, because the defendants consulted California sources and knew the brunt of the harm, both emotional and reputational, would be felt in this state, where Jones lived and pursued her professional career. (Id. at pp. 788-790, 104 S. Ct. 1482.)
California has similarly assumed that, because of this state's "`natural interest in the effects of an act within its territory, even though the act itself was done elsewhere'" (Judicial Council of Cal. com., reprinted at 14 West's Ann.Code Civ. Proc. (1973 ed.) foll. § 410.10, p. 472, quoting Rest.2d Conflict of Laws (Proposed Off. Draft (1967) pt. I) § 37, com. a, p. 197), one whose out-of-state act was intended to cause effects here may be sued in this state for the act just as if it had occurred here (Judicial Council of Cal. com., reprinted at 14 West's Ann.Code Civ. Proc., supra, foil. § 410.10, p. 473; cf. Sibley v. Superior Court (1976) 16 Cal. 3d 442, 446, 128 Cal. Rptr. 34, 546 P.2d 322 (Sibley) [state may exercise jurisdiction over foreign defendant who causes effects here unless nature of effects, and of defendant's relationship to this state, make exercise of jurisdiction unreasonable]).
One cannot be sued in a foreign jurisdiction "solely as a result of `random,' `fortuitous,' or `attenuated' contacts [citations]." (Burger King, supra, 471 U.S. 462, 475, 105 S. Ct. 2174, 85 L. Ed. 2d 528; Keeton, supra, 465 U.S. 770, 774, 104 S. Ct. 1473, 79 L. Ed. 2d 790.) But the minimum contacts necessary to personal jurisdiction are always present where the defendant has so purposefully directed injurious conduct toward the forum, with the intent of affecting its residents, "`that he should reasonably anticipate being haled into court there'" for related litigation. (Burger King, supra, at p. 474, 105 S. Ct. 2174, quoting World Wide Volkswagen, supra, 444 U.S. 286, 297, 100 S. Ct. 559, italics added.)
In Calder, the court unanimously found that the Florida-based author and editor of an allegedly defamatory tabloid article about a California actress "must `reasonably anticipate being haled into court [in California]' to answer for the truth of the statements made in their article. [Citations.]" (Calder, supra, 465 U.S. 783, 790, 104 S. Ct. 1482, 79 L. Ed. 2d 804.) As the court observed, the defendants were "primary participants in an alleged wrongdoing intentionally directed at a California resident, and jurisdiction over them is proper on that basis." (Ibid., italics added.) "An individual injured in California," the court said, "need not go to Florida to seek redress from persons who, though remaining in Florida, knowingly cause the injury in California" (Ibid., italics added.)
As the majority indicate, the Calder test of minimum contacts based upon conduct expressly aimed at the forum is not limited to defamation actions. It applies to intentional *350 torts generally. (See, e.g., Bancroft & Masters, Inc. v. Augusta Nat. Inc. (9th Cir.2000) 223 F.3d 1082, 1087-1088 (Bancroft & Masters ); Panavision, supra, 141 F.3d 1316, 1321-1322; see also, e.g., IMO Industries, Inc. v. Kiekert AG (3d Cir. 1998) 155 F.3d 254, 260 (IMO); Far West Capital, Inc. v. Towne (10th Cir.1995) 46 F.3d 1071, 1077.)
"When a defendant moves to quash service of process on jurisdictional grounds, the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction. [Citation.] Once facts showing minimum contacts with the forum state are established, however, it becomes the defendant's burden to demonstrate that the exercise of jurisdiction is unreasonable. [Citation.] Where there is conflicting evidence, the trial court's factual determinations are not disturbed on appeal if supported by substantial evidence. [Citation.] When no conflict in the evidence exists, however, the question of jurisdiction is purely one of law and the reviewing court engages in an independent review of the record. [Citation.]" (Vons, supra, 14 Cal. 4th 434, 449, 58 Cal. Rptr. 2d 899, 926 P.2d 1085; cf. Floveyor Internal., Ltd. v. Superior Court (1997) 59 Cal. App. 4th 789, 793-794, 69 Cal. Rptr. 2d 457.)
When, as here, no findings of fact were requested or made, the trial court's implicit findings of disputed fact are entitled to the same appellate deference as explicit findings. (See City and County of San Francisco v. Sainez (2000) 77 Cal. App. 4th 1302, 1313, 92 Cal. Rptr. 2d 418 [constitutionality, as applied, of cumulative housing code penalties].) Thus, we must accept all undisputed facts, indulge all other reasonable factual inferences that support the trial court's order, and independently apply the law to those facts. (Integral Development Corp., supra, 99 Cal. App. 4th 576, 584-585, 122 Cal. Rptr. 2d 24; cf. Gleaves v. Waters (1985) 175 Cal. App. 3d 413, 417, 220 Cal. Rptr. 621 [preliminary injunction].)
Application of these principles compels a conclusion that the unique circumstances of this case satisfy the fundamental requirements of Calder. For purposes of minimum contacts analysis, the following facts are either undisputed or fairly inferable from the record: The DeCSS source code was posted on defendant Pavlovich's LiVid Web site as part of a widespread effort to defeat the CSS encryption system jointly developed by the movie and DVD industries for their mutual protection and benefit. DeCSS was posted on the LiVid Web site despite Pavlovich's assumption that DeCSS illegally infringed the licensed trade secret represented by CSS.[3] Pavlovich, a technical expert in this area, knew CSS was intended to protect copyrighted materials on DVD's from unauthorized duplication, and also to limit DVD playback to systems with CSS technology. Indeed LiVid's goal in defeating CSS was to develop an alternative, and presumably competitive, "open source" DVD playback system. *351 Thus, the intended injurious effects of posting DeCSS were aimed directly at the computer hardware industry involved in producing CSS-encrypted DVD players an industry Pavlovich knew was heavily concentrated in California.
Moreover, Pavlovich knew the purpose of CSS was to protect copyrighted movies from pirating, and that the widespread availability of DeCSS undermined that interest. Thus, even if he did not personally pirate copyrighted material for commercial gain, Pavlovich, by publishing material he understood as an infringement of the CSS trade secret, took an action calculated to harm the movie industry, which Pavlovich knew was centered in California.
Accordingly, the necessary minimum contacts required by Calder, supra, 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804, are present. Pavlovich engaged in "`(D intentional actions (2) expressly aimed at the forum state (3) causing harm, the brunt of which is sufferedand which the defendant knows is likely to be suffered in the forum state.'" (Panavision, supra, 141 F.3d 1316, 1321, quoting Core-Vent Corp. v. Nobel Industries AB (9th Cir. 1993) 11 F.3d 1482, 1486 (Core-Vent). Accordingly, he should reasonably anticipate he would be haled into California's courts to account for his conduct.
The majority ascribe undue significance to the fact that Pavlovich acted through a new and rapidly burgeoning medium of interstate and international communicationthe Internet. They assert that the mere posting of information on a passive Internet Web site, which is accessible from anywhere but is directed at no particular audience, cannot be an action targeted at a particular forum. Otherwise, they worry, mere use of the Internet would subject the user to personal jurisdiction in any forum where the site was accessible.
I agree that mere operation of an Internet Web site cannot expose the operator to suit in any jurisdiction where the site's contents might be read, or where resulting injury might occur. (See, e.g., Mink v. AAAA Development LLC (5th Cir. 1999) 190 F.3d 333, 336-337 (Mink); Oasis Corp. v. Judd (S.D.Ohio 2001) 132 F. Supp. 2d 612, 623; Nicosia v. De Rooy (N.D.Cal.1999) 72 F. Supp. 2d 1093, 1098; but see Inset Systems, Inc. v. Instruction Set, Inc. (D.Conn.1996) 937 F. Supp. 161, 164-165 (Inset Systems, Inc.). Communication by a universally accessible Internet Web site cannot be equated with "express aiming" at the entire world.
However, defendants who aim conduct at particular jurisdictions, expecting and intending that injurious effects will be felt in those specific places, cannot shield themselves from suit there simply by using the Internet, or some other generalized medium of communication, as the means of inflicting the harm. (See, e.g., Calder, supra, 465 U.S. 783, 789-790, 104 S. Ct. 1482, 79 L. Ed. 2d 804 [significant California circulation of nationwide newspaper supports California defamation suit by California resident against Florida residents who wrote and edited defamatory article]; Keeton, supra, 465 U.S. 770, 773-780, 104 S. Ct. 1473, 79 L. Ed. 2d 790 [significant regular circulation of nationwide magazine in New Hampshire supports New Hampshire defamation suit against magazine by well-known New York resident]; Panavision, supra, 141 F.3d 1316, 1319-1322 [California suit proper where Illinois defendant registered and used California plaintiffs trademarks as domain names for defendant's Internet Web sites, then solicited payoff to relinquish domain names]; Indianapolis Colts v. Metro. Baltimore Football (7th Cir.1994) 34 F.3d 410, 411-412 (Indianapolis Colts, Inc.) [in Indiana trademark infringement suit by former Baltimore (now Indianapolis) Colts of National *352 Football League against Baltimore CFL Colts of Canadian Football League, defendant established minimum contacts with Indiana, among other ways, through nationwide cable telecasts of football games]; cf., e.g., CompuServe, Inc. v. Patterson (6th Cir.1996) 89 F.3d 1257, 1262-1267 [Ohio declaratory relief action by Ohio-based Internet service provider is proper where Texas defendant transmitted "trademarked" software over the Internet to plaintiff, used plaintiffs Internet service to share and market software, then emailed plaintiff in Ohio, claiming names and marks of plaintiffs similar software infringed his trademarks]; Bancroft & Masters, supra, 223 F.3d 1082, 1084-1088 [California declaratory relief action is proper where defendant, based in Georgia, sent letters both to plaintiff, a California merchant, and to a Virginia-based Internet Web site domain name registrar, claiming plaintiffs registered domain name infringed defendant's trademark, thus forcing plaintiff to sue to retain control of domain name].)[4]
In such circumstances, the defendant is not exposed to universal and unpredictable jurisdiction. He faces suit only in a particular forum where he directed his injurious conduct, and where he must reasonably anticipate being called to account.
The cases cited by the majority for the proposition that operation or use of a passive Internet Web site cannot create personal jurisdiction in a state foreign to the operator's location are inapposite. Those decisions hold that personal jurisdiction cannot be based on mere accessibility to a Web site by residents of the forum state or otherwise conclude, on their individual facts, that particular uses of the Internet did not establish the geographic specificity, knowledge, and intent necessary for "express aiming."[5]
*353 Next, the majority accept Pavlovich's argument that he cannot have expressly aimed his conduct at California because he knew neither the specific identity nor the location of the CSS licensing agency (now California-based plaintiff DVD CCA) at the time DeCSS was posted on the LiVid Web site. But knowledge of this exact kind is unnecessary to establish personal jurisdiction. When a foreign defendant, by intentional conduct directed toward the forum, establishes the necessary minimum contacts with that jurisdiction, he or she may be exposed to litigation there for any "`controversy [that] is related to or "arises out of" [those] contacts....' [Citations.]" (Vons, supra, 14 Cal. 4th 434, 446, 58 Cal. Rptr. 2d 899, 926 P.2d 1085, italics added.) The plaintiff need not be the exact person or entity toward whom the defendant's conduct was directed.
The facts of Vons, supra, 14 Cal. 4th 434, 58 Cal. Rptr. 2d 899, 926 P.2d 1085, are illustrative. There, customers of several Jack-in-the-Box restaurants were injured or killed by eating tainted hamburger. Other Jack-in-the-Box franchisees brought a California suit against Jack-in-the-Box's California parent company, Foodmaker, seeking damages for business losses caused by the adverse publicity. Foodmaker cross-complained against various parties, including California-based Vons, which shipped hamburger to Foodmaker for use in Jack-in-the-Box restaurants. Vons, in turn, cross-complained against Foodmaker and the franchises where food poisoning had occurred, including two Washington state restaurants. Vons alleged the injuries could have been avoided by proper cooking procedures.
We held that for purposes of the particular litigation, jurisdiction over the Washington cross-defendants was proper, though they had no general ties with California, nor any direct contacts with Vons. As we explained, "the nexus required to establish specific jurisdiction is between the defendant, the forum, and the litigation [citations]not between the plaintiff and the defendant." (Vons, supra, 14 Cal. 4th 434, 458, 58 Cal. Rptr. 2d 899, 926 P.2d 1085.) "`The crucial inquiry concerns the character of [the] defendant's activity in the forum [and] whether the cause of action arises out of or has a substantial connection with thai activity ...."' (Id., at p. 452, 58 Cal. Rptr. 2d 899, 926 P.2d 1085, quoting Cornelison, supra, 16 Cal. 3d 143, 148, 127 Cal. Rptr. 352, 545 P.2d 264, italics added by Vons.)
In Vons, this substantial connection between the Washington cross-defendants and Vons's California cross-complaint arose from the cross-defendants' California-centered contractual franchise relationship with Foodmaker. The cross-defendants bought all their hamburger from Foodmaker, and the standard franchise agreement, which provided that contractual disputes between Foodmaker and its *354 franchisees would be litigated in California, set exacting standards for sanitary food preparation in Jack-in-the-Box restaurants. Hence, on the basis of their California contacts, the cross-defendants could reasonably anticipate a California lawsuit with respect to that subject. (Vons, supra, 14 Cal. 4th 434, 456-460, 58 Cal. Rptr. 2d 899, 926 P.2d 1085.)
Similarly here, defendant Pavlovich's connection with California arises from his participation in a concerted effort to defeat the CSS encryption system he knew was developed to protect interests of the movie and DVD-related computer industries. Those industries, as he also knew, were centered or substantially concentrated in this state. He knew CSS was a trade secret, available only by a license his LiVid project had specifically declined to obtain. He also assumed the DeCSS source code posted on the LiVid Web site had been derived by illegal means, and was an infringement of the proprietary information represented by CSS. DVD CCA's lawsuit, alleging that the Web site posting was an infringement of the CSS trade secret, thus "`arises out of or has a substantial connection with'" his conduct aimed at this state. (Vons, supra, 14 Cal. 4th 434, 452, 58 Cal. Rptr. 2d 899, 926 P.2d 1085.) Because he targeted the trade secrets of industries he knew were centered in California, he must reasonably anticipate California litigation calling him to account for that conduct. That he did not know the exact identity or location of the entity authorized to prosecute such an action is immaterial.
The majority also accept Pavlovich's claim that his contacts with the California movie, computer, and consumer electronics industries are too random, remote, and attenuated to satisfy Calder's express aiming test. (Calder, supra, 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804.) As to the motion picture industry, the majority insist it is insufficient that Pavlovich knew the DeCSS source code could be used to harm that industry through the pirating of copyrighted motion pictures. The majority note that DVD CCA's lawsuit does not allege Pavlovich pirated movies, and they say express aiming at the movie industry cannot be found from the mere foreseeability that other persons might use the code to do so. As to the computer and electronics industries, the majority observe there is no evidence Pavlovich actually knew that California members of these industries were among the CSS licensees allegedly harmed by DeCSS. Finally, the majority suggest that a defendant's knowledge of industry-wide effects cannot form the sole basis for personal jurisdiction in any event.
It is true that one cannot be sued in another forum simply because his or her conduct has foreseeable effects there.[6] A number of lower court decisions suggest further that, absent other indicia of activity purposefully directed at the forum, even the defendant's intent to injure a forum *355 resident, standing alone, is not sufficient to satisfy the test of Calder, supra, 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804.[7] And several cases have held that alleged trademark infringement on an Internet Web site cannot alone, under Calder, establish minimum contacts with the forum in which the trademark's owner resides.[8]
Nonetheless, I believe that the unusual and unprecedented facts of this case demonstrate purposeful activity directed toward this forum sufficient to establish minimum contacts under the Calder test. As a result of his actions, defendant Pavlovich should reasonably have anticipated being haled into court in this state, and recognition of California's jurisdiction thus meets constitutional standards of fairness.
The posting of the DeCSS source code on Pavlovich's LiVid Web site was done with the specific goal of negating, by illegal means, the licensed CSS technology Pavlovich knew had been jointly developed by the movie and DVD industries for their mutual protection. Pavlovich's immediate aim, he acknowledged, was to promote development of alternative DVD playback systems not dependent on CSS licensure. However, he also knew CSS was intended to afford crucial copyright protection to DVD movies. He has denied any personal desire to pirate movies, or to encourage others to do so. But by deciding to display the DeCSS source code without restriction on the universally accessible Web site, Pavlovich offered visitors to the site the patent opportunity to exploit this information as they chose.
By taking this calculated action, Pavlovich thus not only foresaw, but must have intended, the natural and probable consequences he knew would befall the affected industries. These consequences included both the competitive injury Pavlovich admitted he intended to inflict upon the DVD industry, which is substantially present in California, and the loss of copyright protection to the movie industry he knew is primarily associated with this state.
This lawsuit, brought by the agent of these affected industries, seeks to forestall just such damage by enjoining Pavlovich, and other members of his network, from continuing to display the DeCSS source code on their Web sites. (Civ.Code, § 3426.2, subd. (a).) For purposes of such an action, it is irrelevant whether Pavlovich himself exploited DeCSS for commercial benefit. The instant suit is predicated on the inherent harm to California-centered industries caused by Pavlovich's intentional, knowing, and allegedly improper *356 "[d]siclosure" of their trade secret. (Id., § 3426.1, subd. (b)(2).) Pavlovich knew he was targeting those industries when he acted. He proceeded despite his assumption that DeCSS was likely "illegal." He thus had every reason to expectindeed, he effectively invitedresponsive litigation.
For purposes of this particular action, therefore, he established sufficient connection with this state that he must "reasonably anticipate" being haled into a California court to account for his conduct. (World-Wide Volkswagen, supra, 444 U.S. 286, 297, 100 S. Ct. 559; see Burger King, supra, 471 U.S. 462, 474, 105 S. Ct. 2174, 85 L. Ed. 2d 528.) Because of the minimum contacts he forged by his intentional conduct directed toward this state, maintenance of a related suit against him in this forum does not offend traditional notions of fair play and substantial justice. (Calder, supra, 465 U.S. 783, 787-788, 104 S. Ct. 1482, 79 L. Ed. 2d 804; see Internal Shoe Co., supra, 326 U.S. 310, 316, 320, 66 S. Ct. 154, 90 L. Ed. 95; see also Integral Development Corp., supra, 99 Cal. App. 4th 576, 587, 122 Cal. Rptr. 2d 24 [suggesting that, even absent prior employer-employee relationship, California suit by California corporation against resident of Germany for misappropriation of trade secrets would be proper under Calder on basis that defendant directed his intentional tortious conduct toward a known forum resident].)[9]
I see no reason why the result should differ simply because Pavlovich targeted entire industries within the forum, rather than a single individual or business. The majority suggest there is no case "where a court exercised jurisdiction under the effects test based solely on the defendant's knowledge of industry-wide effects in the forum state." (Maj. opn, ante, 127 Cal. Rptr.2d at p. 342, 58 P.3d at p. 12.) By the same token, however, no decision has held that the defendant's efforts to target an entire industry cannot form a basis for specific personal jurisdiction. Jurisdiction is appropriate under Calder whenever a foreign defendant expressly aimed injurious actions toward the forum, with the intent and understanding that the brunt of *357 the harm would be felt there. (Calder, supra, 465 U.S. 783, 788-790, 104 S. Ct. 1482, 79 L. Ed. 2d 804.) While targeting of an individual forum resident certainly meets that test, the aiming is no less specific, and jurisdiction no less proper, when the effort is directed, with equal purpose and precision, at one or more entire industries located there.
Pavlovich insists he did not aim at California in particular, because movie and computer companies exist throughout the nation and world. Moreover, he asserts, we may not assume large companies, with widely dispersed interests and operations, suffer the "brunt of the harm" in California simply because they are headquartered here.
Some cases have suggested that "a corporation `does not [necessarily] suffer harm in a particular geographic location in the same sense that an individual does.'" (Cybersell, supra, 130 F.3d 414, 420, quoting Core-Vent, supra, 11 F.3d 1482, 1486; see also IMO, supra, 155 F.3d 254, 262-263, and cases cited.) But other decisions have implicitly rejected the argument that, for purposes of Calder, acts intended to harm a corporation cannot be said to be directed at any particular place. (Core-Vent, supra, at p. 1487.)
Calder "does not preclude a determination that a corporation suffers the brunt of harm in its principal place of business." (Panavision, supra, 141 F.3d 1316, 1322, fn. 2; see Core-Vent, supra, 11 F.3d 1482, 1487.) It seems reasonable that, for purposes of litigation arising from tortious conduct purposefully directed against the general commercial interests of particular business enterprises, those businesses may be deemed to have suffered the "brunt of the harm," and the actor may reasonably anticipate suit, in the state where he or she knew they maintained their principal places of business. (Panavision, supra, at p. 1322, fn. 2.)[10]
Nor, in my view, is it fatal that individual members of the industries Pavlovich targeted are not based exclusively within California. When, as here, one purposefully directs injurious conduct against entire industries, with actual knowledge that they are primarily or substantially present in a particular forum, his contacts with that state are no more attenuated, random, or fortuitous, than if, by unusual happenstance, they were solely concentrated there. The actor must reasonably anticipate that litigation generated by his intentional conduct will originate in a forum where, as he knows, the industry or industries he sought to injure are primarily or substantially located. Otherwise, one who acted from a remote location against an entire multistate or multinational industry, as opposed to a single enterprise, could rest secure that he was immune from suit in every jurisdiction where members of that industry were located.
Indeed, that is the unfortunate result, and the glaring flaw, of the majority's holding. Under the majority's rule, the California-centered industries directly targeted by Pavlovich and his numerous Internet colleagues have no recourse for their alleged injury but to pursue a multiplicity of individual suits against each defendant in his or her separate domicile. Nothing in the basic principles of long-arm *358 jurisdiction compels such an illogical and unfair outcome. I therefore conclude that Pavlovich purposefully established minimum contacts with California sufficient to permit litigation related to those contacts to proceed against him here.
Of course, "[o]nce it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts [must] be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with `fair play and substantial justice.' [Citations.] Thus courts in `appropriate case[s]' may evaluate `the burden on the defendant,' `the forum [s]tate's interest in adjudicating the dispute,' `the plaintiffs interest in obtaining convenient and effective relief,' `the interstate judicial system's interest in obtaining the most efficient resolution of controversies,' and the `shared interests of the several [s]tates in furthering fundamental substantive social policies.' [Citations.]" (Burger King, supra, 471 U.S. 462, 476-477, 105 S. Ct. 2174, 85 L. Ed. 2d 528; see also Asahi Metal Industry Co., supra, 480 U.S. 102, 113, 107 S. Ct. 1026, 94 L. Ed. 2d 92; World-Wide Volkswagen, supra, 444 U.S. 286, 292, 100 S. Ct. 559, 62 L. Ed. 2d 490.)
"These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required. [Citations.]" (Burger King, supra, 471 U.S. 462, 477, 105 S. Ct. 2174, 85 L. Ed. 2d 528, italics added.) Moreover, "where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." (Ibid., italics added.)
Though Pavlovich argues otherwise, he has failed to make such a compelling case here. On the contrary, as the Court of
Appeal concluded, the factors bearing on the overall reasonableness of California jurisdiction weigh strongly on the side of such jurisdiction.
The first of these factors, the burden on the defendant, favors Pavlovich the most, since he would presumably be required to travel from his current home in Texas to defend the suit. We cannot discount the significant time, expense, and inconvenience this may entail.
But such concerns are present whenever jurisdiction away from the defendant's residence is at issue. Here, the travel required is domestic, not international, and Pavlovich is not disadvantaged by the alien judicial system of a foreign nation. (Compare, e.g., Asahi Metal Industry Co., supra, 480 U.S. 102, 114, 107 S. Ct. 1026, 94 L. Ed. 2d 92; Core-Vent, supra, 11 F.3d 1482, 1489.) The distance between Texas and California is not extreme under modern conditions. Pavlovich cites his youth and represents in his brief that his current income is relatively low, but he does not otherwise suggest any unusual hardship.
Moreover, as indicated above, Pavlovich assumed the DeCSS source code was an illegal infringement of the licensed CSS technology, yet a decision was made to post it on the LiVid Web site anyway. Pavlovich thus had reason to anticipate a responsive lawsuit from somewhere. According to his deposition, he has already voluntarily appeared outside his home state as an expert witness in related litigation. Thus, the burden is not constitutionally unreasonable in this case.
On the other hand, the interests of the plaintiff, the forum, and the interstate judicial system all strongly favor jurisdiction in this state. For several reasons, California is a logical forum for convenient, efficient, and effective relief. The industries affected by Pavlovich's conduct are centered *359 or substantially present here. Their licensing agent DVD CCA, the plaintiff in this suit, has its headquarters here. As indicated above, California has a natural interest, reflected by the reach of its long-arm statute, in redressing the effects of an act within its territory, even though the act was done elsewhere. (See ante, 127 Cal. Rptr.2d at p. 338, 58 P.3d at p. 9.) California has also evidenced a more specific interest in the type of injury at issue here. California's adoption of the Uniform Trade Secrets Act (Civ.Code, § 3426 et seq.) reflects both its common concern with regulating trade secret infringements and its special interest in providing effective remedies for such infringements committed against its own residents.
Finally, and importantly, both DVD CCA and the interstate judicial system have a strong interest in efficient resolution of DVD CCA's dispute, involving common issues of fact and law, with all of the many defendants named in its complaint. That interest is not served by requiring DVD CCA to pursue individual defendants in separate fora, if a single suit in one fair and logical forum is possible. For the reasons already stated, California is such a forum in this case. In fact, I submit, California's specific interests, reinforced by the interest in efficient dispute resolution, are so strong here that "the reasonableness of [California] jurisdiction [may be established] upon a lesser showing of minimum contacts than would otherwise be required." (Burger King, supra, 471 U.S. 462, 477, 105 S. Ct. 2174, 85 L. Ed. 2d 528.) For these reasons, I amply persuaded that California's assertion of personal jurisdiction over Pavlovich, for purposes of this specific litigation, is constitutionally fair and reasonable.[11]
Though the majority imply otherwise, the result I propose does not signal a broad new rule that California jurisdiction is proper over any foreign defendant who causes foreseeable effects in this state. On the contrary, I base my conclusions on the specific facts of this case. These facts indicate that defendant Pavlovich engaged in intentional conduct purposefully targeted at interests he knew were centered or substantially present in California, with knowledge they would suffer harm here, such that he must reasonably have anticipated being called to account in this state. Pavlovich thus forged minimum contacts with California, and it is otherwise fair and reasonable to assert personal jurisdiction over him here for purposes of related litigation. For these reasons, and these reasons alone, I conclude that his motion to quash was properly denied.
I would affirm the judgment of the Court of Appeal.
WE CONCUR: GEORGE, C.J, and CHIN, J.
NOTES
[1] (See, e.g., Wien Air Alaska, Inc. v. Brandt (5th Cir.1999) 195 F.3d 208, 212 ["Foreseeable injury alone is not sufficient to confer specific jurisdiction, absent the direction of specific acts toward the forum"]; Noonan, supra, 135 F.3d at p. 9] [holding that the defendants' knowledge that the plaintiff would suffer injury in the forum was insufficient to establish jurisdiction under the effects test because the defendants "did not direct their actions toward" the forum state]; id. at pp. 90-91; ESAB Group, Inc. v. Centricut, Inc. (4th Cir.1997) 126 F.3d 617, 625 (ESAB) [holding that the defendants' knowledge that their actions would, if successful, "result in less sales" for the plaintiff, "which was headquartered in" the forum state, was insufficient to establish jurisdiction under the effects test, because the defendants did not "manifest behavior intentionally targeted at and focused on" the forum]; Far West, supra, 46 F.3d at p. 1080 [holding that the defendants' knowledge that their acts would interfere with the contractual rights of a forum resident is not enough to establish jurisdiction under the effects test because their acts had no "connection" to the forum state "beyond [the] plaintiff's corporate domicile"]; id. at pp. 1079-1080; Hicklin Engineering, Inc. v. Aidco, Inc. (8th Cir.1992) 959 F.2d 738, 739 [holding that the defendant's knowledge that its tortious acts "may have an effect on a competitor, absent additional contacts," is insufficient to establish jurisdiction]; Drayton Enterprises, L.L.C. v. Dunker (D.N.D.2001) 142 F. Supp. 2d 1177, 1184 [holding that the defendants'"revealing and procuring [of] a trade secret" "while knowing that the primary consequence would be felt in" the forum state was not enough to establish jurisdiction]; id. at pp. 1184-1185; Cognigen Networks, Inc. v. Cognigen Corp. (W.D.Wash.2001) 174 F. Supp. 2d 1134, 1141 ["A defendant's knowledge of a resident plaintiff's use of a mark in an intellectual property tort claim is not enough to satisfy the effects test for personal jurisdiction"]; Barrett v. Catacombs Press (E.D.Pa. 1999) 44 F. Supp. 2d 717, 731 ["Unless [the forum state] is deliberately or knowingly targeted by the tortfeasor, the fact that harm is felt in [the forum state] from conduct occurring outside [that state] is never sufficient to satisfy due process"]; Conseco, Inc. v. Hickerson (Ind.Ct.App.1998) 698 N.E.2d 816, 819 [holding that the defendant's knowing posting of a forum resident's trademark on a Web site was insufficient to confer jurisdiction because there was no "purposefully directed activity"]; Griffis v. Luhan, supra, 646 N.W.2d at pp. 535-537 [holding that the knowing posting of defamatory material about a forum resident on the Internet is insufficient to establish express aiming]; Laykin v. McFall (Tex.App.1992) 830 S.W.2d 266, 271 [holding that a court may not exercise jurisdiction even though the "intentional tortfeasor knowingly cause[d] injury" in the forum state because "he did not purposefully direct his activities into" the forum].)
[2] (See, e.g., Bunn-O-Matic Corp. v. Bunn Coffee Service Inc. (C.D.Ill.2000) 88 F. Supp. 2d 914; Clearclad Coatings, Inc. v. Xontal Ltd. (N.D.Ill. Aug. 20, 1999, No. 98 C 7199) 1999 WL 652030; McMaster-Carr Supply Co. v. Supply Depot, Inc. (N.D.Ill. June 16, 1999, No. 98 C 1903) 1999 WL 417352; Bunn-O-Matic Corp. v. Bunn Coffee Service Inc. (CD.Ill.1998) 46 U.S.P.Q.2d 1375 (Bunn-Matic I).)
[3] (See, e.g., Sibley v. Superior Court (1976) 16 Cal. 3d 442, 446, 128 Cal. Rptr. 34, 546 P.2d 322 ["The mere causing of an `effect' in California ... is not necessarily sufficient to afford a constitutional basis for jurisdiction"]; Mansour v. Superior Court (1995) 38 Cal. App. 4th 1750, 1762, 46 Cal. Rptr. 2d 191 [refusing to exercise jurisdiction under the effects test because there was "no evidence [the defendants] purposefully directed their activities toward[] California"]; Edmunds v. Superior Court (1994) 24 Cal. App. 4th 221, 236, 29 Cal. Rptr. 2d 281 [refusing to exercise jurisdiction under the effects test because the defendant's acts were directed at Hawaii and not California]; Wolfe v. City of Alexandria (1990) 217 Cal. App. 3d 541, 548-549, 265 Cal. Rptr. 881 (Wolfe) [refusing to exercise jurisdiction under the effects test because the defendant's acts, even if wrongful and fraudulent, were not expressly aimed at California]; Taylor-Rush v. Multitech Corp. (1990) 217 Cal. App. 3d 103, 114, 265 Cal. Rptr. 672 [exercising jurisdiction under the effects test because the defendant's contacts with California showed intentional targeting]; Farris v. Capt. J.B. Fronapfel Co. (1986) 182 Cal. App. 3d 982, 990, 227 Cal. Rptr. 619 [finding that the "effects in California" of the defendant's tortious acts were "too remote in time and causal connection to fairly and justly require" the defendant "to come to California to defend himself"]; Quattrone v. Superior Court (1975) 44 Cal. App. 3d 296, 304, 118 Cal. Rptr. 548 [exercising jurisdiction based on the effects of the defendant's tortious acts plus his other contacts with California].)
[4] At oral argument, DVD CCA claimed that Pavlovich had received a cease-and-desist letter from the Motion Picture Association (MPA), and contended his receipt of this letter established purposeful availment. Although the complaint alleged that MPA sent such a letter to various Web sites and Internet service providers, the record contains no copy of this letter. Moreover, nothing in the record indicates that such a letter was sent to Pavlovich or that he received or even knew about the letter. Accordingly, DVD CCA's unsubstantiated allusion to a cease-and-desist letter cannot support a finding of jurisdiction. In any event, DVD CCA made no mention of this letter to the trial court and Court of Appeal or in its briefs to this court. Thus, it has waived the issue.
[5] (See, e.g., JDO, supra, 72 Cal.App.4th at p. 1059, 85 Cal. Rptr. 2d 611 [refusing to exercise jurisdiction under the effects test because the defendant did not know that the plaintiff would suffer harm in the forum state]; Chaiken v. VV Pub. Corp. (2d Cir.1997) 119 F.3d 1018, 1029 [refusing to exercise jurisdiction under the effects test because the defendant had no reason to believe that the plaintiffs would suffer harm in the forum state]; Search Force, Inc. v. Dataforce Intern., Inc. (S.D.Ind. 2000) 112 F. Supp. 2d 771, 780 [refusing to exercise jurisdiction under the effects test because the defendant was not aware of the plaintiff's use of the trademark before the defendant created its infringing Web site]; Tech Heads, Inc. v. Desktop Service Center, Inc. (D.Or.2000) 105 F. Supp. 2d 1142, 1148 [refusing to exercise jurisdiction under the effects test because the defendant did not know about the plaintiff or its presence in the forum state]; Perry v. RightOn.com (D.Or. 2000) 90 F. Supp. 2d 1138, 1141 [refusing to exercise jurisdiction under the effects test because the defendant did not know about the plaintiff or his residence when the defendant acquired the infringing domain name]; Rannoch, Inc. v. Rannoch Corp. (E.D.Va. 1999) 52 F. Supp. 2d 681, 685 [refusing to exercise jurisdiction under the effects test because the defendant did not know about the plaintiff or its trademarks].)
[6] (See Panavision, supra, 141 F.3d at p. 1322 [the defendant "engaged in a scheme to register [a forum resident's] trademarks as his domain names for the purpose of extorting money from" that resident]; Cable News Network v. GoSMS.com, Inc. (S.D.N.Y.2000) 56 U.S.P.Q.2d 1959, 1963 [2000 WL 1678039, *4] [the defendant "transmitted infringing content to" forum residents]; 3DO Co. v. Poptop Software Inc. (N.D.Cal.1998) 49 U.S.P.Q.2d 1469, 1472 [1998 U.S. Dist. Lexis 21281], 1998 WL 962202 [the defendants "encourage[d] and facilitated] users" in the forum state "to download allegedly infringing copies" from its Web site and used a server in the forum state to operate the site].)
[7] Pavlovich claimsand DVD CCA does not disputethat DeCSS may be used for legitimate, and not just illegal, purposes. Thus, Pavlovich is no different from the student or store owner in the hypothetical.
[8] We disapprove of Nam Tai Electronics, Inc. v. Titzer (2001) 93 Cal. App. 4th 1301, 113 Cal. Rptr. 2d 769, to the extent it is contrary to our decision today.
[1] Pavlovich vigorously disputes whether DVD CCA has shown, for purposes of personal jurisdiction over him, that the DeCSS source code actually was posted on the LiVid Web site, and if so, whether Pavlovich himself had any responsibility for the posting. In his declaration attached to the motion to quash, Pavlovich carefully avoided either admitting or denying that DeCSS was posted on the site, or that he was personally involved, though he acknowledged he had "input" into the site. In excerpts from his deposition, as presented to the trial court, Pavlovich several times described himself as the "founder and leader" of the LiVid project, but these deposition excerpts shed no further light on whether, or by whom, the DeCSS source code was posted. In his brief on the merits, Pavlovich urges affirmatively that his "sole connection" to the case is as "one of many contributors" to a Web site which "allegedly" posted information in derogation of the CSS trade secret. At oral argument in this court, Pavlovich's counsel insisted it is not clear by whom, or even whether, the DeCSS source code was posted on the LiVid Web site; counsel represented that no such material was found among the contents of Pavlovich's computer hard drive, as provided during discovery on the motion to quash. But in light of Pavlovich's claim of his predominant role in LiVid, his admission that he had input into the project's Web site, and his artful failure to deny the Web site posting or his involvement therein, I conclude the trial court was entitled, based on the evidence before it, to draw the inferences necessary for personal jurisdiction.
[2] There is some controversy among those familiar with DVD technology, and with the CSS system in particular, whether CSS encryption itself prevents the copying of materials contained on CSS-encoded DVD's. However, in a recent federal case involving the federal Digital Millennium Copyright Act (17 U.S.C.A. § 1201 et seq.), the court of appeals upheld district court findings that DeCSS "sidesteps" whatever anticopying protections are contained on standard DVD's and is the "superior" means of acquiring easily copyable movies. (Universal City Studios, Inc. v. Corley (2d Cir.2001) 273 F.3d 429, 438, fn. 5.)
[3] As indicated above, this assumption is evidenced by Pavlovich's admission that he understood DeCSS had been derived by reverse engineering a DVD player equipped with CSS technology, and by his e-mail, dated October 1, 1999, warning that "[r]everse engineering is illegal in most (if not all) of the countries that developers in this project live in." Pavlovich now urges that under the Uniform Trade Secrets Act as applicable in California (Civ. Code, § 3426 et seq.), "[r]everse engineering ... alone shall not be considered improper means" of acquiring a trade secret. (Id., § 3426.1, subd. (a).) But the merits of DVD CCA's lawsuit are not before us at this preliminary stage. What counts for jurisdictional purposes is that Pavlovich engaged in intentional conduct, targeted against California interests, with the understanding that it would produce potentially actionable effects in this state, thus making it reasonable to anticipate that he would be haled into court here.
[4] The majority imply that the maintenance of a passive Internet Web site cannot be considered "express aiming" at any jurisdiction because such a site is just a way of allowing interested persons to search for and retrieve information stored in remote computers. (Maj. opn., ante, 127 Cal.Rptr.2d at p. 332, 58 P.3d at p. 4, citing, for such a description of the World Wide Web, Reno v. American Civil Liberties Union (1997) 521 U.S. 844, 849-852, 117 S. Ct. 2329, 138 L. Ed. 2d 874.) But the maintenance of a Web site that includes content intended and expected to harm particular individuals, entities, or interests in specific places is no more "passive" in this regard than television broadcasts which all or none may watch as they choose (see Indianapolis Colts, Inc., supra, 34 F.3d 410, 411-412), or a recorded toll-free telephone message which all or none may hear as they choose (cf. Inset Systems, Inc., supra, 937 F. Supp. 161, 165).
[5] (E.g., Jewish Defense Organization, Inc. v. Superior Court (1999) 72 Cal. App. 4th 1045, 1059, 85 Cal. Rptr. 2d 611, 620 [assertion by plaintiff, who lives in New York and travels frequently, that he "spends `considerable professional time' in California" is insufficient to show California was targeted when plaintiff was allegedly defamed by an individual and organization, both located in New York, using Internet services provided by companies with offices in California]; Cybersell, Inc. v. Cybersell, Inc. (9th Cir.1997) 130 F.3d 414 (Cybersell ) [Floridians' mere use of an allegedly infringing mark on a passive Web site home page promoting their business did not subject users to personal jurisdiction in Arizona, where mark's owners were located; there was no evidence defendants sought Arizona business or otherwise targeted Arizona with knowledge that harm would be suffered there]; GTE New Media Service, Inc. v. Bell-South Corp. (D.C.Cir.2000) 199 F.3d 1343 [mere evidence that foreign defendants sought to maximize use, within District of Columbia as elsewhere, of their Internet "yellow pages" service did not create District of Columbia jurisdiction for suit by competing Internet "yellow pages" service provider]; Bensusan Restaurant Corp. v. King (S.D.N.Y. 1996) 937 F. Supp. 295, affd. (2d Cir.1997) 126 F.3d 25 (Bensusan Restaurant Corp.) [use of allegedly infringing logotype on Web site promoting independent Blue Note jazz club, which was located in Missouri, did not create New York personal jurisdiction in trademark infringement suit by owner-operator of Blue Note jazz clubs in New York and elsewhere]; see also, e.g., Nam Tai Electronics, Inc. v. Titzer (2001) 93 Cal. App. 4th 1301, 113 Cal. Rptr. 2d 769 [defendant Colorado resident, who posted alleged commercial libels against plaintiff Hong Kong company on an Internet bulletin board provided by Yahoo!, a California corporation, was not subject to California jurisdiction at plaintiff's behest simply because Yahoo!'s Web site was "maintained" in California and defendant's service agreement with Yahoo! stated that California jurisdiction would apply to disputes between Yahoo! and defendant].)
For purposes of this case, which does not involve direct commercial use of the Internet, I find little utility in those federal decisions that look to "`the nature and quality of commercial activity that an entity conducts over the Internet'" to determine personal jurisdiction. (Mink, supra, 190 F.3d 333, 336, quoting Zippo Mfg. Co. v. Zippo Dot Com, Inc. (W.D.Pa.1997) 952 F. Supp. 1119, 1124.)
[6] E.g., Asahi Metal Industry Co. v. Superior Court (1987) 480 U.S. 102, 112, 107 S. Ct. 1026, 94 L. Ed. 2d 92 (Asahi Metal Industry Co.) (placing product into stream of commerce does not create minimum contact with every state to which product may foreseeably travel); World-Wide Volkswagen, supra, 444 U.S. 286, 298, 100 S. Ct. 559, 62 L. Ed. 2d 490 (mere foreseeability that vehicle sold by wholesale and retail dealers serving New York City metropolitan area would be taken to another state, such as Oklahoma, did not create dealers' minimum contacts with Oklahoma for products liability suit arising from Oklahoma accident); Noonan v. Winston Co. (1st Cir.1998) 135 F.3d 85, 90-92 (French publisher's knowledge that copies of its magazine, containing offensive photo of Massachusetts resident, might reach that state is insufficient to satisfy Calder); see also Sibley, supra, 16 Cal. 3d 442, 445-446, 128 Cal. Rptr. 34, 546 P.2d 322.
[7] See, e.g., IMO, supra, 155 F.3d 254, 260-268 (the defendant German corporation's activities, outside New Jersey, which allegedly interfered with New Jersey-based company's efforts to sell its Italian subsidiary did not create minimum contacts between the defendant and New Jersey despite the defendant's knowledge that the plaintiff was headquartered there); ESAB Group, Inc. v. Centricut, Inc. (4th Cir.1997) 126 F.3d 617, 625-626 (scheme, carried out in New Hampshire and Florida, at behest of defendant New Hampshire manufacturer, to procure, disclose, and use trade secrets and customer lists of the plaintiff, a South Carolina competitor, did not create minimum contacts with South Carolina despite the defendant's presumed intent to affect the plaintiff's business); Hicklin Engineering, Inc. v. Aidco, Inc. (8th Cir. 1992) 959 F.2d 738, 739 (actions by Michigan manufacturer, taken outside Iowa, to injure general business of Iowa competitor, did not create minimum contacts with Iowa).
[8] E.g., Cybersell, supra, 130 F.3d 414, 418-420; Bensusan Restaurant Corp., supra, 937 F. Supp. 295, 299-300; but see Inset Systems, Inc., supra, 937 F. Supp. 161, 164-165 (Massachusetts defendant directed its activities toward all states, including Connecticut, by advertising via Internet and toll-free telephone number; hence, Connecticut jurisdiction was proper for suit by Connecticut firm alleging that the defendant's Web site domain name infringed the plaintiff's trademark).
[9] The majority reject Janmark, Inc. v. Reidy (7th Cir.1997) 132 F.3d 1200, deeming it the only federal decision that would support jurisdiction over Pavlovich, because, they conclude, it stands for the unpersuasive notion that jurisdiction over an intentional tort is always proper where the injury, or at least foreseeable injury, occurred. In Janmark, a California manufacturer of minishopping carts was sued in Illinois by an Illinois competitor. The plaintiff alleged that when it refused to participate in the defendant's cartel scheme, the defendant retaliated by inducing a New Jersey customer to cancel an order for the plaintiff's carts. The court of appeals found jurisdiction proper on grounds that the alleged tort was not complete until the customer cancelled the order; accordingly, the court ruled, "the injury and thus the tort occurred in Illinois" for purposes of that state's long-arm statute. (Id. at p. 1202.) Whatever the merits of this reasoning, the court additionally noted, without extended discussion, that Illinois jurisdiction also satisfied the Calder test. I pass no final judgment on Janmark, but I do not believe it stands for so broad or unsupportable a proposition as the majority contend. The plaintiff in Janmark posited a scenario in which the defendant, who knew the plaintiff's identity and Illinois location, attempted to obtain the plaintiff's cooperation in a monopolistic scheme, and, when that effort failed, took revenge by acting for the express purpose of causing commercial injury to the plaintiff. I do not find this fact pattern lacking in Calder's requirement of particularized "`knowledge and intent in committing the tortious activity'" (maj. opn., ante, 127 Cal.Rptr.2d at p. 337, 58 P.3d at p. 9, quoting IMO, supra, 155 F.3d 254, 264), nor do I construe Janmark as permitting jurisdiction based solely on mere "`[f]oreseeability of causing injury in another State'" (maj. opn., ante, 127 Cal. Rptr.2d at p. 338, 58 P.3d at p. 9, quoting Burger King, supra, 471 U.S. 462, 474, 105 S. Ct. 2174, 85 L. Ed. 2d 528, original italics omitted).
[10] In any event, where minimum contacts are otherwise present, it may not be necessary that the "brunt of the harm" was suffered in the forum. In Keeton, supra, 465 U.S. 770, 104 S. Ct. 1473, 79 L. Ed. 2d 790, the high court allowed a New Hampshire defamation action against a national magazine with circulation in that state, even though the plaintiff was a resident of New York, and it was "undoubtedly true that the bulk of the harm done to [the plaintiff] occurred outside [the forum]." (Id. at p. 780.)
[11] To the extent it is relevant to consider whether California jurisdiction would conflict with the competing sovereign interest of another forum, particularly the defendant's state of residence (see, e.g., Core-Vent, supra, 11 F.3d 1482, 1487), Pavlovich identifies no specific interest of Texas in this litigation that might create such a conflict, and I am aware of none. Pavlovich concedes that this factor has little if any weight in his favor. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1496600/ | 757 S.W.2d 646 (1988)
Toney LAWSON, Appellant,
v.
STATE of Missouri, Respondent.
No. 53810.
Missouri Court of Appeals, Eastern District, Division One.
July 19, 1988.
Motion for Rehearing and/or Transfer Denied August 31, 1988.
Application to Transfer Denied October 18, 1988.
*647 Dorothy Mae Hirzy, Sp. Public Defender, Beverly A. Beimdiek, St. Louis, for appellant.
William L. Webster, Atty. Gen., Elizabeth Levin Ziegler, Asst. Atty. Gen., Jefferson City, for respondent.
Motion for Rehearing and/or Transfer to Supreme Court Denied August 31, 1988.
CRIST, Presiding Judge.
Movant appeals the denial of his 27.26 motion after an evidentiary hearing. We affirm.
Movant pled guilty to five counts of sale of a controlled substance and was sentenced to five years on each count with the sentences for Counts I, II and III to run consecutively and the sentences for Counts IV and V to run concurrently with each other and with Counts I, II and III for a total of fifteen years. The court suspended execution of the sentences and placed movant on five years' probation. Movant's probation was subsequently revoked on February 21, 1985, reinstated on June 20, 1985, and again revoked on February 27, 1986, and execution of the imposed sentences was ordered.
Movant first asserts his guilty pleas were involuntary because his trial attorney "failed to investigate the charges [movant] faced." In order to prove counsel was ineffective for failing to investigate, movant must show "what specific information the attorney failed to discover, that reasonable investigation would have disclosed that information, and that the information would have aided or improved defendant's position." Franklin v. State, 655 S.W.2d 561, 565[11] (Mo.App.1983). In reviewing the record in this case, we find defendant's position lacks substance. At the guilty plea hearing, the following exchange occurred:
Q. [COURT] You have had Mr. Larrew represent you as your lawyer. Do you think he's done a good job for you?
A. Yes, sir, I'm satisfied.
Q. Do you know of anything he could have done that he hasn't done?
A. No, sir.
Q. Any witnesses he could have contacted that he hasn't contacted?
A. No, sir.
Furthermore, when movant testified at the evidentiary hearing, he failed to disclose information which an investigation would have revealed to aid his defense. For these reasons, we find the motion court was not clearly erroneous in finding movant failed to prove his counsel was ineffective for failing to investigate.
Movant next alleges his guilty plea was involuntary because it was based on a plea agreement which the judge refused to honor. Movant asserts he was entitled to the opportunity to withdraw the plea when the judge refused to honor the agreement.
Movant is correct in his assertion that a judge who rejects a plea agreement must afford the defendant an opportunity to withdraw his plea. Schellert v. State, 569 S.W.2d 735, 739[5] (Mo. banc 1978). The emphasis in Schellert was that plea bargaining "be conducted fairly on both sides and the results ... not disappoint the reasonable expectations of either." Id.
In this case the record of the guilty plea hearing discloses the State agreed to recommend a sentence of five years on each count, with the sentences to run concurrently. When asked if any other promises were made to him to induce his guilty plea, movant replied "No, sir." Movant's attorney asked that movant be placed on probation. The judge ordered a pre-sentence investigation and released movant on his own recognizance pending the report from that investigation. Following the pre-sentence investigation, the judge sentenced movant and granted him suspended execution of sentence and five years' probation.
The record reflects movant pled guilty voluntarily and understood the consequences of his plea. Movant was not sentenced according to the State's recommendation because of his own requests and those of his attorney for probation. The judge informed movant that he would sentence him in accordance with the State's *648 recommendation if he determined probation was not appropriate. Movant's argument that his sentence was not as favorable as the State's recommendation because his probation violations resulted in revocation of the probation and subsequent imprisonment is not persuasive. See McCartney v. State, 657 S.W.2d 289, 291[2] (Mo.App. 1983) (fifteen-year suspended sentence with probation was more favorable to defendant than seven years immediate confinement). See also Moore v. State, 624 S.W.2d 520, 523 n. 1 (Mo.App.1981) (defendant given six-year suspended sentence with probation instead of three years immediate confinement was not prejudiced).
Judgment affirmed.
DOWD and REINHARD, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1496601/ | 181 F. Supp. 41 (1959)
Jacob P. GOLDFARB, Plaintiff,
v.
Richard H. MULLER, Defendant and Third-Party Plaintiff (John S. Davidson, Third-Party Defendant).
Civ. A. 903-58.
United States District Court D. New Jersey.
December 17, 1959.
*42 Archie Elkins, Jersey City, N. J., for Jacob P. Goldfarb.
Gaffey & Webb, John Gaffey, Newark, N. J., for Richard H. Muller.
Chester A. Weidenburner, U. S. Atty., Barbara A. Morris, Asst. U. S. Atty., Newark, N. J., for John S. Davidson.
FORMAN, Circuit Judge (specially designated).
On March 3, 1958, Jacob Goldfarb commenced a suit against Richard H. Muller in the Law Division of the Superior Court of New Jersey, Monmouth County, alleging that because of the negligence of Muller an accident had occurred on March 16, 1956, in which Muller's automobile struck that of Goldfarb who seeks damages for personal injuries incurred thereby. Muller filed his answer on March 19, 1958. On July 11, 1958, he filed a third party complaint against John S. Davidson, the driver of a United States Postal Service truck, under the provisions of the New Jersey Joint Tortfeasors Act, N.J.S.A. 2A:53A-1 et seq., alleging that Davidson caused the accident, and claiming contribution from Davidson toward any judgment which might be entered against him in favor of Goldfarb.
On August 11, 1958, Davidson filed a petition to remove the case to this court by the United States Attorney.
On August 15, 1958, Davidson filed his answer to Muller's third party complaint. The answer alleges in part that Muller had administratively settled his claim with the United States Government for $94.50 and had accepted payment of that sum on July 7, 1958, thereby releasing the United States and Davidson from liability under the provisions of 28 U.S.C. § 2672.
Davidson has moved for summary judgment or dismissal of the third party complaint on the ground of release.
The plaintiff Goldfarb has moved to sever the third party action of Muller against Davidson and to remand his case against Muller to the Law Division of the Superior Court.
Although not mentioned in the petition the United States Attorney has submitted in his brief that Davidson's petition to remove is based on § 1442(a) of Title 28 U.S.C., which is as follows:
"§ 1442. Federal officers sued or prosecuted.
"(a) A civil action or criminal prosecution commenced in a State court against any of the following persons may be removed by them to the district court of the United States for the district and division embracing the place wherein it is pending:
*43 "(1) Any officer of the United States or any agency thereof, or person acting under him, for any act under color of such office or on account of any right, title or authority claimed under any Act of Congress for the apprehension or punishment of criminals or the collection of the revenue.
"(2) A property holder whose title is derived from any such officer, where such action or prosecution affects the validity of any law of the United States.
"(3) Any officer of the courts of the United States, for any Act under color of office or in the performance of his duties;
"(4) Any officer of either House of Congress, for any act in the discharge of his official duty under an order of such House."
A reading of subsection (a) (1) makes it clear that the motion to remand should be denied only if Davidson was an officer of the United States, or a person acting under such officer under color of office at the time of the occurrences alleged in the third party complaint.
Section 1442 has been, described as having
"* * * originated in 1833 during the `nullification' controversy between the United States and South Carolina. Its purpose was to protect those charged with the enforcement of the federal revenue laws from prosecutions in state courts for violations of state law. See State of Tennessee v. Davis, 100 U.S. 257, 25 L. Ed. 648, where its constitutionality was upheld. The section appears as Section 643 of the Revised Statutes and in 1875 was extended to include officers of either house of Congress while engaged in discharging their official duties. 18 Stat. 371, 401. In 1916 the section was amended and the removal privilege extended to any officer of the courts of the United States as noted above. 39 Stat. 532." Ampey v. Thornton, D.C.D.Minn.1946, 65 F. Supp. 216, 217.
"The present § 1442 of the 1948 Revised Code is a consolidation of §§ 76 and 77 of Title 28 (1940 Edition), being amended Section 33 of the Judicial Code, which was limited in its application to revenue officers in the enforcement of the criminal or revenue laws." State of Oklahoma v. Willingham, D.C.E.D.Okla.1956, 143 F. Supp. 445, 447.
The reviser's notes state that "The revised subsection (a) (1) [set forth above] is extended to apply to all officers and employees of the United States or any agency thereof. * * *." In his brief the United States Attorney contends that "A fair reading of these notes leads to the conclusion that the intention of Congress was to include all employees of the United States within its provisions and therefore, third-party, Davidson, can properly invoke it." This is true providing Davidson was acting under the color of office at the time the incident complained of occurred.
The United States Attorney also contends that implicit in its allegation that Davidson was a Post Office employee acting under the Postmaster, an officer of the United States, "is the fact that [Davidson's] actions * * * were under color of the office alleged therein." But color of office is not synonymous with performance of duties. It is on this basis that Brann v. McBurnett, D.C.E.D. Ark.1939, 29 F. Supp. 188, upon which the United States Attorney relies is readily distinguishable. The defendants in that case were Deputy United States Marshals charged with the negligent operation of their vehicle, in which they were transporting prisoners, pursuant to a court order. The case arose under what is now subsection (a) (3) of § 1442, then contained in § 76 of Title 28. In pertinent part it read as follows:
"When any civil suit or criminal prosecution is commenced in any court of a State * * * against any officer of the courts of the United States for or on account of any *44 act done under color of his office or in the performance of his duties as such officer * * * the said suit or prosecution may at any time before the trial or final hearing thereof be removed for trial into the district court next to be holden in the district where the same is pending upon the petition of such defendant to said district court." (Emphasis supplied.)
Thus an officer of a United States court may remove from a state court, when the act complained of was either under "color of office or in the performance of his duties.", (emphasis supplied) whereas removal obtains under subsection (a) (1) only if the act complained of was done under color of office.
In Fink v. Gerrish, D.C.S.D.N.Y.1957, 149 F. Supp. 915, the defendants, Internal Revenue Agents, were alleged to have negligently run down the plaintiff, a pedestrian, while driving a government owned vehicle and to have falsely arrested and imprisoned him. In granting plaintiff's motion to remand the case to the state court from which the defendants had removed it, the court noted that:
"The government in support of the removal places much reliance on Brann v. McBurnett, D.C.E.D.Ark. 1939, 29 F. Supp. 188, 189. That was an action brought in a State court against a United States Marshal for negligently operating an automobile while transporting prisoners. The District Court, upholding removal, held that the Marshal was acting under the authority and direction of the court in transporting the prisoners to the federal penitentiary at Leavenworth and, therefore, was acting `in the performance of his duties as such officer.' With deference we disagree." 149 F.Supp. at page 916.
The United States Attorney contends that Fink v. Gerrish is contrary to the weight of authority. In this connection there is attached to his brief a memorandum opinion filed August 11, 1958 in Pepper v. Sherrill, D.C.E.D.Tenn., 181 F. Supp. 40. In that case the defendant was a postal employee who was carrying a special delivery letter at the time he was alleged to have negligently operated his vehicle so that it collided with that of the plaintiff. In denying plaintiff's motion to remand the court cited with approval Brann v. McBurnett, supra, without discussing the distinguishing aspects of that case as noted heretofore. Thus in neither Fink v. Gerrish, supra, nor Pepper v. Sherrill did the court note that Brann v. McBurnett was removed under the exact language of 28 U.S.C. § 76, which is the present subsection (a) (3) of § 1442 of Title 28 U.S.C.
In Pepper v. Sherrill the court distinguished Fink v. Gerrish saying:
"* * * The facts in that case were that the defendants, after the accident, forcibly imprisoned the plaintiff in their motor vehicle, even handcuffing him to the wheel. Such an intentional tort is far removed from the performance of the duties of the employes of the government."
While it is true that the defendants were alleged to have falsely imprisoned and arrested the plaintiff the opinion in Fink makes it clear that the case was not remanded on the basis of an intentional tort. Indeed the court in Fink said "* * * nor is there any statement [in the petition for removal] referring to the causes of action for false arrest and false imprisonment." The court did refer "[p]arenthetically" to the allegations of false arrest and imprisonment and said: "Perhaps if this statement is true it suggests the reason why the government has remained silent in its petition concerning the facts of the false arrest and false imprisonment." However, in granting the motion to remand the court stated the issue as follows: "In any event the narrow question presented on this motion for remand is whether the negligent running down of a pedestrian by two government employees *45 in a government-owned automobile is an act under color of their office."
Thus, though misconceiving the basis for the decision in Brann v. McBurnett, the court arrived at the proper result in Fink v. Gerrish.
The United States Attorney has cited Ampey v. Thornton, supra as being consistent with Pepper v. Sherrill. In the former case the defendant was an F.B.I. agent who was alleged to have slandered the plaintiff in the course of an inquiry as to the whereabouts of a third person. The court granted plaintiff's motion to remand finding that the slander complained of was an intentional and personal tort unrelated to defendant's official duty.
While the act complained of in the instant matter does not appear to have been intentional it is nevertheless personal since it bears no causal relationship to Davidson's official duties. Gay v. Ruff, 1934, 292 U.S. 25, 54 S. Ct. 608, 78 L. Ed. 1099. Cf. State of Maryland v. Soper, 1926, 270 U.S. 9, 46 S. Ct. 185, 70 L. Ed. 449.
Thus while in agreement with the reasoning and result in the Ampey case, I find myself in disagreement with the application of that reasoning in Pepper v. Sherrill.
Other cases cited by the United States Attorney and in which a motion to remand was denied are inapposite[1] because in each of them the particular act complained of and held to have been done under color of office, was a necessary incident of the defendant's duty, i. e. "a claim of federal right or authority for doing the act complained of [was] recognized as the basis for removal." State of Tennessee v. Davis, 100 U.S. 257, 25 L. Ed. 648.
*46 The United States Attorney also cites Kozlowski v. Ferrara, D.C.S.D.N.Y.1954, 117 F. Supp. 650, in which a Federal Bureau of Investigation agent who had arrested the plaintiff without a warrant was sued for false arrest and prosecution. In denying the defendant's motion to dismiss the amended complaint and in the alternative to require the plaintiff to state his claims separately the court said, at page 652:
"Agents of the F.B.I. are empowered by statute to arrest without a warrant where they have `reasonable grounds to believe that the person arrested is guilty of (a) felony and there is a likelihood of his escaping before a warrant can be obtained for his arrest.' 18 U.S.C.A. § 3052. Whether an agent is acting within the scope of his prescribed duties depends on whether, in arresting without a warrant, he has reasonable groundsthat is, probable causefor his actions, as required by the statute." * * *
"* * * This action, which was originally brought in the New York Supreme Court, was removed to the federal court not on the grounds of diversity, but under the provisions of 28 U.S.C.A. § 1442(a) (1), as an action against an officer of the United States. * * *."
Plaintiff did not move to remand.
Similarly no motion to remand was made in Underhill v. Tabbutt, D.C.E.D. Pa.1945, 62 F. Supp. 11, 13, also cited by the United States Attorney, in which the defendant, an employee of the United States Bureau of Internal Revenue, was alleged to have damaged the plaintiff's automobile by the negligent operation of his own. The case was tried to the court without a jury. The court held that it had "jurisdiction * * * under the provisions of Section 33 of the Judicial Code, 28 U.S.C.A. § 76." The opinion gives no basis for this finding other than that defendant was employed by the Department of Internal Revenue. In view of the Supreme Court's statement in State of Colorado v. Symes, 1932, 286 U.S. 510, 52 S. Ct. 635, 76 L. Ed. 1253, that federal employees are not on that basis alone granted immunity from prosecution in state courts for crimes against state law under 28 U.S.C.A. § 76 which on its face applies to both civil suits and criminal prosecutions I disagree respectfully with the findings in Underhill v. Tabbutt.
Another case relied upon by the United States Attorney, Jones v. Elliott, D.C. E.D.Va.1950, 94 F. Supp. 567, involved a motion to remand made by a co-defendant which was denied because the removing defendant was found to be within the scope of § 1442(a) (1). However, the decision does not recite the facts of the case.
The United States Attorney contends that since § 1442 is remedial it is to be liberally construed, citing State of Colorado v. Symes, 1932, 286 U.S. 510, 52 S. Ct. 635, 76 L. Ed. 1253. In that case the State of Colorado filed an original motion in the United States Supreme Court for a rule requiring the respondent, a judge of the United States District Court for the District of Colorado, to show cause why a writ of mandamus should not issue to compel him to remand the prosecution of Henry Dierks (See Ex parte Dierks, D.C.D.Colo.1931, 55 F.2d 371) to the state court. The motion was granted and Judge Symes made his response. In holding that the prosecutor's motion to remand in the original case should have been granted, the Court said by way of dicta, 286 U.S. at page 517, 52 S.Ct. at page 637:
"* * * It scarcely need be said that such measures are to be liberally construed to give full effect to the purposes for which they were enacted. See Venable v. Richards, 105 U.S. 636, 638, 26 L. Ed. 1196. State of North Carolina v. Sullivan, C.C., 50 F. 593, 594. And it is axiomatic that the right of the states, consistently with the Constitution and laws of the United States, to make and enforce their own laws is *47 equal to the right of the federal government to exert exclusive and supreme power in the field that by virtue of the Constitution belongs to it. The removal statute under consideration is to be construed with highest regard for such equality. * * *."
The statute to which the Court spoke was the 1916 precursor of § 1442, the history of which has already been recited.
I see no evidence that Congress desired that removal be made available to all federal employees whenever they are sued or prosecuted in a state court for an act done in the performance of their duties. Indeed, in the Symes case, supra, the Court said:
"* * * Federal officers and employees are not, merely because they are such, granted immunity from prosecution in state courts for crimes against state law. Congress is not to be deemed to have intended that jurisdiction to try persons accused of violating the laws of a state should be wrested from its courts in the absence of a full disclosure of the facts constituting the grounds on which they claim protection under section 33." State of Colorado v. Symes, 286 U.S. at page 518, 52 S. Ct. at page 637.
True the statute has been expanded since the time of the Symes case. But as was said in State of Oklahoma v. Willingham, supra [143 F. Supp. 447], "Revised Section 1442 made no change in the theory or basis for removal. It merely extended its application to `all officers [and employees] of the United States or any agency thereof'." The fact that Symes emanated from a criminal proceeding and that Willingham was a criminal case, does not in itself render their teaching any less pertinent for § 1442 applies to both civil actions and criminal prosecutions, as did the former statute, 28 U.S. C. § 76.
There is no official connection between the act complained of and Davidson's official duties. The mere fact that he was driving a mail truck does not present any federal question or defense under federal law.
As Judge Rice said in State of Oklahoma v. Willingham, supra, 143 F.Supp. at page 448:
"* * * There is no official connection between the acts complained of and the official duties of the mail carrier. The mere fact that the defendant was on duty and delivering mail along his route does not present any federal question or defense under federal law. The efficient operation and administration of the work of the Post Office Department does not require a carrier, while delivering mail to drive his car from a stopped position into the path of an approaching automobile. When he is charged with doing so, his defense is under state law and is not different from that of any other citizen."
It may well be commendable for the United States Attorney to give legal representation to a faithful government employee in a case of this kind. But it does not follow that the case should on the basis of that employment alone be removed from the state court and the original plaintiff deprived thereby of his choice of a forum.
That Davidson's answer raises a defense of release under 28 U.S.C. § 2672 does not militate toward denying the motion for I find no federal question which may not be passed upon by the state court.
It should be noted that the United States Government has not been made a party to this action.
The motion to remand will be granted. The remaining motions are accordingly not reached. An order should be submitted.
NOTES
[1] Sarner v. Mason, 3 Cir., 1956, 228 F.2d 176, 178 (Individual plaintiffs held all the common stock of the 13 corporate plaintiffs which themselves constructed and operated housing projects financed through Federal Housing Administration insured loans. Defendant was the Federal Housing Commissioner and held all the preferred stock in each of the corporate plaintiffs. "Under the certificates of incorporation, which are substantiallly identical, the Commissioner, the sole preferred stockholder, has the right to replace the boards of directors of the corporations if any one of certain defaults specified in the charter take place." Plaintiffs sought to enjoin the defendant Commissioner from electing new boards of directors.)
DeBusk v. Harvin, 5 Cir., 1954, 212 F.2d 143, 144 (Plaintiff, a loan examiner in the Veterans Administration, sued defendants "for their alleged malicious acts" in causing his dismissal therefrom. Defendants were plaintiff's superiors and had the responsibility of supervising plaintiff including recommending appropriate disciplinary action.)
City of Norfolk, Va. v. McFarland, D.C. E.D.Va.1956, 143 F. Supp. 587 (Defendant, an investigator for the Alcohol and Tobacco Tax Division of the Treasury Department, was charged with speeding in the City of Norfolk while enroute under emergency conditions to raid an illegal still.)
People of State of Colorado v. Maxwell, D.C.D.Colo.1954, 125 F. Supp. 18 (Defendant, a civilian police captain, was indicted for murder which allegedly occurred when he fatally shot an Army Corporal whom he was holding pursuant to the request of a United States Air Force Captain.)
Stack v. Strang, D.C.S.D.N.Y.1950, 94 F. Supp. 54 (Pursuant to Executive Order of the President of the United States [No. 6102 of April 5, 1933 and No. 6260 of August 28, 1933, 12 U.S.C.A. § 95a note] the Treasury Department had the defendant, a Secret Service Agent, recover a gold United States coin known as a "Double Eagle" from plaintiff who gave the coin to the defendant under protest and sued to recover it.)
Logemann v. Stock, D.C.D.Neb.1949, 81 F. Supp. 337, 338 (Deputy Collector of Internal Revenue was alleged to have "falsely and maliciously accused Stock of failing to report his correct and entire income * * * and later submitted like representations to his own official superior, and made certain threats to Stock of the assessment of further taxes.")
Potts v. Elliott, D.C.E.D.Ky.1945, 61 F. Supp. 378, 379 (Referee in Bankruptcy was held to be an "official of the court within the meaning of the removal statute", then 28 U.S.C. § 76.) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1553030/ | 423 B.R. 655 (2009)
In re PALMDALE HILLS PROPERTY, LLC, Debtor.
Lehman Commercial Paper, Inc., Appellant,
v.
Palmdale Hills Property, LLC, et al., Appellees.
BAP Nos. CC-09-1100-HPaMk, CC-09-1101-HPaMk, CC-09-1102-HPaMk, CC-09-1103-HPaMk, CC-09-1104-HPaMk, CC-09-1105-HPaMk, CC-09-1106-HPaMk, CC-09-1107-HPaMk. Bankruptcy No. SA 08-17206-ES.
United States Bankruptcy Appellate Panel of the Ninth Circuit.
Argued and Submitted on September 25, 2009.
Filed December 15, 2009.
*659 Christopher Pace, Weil Gotshal & Manges, LLP, Miami, FL, Attorney for Lehman Commercial Paper, Inc.
Paul John Couchet, Winthrop Couchet Professional Corp., Newport Beach, CA, Attorney for Palmdale Hills Property, LLC.
Before: HOLLOWELL, PAPPAS and MARKELL, Bankruptcy Judges.
OPINION
HOLLOWELL, Bankruptcy Judge.
The issue presented in this appeal is whether a debtor violates the automatic stay of its creditor's bankruptcy case when it proposes to equitably subordinate the creditor's claim and transfer the lien securing the claim under § 510(c).[1] Because, in this case, equitable subordination would modify the creditor's property interest, we find it violates the creditor's automatic stay. Accordingly, we REVERSE those provisions of the bankruptcy court's orders on appeal that find otherwise.
I. FACTS
Lehman Commercial Paper Inc. ("Lehman Commercial") is a debtor in a chapter 11 bankruptcy case in the Southern District of New York. Palmdale Hills Property, LLC ("Palmdale") filed a chapter 11 bankruptcy petition on November 6, 2008, in the Central District of California. The case is being jointly administered with seventeen of Palmdale's related entities ("Debtors").[2] Debtors are part of an integrated network of companies that operate as the Sun Cal Companies, or SunCal, and were formed as part of a joint venture to *660 develop twenty-one residential real estate projects with affiliates of Lehman Brothers, Inc.
Lehman Brothers and its affiliates, including Lehman ALI, Inc. (ALI)[3] and Lehman Commercial, provided over $2.3 billion in financing for the projects through a series of loan agreements and equity arrangements on Debtors' projects. Among other things, Debtors allege that the structure of these financing arrangements constituted manipulative lending practices and fraudulent conveyances. Debtors contend that the complete control of Lehman Brothers, as well as ALI and Lehman Commercial, over the use of the funds in the loan facility created Debtors' debt burdens and ultimately forced Debtors to file for bankruptcy protection.
On November 10, 2008, soon after filing bankruptcy, Debtors sought blanket relief from the automatic stay in Lehman Commercial's bankruptcy case in the Southern District of New York "to allow the Debtors to generally administer their California Chapter 11 cases in order to avoid the need for having to file repeated relief from stay motions in New York." The bankruptcy court in New York denied the broad relief, but did so without prejudice so that Debtors could refile specific stay relief requests as needed.
Debtors' proposed joint chapter 11 plan of reorganization is based on their attempt to equitably subordinate the claims of ALI and Lehman Commercial ("Lehman Lenders"). On January 6, 2009, Debtors commenced an adversary proceeding against ALI to equitably subordinate its claim. Debtors amended the equitable subordination complaint to include Lehman Commercial as a defendant and proposed to file the amended complaint if the California bankruptcy court determined the complaint would not violate Lehman Commercial's automatic stay.
On January 29, 2009, the Lehman Lenders filed motions for relief from stay in Debtors' bankruptcy case asserting they were owed approximately $649 million in principal, plus interest, on various Lehman Lenders' loans.[4] The loans consisted, in part, of three credit agreements between Lehman Commercial and Debtors including: an agreement executed in November 2005, by SunCal I, which provided for a loan in the amount of $75 million (which increased to $395 million over time and was later reduced to $277 million), secured by a first lien on all the real and personal property owned by Bickford, Acton and Emerald Meadows, as well as a pledge of equity interests held by SunCal I and Summit; a February 2007, agreement with Palmdale for a $264 million loan secured by Palmdale's real property and equity interests; and a March 2007, agreement executed by SCC/Palmdale for a $95 million loan, secured by SCC/Palmdale's property and equity interest in Palmdale. ALI holds a promissory note executed by Bickford in May 2005, in the amount of $30 million secured by a second lien on Bickford's real and personal property.
The Lehman Lenders argued the properties securing the loans lacked equity and were declining in value ("Stay Relief Motion"). The Lehman Lenders also argued that Debtors' reorganization could not succeed since it was premised in part on subordinating Lehman Commercial's claim, which Lehman Commercial argued violated its stay.
*661 Debtors filed an omnibus opposition to the motion on February 6, 2009 ("Opposition"). Debtors contended they had equity in the properties based on the argument that the Lehman Lenders' claims could be equitably subordinated and the liens transferred to the estate.
On February 20, 2009, the bankruptcy court issued a tentative ruling on the Stay Relief Motion, finding that:
the existence of the [equitable subordination] claims can be asserted as a defense to the motion for relief from stay. . . . Given movant's assertion of secured claims against Debtors in these bankruptcy estates, Debtors are entitled to assert appropriate defenses to such claims and may do so without violating the automatic stay of the movant.
The parties addressed the tentative ruling during the hearing that same day. At the close of hearing, the bankruptcy court stated the tentative ruling would stand, finding there was not sufficient cause to grant stay relief and that Debtors could pursue equitable subordination, either through an adversary proceeding or through a plan or reorganization, as a defense to Lehman Commercial's Stay Relief Motion, which the court treated as an informal proof of claim. The final orders denying stay relief were entered March 10, 2009 ("Denial Orders"). The Denial Orders held that:
(a) The [Stay Relief] Motion sufficiently states an express demand referencing the nature and amount of the claim, and therefore Movant's Motion constitutes an informal proof of claim.
(b) This Court has concurrent jurisdiction to determine the scope and applicability of the automatic stay under 11 U.S.C. § 362(a) and/or (b), arising from the Chapter 11 bankruptcy proceeding of Lehman Commercial Paper Inc. ("Lehman Commercial") as it applies to matters before this Bankruptcy Court.
(c) The automatic stay arising from the bankruptcy case of Lehman Commercial does not apply to any objection to the claim of Lehman Commercial, any proceeding to subordinate the claim of Lehman Commercial pursuant to 11 U.S.C. § 510(c)(1), and/or the transfer of a lien securing a subordinated claim to the estate pursuant to 11 U.S.C. § 510(c)(2), in this Chapter 11 proceeding.
(d) The Debtors may object to the claim of Lehman Commercial, seek to subordinate the claim of Lehman Commercial pursuant to 11 U.S.C. § 510(c)(1), and/or seek to transfer a lien securing a subordinated claim to the estate pursuant to 11 U.S.C. § 510(c)(2), via an adversary proceeding or plan, without violating Lehman Commercial's automatic stay.
Lehman Commercial timely appealed the Denial Orders. Lehman Commercial does not contend the bankruptcy court abused its discretion in denying the Stay Relief Motion, but assigns error to the bankruptcy court's determination regarding the scope and application of Lehman Commercial's automatic stay.
II. JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. § 157(b)(1) and (2)(G) and (O). We have jurisdiction under 28 U.S.C. § 158.[5]
*662 On September 23, 2009, Debtors filed an emergency motion to continue for sixty days the oral argument, which was scheduled on September 25, 2009. The Panel denied the request the same day. Oral argument was held on September 25, 2009.
After oral argument, on October 20, 2009, Debtors filed a motion to dismiss the appeal for lack of jurisdiction as a result of decisions made in the bankruptcy court regarding the ownership of Lehman Commercial's loans ("October Order"). Specifically, the bankruptcy court determined that certain Lehman Commercial loans were sold, not simply transferred to a third party, Fenway Capital ("Fenway Capital Loans"), for security. Thus, in the October Order, the bankruptcy court ruled that Lehman Commercial was not the creditor with respect to the Fenway Capital Loans. The bankruptcy court reserved ruling on whether Lehman Commercial could file proofs of claim as an agent for Fenway Capital.
Debtors argue that Lehman Commercial does not own any interest in the Fenway Capital Loans, and therefore, the automatic stay could not bar subordination of such loans. As a result, Debtors argue the appeals are moot and that Lehman Commercial lacks standing. Lehman Commercial contends that a portion of at least one of the loans was not part of any sale or transfer to Fenway Capital.
An appeal is moot if events have occurred that "prevent an appellate court from granting effective relief." Varela v. Dynamic Brokers, Inc. (In re Dynamic Brokers, Inc.), 293 B.R. 489, 493-94 (9th Cir. BAP 2003) citing First Fed. Bank v. Weinstein (In re Weinstein), 227 B.R. 284, 289 (9th Cir. BAP 1998).
However, we find that effective relief could be granted to Lehman Commercial, since it is not clear that all the loans Lehman Commercial made to the Debtors were the subject of the October Order. Moreover, Lehman Commercial has filed a motion for clarification of the October Order and the bankruptcy court's findings. Thus, no final order regarding the ownership of the loans has yet been entered (and Lehman Commercial has stated that it will appeal the final order after it is entered).
For similar reasons, we find that Lehman Commercial has standing to appeal the Denial Orders. The Ninth Circuit has adopted the "person aggrieved" test as the standard for determining whether a party possesses standing in a bankruptcy appeal. See, e.g., Fondiller v. Robertson (In re Fondiller), 707 F.2d 441, 442-43 (9th Cir.1983). The test limits appellate standing to "those persons who are directly and adversely affected pecuniarily by an order of the bankruptcy court." Id. at 442. Even if Lehman Commercial has no interest in the Fenway Capital Loans, it has an interest in at least one of the loans to Debtors, and furthermore, may possibly have an interest in the Fenway Capital Loans under a contractual repurchase obligation. Lehman Commercial also has an interest if and when the October Order becomes final and is successfully appealed. Therefore, Lehman Commercial has standing *663 to appeal the Denial Orders despite the October Order.[6]
Accordingly, we conclude we have jurisdiction over these appeals and address the merits.
III. ISSUE
Do Debtors violate Lehman Commercial's automatic stay when they attempt to equitably subordinate Lehman Commercial's claims and transfer its liens to the estate?
IV. STANDARDS OF REVIEW
The scope or applicability of the automatic stay under § 362 is a question of law, which is reviewed de novo. Salazar v. McDonald (In re Salazar), 430 F.3d 992, 994 (9th Cir.2005) ("We review the [bankruptcy court's] interpretation of the bankruptcy code as a question of law and, therefore, review it de novo."). Additionally, the determination of whether a particular action is exempt from the automatic stay is a question of law that we review de novo. Berg v. Good Samaritan Hosp. (In re Berg), 198 B.R. 557, 560 (9th Cir.BAP 1996), aff'd 230 F.3d 1165 (9th Cir.2000).
V. DISCUSSION
A. The Automatic Stay Protects a Debtor's Estate
The filing of a bankruptcy petition creates a bankruptcy estate, which is protected by an automatic stay of actions by all entities to collect or recover on claims. 11 U.S.C §§ 541(a) and 362(a). The automatic stay arising in the bankruptcy court where a debtor files a petition for relief (the home bankruptcy court) applies to all other bankruptcy courts. Snavely v. Miller (In re Miller), 397 F.3d 726, 731 (9th Cir.2005).
The policy behind § 362 is to protect the estate from being depleted by creditors' lawsuits and seizures of property in order to provide the debtor breathing room to reorganize. White v. City of Santee (In re White), 186 B.R. 700, 704 (9th Cir. BAP 1995). The automatic stay extends to "prevent piecemeal dismemberment" of the bankruptcy estate. Id.; In re Worldcom, Inc., 2003 WL 22025051 at *3 (Bankr.S.D.N.Y. Jan. 30, 2003). Thus, the automatic stay prohibits "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3). The automatic stay preserves assets for both the estate and creditors. Prewitt v. N. Coast Vill., Ltd. (In re N. Coast Vill., Ltd.), 135 B.R. 641, 643 (9th Cir. BAP 1992).
Although the scope of the automatic stay is broad, it does not stay all proceedings. Courts have recognized the automatic stay does not apply to actions against the debtor in the debtor's home bankruptcy court. In re Miller, 397 F.3d at 730; In re N. Coast Vill., Ltd., 135 B.R. at 643. Additionally, the automatic stay has been found inapplicable to lawsuits initiated by the debtor. Eisinger v. Way (In re Way), 229 B.R. 11, 13 (9th Cir. BAP 1998) (primary policy considerations do not exist where debtor has initiated a lawsuit against a creditor); Martin-Trigona v. Champion Fed. Sav. & Loan Ass'n, 892 F.2d 575, 577 (7th Cir.1989) (statutory language refers to actions "against the debtor"). Alternatively, a defendant in an action brought by a plaintiff/debtor may defend itself in that action without violating the automatic stay. Gordon v. Whitmore *664 (In re Merrick), 175 B.R. 333, 336 (9th Cir. BAP 1994); In re Way, 229 B.R. at 13.
Debtors contend Lehman Commercial initiated the action against Debtors by filing its Stay Relief Motion, which was treated by the bankruptcy court as a proof of claim.[7] Debtors argue that because Lehman Commercial initiated the litigation by filing the Stay Relief Motion or a proof of claim against Debtors, Lehman Commercial's automatic stay does not prevent Debtors from prosecuting their equitable subordination claim. In re Merrick, 175 B.R. at 336 (a party may defend against an action brought by a debtor without violating the automatic stay); Hi-Tech Commc'n Corp. v. Poughkeepsie Bus. Park, LLC (In re Wheatfield Bus. Park, LLC), 308 B.R. 463, 466 (9th Cir.BAP 2004) (debtor may object to a claim filed in its bankruptcy case without violating the automatic stay).
The bankruptcy court agreed that Debtors' equitable subordination claims against Lehman Commercial did not violate Lehman Commercial's automatic stay because they were raised as a defense to the Stay Relief Motion. Because equitable subordination would alter the lien rights of the creditor, we agree that equitable subordination involves the question of a debtor's equity and may be properly asserted as a defense to a motion seeking relief from the automatic stay. See In re Poughkeepsie Hotel Assocs. Joint Venture, 132 B.R. 287, 292 (Bankr.S.D.N.Y.1991); Bialac v. Harsh Inv. Corp. (In re Bialac), 694 F.2d 625, 627 (9th Cir.1982) (when debtor's affirmative defenses and counterclaims directly involve the question of the debtor's equity, it is appropriate to hear them in the stay proceeding).
At the hearing on the Stay Relief Motion, the bankruptcy court stated:
. . . the filing of the motion for relief from stay is, and the case law is pretty clear on this, effectively an informal proof of claim. Whether you filed a formal proof of claim or not, you have asserted a claim against the Debtor. It's quite clear that you intend to assert that claim.
By denying the motion without prejudice that claim remains within this estate. So in my view, if the Debtor wants to proceed to resolve this issue [through equitable subordination] because this issue was presented as a defense to the motion for relief from stay and I think it's an effective defense to the motion for relief from stay but . . . they can't litigate that defense here because it is not appropriate to do it in a summary sort of situation.
Hr'g Tr. at 63:8-20 (February 20, 2009).
The bankruptcy court correctly recognized that a separate procedure was required to litigate the merits of Debtors' equitable subordination claim. See Rule 7001(8) (a request to subordinate an allowed claim or interest requires an adversary proceeding except when a debtor's plan provides for the relief). As one court explained:
When the defendant debtor through complex and bona fide affirmative defenses or counterclaims seeks affirmative counter relief it is not proper to attempt to determine that issue in the adequate protection hearing and thereby determine finally the amount of the debt which in turn will determine the extent of the creditor's interest which he is entitled to have protected. Rather, the *665 counterclaims or affirmative defenses may be severed out and the modification of stay tried on the assumption that the creditor will prevail on the counterclaim.
In re Poughkeepsie Hotel Assocs. Joint Venture, 132 B.R. at 290.
However, the bankruptcy court conflated the defense of equitable subordination to a motion for relief from stay with equitable subordination as a defensive action against (or objection to) a claim. There is a "'tremendous difference between adjudication of the merits and mere consideration of counterclaims and defenses' raised in a motion for stay relief." Id. at 293 (quoting In re Tally Well Serv., Inc., 45 B.R. 149, 151 (Bankr.E.D.Mich. 1984)). Courts must "disaggregate" litigation so that "particular claims, counterclaims, cross claims and third-party claims are treated independently when determining which of their respective proceedings are subject to the bankruptcy stay." In re Miller, 397 F.3d at 731 (quoting Parker v. Bain, 68 F.3d 1131, 1137 (9th Cir.1995)). The adjudication of Debtors' equitable subordination action seeks affirmative relief, and therefore, violates Lehman Commercial's automatic stay. See In re Enron Corp., 2003 WL 23965467, 2003 Bankr.LEXIS 2261, at *23 (Bankr. S.D.N.Y. Jan. 13, 2003).
B. Under These Facts, Equitable Subordination is Not a Defensive Action
Debtors contend they are "entitled to take any action necessary to defeat" a claim asserted in their bankruptcy case. Thus, Debtors frame their equitable subordination action as a defensive action against Lehman Commercial's claim.
The distinction between defensive and offensive actions affecting a debtor's estate is appropriate in determining the applicability of the automatic stay because courts have held that a debtor may defend against suits brought against it without violating a bankruptcy stay. Justus v. Fin. News Network, Inc., (In re Fin. News Network, Inc.), 158 B.R. 570, 573 (S.D.N.Y. 1993) (distinguishing cases where a party "makes an active attempt to recover property" of a debtor through judicial or adversary proceedings); In re Merrick, 175 B.R. at 336. In particular, courts allow debtors to object to creditors' claims on the basis that it is a defense against the assertion of the claim, and therefore, does not violate the creditor's automatic stay. In re Wheatfield Bus. Park, LLC, 308 B.R. at 466.
Accordingly, Debtors argue that if the complete elimination of a claim or lien can be achieved through a claim objection without a stay violation, then the "lesser defensive remedy of subordination" cannot be considered an offensive action that violates the automatic stay. We disagree with Debtors' characterization of subordination as a mere defense to a claim or a "lesser remedy" than claim disallowance.
A claim is a right to payment. 11 U.S.C. § 101(5)(A). A proof of claim is prima facie evidence of the validity and amount of a claim. Rule 3001(f). A party objecting to a claim has the burden of overcoming the prima facie case by challenging the validity of the claim. In a claim objection, the court investigates the existence, validity, and enforceability of claims and determines whether the claim is allowed by applicable law. Murgillo v. Cal. State Bd. of Equalization (In re Murgillo), 176 B.R. 524, 532-33 (9th Cir. BAP 1995); USA Capital Realty Advisors, LLC v. USA Capital Diversified Trust Deed Fund, LLC (In re USA Commercial Mortg. Co.), 377 B.R. 608, 617 (9th Cir. BAP 2007) ("disallowance of a claim is a legal determination that the claim under consideration is not allowable by law.").
*666 If the claim is disallowed or modified in amount because the asserted claim was found to be unenforceable against the debtor as a matter of law, then the creditor effectively never had the right to payment of the claim it asserted. Importantly, if a debtor succeeds in a claim objection, the debtor does not recover property from the creditor. As a result, a debtor is able to challenge (or "defend" against) a claim without impacting a creditor's property rights.
Even though equitable subordination, "if established, may be functionally equivalent to disallowance (i.e., no distribution on the claims)," it is a legally distinct proceeding which seeks to reprioritize the order of allowed claims based on the equities of the case, rather than to disallow the claim in the first instance. In re USA Commercial Mortgage Co., 377 B.R. at 617; see also In re Enron Corp., 2003 WL 23965467, 2003 Bankr.LEXIS 2261 at *26; In re County of Orange, 219 B.R. 543, 557 (Bankr.C.D.Cal.1997).
Equitable subordination is sought when a creditor has engaged in some type of inequitable conduct that resulted in injury to the debtor's other creditors or conferred an unfair advantage on the claimant. United States v. Noland, 517 U.S. 535, 538-39, 116 S. Ct. 1524, 134 L. Ed. 2d 748 (1996). It is an unusual remedy, applied only in limited circumstances. Id.; Feder v. Lazar (In re Lazar), 83 F.3d 306, 309 (9th Cir.1996).
Section 510(c)(1) allows for subordination of otherwise allowed claims "when the principles of equity would be so offended by the allowance of such claims on a parity with those of other creditors." 4 COLLIER ON BANKRUPTCY ¶ 510.01 (Alan N. Resnick & Henry J. Sommer, eds. 15th ed. rev.2009). If the subordinated claim is secured by a lien, under § 502(c)(2), the lien is transferred to the debtor's estate. The subordinated lien claim becomes unsecured and the property securing such claim becomes part of the debtor's estate.
Thus, unlike in claim disallowance, in the situation of equitable subordination, a creditor has the right to payment on its claim, but that property right may be modified by the bankruptcy court based upon equitable principles.[8] This key difference turns Debtors' assertion of equitable subordination as a proper defense to Lehman Commercial's Stay Relief Motion into an offensive action against Lehman Commercial's property.
As the Panel has previously noted:
the proper exercise of the bankruptcy court's equitable powers under § 502 is through investigation into the existence, validity and enforceability of claims leading to their allowance or disallowance; and the proper exercise of equitable powers regarding an allowed claim is through the equitable subordination provisions of § 510(c).
In re Murgillo, 176 B.R. at 533; Benjamin v. Diamond (Matter of Mobile Steel Co.), 563 F.2d 692, 699 (5th Cir.1977)(equitable considerations can only justify subordination of claims, not their disallowance). Importantly, misconduct on the part of a *667 creditor, when directed against a debtor, gives a debtor a clear defense to invalidate a claim under § 502. See In re Mobile Steel Co., 563 F.2d at 699 n. 10. However, in this case, Debtors have not sought to disallow the claim on principles of misconduct or fraud; they have commenced an adversary proceeding to equitably subordinate Lehman Commercial's claims and transfer the liens securing the claims to Debtors' own bankruptcy estate.
This scenario differs markedly from a case cited by Debtors, In re Metiom, 301 B.R. 634 (Bankr.S.D.N.Y.2003). Metiom involved an unsecured claim. The facts of this case differ from Metiom because, here, Lehman Commercial's claims are secured and Debtors are seeking to transfer the liens to the estate. Such affirmative relief was not part of the Metiom case where the equitable subordination, along with § 547 and § 549, were included as alternatives in debtor's claim objection and the bankruptcy trustee expressly waived any affirmative relief or damages resulting from the creditor's postpetition conduct. Id. at 637. There is no analysis in Metiom that focuses on whether equitable subordination under § 510(c)(2) violates the automatic stay.
Simply because Lehman Commercial filed a proof of claim (whether formally or informally) does not mean that Debtors may take any action against Lehman Commercial without violating Lehman Commercial's automatic stay. Debtors may not initiate an action or proceeding against Lehman Commercial that seeks affirmative relief, such as a counterclaim without violating the automatic stay.[9]In re Miller 397 F.3d at 732. In this case, Debtors' subordination action seeks affirmative control over property of Lehman Commercial's bankruptcy estate by proposing to alter the priority of Lehman Commercial's claim and the transfer of Lehman Commercial's lien rights to Debtors' estate. Thus, equitable subordination seeks affirmative relief: the modification of a claimant's valid claim and property interest. 4 COLLIER ON BANKRUPTCY, ¶ 510.01 (Alan N. Resnick & Henry J. Sommer, eds., 15th ed. rev. 2009) ("Because subordination under § 510 involves valid claims, the claimant has a property interest that would be modified by subordination. The notice and hearing requirement, therefore, is a basic due process protection."). Accordingly, we find the adjudication of Debtors' equitable subordination claim violates Lehman Commercial's automatic stay.
One of the purposes of the automatic stay is to protect the bankruptcy court's jurisdiction over the debtor and the property of the estate. The protection of Lehman Commercial's automatic stay did not evaporate when it filed a proof of claim in Debtors' bankruptcy case. See In re Miller, 397 F.3d at 732. If Debtors were allowed to subordinate Lehman Commercial's claim in the California bankruptcy *668 court without first seeking stay relief in Lehman Commercial's home bankruptcy case, Lehman Commercial's creditors would have no notice or opportunity to challenge the action even though their rights would be affected by the subordination action.
Therefore, while the California bankruptcy court may have concurrent jurisdiction to determine the scope or applicability of the automatic stay, the New York bankruptcy court must have the final say as to whether the automatic stay applies to the bankruptcy case before it. See Erti v. Paine Webber Jackson & Curtis, Inc. (In re Baldwin-United Corp. Litig.), 765 F.2d 343, 347-48 (2nd Cir.1985)(even though district court had jurisdiction to determine applicability of stay, asserting that jurisdiction would frustrate the debtor's reorganization efforts in the bankruptcy case); Gruntz v. County of L.A. (In re Gruntz), 202 F.3d 1074, 1079, 1081-82 (9th Cir.2000) (the automatic stay, which is an injunction issuing from the authority of the bankruptcy court, is the primary means to centralize the control over and administration of bankruptcy cases). Debtors are not hamstrung by this decision; Debtors may either seek relief from stay or initiate the equitable subordination action against Lehman Commercial in the New York bankruptcy case.
CONCLUSION
For the forgoing reasons, we REVERSE and void those provisions of the Denial Orders that find Debtors may prosecute an adversary proceeding, or propose a reorganization plan, seeking to equitably subordinate Lehman Commercial's claim and transfer its liens to the estate in the California bankruptcy case without first obtaining relief from the automatic stay in the New York bankruptcy case.
MARKELL, Bankruptcy Judge, dissenting:
I respectfully dissent. The majority essentially holds that a debtor may not, in its own bankruptcy, unilaterally defend against a lender's inequitable claim if that lender is also a bankruptcy debtor. I disagree.[1]
The central inquiry here is what a debtor may do in response to a creditor's filing a proof of claim.[2] Normally, this inquiry presents no issue. The only limits are those imposed by the relevant nonbankruptcy law. As recognized by the lender's home bankruptcy court, that law includes the law of equitable subordination. See In re Metiom, 301 B.R. 634 (Bankr.S.D.N.Y. 2003) (permissible to join equitable subordination allegation with general claims objection).
Here, however, the creditor is also a debtor in bankruptcy. As such, the creditor is entitled to the benefits of the automatic stay with respect to actions against it and its estate. That much is undisputed.
*669 What is disputed is whether the lender's stay extends to the Debtors' equitable subordination claims raised in response to the lender's assertion of its claim in the Debtors' bankruptcy. In holding that the lender's stay extends to such actions, but not to any efforts to disallow outright the same claims, the majority's opinion essentially holds that equitable subordination claims are not related to the adjustment of debtor-creditor rights.
Existing law does not mandate this result. The Code and our precedents recognize implicit equitable exceptions to the automatic stay that permit a debtor to defend against a filed proof of claim in any manner permitted by applicable nonbankruptcy law. All the bankruptcy court did here was to protect that right. Even if I am wrong, however, I believe Lehman Commercial waived its right to raise automatic stay issues when it filed its proof of claim. I would therefore affirm the bankruptcy court's ruling.
Although I believe this case is controlled by recognized exceptions to the automatic stay, those exceptions are not found in § 362(b). While § 362(b) lists explicit exceptions to the automatic stay, there are additional, implicit, equitable exceptions necessary for a practical and functioning bankruptcy system. One is that a creditor does not need relief from stay to seek relief from stay. Another is that a creditor does not need relief from stay to file and prosecute a proof of claim. Common sense dictates both these exceptions, even if § 362(b) does not mention them.
Our precedents identify a third equitable exception: a debtor need not seek relief from stay to object to a proof of claim filed by a creditor who coincidentally happens to be a debtor in bankruptcy. As we stated in Hi-Tech Commc'n. Corp. v. Poughkeepsie Bus. Park, LLC (In re Wheatfield Business Park, LLC), 308 B.R. 463, 466 (9th Cir. BAP 2004), "the automatic stay does not apply under such circumstances." See also Eisinger v. Way (In re Way), 229 B.R. 11, 13 (9th Cir. BAP 1998); Gordon v. Whitmore (In re Merrick), 175 B.R. 333, 338 (9th Cir. BAP 1994).
Merrick provides the analytical underpinning for this equitable exception. In Merrick, we noted that:
[A]n equitable principle of fairness requires a defendant to be allowed to defend himself from the attack without imposing on him a gratuitous impediment in dealing with an adversary who suffers no correlative constraint. The automatic stay should not tie the hands of a defendant while the plaintiff debtor is given free rein to litigate.
Merrick, 175 B.R. at 338.
The majority rejects Merrick and our other precedents as inapplicable on two grounds. Initially, they contend that we permitted these equitable exceptions only in the context of disallowance of a claim under § 502 but not subordination under § 510, and therefore any attempt to subordinate Lehman Commercial's claim under § 510 would be "offensive."[3] Second, the *670 majority notes that Lehman Commercial's claim is secured. Therefore, they believe that any subordination pursuant to § 510 would adversely affect Lehman Commercial's property interest and violate § 362(a)(3) as it applies in Lehman Commercial's bankruptcy estate.
Neither of these arguments is convincing. The majority initially distinguishes between claim allowance and claim subordination. Under these facts, this is a distinction without a difference. A bankruptcy court has core jurisdiction over "proceedings affecting the . . . adjustment of the debtor-creditor . . . relationship." 28 U.S.C. § 157(b)(2)(O). Along with claim disallowance, equitable subordination has historically been one such proceeding within that broad grant of jurisdiction. Long before the enactment of the 1978 Bankruptcy Code, the Supreme Court had recognized that "[i]n appropriate cases, acting upon equitable principles, [the bankruptcy court] may also subordinate the claim of one creditor to those of others in order to prevent the consummation of a course of conduct by the claimant which, as to them, would be fraudulent or otherwise inequitable." Heiser v. Woodruff, 327 U.S. 726, 732-33, 66 S. Ct. 853, 90 L. Ed. 970 (1946).
Heiser and § 510(c) confirm that equitable subordination has a venerable history as a doctrine available to avoid inequitable distributions. With this heritage, equitable subordination is surely as much a part of the adjustment of debtor-creditor rights as is claim disallowance. I thus fail to see any link between § 510's language regarding application to "allowed claims" and the nonapplicability of Merrick equitable principles. Put another way, there is no good reason to require a bankruptcy estate to seek permission from another court to avoid inequitable results in its own case, so long as what is sought is confined to the defense of the claim asserted. Any other result unnecessarily hobbles estates in their attempt to maximize fair returns to their creditors.[4]
The unfairness of the majority's position can be seen under the facts present here. When Lehman Commercial sought to establish its claim, the Debtors had a duty on behalf of the estate to respond by raising all appropriate responses. The Debtors believed this response included a challenge to the equity of Lehman Commercial's claimed priority. But the majority's position would have required the Debtors to obtain permission from Lehman Commercial's home bankruptcy court before responding on this ground. This extra step is just the type of "gratuitous impediment in dealing with an adversary who suffers no correlative constraint" that Merrick condemned. See also In re Metiom, 301 B.R. 634 (Bankr.S.D.N.Y.2003) (under prior version of Rule 3007, court finds that joining equitable subordination to claims objection permissible).
The majority's reliance on § 362(a)(3) also does not survive scrutiny. In this context, adjustment of lien priorities is no different from an adjustment of claim priorities. A lien is nothing but an incident of the debt it secures; there can be no lien without a debt to support it. See, e.g., Satsky v. United States, 993 F. Supp. 1027, 1029 (S.D.Tex.1998). As a result, if no stay relief is necessary to adjust priority of *671 payment, no stay relief should be necessary to adjust liens securing those debts. The majority's position essentially allows creditors to immunize inequitable conduct from equitable subordination by the simple expedient of taking a security interest.
Finally, the majority's fears that the bankruptcy court's ruling could somehow usurp the alleged right of Lehman Commercial's home court to determine whether subordination would violate § 362(a)(3) are easily allayed. By filing the proof of claim, Lehman Commercial clearly put its entire claim at risk. At a minimum, Lehman Commercial impliedly consented to have all its claims against the Debtors adjudicated in the Debtors' bankruptcy case. Metiom, a decision from Lehman Commercial's home court, holds as much. Moreover, as the Ninth Circuit has made explicit, "[w]hen a creditor submits to bankruptcy court jurisdiction by filing a proof of claim in order to collect all or a portion of a debt, it assumes certain risks. . . bankruptcy converts the creditor's legal claim into an equitable claim to a pro rata share of the res." Hong Kong & Shanghai Banking Corp. Ltd. v. Simon (In re Simon), 153 F.3d 991, 997 (9th Cir.1998).
It is the height of formalism and the nadir of equity to allow Lehman Commercial to file its proof of claim under an implied waiver from the Debtors' stay, only to deny the Debtors a correlative and reciprocal waiver with respect to any accepted challenge to that proof of claim.
For these reasons, I would affirm.
NOTES
[1] Unless otherwise indicated, all chapter, section, and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and to the Federal Rules of Bankruptcy Procedure, Rules XXXX-XXXX.
[2] SunCal Beaumont Heights, LLC, SCC/Palmdale, LLC ("SCC/Palmdale"), SunCal Johannson Ranch, LLC, SunCal Summit Valley, LLC ("Summit"), SunCal Emerald Meadows, LLC ("Emerald Meadows"), SunCal Bickford Ranch, LLC ("Bickford"), Acton Estates, LLC ("Acton"), Seven Brothers, LLC, SJD Partners, Ltd., SJD Development Corp., Kirby Estates, LLC, SunCal Communities I, LLC ("SunCal I"), and SunCal Communities II, LLC ("SunCal II") filed chapter 11 bankruptcies on November 6 and November 7, 2008. North Orange Del Rio Land, LLC, SCC Communities, LLC, and Tesoro SF, LLC, filed chapter 11 on November 19, 2008. There are also nine related entities in involuntary bankruptcy proceedings represented by a court appointed trustee.
[3] ALI is not in bankruptcy.
[4] As noted below, Debtors challenge whether Lehman Commercial is actually a creditor of the Debtors' estate since some of the loans were determined by the bankruptcy court to have been sold (not transferred for security).
[5] Debtors argue Lehman Commercial limited the scope of appeal to only the finding made by the bankruptcy court that Debtors, through an adversary proceeding, could subordinate Lehman Commercial's claim without violating Lehman Commercial's stay. Debtors contend Lehman Commercial did not appeal the related finding that Debtors could, through a plan of reorganization, subordinate Lehman Commercial's claim without a stay violation. Therefore, Debtors argue we lack jurisdiction on the basis that we could not provide effective relief to Lehman Commercial. Debtors contend that even if the Panel sets aside the ruling permitting Debtors to prosecute an adversary proceeding to subordinate Lehman Commercial's claim, Debtors would still be able to subordinate Lehman Commercial's claim through their plan. This argument is meritless. Lehman Commercial appealed the Denial Orders in their entirety, "specifically, Lehman Commercial appeals the rulings in the Order[s] regarding the scope and application of the automatic stay in Lehman Commercial's chapter 11 case."
[6] In making this determination, we deny Debtors' Motion to Dismiss Appeal for Lack of Jurisdiction. We do, however, grant Lehman Commercial's Motion to Supplement Record on Appellee's Motion to Dismiss Appeal, which was filed December 1, 2009.
[7] Lehman Commercial has since filed formal proofs of claim in Debtors' bankruptcy cases. Therefore, we do not reach the issue of whether the bankruptcy court erred in treating the Stay Relief Motion as an informal proof of claim.
[8] We do not agree that Lehman Commercial's assertion of the automatic stay will paralyze Debtors' reorganization or thwart the principles of bankruptcy law because of Lehman Commercial's "running around the country demanding that all other chapter 11 debtors yield to its automatic stay." Appellee's Brief at 14-15, 27. Lehman Commercial has a right to protect its estate from diminishment of its assets by others, which here includes Debtors' proposed modification of its rights, including its lien rights. Furthermore, Debtors are not without a remedy. They can seek relief from stay in Lehman Commercial's case where their earlier motion was denied without prejudice.
[9] The dissent points to recoupment as a counterclaim that should be permitted because it seeks to adjust the amount of debt owed, and makes an implied correlation to equitable subordination as another type of counterclaim that should be permitted, for the same reasons. Recoupment, however, "is the setting up of a demand arising from the same transaction as the plaintiff's claim or cause of action, strictly for the purpose of abatement or reduction of such claim." Newbery Corp. v. Fireman's Fund Ins. Co., 95 F.3d 1392, 1399 (9th Cir. 1996). It is an equitable common law doctrine to net out debts and allow the defendant to recoup payments made against the claim and is not limited to prepetition claims. It is not subject to the automatic stay. Sims v. United States Dept. Of Health & Human Serv. (In re TLC Hospitals, Inc.), 224 F.3d 1008, 1011 (9th Cir.2000). Equitable subordination, however, involves the subordination and reprioritization of an allowed claim and is, therefore, not the equivalent of a recoupment claim.
[1] I do not disagree, however, with the majority's treatment of the mootness and standing issues addressed in Part II of the opinion. I therefore join the majority in its decision to reach the merits, and in its disposition of the Debtors' motion to dismiss and of Lehman Commercial's motion to supplement the record.
[2] As the majority also points out, the issue was presented in the bankruptcy court in the context of the Debtors' response to Lehman Commercial's relief from stay motion. But during the case and after the motions leading to this appeal were filed, Lehman Commercial filed proofs of claim related to the debt that formed the basis of the requested stay relief. At oral argument, counsel for Lehman Commercial conceded that, due to a lack of any prejudice, the legal issue as framed in the text is identical to the issue litigated in the bankruptcy court.
[3] The majority states that any action which "seeks affirmative relief, such as a counterclaim violates the automatic stay." To the extent that this could be read to imply that all counterclaims seek affirmative relief. I disagree. Recoupment, for example, typically is asserted by counterclaim, and should not be considered offensive. Cf. Bull v. U.S., 295 U.S. 247, 262, 55 S. Ct. 695, 79 L. Ed. 1421 (1935) ("recoupment is in the nature of a defense arising out of some feature of the transaction upon which the plaintiff's action is grounded"); ASARCO LLC v. Americas Mining Corp., 396 B.R. 278, 432 (S.D.Tex. 2008) ("recoupment is a common-law, equitable doctrine that permits a defendant to assert a defensive claim aimed at reducing the amount of damages recoverable by a plaintiff").
[4] There is also nothing in the history of § 510 that should cause equitable subordination claims to be treated differently. Indeed, Congress intended "that the term `principles of equitable subordination' follow existing case law and leave to the courts development of this principle." 124 CONG. REC. 32, 398 (1978) (statement of Rep. Edwards); id. at 33, 998 (statement of Sen. DeConcini). See also, 4 COLLIER ON BANKRUPTCY ¶ 510.05 (15th rev. ed.2009). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2612136/ | 71 Cal. 2d 1170 (1969)
459 P.2d 259
81 Cal. Rptr. 5
THE PEOPLE, Plaintiff and Respondent,
v.
ERNEST WASHINGTON, Defendant and Appellant.
Docket No. Crim. 12403.
Supreme Court of California. In Bank.
October 3, 1969.
*1172 James Martin MacInnis, under appointment by the Supreme Court, for Defendant and Appellant.
Thomas C. Lynch, Attorney General, William E. James, Assistant Attorney General, and Thomas Kallay, Deputy Attorney General, for Plaintiff and Respondent.
TRAYNOR, C.J.
By indictment Mrs. Leiala Spencer, Kenneth Davis, and defendant Ernest Washington, were jointly charged with the robbery and murder of Benjamin Kay. The trial court granted defendant's motion for a severance, and thereafter a jury found him guilty of first degree murder (Pen. Code, § 187) and first degree robbery (Pen. Code, § 211) and fixed the penalty for the murder at death. The trial court denied motions for a new trial and to reduce the penalty and entered judgment on the verdict. It stayed execution of sentence for both crimes pending this automatic appeal. (Pen. Code, § 1239, subd. (b).)
Mr. Kay owned a department store in San Diego. He made many credit sales to welfare recipients and other people who had low incomes. He personally collected from his credit customers by calling on them at their homes at the beginning and middle of each month when welfare recipients receive their checks. He carried as much as $1,000 in cash so that he could cash his customers' checks on such visits. On November 1, 1967, he was fatally beaten and robbed just after he had called at the home of Mrs. Spencer to make a collection.
The crime took place about 9 p.m. behind Mrs. Spencer's house. The area was very dark, for someone had tampered with the lights at the back of the house next door that otherwise would have illuminated the area. A witness saw Mr. Kay walk toward the back of Mrs. Spencer's house and heard him knock at the back door. Shortly thereafter he was found still alive but badly beaten. He died in a hospital the next morning.
A web of evidence implicated defendant in the crime. About ten days before it occurred, when defendant was visiting a witness at her house in the neighborhood, he looked out a window and said: "That's Ben Kay. He carries about five or six hundred dollars around with him every day ... and all you have to do is knock him in the head." He also mentioned that Kay came around on the first and sixteenth of every month.
*1173 On the afternoon of the day of the crime, Mr. Kay's son saw Mrs. Spencer and defendant together across the street from the Kay store gesturing in its direction. Defendant was then living at Mrs. Spencer's house, and he made a long distance telephone call from there about 7:05 p.m. on November 1.
Before November 1, defendant was unemployed and ineligible for relief. His car had been repossessed and he had unsuccessfully sought to borrow money from a friend. Between 7:30 and 8 on the evening of November 1, however, he telephoned another friend, Elvernon White, asked if he could use White's car, and said that he might have some money with which to get his own car back. At 8:30 the next morning he went to the dealer who had repossessed his car, paid him $100 and retrieved his car. Witnesses who saw him on the following days testified that he had many $20 bills and spent money freely. About 9 on the evening of the murder he checked into a motel some six minutes walking distance from Mrs. Spencer's house. He stayed for three days and paid the motel rent in cash.
Between 9:45 and 11 on the morning of November 2, defendant, Mrs. Spencer, and Davis were in the apartment of the witness Rodney Pitts. Pitts testified that the three spent some time in his kitchen whispering, that Mrs. Spencer had quite a few bills and many money orders that she had apparently purchased, and that she gave some of the money and money orders to Davis. When defendant left Pitts' apartment about 11 a.m., he met his friend Elvernon White on the street and told him, "I'm hot. I think I have killed a man," or "I have killed a man."
Defendant was arrested on November 4 as he was preparing to leave San Diego. He made several statements to police officers in which he gave differing accounts of the crime and the parts he, Davis, and Mrs. Spencer played in it. He was repeatedly warned of his constitutional rights, and he does not contend that any of his statements were inadmissible. Although defendant never admitted to the officers that he attacked Mr. Kay, he told them that he was present when Mrs. Spencer planned to have Davis rob Mr. Kay after Mr. Kay left her house; he admitted that he and Davis went behind Mrs. Spencer's house when Mr. Kay approached and stated that Davis hit him with a pipe, and that when Mr. Kay yelled, Davis hit him twice more. Defendant claimed that he got scared, walked away, and shortly thereafter checked into a *1174 motel. In a later statement defendant revised his account of the crime and stated that Mrs. Spencer "hit the old man; that she followed him out of the house and hit him with the pipe from the rear, from the back." He further stated that Mrs. Spencer had removed the light fixture from the back of the house next door.
The prosecution also introduced evidence that while defendant was in jail awaiting trial, he wrote two letters requesting friends to testify that he was at their houses from 5 to 8:30 on the evening of November 1.
Defendant testified in his own defense. He denied any involvement in the robbery and murder and stated that from 7:30 until 10 on the evening of November 1, he was in downtown San Diego looking for his wife. He denied having made many of the admissions attributed to him and testified that other admissions that he made were false.
[1] Defendant contends that the trial court erred in instructing the jury that he could be held liable for the acts of other persons if those acts were committed in furtherance of a conspiracy of which he was a member. He contends that there was no evidence of a conspiracy and points out that no conspiracy was charged against him in the indictment. There was substantial evidence, however, that defendant, Mrs. Spencer, and Davis entered into an agreement to rob Mr. Kay, that the agreement contemplated the use of violence against Mr. Kay, and that the robbery and murder were committed pursuant to and in furtherance of the agreement. [2] When there is evidence of a conspiracy to commit the substantive offenses charged, it is not error to instruct the jury on the law of conspiracy even though no conspiracy is charged. (People v. Teale (1965) 63 Cal. 2d 178, 188 [45 Cal. Rptr. 729, 404 P.2d 209], reversed on other grounds, sub nom. Chapman v. California (1967) 386 U.S. 18 [17 L. Ed. 2d 705, 875 Ct. 824]; People v. Durham (1969) 70 Cal. 2d 171, 180 [74 Cal. Rptr. 262, 449 P.2d 198].)
After correctly stating the law of conspiracy applicable to the case, however, the court further instructed on the requirements of pleading and proving a conspiracy when a conspiracy is charged.[1] Realizing that such an instruction is inapposite when a conspiracy is not charged, the trial court extemporized an explanation of the distinction between a case *1175 in which conspiracy is charged and one in which a conspiracy theory is used to establish liability for the substantive offense. It pointed out that in the latter situation the People are not required to prove all of the elements of a conspiracy.
[3] Defendant contends that the court's explanation allowed the jury to find him guilty as a principal in the robbery and murder under a conspiracy theory even though all the elements of a conspiracy were not proved. Although the court's explanation was confusing, we do not believe that when it is considered in the light of all of the instructions given, it would be understood to mean that defendant could be found guilty on a conspiracy theory in the absence of proof that he was a principal in the robbery and murder. The jury was instructed that defendant could be found guilty if he personally robbed and murdered Mr. Kay, if he aided and abetted Mrs. Spencer or Davis or both in committing those crimes, or if he conspired with Mrs. Spencer or Davis or both to commit those crimes. Under any of these theories the jury could have found defendant guilty only if it found the crimes were committed and that defendant participated therein by committing them himself or by aiding and abetting the others to commit them, either directly or by entering into a conspiracy to commit them. In this setting, the court's explanation meant, not that defendant could be found guilty of substantive crimes he did not commit, but only that the People *1176 were not required to prove all of the elements of a conspiracy if the jury otherwise believed that defendant was a principal in the robbery and murder.
[4a] Defendant contends that the trial court erred in admitting into evidence statements made by Mr. Kay to a nurse shortly after he was taken to a hospital. The trial court admitted the statements over objection under the spontaneous statement exception to the hearsay rule. (Evid. Code, § 1240.) Mr. Kay was unconscious when he arrived at the hospital about 45 minutes after the crime was committed. An officer asked the emergency room nurse to ask Mr. Kay what happened to him. He did not respond to her initial inquiries, but in about 20 minutes he regained consciousness for three or four minutes. The nurse again asked him what happened to him, and he said either "I was beaten" or "I was robbed." She then asked him if he knew who had done it and he replied "no." She then asked, "Was there more than one person involved?" and he said, "There was more than one." "Was there two involved?" she inquired, and he replied, "Maybe two or three." There was a pause of about 30 seconds between each question and the reply.
Section 1240 of the Evidence Code provides: "Evidence of a statement is not made inadmissible by the hearsay rule if the statement: (a) Purports to narrate, describe, or explain an act, condition, or event perceived by the declarant; and (b) Was made spontaneously while the declarant was under the stress of excitement caused by such perception." The section codified an existing exception to the hearsay rule (Law Revision Commission Comment to § 1240), which was carefully restated in Showalter v. Western Pac. R.R. Co. (1940) 16 Cal. 2d 460, 468 [106 P.2d 895]. To be admissible, "(1) there must be some occurrence startling enough to produce ... nervous excitement and render the utterance spontaneous and unreflecting; (2) the utterance must have been before there has been time to contrive and misrepresent, i.e., while the nervous excitement may be supposed still to dominate and the reflective powers to be yet in abeyance; and (3) the utterance must relate to the circumstance of the occurrence preceding it. (Wigmore on Evidence, [2d ed.], sec 1750.)"
[5] Neither lapse of time between the event and the declarations nor the fact that the declarations were elicited by questioning deprives the statements of spontaneity if it nevertheless appears that they were made under the stress of excitement and while the reflective powers were still in abeyance. *1177 (Lane v. Pacific Greyhound Lines (1945) 26 Cal. 2d 575, 583 [160 P.2d 21]; People v. Costa (1953) 40 Cal. 2d 160, 168 [252 P.2d 1]; Showalter v. Western Pac. R.R. Co., supra, 16 Cal. 2d 460, 467; Wiley v. Easter (1962) 203 Cal. App. 2d 845, 854 [21 Cal. Rptr. 905].) [4b] In the present case Mr. Kay was unconscious for most of the time between the beating and the nurse's questions. (See People v. Costa, supra.) He had suffered brain damage and was having difficulty breathing. The evidence supports the trial court's findings that Mr. Kay did not have power to reflect on his answers and that the slowness of his responses resulted, not from reflection, but from his critical physical condition. Accordingly, the trial court did not err in ruling that the statements were admissible under section 1240. (See Showalter v. Western Pac. R.R. Co., supra, 16 Cal. 2d 460, 468-469; Ungefug v. D'Ambrosia (1967) 250 Cal. App. 2d 61, 67 [58 Cal. Rptr. 223]; People v. Fain (1959) 174 Cal. App. 2d 856, 861 [345 P.2d 305]; 6 Wigmore, Evidence (3d ed. 1940) § 1750, p. 154; Witkin, Evidence (2d ed. 1966) § 547, p. 520.) [6] Moreover, that decision was for the trial court alone to make, and it therefore did not err in failing to instruct the jury to disregard the statements if the jury found them not to have been spontaneous within the meaning of section 1240. (Evid. Code, § 405; People v. Cruz (1968) 264 Cal. App. 2d 350, 360, fn. 11 [70 Cal. Rptr. 603]; cf. People v. Bazaure (1965) 235 Cal. App. 2d 21, 38 [44 Cal. Rptr. 831], stating rule applicable before the adoption of the Evidence Code.)
[7] Defendant contends that seven prospective jurors were excused for cause in violation of Witherspoon v. Illinois (1968) 391 U.S. 510 [20 L. Ed. 2d 776, 88 S. Ct. 1770]. We need not canvass the entire group cited by defendant, for it is clear that at least one venireman was excused in violation of the standards set forth in that case. (See People v. Bradford (1969) 70 Cal. 2d 333, 345-346 [74 Cal. Rptr. 726, 450 P.2d 46].)
Venireman Norbert Elsner twice indicated on the first day of voir dire that he could vote for the death penalty, though he would be loath to do so on circumstantial evidence alone unless that evidence were "very strong." On the second day the following colloquy took place between Mr. Elsner and the bench.
"PROSPECTIVE JUROR ELSNER: Your Honor, I have certain reservations where I can't vote for taking a man's life.
*1178 "THE COURT: Do you feel your responses to the Court yesterday were not
"PROSPECTIVE JUROR ELSNER: They were in truth yesterday. Its just that I have given it more thought. I had never thought about it as being a personal responsibility in this case. I seem to be going the other way today. Up to this point I had never thought I was against capital punishment, but for some reason I tend to be drifting that way. The answers I gave the prosecuting attorney yesterday I think were
"THE COURT: Are you satisfied at this time in your own mind that you entertain a conscientious opinion with reference to the death penalty?
"PROSPECTIVE JUROR ELSNER: I feel I would be hesitant to vote for a death penalty.
"THE COURT: All right. You may be excused, Mr. Elsner."
Witherspoon held that "a sentence of death cannot be carried out if the jury that imposed or recommended it was chosen by excluding veniremen for cause simply because they voiced general objections to the death penalty or expressed conscientious or religious scruples against its infliction." (391 U.S. at p. 522 [20 L.Ed.2d at p. 784].) In the instant case Elsner did not even indicate that he objected to the death penalty, but only that he was "drifting that way." His feeling that he would be "hesitant" to impose the death penalty is one undoubtedly shared by many who would nevertheless impose it in some cases. (See, e.g., Witherspoon v. Illinois, supra, 391 U.S. 510, 515, fn. 8 [20 L. Ed. 2d 776, 781, 88 S.Ct 1770]; People v. Bradford, supra, 70 Cal. 2d 333, 346.) Elsner's statements did not make it "unmistakably clear (1) that [he] would automatically vote against the imposition of capital punishment without regard to any evidence that might be developed at the trial ... or (2) that [his] attitude toward the death penalty would prevent [him] from making an impartial decision as to the defendant's guilt." (391 U.S. at p. 522, fn. 21 [20 L.Ed.2d at p. 785].)
The judgment is reversed insofar as it relates to the penalty on the conviction for murder. In all other respects the judgment is affirmed.
Peters, J., Tobriner, J., Mosk, J., Burke, J., and Sullivan, J., concurred.
McCOMB, J.
I would affirm the judgment in its entirety.
Appellant's petition for a rehearing was denied November 12, 1969.
NOTES
[1] The relevant part of the record reads as follows:
"No agreement amounts to a criminal conspiracy in California unless in addition to entering into the unlawful agreement an overt act is done within this state by one or more of the conspirators for the purpose of accomplishing the object of the agreement. The law requires that at least one of such overt acts be expressly alleged, and that in addition to proof of the criminal agreement between the parties, at least one of the overt acts thus alleged must be proved to support a conviction for conspiracy.
"Gentlemen, let me discuss this instruction for just a moment.
"[The following proceedings were held at the bench out of the hearing of the jury:]
"THE COURT: Unfortunately I did not edit this instruction, but I see now it relates to the crime of conspiracy. This defendant isn't charged with the crime of conspiracy. I will have to change it. I think the purpose of this instruction is to indicate the overt act, what an overt act is, and I think I had better interpolate at this time. I do not think this is a proper instruction.
"[The following proceedings were held in open court within the presence and hearing of the jury:]
"THE COURT: I told you just a few moments ago that no agreement amounts to a criminal conspiracy in California unless in addition to entering into the unlawful agreement an overt act is done.
"Let me state this to you: As you will recall, in the indictment the defendant is not charged with the crime of conspiracy. It may well be that the evidence discloses a conspiracy. This does not require, for example, that the People prove all the elements of a conspiracy if it were charged as such. It is not so charged. I did, however, make reference to an overt act in the matter of conspiracy. Let me define that for you."
The court proceeded to correctly define overt acts. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1884754/ | 299 So. 2d 815 (1974)
Calvin J. PELAS, Sr.
v.
AMERICAN EMPLOYERS' INSURANCE COMPANY.
No. 6038.
Court of Appeal of Louisiana, Fourth Circuit.
July 3, 1974.
Rehearing Denied September 10, 1974.
Writ Refused November 8, 1974.
Hilary J. Gaudin, Lee C. Grevemberg, New Orleans, for plaintiff-appellee.
Hammett, Leake & Hammett, Craig R. Nelson, New Orleans, for defendant-appellant.
Before SAMUEL and SCHOTT, JJ. and MARCEL, J. Pro Tem.
*816 CLEVELAND J. MARCEL, Sr., Judge Pro Tem.
This suit was filed on July 8, 1970 on an insurance policy, wherein plaintiff-appellee sued to recover for the loss of a dragline, lost while aboard a barge, in the Mississippi River on July 6, 1969.
From a judgment in favor of plaintiff, Pelas, defendant-appellant, American Employers Insurance Company appealed. We affirm.
The thrust of appellant's case is that appellee failed to file a written notice of loss as required by the policy of insurance; failed to cooperate with American in conducting an investigation of the loss and entrusted the insured item with someone whose infidelity caused the loss, thus excluding it from coverage under the policy. Appellant also urges that Pelas failed to establish the actual cash value of the dragline.
The trial court found American guilty of being arbitrary and capricious in not paying the policy limits to plaintiff and ordered American to pay penalties and attorney's fees.
Pelas testified that he acquired the dragline in 1958 for the sum of $2,000 and subsequently spent $8,500 repairing same. In 1968, he placed the dragline upon the deck of barge M-46. He had entered into a rental-purchase agreement with Motto Francevich to purchase the barge. The dragline mounted on the barge was used to cut slips. Prior to placing the dragline on the M-46, he contacted a Mr. Ostendorf, a friend who was an employee of Martin-LeBreton Insurance Agency. A policy of insurance, which is sued upon, was issued in the sum of $10,000. The M-46 remained in the slip belonging to Francevich near Empire, Louisiana. In the slip, it was spudded down; that is, spuds, or long rods on either side of the barge were lowered through their holders into the water bottom and these securely anchored the vessel. Pelas states that in June or July, 1969, he drove to Motto's boatyard (some eight miles from his home) and his barge wasn't there. He was advised that a squall and heavy winds forced the vessel against the bank. Water came over the vessel later on and caused the barge to sink. He called Mr. Ostendorf and advised him of what had happened. Ostendorf acknowledged the claim and a notice of loss was made by Martin-LeBreton to American. The date of the loss is shown as July 9, 1969.
The testimony of both Ostendorf and Pelas reflects that they met on several occasions thereafter, and on each occasion, Pelas asked Ostendorf about his loss and Ostendorf replied in each instance that the insurance company was handling it. Furthermore, Ostendorf knew the whereabouts of Pelas and his correct address. American could have reached Pelas, if an inquiry had been made.
Mr. Rolland Wilkins testified that he was an employee of Employers' Commercial Union Company, of which American is one of the group. His job is that of chief adjuster and supervisor. He alleges he made an investigation of the claim sued upon but was unable at any time to contact Pelas. He wrote a letter to Pelas and this letter was not returned. He contacted Ostendorf and asked him if he did see Pelas that he, Wilkins, would like to see him. This court is not impressed with the fact that there was a lack of cooperation on the part of Pelas, but rather there was a lack of diligence on the part of defendant's agents in seeking the cooperation. The allegations of the defendant in this regard are without merit.
As to the proof of loss, Wilkins states that no proof of loss blanks were submitted to Pelas because it was premature. Normally as much information as possible is sought concerning the loss before the proof of loss is submitted. Wilkins further stated that Hurricane Camille struck and he had many claims to handle. This court can only conclude from the record that *817 Wilkins did not do the investigative work desired and no proof of loss blanks were ever supplied Pelas.
Plaintiff cited Bamburg v. American Security Life Ins. Co., 241 So. 2d 606 (1970) but this case is inapplicable. In that case, requests for proof of loss were made by plaintiff but no forms were ever sent him. The court found that this constituted a waiver by the insuror. In the instant case, there is a negation of the necessity for the proof of loss by defendant's agent. This is an absolute contradiction to the express verbiage of the contract. For defendant-appellant to now assert the necessity of a proof of loss and by the testimony of their agent, deny the necessity for such proof, surely constitutes a waiver by the insuror of the necessity of a proof of loss. To find otherwise would place the claimant in an untenable position. Defendant's position in this regard is without merit.
In the month of August, 1969, Wilkins' claim supervisor, Frank Cefalu called his attention to an article in the Times-Picayune, wherein the article stated that a federal grand jury indictment was returned against Calvin J. Pelas, Sr. for removing equipment from a vessel and then sinking it. Wilkins stated, "We had suspicions and we though we had better investigate the matter thoroughly." Also, Motto Francevich, from whom Pelas bought the barge M-46, had been convicted of sinking of vessels by a federal court and was serving time in the federal penitentiary. Wilkins went on to state that, although they had these suspicions, they were hampered in their investigations because of the heavy work load brought on by Hurricane Camille and from all indications, the matter was merely left in abeyance until such time as a suit was filed by Pelas, plaintiff-appellee.
The jurisprudence of this state is so well settled as to require that specific exclusions in a policy of insurance must be proven and the burden of proving said exclusions rests upon those asserting them, the insuror. Clearly, the appellants have failed to discharge this burden. On the contrary, the testimony of Ostendorf and Wilkins leads this court to the conclusion that Pelas was lulled into a feeling of complacency thinking his claim was being handled by American. This testimony refutes the need for a proof of loss.
The record further indicates that no real effort to locate Pelas to seek his cooperation was made. In fact, the testimony signally points out that Wilkins was very busy with claims from Hurricane Camille and only because he suspected that fraud may exist, did he delay the resolution of Pelas' claim. It is significant that Pelas' suit was filed just one day before the anniversary of the loss.
This court must conclude, as the lower court did, that the unwarranted delay by American in its investigation of this case and the refusal of Pelas' claim under the terms of the insurance contract is arbitrary and capricious, and without probable cause.
For the foregoing reasons the judgment of the lower court is affirmed. Cost of this appeal to be borne by defendant-appellant.
Affirmed.
SCHOTT, J., dissenting.
SCHOTT, Judge (dissenting).
The policy sued on in this case provides:
"This policy insures, except as hereinafter excluded, against direct loss or damage resulting from any external cause."
As in any action on an insurance policy the burden is upon the plaintiff to prove the loss insured against. From my careful review of the record in this case I have concluded that the plaintiff did not prove that the insured barge was lost in the first *818 instance and consequently he failed to carry his burden of proof.
He testified that he left the barge with the dragline in the care of one Motto Francevitch and that he had seen it spudded down in the boatyard prior to July, 1969, when one morning he went to the yard and found that the dragline wasn't there. He attempted to prove by hearsay testimony with conversations he had with someone named "Ness" and with Francevitch himself that the barge had sunk, but timely objection was made to this testimony and the trial judge erroneously overruled the objection. With this evidence removed from the record there is no admissible evidence to support what happened to the barge, although this evidence was presumably available to plaintiff. There was testimony to the effect that Francevitch was in a penitentiary in Texarkana, Arkansas, where his deposition could have been taken. As to Ness, no evidence whatsoever was placed in the record to explain why he was not called. On cross examination, plaintiff was asked the question, "As far as you know, of your own direct knowledge, that barge and the link belt might be sitting over in some bayou somewhere, just in perfectly good shape, is that correct?" And after some objections and arguments between counsel the witness finally answered, "I couldn't say where it was."
In the majority opinion, the statement is made that plaintiff "was advised that a squall and heavy winds forced the vessel against the bank. Water came over the vessel later on and caused the barge to sink." This testimony was absolutely inadmissible and should not be considered by this Court. The history of the statement is that it appears in the proof of loss entered in evidence over the objection of defendant on the testimony of the insurance agent to the effect that he received a telephone call from plaintiff and had this memorandum written up by someone in his office.
When all of the inadmissible testimony is expunged from the record we are left with no evidence whatsoever that this barge and dragline were ever lost. That being the case, plaintiff has failed to prove his case and his suit should be dismissed.
I respectfully dissent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3767859/ | Defendant-appellant Eric J. Steele appeals from his conviction of aggravated robbery in the Franklin County Court of Common Pleas following his entering of a no-contest plea and raises two assignments of error, as follows:
"1. The trial court erred in overruling the appellant's motion to dismiss since he was not brought to trial within the time limits set forth in Ohio Rev. Code 2945.71, et seq.
"2. The appellant was denied the effective assistance of counsel in violation of his Sixth and Fourteenth Amendment rights under the Constitution of the United States."
Defendant, then seventeen years old, was arrested on November 18, 1981, for aggravated robbery, which occurred four days earlier. The state filed a motion in the Juvenile Branch of the Domestic Relations Division of the Franklin County Court of Common Pleas seeking to have defendant tried as an adult. Hearings were conducted in the juvenile court on December 8, 1981, and January 19, 1982, and, at the latter hearing, the juvenile court announced an oral decision finding that defendant should be tried as an adult since he was not amenable to care or rehabilitation in any facility designed for the care and rehabilitation of delinquent children and that the safety of the community may require him to be kept under restraint beyond his majority.
This oral decision was reduced to a written decision signed by the juvenile judge and filed in the juvenile division of the court of common pleas on January 27, 1982. On January 29, 1982, a formal entry signed by the trial judge was filed in the general division of the court of common pleas and bears two identical file stamps, one at the top and one at the bottom of the page, the one at the top bearing the time of 1:17 p.m. and the one at the bottom the time of 1:27 p.m., both on January 29, 1982. This entry bears no file stamp of the juvenile division of the court of common pleas as does the findings which were filed on January 27, 1982.
Defendant filed a motion contending that he had not been brought to trial within the time required by R.C. 2945.71, initially contending that, since he had been incarcerated from the date of his arrest, he should have been brought to trial within ninety days from November 18, 1981, the date of his original arrest as a juvenile upon the charge.
However, as held in State, ex rel. Williams, v. Court of CommonPleas (1975), 42 Ohio St.2d 433, 434 [71 O.O.2d 410], R.C.2945.71 applies only from the time that the juvenile court relinquishes jurisdiction and transfers the defendant to be tried as an adult.
Notwithstanding Williams, defendant continues to contend that he was not brought to trial within the time required by R.C.2945.71, since his trial did not commence until April 26, 1982, some ninety-seven days after January 19, 1982, the day the trial court rendered the oral decision determining that defendant should be tried as an adult. However, in Williams, as well as inState v. George (Jan. 10, 1980), Franklin App. No. 79AP-552, unreported, the time was computed from the time of the filing of the journal entry in the juvenile court determining to transfer the defendant to the general division for trial as an adult. While there may be some uncertainty as to the date on which the journal entry was filed in the juvenile court in this case, clearly it was no earlier than January 27, 1982, the date that the written findings bearing the juvenile division file stamp were filed. Even assuming that the findings of the trial court rather than the journal entry would constitute the equivalent of the "arrest," for purposes of R.C. 2945.71, under the circumstances of this *Page 139
case, the filing of the written findings, rather than the announcement of an oral decision, would be the pertinent time. Since April 26, 1982 is the eighty-ninth day from January 27, 1982, defendant was brought to trial timely. The juvenile division of the court of common pleas, not the prosecutor, is charged with the responsibility of making findings and causing journal entries to be filed. While the court may require counsel to prepare an entry to submit to the court, the ultimate responsibility is that of the court. Nevertheless, under the circumstances of this case, there has been no violation of R.C.2945.71 with respect to bringing defendant to trial as an adult. The first assignment of error is not well-taken.
By the second assignment of error, defendant contends that his trial counsel was ineffective by not presenting certain motions. His appointed trial counsel made a determination either not to file or not to pursue certain motions, including motions to suppress evidence, for reasons unknown to this court. The filing of such motions is not routine and should be done only where the motions have arguable merit. Here, the record does not, and cannot, demonstrate whether or not there were pretrial motions having arguable merit, which prudent counsel would have filed under the circumstances of this case. Resolution of this issue necessarily involves evidence dehors the record. If such an issue is justiciable, it must be raised by post-conviction proceedings under this circumstance involving extrinsic evidence. The second assignment of error is not well-taken.
For the foregoing reasons, both assignments of error are overruled, and the judgment of the Franklin County Court of Common Pleas is affirmed.
Judgment affirmed.
STRAUSBAUGH and NORRIS, JJ., concur. | 01-03-2023 | 07-06-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/2230106/ | 702 N.W.2d 581 (2005)
PEOPLE
v.
HOLLIS.
No. 128222.
Supreme Court of Michigan.
August 30, 2005.
SC: 128222, COA: 251008.
On order of the Court, the application for leave to appeal the February 15, 2005 judgment of the Court of Appeals is considered, and it is DENIED, because we are not persuaded that the questions presented should be reviewed by this Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3354516/ | [EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]MEMORANDUM OF DECISION ON MOTION TO DISMISS
The plaintiff corporation operates a nightclub at a shopping center in East Windsor, Connecticut. The nightclub is operated in a B-2 zone which requires a special use permit for such use of the property, see East Windsor Zoning regulation 8.1.5.
Plaintiff initially applied for a special use permit in December of 1994. It was approved by the defendant town of West Windsor Planning and Zoning Commission on January 10, 1995, subject to sixteen conditions. Condition #13 provided "The special permit shall initially expire one year from the issuance of a full liquor license by the Liquor Control Commission."
The plaintiff received its full liquor license in August of 1995. Prior to the expiration of the special permit in August of 1996, the plaintiff applied to renew the special permit. The plaintiff further sought the elimination of condition #16 of the original special use permit. Condition #16 required: "No one under 21 shall be permitted on the premises (other than employees) except during non-alcoholic special events." Following a hearing on the renewal application, the defendant renewed the permit for one year with condition #16.1
The plaintiff again applied to renew the special use permit in August of 1997, again seeking the elimination of condition #16. Following a hearing, the defendant on August 12, 1997, renewed the permit for one year, once again subject to condition #16. This appeal, filed on September 12, 1997, challenges the legal basis of condition #16. The defendant on October 30, 1997, moved to dismiss the appeal as untimely under General Statutes § 8-8 (b).2
Defendant argues that plaintiff was required under § 8-8
(b) to appeal condition #16 within thirty days of the original special use permit issued on January 10, 1995. Defendant relies on the authority of Spectrum ofConnecticut, Inc. v. Planning Zoning Commission,
CT Page 178213 Conn. App. 159, cert. denied, 207 Conn. 804 (1988), and Upjohn Co.v. Zoning Board of Appeals, 224 Conn. 96 (1992).
In Spectrum the property owner-plaintiff was granted a special use permit to operate a game room on July 1, 1983 for one year with a condition that it control "loitering and other nuisance occurrences." Id., 162.
When Spectrum sought to renew its permit in 1984 a public hearing was held where testimony was adduced concerning noise, litter, vandalism, loitering, and use of drugs and alcohol by Spectrum's patrons. The Ellington Planning and Zoning Commission denied the renewal of the special use permit on the grounds that Spectrum failed to control loitering and nuisances. Spectrum appealed the denial of the renewal of the special permit. The Appellate Court in reversing the trial court held: "a party may not challenge on appeal the validity of a preexisting condition to a special permit which it seeks to renew. Having failed to challenge it when it was imposed, Spectrum was in no position to contest the validity of the condition when the commission evaluated Spectrum's renewal application by looking at its noncompliance with the condition." Spectrumof Connecticut, Inc. v. Planning Zoning Commission, supra,13 Conn. App. 162.
In Upjohn, supra, the property owner-plaintiff appealed a zoning board of appeals decision upholding a cease and desist order resulting from a violation of a condition to a zoning permit. The Supreme Court in Upjohn would not allow a collateral attack on the condition in the original permit. We conclude that Upjohn, having secured the permits in 1983 subject to condition seven and not having challenged the condition by appeal at that time, was precluded from doing so in the 1986 enforcement proceedings at issue in this case." Upjohn Co. v. Zoning Board of Appeals, supra,224 Conn. 102. The court went on to note the need for stability in land use planning which necessitated this result.
The instant case is presented in a slightly different context. Unlike the plaintiff in Spectrum, Ike, Inc. has disputed the condition before the Planning and Zoning Board. Also, this appeal is not so clearly a collateral action as in Upjohn. However, Spectrum and Upjohn are based on a more fundamental principle which is dispositive of this case: CT Page 1783 "the failure of a party to appeal from the action of a zoning authority renders that action final so that the correctness of that action is no longer subject to review by a court. Haynes v. Power Facility Evaluation Council,177 Conn. 623, 629-30 (1979); see Beit Havurah v. Zoning Boardof Appeals, 177 Conn. 440 (1979)." Upjohn Co. v. ZoningBoard of Appeals, supra, 204 Conn. 102.
This principle recognizes that special uses or exceptions are "neither absolutely permitted as of right nor prohibited by law. They are privileges, in a sense, which must be applied for and approved by some designated governmental body authorized to condition the grant of permission based on a number of land use considerations. Rohan, Zoning and Land Use Controls § 44.01[1] (1992). SeeA.P.W. Holding Corp. v. Planning Zoning Board,167 Conn. 182, 185 (1974) (the special use must satisfy the conditions enunciated by the zoning board to protect the public health, safety, convenience, and property values."); andRocci v. Zoning Board of Appeals, 157 Conn. 106, 112 (1968). "The basic rationale for the special permit . . . is that while certain land uses may be generally compatible with the uses permitted as of right in a particular zoning district, their nature is such that their precise location and mode of operation must be individually regulated because of the particular topography, traffic problems, neighboring uses, etc., of the site." (Internal quotation marks omitted.)Whisper Wind Development Corp. v. Planning Zoning Commission,32 Conn. App. 515, 519 (1993), aff'd, 229 Conn. 176,640 A.2d 100 (1994).
The plaintiff having failed to appeal the imposition of Condition #16 on its initial special use permit, is no longer able to seek court review of the propriety of such decision.
The appeal is dismissed.
Robert F. McWeeny, J. | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/3354517/ | To summarize briefly what has taken place, this court, following its memorandum of April 8, 1963, entered an order, under the provisions of § 52-156 of the General Statutes, directing that depositions be taken of certain employees of the city of New Haven. The reason for granting the petition of the plaintiff for the taking of these depositions and for the issuance of the order, dated April 25, 1963, was to make it possible for her to have the information necessary for properly bringing on action under the provisions of § 7-308 of the General Statutes against the city of New Haven and the specific employee or member of the city fire department who she claims was responsible for causing her injury. By taking an appeal, which, of course, the city had every right to do, from the order, the city has effectively stayed the taking of *Page 456
the depositions, unless this court, as the one who issued the order, interferes.
There is no question in the court's mind that it has the authority under § 411 of the Practice Book to order that the stay be terminated. The specific portion of § 411 to which reference is made is that reading ". . . if the judge who tried the case is of the opinion that . . . the appeal is taken only for delay or that the due administration of justice requires him to do so, he may at any time, upon motion and hearing, order that the stay be terminated." As indicated at time of argument, the court certainly does not think that the city took its appeal solely for the purpose of delay. There is a good question of law involved, which should be resolved by our Supreme Court, as to whether or not this is the proper use to be made of the statute providing for the perpetuation of testimony. General Statutes § 52-156. However, the entire purpose of the issuance of the order to perpetuate testimony would be defeated if the depositions are delayed beyond the time within which the plaintiff must file her action, and in order to do so she must have the information that she seeks in the depositions. For that reason, the conclusion has been reached that the due administration of justice requires the court to terminate the stay. With respect to the city's position that this termination of the stay will cause the parties whose depositions are to be taken irreparable injury, the court must, of course, balance that claim against the injury that would result to the plaintiff if her application is denied.
The position of the city is that the plaintiff would not be irreparably harmed because there are other methods which her counsel might pursue in protecting her rights, but it seems that the same reasons apply here as applied to granting her petition to perpetuate testimony in the first place, namely, that *Page 457
the other procedures suggested would be cumbersome and roundabout, and although they may exist it seems to the court that this is exactly the type of situation which is sought to be covered by § 52-156
of the General Statutes — regardless of the use of the word "perpetuate" in that statute. On the other hand, it is difficult to see what irreparable damage would be caused to Chief Collins or Lieutenant Boyle or Officer Buffalo, if they were to be subjected to the taking of depositions which probably would not take more than five minutes, other than the slight inconvenience of appearing briefly before some proper authority. Doubtless, the "irreparable harm" referred to by counsel for the city is the very use of this statute for the purpose of taking depositions against anyone, rather than any burdensome inconvenience to the individuals.
However, if it is the rather academic question that the city wishes to have determined, as to whether the court has authority under the deposition statute to order this kind of proceedings, that question can be resolved on appeal even if the depositions have been taken, and it would appear that the real solution of the whole problem might be to request the Supreme Court to review the original order which the court gave for perpetuating testimony under these circumstances at the time it hears the merits of any appeal from this order terminating the stay of execution.
Under the case of Northeastern Gas TransmissionCo. v. Benedict, 139 Conn. 36, our Supreme Court seems to indicate that this is the proper procedure under these particular circumstances — that is, to proceed as counsel has done under § 411 of the Practice Book — and the Supreme Court there states specifically that this is a matter which lies entirely within the discretion of the trial judge. *Page 458
So as to leave no stone unturned, reference also is made to § 52-477 of the General Statutes, which refers to a stay pending appeal of a mandatory injunction. This statute probably is not applicable here instead of § 411 of the Practice Book, but the view might be taken that by ordering the taking of these depositions the court has, to some extent, issued an order similar to a mandatory injunction, and § 52-477 provides that "[W]hen judgment has been rendered for a permanent injunction ordering either party to perform any act, the court, upon an application similar to that mentioned in § 52-476, shall stay the operation of such injunction until a final decision in the supreme court of errors, unless the court is of the opinion that great and irreparable injury will be done by such stay or that such application was made only for delay and not in good faith." Here again, it is not implied that any bad faith or intentional delay is involved. Rather, as under the section of the Practice Book referred to, in the exercise of the court's discretion and in its best judgment, it appears that irreparable injury would be caused to this plaintiff unless this stay of execution is terminated.
For that reason, the court grants the motion of Mary Muti that stay of execution on appeal in this matter shall terminate and that depositions of Chief Collins, Lieutenant Boyle and Officer Buffalo be taken either at the hour presently suggested of 4 p.m., May 13, 1963, or at such other time within the next two weeks as may be agreed upon by counsel.1
It is so ordered. | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/2296250/ | 694 A.2d 138 (1997)
115 Md. App. 524
Nathaniel FICK
v.
PERPETUAL TITLE COMPANY et al.
No. 959, Sept. Term, 1996.
Court of Special Appeals of Maryland.
May 28, 1997.
*140 Nathaniel Fick, Baltimore, for Appellant.
Stanley Alpert (Yvette N. Diamond and Cohen, Alpert and Forman, on the brief, for Appellees, Perpetual and the Bourquins), Baltimore; Edward J. Gilliss (Christine J. Saverda and Royston, Mueller, McLean & Reid, LLP, on the brief, for Appellee Great Western Mortg. Corp.), Towson, for Appellees.
Argued before HOLLANDER, SALMON and THIEME, JJ.
*139 SALMON, Judge.
This case has its provenance in a simple debt collection suit filed by the law firm of Fick & Petty against Jeanette Saint-Bell (Ms. Saint-Bell). That case led to the present one, in which the major legal issue presented is whether, under the Maryland Fraudulent Conveyance Act, the grantee of property who pays fair consideration for the property must be shown to have actual, as opposed to constructive, knowledge of the fraudulent nature of the conveyance in order for a creditor to set aside that conveyance. To understand fully the facts and legal nuances of the interplay between the two cases, it is useful to know the sequence of background events.
I. THE TIME LINE
1. Commencing in 1989, the law firm of Fick & Petty represented Ms. Saint-Bell in a successful lawsuit she brought against a third party. As a result of that lawsuit, Ms. Saint-Bell owed Fick & Petty certain legal fees.
2. Fick & Petty, on June 14, 1991, sued Ms. Saint-Bell in the Circuit Court for Baltimore County for the aforementioned legal fees ("the debt suit").
3. At the time the debt suit was filed, Ms. Saint-Bell, individually, owned approximately eleven acres of land improved by a home known as 16510 Cedar Grove Road, Sparks, Maryland ("the property"). On September 11, 1991, she executed a deed to the property to herself and her minor daughter, Casey Joy Saint-Bell ("Casey Joy"), as joint tenants. The deed recited as consideration: "None (The love and affection that a mother has for her child)."
4. Ms. Saint-Bell and the law firm of Fick & Petty filed, on December 18, 1991, in the debt suit, a "Stipulation," which stated, in pertinent part:
5. The plaintiff [Fick & Petty] agrees to accept the sum of Ten Thousand ($10,000.00) Dollars in full satisfaction if paid on or before January 22, 1992. Payment shall be made in cash, certified check, bank check or attorney's escrow check. Upon payment as provided for in this paragraph, plaintiff shall dismiss its claim with prejudice and tender the original Consent Order for Judgment to defendant's counsel.
6. The defendant expressly consents to the filing of the Consent Order for Judgment on January 23, 1992 if the payment specified in paragraph 5 above is not made prior to 5:00 p.m., January 22, 1992 tendered to the office of counsel for plaintiff.
7. Should the payment as specified in paragraph 5 above not be made as agreed, the defendant may satisfy the Consent Order for Judgment according to the following schedule:
a. pay $11,000.00 until February 22, 1992.
b. pay $12,000.00 from February 23, 1992 until March 22, 1992.
c. pay $13,000.00 from March 23, 1992 until April 22, 1992.
d. pay $14,000.00 from April 23, 1992 until May 22, 1992.
After May 22, 1992, the plaintiff is entitled to execute its judgment and attach *141 such property as it deems necessary, subject to lawful exemption. Post judgment interest at the legal rate shall commence to [accrue] as of May 23, 1992.
5. The day after the Stipulation was signed, on December 19, 1991, the deed mentioned in paragraph 3 above, was filed in the land records of Baltimore County.
6. Ms. Saint-Bell did not pay $10,000 as agreed in the Stipulation. Accordingly, on June 9, 1992, a consent judgment in the amount of $14,000 was entered in the Circuit Court for Baltimore County in favor of the firm of Fick & Petty against Ms. Saint-Bell.
7. On April 5, 1993, Ms. Saint-Bell, individually and on behalf of herself and her minor daughter, Casey Joy, entered into a contract to sell the property to Paul and Donna Bourquin (the "Bourquins") for $263,000.
8. Immediately after the signing of the contract, the Bourquins retained Perpetual Title Company ("Perpetual") to perform a title search on the property to ascertain, inter alia, if the property was encumbered by any lien.
9. Based upon advice of Perpetual's agent, Geoffrey Forman, that she would need a court order permitting her to execute a deed conveying Casey Joy's interest in the property, Ms. Saint-Bell retained an attorney who filed a Motion for Authorization of Sale Under Affidavit. The motion was supported by Ms. Saint-Bell's affidavit to the court in which she swore that the reason she conveyed the property to her daughter (as a joint tenant) was because in 1991 she had been "diagnosed as having a serious illness," and she wanted to "facilitate the transfer of [the property] ... in case of [her] demise." She further averred that she was presently "symptom free," but due to lost earnings and medical treatment it was necessary to sell the property. The circuit court, on April 29, 1993, signed an order authorizing Ms. Saint-Bell to execute a deed to the Bourquins on behalf of Casey Joy.
10. On April 30, 1993, the firm of Fick & Petty filed (in the debt suit) a Writ of Execution against the property.
11. A settlement on the property was held on May 7, 1993, and Ms. Saint-Bell, individually and on behalf of her daughter, conveyed the property to the Bourquins at a price of $263,000. Perpetual's agent at the settlement was Geoffrey Forman, an attorney in the law firm of Cohen, Alpert, and Forman. At the settlement, the Bourquins executed a $236,700 note in favor of Great Western Mortgage Corporation (Great Western), secured by a mortgage on the property.
12. Three days after the settlement, on May 10, 1993, the sheriff of Baltimore County attempted to carry out the Writ of Execution filed by the law firm of Fick & Petty by posting the property.
13. On May 13, 1993, the deed conveying the property to the Bourquins and the deed of trust securing Great Western were filed in the Baltimore County land records.
14. Nathaniel Fick, as an assignee of the law firm of Fick & Petty, filed, on August 5, 1993, a lawsuit in the Circuit Court for Baltimore County against Ms. Saint-Bell and the Bourquins requesting, inter alia, that the court order the county sheriff to issue a writ of execution against the property to be released only under payment of the amount that was owed by Ms. Saint-Bell to him.
15. Ms. Saint-Bell, on January 21, 1994, filed a suggestion of bankruptcy in which she stated that she had filed a petition for bankruptcy in a federal court in Florida.
16. On October 11, 1994, Ms. Saint-Bell received a discharge of all her debts, including the debt assigned to Fick, from the bankruptcy court.
II. THE SECOND AMENDED COMPLAINT
Mr. Fick's initial complaint and an amended complaint against the Bourquins and others were dismissed with leave to amend. On September 6, 1994, Mr. Fick filed a second amended complaint ("the Complaint") in the Circuit Court for Baltimore County.
*142 In Count I of the Complaint, the Bourquins and Great Western were named as defendants. Fick alleged three fraudulent conveyances. The first was from Ms. Saint-Bell to Ms. Saint-Bell and her daughter; the second was from Ms. Saint-Bell and her daughter to the Bourquins; and the third was the mortgage by the Bourquins to Great Western. Fick requested in Count I, inter alia, that the court issue a writ of execution on the property.
Count II was a negligence count directed against Perpetual wherein Fick claimed, inter alia, that Perpetual owed him (Fick) a duty to search the land records non-negligently and to give his enrolled judgment against Ms. Saint-Bell as well as his "execution and levy" against the property "full force and effect." Count III was a negligence count against the law firm of Cohen, Alpert and Forman (CAF). Count IV was a negligence count directed at Forman.
Forman, CAF, and Perpetual filed Motions to Dismiss, and on February 2, 1995, after a hearing, the trial court dismissed Counts III and IV, with leave to amend within 20 days. Fick never amended those counts.
In the meantime, on November 17, 1994, Fick voluntarily dismissed the action against Ms. Saint-Bell, although technically she was not named a defendant in the Second Amended Complaint. Summary judgment motions were filed on behalf of Great Western and the Bourquins, and on August 8, 1995, after a hearing, the court granted summary judgment in favor of the movants.
This case went to trial on April 11, 1996, against Perpetual, the only remaining defendant. At the conclusion of Fick's case, the trial judge (Bollinger, J.) determined that Fick had failed to prove negligence and granted Perpetual's motion for judgment.
QUESTIONS PRESENTED
Appellant presents us with three questions, which we have rephrased:
1. Did the trial judge err in granting summary judgment in favor of the Bourquins and Great Western?
2. Did the trial court err in dismissing Counts III and IV, with leave to amend, against the firm of Cohen, Alpert and Forman (Count III) and Forman (Count IV)?
3. Did the trial court err in granting Perpetual's motion for judgment at the conclusion of plaintiff's case?
STANDARD OF REVIEW AS TO QUESTION 1
A trial court shall grant a motion for summary judgment "if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law." Md. Rule 2-501(e). Thus, in considering a motion for summary judgment, the trial court determines issues of law and resolves no disputed issues of fact. Beatty v. Trailmaster Prods., Inc., 330 Md. 726, 737, 625 A.2d 1005 (1993) (citing Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 591, 578 A.2d 1202 (1990)). In determining whether a party is entitled to judgment under this rule, the court must view the facts, including all reasonable inferences, in the light most favorable to the opposing party. Baltimore Gas & Elec. Co. v. Lane, 338 Md. 34, 43, 656 A.2d 307 (1995); Warner v. German, 100 Md.App. 512, 516, 642 A.2d 239 (1994). The existence of a question of fact, however, will not necessarily preclude summary judgment unless the resolution of that question will affect the outcome of the case. King v. Bankerd, 303 Md. 98, 111, 492 A.2d 608 (1985); Warner, 100 Md.App. at 516-17, 642 A.2d 239.
In order for the opposing party to defeat a motion for summary judgment, the party must show that there is a genuine dispute as to a material fact and support his or her opposition by an affidavit or other sworn pleadings or admissions that set forth facts that would be admissible as evidence. Md. Rule 2-501(b) & (c); Beatty, 330 Md. at 737, 625 A.2d 1005. Furthermore, even if the facts are undisputed, if the facts can be interpreted as having more than one permissible inference, the case should be submitted to the trier of fact. The "standard for appellate review of a trial court's grant of a motion *143 for summary judgment is whether the trial court was legally correct." Heat & Power Corp., 320 Md. at 591-92, 578 A.2d 1202.
RESOLUTION OF QUESTION 1
The law as to fraudulent conveyances is largely founded on the English statute of 13 Elizabeth, enacted in 1570, which provided in substance that all conveyances or dispositions of property, real or personal, made with the intention to defraud creditors, should be null and void as against the creditors. This statute has, in practically all the states, been either recognized as a part of the common law ... or expressly adopted or reenacted in more or less similar terms.
37 C.J.S. Fraudulent Conveyances § 2, at 852 (1943) (footnote omitted).
The English statute was adopted in Maryland, 1 Alexander's British Statutes 499 (Coe's ed. 1912) and remained in effect until 1920, when the Maryland Uniform Fraudulent Conveyance Act (the "Act") was adopted. The Act was derived from the Uniform Fraudulent Conveyance Act, which was approved by the National Conference of Commissioners of Uniform State Laws and the American Bar Association in 1918. Unif. Fraudulent Conveyance Act, 7A U.L.A. 427 (1985 & Supp.1996). Between 1918 and 1985, the Act was adopted by twenty-five states and the Virgin Islands. Id. Although eighteen states have since repealed the Act, a substantial body of case law has developed interpreting its provisions.[1]
In Count I, as against the Bourquins and the mortgagor, Great Western, Fick did not ask for money damages. Instead, Count I is based on the Act as set forth in sections 15-201 to 15-212 of the Commercial Law Article of the Maryland Code (1975, 1990 Repl.Vol.). In Count I, Fick asked: 1) that the deed, dated September 11, 1991, from Ms. Saint-Bell to Casey Joy and Ms. Saint-Bell be set aside; 2) that the deed, dated May 7, 1993, from Ms. Saint-Bell and her daughter to the Bourquins be set aside; 3) that the mortgage to Great Western be declared to be subservient to the judgment against Ms. Saint-Bell, which had been assigned to Fick; 4) that the court direct the sheriff to issue a writ of execution against the property and to release it only upon satisfaction of the judgment against Ms. Saint-Bell; and 5) that the court order the sale of the property if the amount owing from Ms. Saint-Bell to plaintiff was not paid within thirty days. Under Maryland law, once a conveyance is proven to be fraudulent, a creditor has the option of either having the conveyance set aside or attaching the property conveyed. Frain v. Perry, 92 Md.App. 605, 620 n. 7, 609 A.2d 379, cert. denied, 328 Md. 237, 614 A.2d 83 (1992).
Sections 15-206 and 15-207 of the Act provide:
§ 15-206. Conveyance by a person about to incur debts.
Every conveyance made and obligation incurred without fair consideration when the person who makes the conveyance or who enters into the obligation intends or believes that he will incur debts beyond his ability to pay as they mature, is fraudulent as to both present and future creditors.
§ 15-207. Conveyance made with intent to defraud.
Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud present or future creditors, is fraudulent as to both present and future creditors.
In their motions for summary judgment, the Bourquins and Great Western contended that they were protected by the provisions of section 15-209 of the Act, which say, in pertinent part:
§ 15-209. Rights of creditor whose claim has matured.
(a) Setting aside conveyance; levy on or garnishment of property conveyed.If a conveyance or obligation is fraudulent as to a creditor whose claim has matured, the creditor, as against any person except a *144 purchaser for fair consideration without knowledge of the fraud at the time of the purchase or one who has derived title immediately or immediately [sic] from such a purchaser, may:
(1) Have the conveyance set aside or obligation annulled to the extent necessary to satisfy the claim; or
(2) Levy on or garnish the property conveyed as if the conveyance were not made.
(b) Prior judgment not required.In an action to have a conveyance set side or an obligation annulled, it is not necessary as a condition to the granting of relief that the creditor first obtain judgment on the claim.
(Emphasis supplied.)
The Bourquins assert that they purchased the property for fair value and that the purchase was made without knowledge of the fraud that Ms. Saint-Bell is alleged to have perpetrated and therefore, under section 15-209(a) of the Act, Fick was not entitled to set aside the conveyance or to levy against the property. Great Western, as the holder of a mortgage that conveyed an interest in the property from the Bourquins, claims that section 15-209 also protects it because it is "one who has derived title immediately ... from such a purchaser" as that phrase is used in section 15-209(a).
Substantively, section 15-209 is quite similar to the proviso in the Statute of Elizabeth, 13 Eliz., ch. 5 (1570) (Eng.), which reads:
Provided also ... that this act or anything therein contained, shall not extend to any estate or interest ... which estate or interest is or shall be upon good consideration and bona fide lawfully conveyed or assured to any person or persons, or bodies politic or corporate, not having at the time of such conveyance ... any matter of notice or knowledge of such covin,[[2]] fraud, or collusion as is aforesaid.
In Garrard Glenn, 1 Fraudulent Conveyances and Preferences § 236, at 497 (rev. ed. 1940), an example is given as to how the British statute operated in a case like the one at hand:
An insolvent debtor (whom we shall call X) sells to A under such circumstances as to make a fraudulent grantee of A. In such a case, the creditors of X may set aside the transaction and recapture the property from A so long as he still has it. But suppose that before the creditors move against him, A sells the property to B, who has no knowledge or notice of the circumstances that attended A's original acquisition, and regarded X as merely a predecessor in title. The question is whether the creditors of X may set aside both transfers, from X to A, and from A to B, and thus subject to their debts the property while in the hands of B.
... On the other hand, we are dealing with a rule which is drawn from a statute supplemented by equitable ideas.
Of course, if the statute had affirmatively stated that the ultimate grantee, though he took in good faith and for value, got nothing better than the rights possessed by his transferor, there would be no room for argument. But the original statute, the 13th Elizabeth, never said that. On the contrary, the proviso cuts off the application of the Act to any property which "is upon good consideration and bona fide lawfully conveyed or assured to any person or persons," etc., who shall not have "at the time of such conveyance ... any manner of notice or knowledge," etc. By not limiting its protection to the debtor's immediate grantee, the statute leaves room for protection of an ultimate purchaser in good faith.
In order for Fick to prevent the entry of summary judgment against him, he was required to put forth evidence from which a trier of fact could find 1) that the Bourquins did not give fair consideration to the grantors of the property or 2) that at the time the Bourquins bought the property they had knowledge that the grantors were making a fraudulent conveyance of the type mentioned in his Complaint. Mr. Fick never contended that the Bourquins did not give the grantors fair consideration when they purchased the property for $263,000.
*145 A. KNOWLEDGE OF THE FRAUDULENT NATURE OF THE TRANSACTION
Must the grantees have actual, as opposed to constructive, knowledge of the fraudulent nature of the conveyance in order to set aside a conveyance as fraudulent under section 15-209? Most courts that have considered the question have held that constructive notice is sufficient.
While there is authority to the contrary in some jurisdictions, the general rule is that if a purchaser had knowledge of facts and circumstances naturally and justly calculated to excite suspicion in the mind of a person of ordinary prudence, and which would naturally prompt him to pause and inquire before consummating the transaction, and such inquiry would have necessarily led to a discovery of the fact with notice of which he is sought to be charged, he will be considered to be affected with such notice, whether or not he made the inquiry. Under these circumstances it is immaterial that the purchaser did not have actual knowledge of the fraudulent intent of the seller or did not participate therein.
37 C.J.S. Fraudulent Conveyances § 126, at 957-58 (1943) (footnotes omitted). To the same effect, see 37 Am.Jur.2d Fraudulent Conveyances § 9, at 699-700 (1968).
In Columbia Int'l Corp. v. Perry, 54 Wash.2d 876, 344 P.2d 509 (1959), the court held that constructive knowledge, not actual knowledge, was all the creditor needed to prove. In that case, one Perry was the majority stockholder in a corporation. Perry was indebted to plaintiff. He sold his corporate stock to one Trosper for $57,000. Thereafter, Perry squandered the sales proceeds. Id. 344 P.2d at 511. Trosper indisputably had no actual knowledge that Perry intended to defraud his creditor, but he was nevertheless sued by plaintiff in an effort to set aside the stock transfer as a fraudulent conveyance. In this context, the Perry court set forth the rule:
But the actual knowledge is not always needed. A transferee may be charged with knowledge where he is aware of facts and circumstances which are calculated to put him on inquiry, and such inquiry would have led him to discover the intent of the transferor. O'Leary v. Duvall, 10 Wash. 666, 39 P. 163 [(1895)]; Armstrong v. Armstrong, 100 Wash. 270, 170 P. 587 [(1918)]. However, there must be more than mere suspicion to charge the buyer with inquiry and knowledge of the seller's fraud. There must be discovery of evidential facts leading to a belief in the fraud. Davison v. Hewitt, 6 Wash.2d 131, 106 P.2d 733 [ (1940) ].
Id.
The same basic rule was adopted in O'Neill v. Little, 107 N.J.Super. 426, 258 A.2d 731, 735 (1969), although different terminology was used:
A transfer is not made in good faith if the transferee has knowledge of the fraudulent intent of his grantor or if he is aware of circumstances which should have put him on inquiry and which were equivalent to notice of said fraudulent intent. A leading authority for this proposition is Tantum v. Green, 21 N.J.Eq. 364 (E. & A. 1869), where the court stated:
The conclusion to which I have come is the same as that arrived at by the Chancellor, that though Dr. Tantum may not have had such knowledge of the intended fraud as to make his denial thereof perjury, yet he had notice of suspicious, unusual, and extraordinary circumstances, which should have put him on inquiry. That he paid full consideration for the assignments will not suffice. He must not only be a purchaser for value, but a bona fide purchaser without notice of the fraudulent intent of the assignor, or of circumstances which should have put him on inquiry, and which were equivalent to notice.
To same effect, see Equitable Life Assurance Society v. Patzowsky, 131 N.J.Eq. 49, 23 A.2d 561 (E. & A. 1942).
There is language in some Maryland cases that suggests that Maryland follows the minority rule. Berger v. Hi-Gear Tire & Auto Supply, Inc., 257 Md. 470, 475, 263 A.2d 507 (1970) ("a grantor's fraudulent intent does not vitiate a conveyance unless the grantee participates in the grantor's fraudulent intent"); *146 Long v. Dixon, 201 Md. 321, 323, 93 A.2d 758 (1953) (same); McCauley v. Shockey, 105 Md. 641, 645, 66 A. 625 (1907). Knowledge of the fraud is equivalent to participation in the fraud. Oles Envelope Corp. v. Oles, 193 Md. 79, 89, 65 A.2d 899 (1949). In Oles, Judge Delaplaine for the Court said:
The grantee's knowledge of or participation in the fraud of the grantor must be gathered from the various facts composing the transaction and all the surrounding circumstances. Where a conveyance is valid on its face, the burden of proof is upon the party attacking the conveyance to show either (1) that it was not made upon a good consideration, or (2) that it was made with a fraudulent intent on the part of the grantor to hinder, delay or defraud his creditors, and that this intent was known to or participated in by the grantee. Fuller v. Brewster [& Co.], 53 Md. 358, 359 [(1880)]; McCauley v. Shockey, 105 Md. 641, 66 A. 625 [(1907)]; Kennard v. Elkton Banking & Trust Co., 176 Md. 499, 6 A.2d 258 [(1939)].
Id.
None of the cases mentioned in the last paragraph, however, concerned an allegation by a creditor that a grantee had constructive, as opposed to actual, knowledge of the grantor's fraud.
Older Maryland cases explicitly hold that constructive knowledge on the part of the grantee is sufficient.
It is very clear to us that Smith, the father, had ample reason from the facts within his knowledge to believe that his son was perpetrating a fraud on his creditors, and that if his plans were successful he would place the stock of goods and their proceeds beyond their reach. This Court has frequently given its opinion on such a state of facts. In Baynard v. Norris, 5 Gill [468], 483 [(Md.1847)] it was said: "In any purchase, if there be circumstances which in the exercise of common reason and prudence ought to put a man upon particular inquiry, he will be presumed to have made that inquiry, and will be charged with notice of every fact which that inquiry would give him." And again, "A purchaser whenever he has sufficient information to put him on inquiry, in equity is considered as having notice; and in such case he will not be deemed a bona fide purchaser." We may also refer to Green v. Early, 39 [Md. 223], 229 [(1874)]; Abrams v. Sheehan, 40 [Md.] 446 [1874], and Higgins v. Lodge, 68 [Md. 229], 235 [11 A. 846 (1888)]. Upon this principle we must hold that Smith, the father, was not a bona fide purchaser.
Smith v. Pattison, 84 Md. 341, 345, 35 A. 963 (1896) (emphasis added). While Pattison was decided prior to the Act, the Act itself is declaratory of the common law and of the Statute of Elizabeth, 13 Eliz., ch. 5 (1570) (Eng.). Damazo v. Wahby, 269 Md. 252, 256, 305 A.2d 138 (1973). As mentioned earlier, the Statute of Elizabeth protected only grantees who were without "any manner of notice or knowledge of such covin, fraud, or collusion...." Pattison has not been explicitly overruled.
We distill from all the above that Pattison still enunciates the rule to be here followed, and therefore we first must determine what facts were actually known to the Bourquins at the time they purchased the property. Based on those facts we then determine whether, in the exercise of common sense and prudence, the Bourquins should have been put on inquiry as to Ms. Saint-Bell's alleged fraud. If they should have been put on inquiry, then the law charges them, as grantees, with knowledge of every fact that would have been learned after reasonable inquiry.
Curiously, Fick places prime reliance on the case of Milholland v. Tiffany, 64 Md. 455, 2 A. 831 (1886), in his effort to show that the Bourquins had constructive knowledge of the fraud. Based on the Milholland case, he argues that knowledge that the deed from Ms. Saint-Bell to herself and Casey Joy was for no consideration was "sufficient to indicate a measure of fraud affecting the conveyance of the property." Fick's reliance on the Milholland case is misplaced.
At the time the Milholland case was decided, a Maryland statute (article 45, section 1, of the Maryland Code) provided that a conveyance of property from a husband to a wife *147 was not valid if the transfer was "in prejudice of the rights of creditors." Green v. Early, 39 Md. 223, 229 (1874). In Milholland, 64 Md. at 457, 2 A. 831, a Mr. Hand transferred land to his wife's name and at the same time paid off an existing mortgage with money borrowed from one Tiffany. Tiffany took back a note, signed by Mr. Hand and his wife, that was secured by a mortgage on the land. Mr. Hand then became insolvent. A lawsuit was filed by the insolvent's trustee to set aside the conveyance to Mrs. Hand as a fraud on creditors. The property was sold by the court, and Tiffany claimed he had a right to the proceeds as a "bona fide purchaser, under his mortgage[,] without knowledge that the deed to the wife was fraudulent." Id. The non-secured creditors claimed that, although Tiffany did not have actual knowledge of the fraudulent transfer, a "voluntary conveyance to the wife is in itself sufficient knowledge to put the purchaser [Tiffany] upon inquiry, and if he fails or refuses to make the inquiry, he is chargeable with the knowledge of such facts as the inquiry would necessarily have disclosed." Id. The court agreed with the creditors and ruled against Tiffany, saying:
And since the decision in Green v. Early, 39 Md. 223, this is no longer an open question. In that case it was expressly decided that the purchaser of property thus acquired by the wife under the Code, "was bound to know that the property was liable to the husband's debts, if there was no other sufficient property with which they could be paid; and with this knowledge," say the Court, "he was put upon inquiry as to the existence and extent of the debts for which the property might be liable." We see no reason to qualify in any manner the decision thus made; on the contrary, it is but a just and proper construction of the Code, having regard to the rights of creditors which the Legislature obviously intended to protect.
Conveyances founded upon the consideration of blood or marriage, are, we admit, sanctioned by the law, and it has been held, that such conveyances are not in themselves sufficient under the Statute of Elizabeth, to put a purchaser upon the inquiry as to their good faith,that he has the right to rely upon the presumption that they were honestly made in the absence of evidence to the contrary. But there is this difference between the Statute of Elizabeth and our Code: the husband could not under the English Statute nor by the common law convey his property directly to his wife, while under our Code he may do so, provided, however, says the Legislature, that such conveyances are not in fraud of the rights of subsisting creditors. He could, it is true, convey his property to a trustee for the use and benefit of his wife under the English Statute, but the property in the hands of the trustee was still liable for his debts. And such are the relations between husband and wife, that in dealing with a voluntary conveyance made to the wife under the Code, Courts ought to be watchful to see that they are not mere contrivances to put the property of the husband beyond the reach of his creditors.
Id. at 457-58, 2 A. 831 (emphasis added).
Milholland does not help appellant because there no longer is any counterpart to article 45, section 1, of the Maryland Code, which was the statute under consideration in Milholland. Moreover, as the Milholland case points out, under the Statute of Elizabeth, the mere fact that the consideration for a conveyance is "blood or marriage" is not in itself sufficient to put a purchaser, such as the Bourquins, upon inquiry.
B. WHAT THE BOURQUINS KNEW
The Bourquins were deposed. Excerpts of their depositions were filed in support of Great Western's motion for summary judgment. Mr. Bourquin testified that at settlement he knew that Ms. Saint-James had three unpaid judgments against her but Mr. Forman advised him that the judgments would not affect the grantors' ability to convey clear title to the property. Mr. Bourquin did not discuss the judgments "in any detail" with Mr. Forman and was not made aware of the nature of the lawsuits that resulted in *148 judgments against Ms. Saint-Bell.[3]
Mr. Forman, Perpetual's agent, testified in his deposition that he retained Robert C. Raglin to do a title search on the property. Mr. Raglin's title report showed that on September 5, 1991, there was a deed from Ms. Saint-Bell to herself and Casey Joy as joint tenants and that there were three "open" judgments against Ms. Saint-Bell. Mr. Forman said in his deposition that he was aware of the three judgments against the property prior to the May 7, 1993, settlement but that, in his opinion, these judgments did not affect the title to the property.
Mr. Raglin was also deposed. He sent Mr. Forman photocopies of the open judgments. Nothing in the title report shows that the searcher examined the debt suit file or that he was otherwise aware of details in that file such as the date when Ms. Saint-Bell entered into the stipulation with Fick & Petty or the contents of the stipulation.
In summary, at the time of the May 7, 1993, settlement, all that the Bourquins or their agents actually knew was that Ms. Saint-Bell had open judgments against her and that the conveyance from Ms. Saint-Bell to herself and her daughter as joint tenants was based on blood, i.e., the love a mother has for her daughter. Mere knowledge by a grantee of pre-existing judgments against the grantor does not constitute "knowledge of facts and circumstances naturally and justly calculated to excite suspicion in the mind of a person of ordinary prudence, and which would naturally prompt [the grantee] to pause and inquire about consummating the transaction...." 37 C.J.S. Fraudulent Conveyances § 126, at 957 (1943).
The unpaid judgments did not constitute liens against the property at the time of Raglin's title report because the property was owned by Ms. Saint-Bell and her daughter as joint tenants. A judgment against one owner does not attach as a lien against real property owned as joint tenants until the sheriff executes against that judgment. Eastern Shore Bldg. & Loan Corp. v. Bank of Somerset, 253 Md. 525, 530-31, 253 A.2d 367 (1969). Once the sheriff levies an execution against the property, however, a lien attaches as against the judgment debtor's share of the joint property. Id.
Perpetual and its agent, Geoffrey Forman, were not shown by any evidence proffered by appellant in his opposition to the motions for summary judgment to have been negligent in searching the title to the property. Under such circumstances, we know of no authority, and appellant has cited none, that would have required Perpetual or anyone else searching Ms. Saint-Bell's title to inspect the pleadings or other papers in the debt suit filed by Fick & Petty.
The Complaint alleges that the transfer from Ms. Saint-Bell to herself and Casey Joy and later the transfer from Ms. Saint-Bell and Casey Joy to the Bourquins were fraudulent transfers for two separate reasons: 1) that the transfers were made by a person who intends or believes that she will incur debts beyond her ability to pay as they mature (§ 15-206) or 2) the conveyance was made by a person who has the actual intent to hinder, delay or defraud present creditors (§ 15-207). In order to set aside the conveyance to the Bourquins, appellant was obligated to prove that the Bourquins had actual or constructive knowledge that Ms. Saint-Bell harbored the fraudulent intent mentioned in the complaint, i.e., the intent mentioned in sections 15-206 and 15-207 of the Act.
In regard to section 15-206 of the Act, Fick plainly did not prove that there was a material issue of fact as to whether the Bourquins had actual knowledge that Ms. Saint-Bell, at the time of any of the transfers, intended or believed that she would incur debt that was beyond her ability to pay as the debt matured. Moreover, based on the facts actually known to the Bourquins, they were not put on inquiry. Smith, 84 Md. 341, 35 A. 963. But even if we assume, arguendo, that the Bourquins were put on inquiry, and further assume that the Bourquins should have carefully inspected the *149 court file dealing with the Fick & Petty debt suit, appellant failed to show what Ms. Saint-Bell's financial status was at the time she made any of the transfers in question. In other words, because we do not know the extent of Ms. Saint-Bell's assets or liabilities at any relevant point in time, we cannot infer what Ms. Saint-Bell intended or believed prior to making any transfer. Even at this late stage we do not know what Ms. Saint-Bell intended, and therefore we cannot say that if the Bourquins had investigated the matter they would have learned of Ms. Saint-Bell's fraudulent intent.
Concerning section 15-207 of the Act, there was no proof that the September 11, 1991, transfer to Casey Joy was "to hinder, delay or defraud creditors." Ms. Saint-Bell's affidavit was unrebutted as to her reason for the transfer. It is worth noting that at any time between the date of Fick & Petty's June 9, 1992, judgment and April 5, 1993, when the Bourquins' contract to purchase was signed, Fick could have executed against Ms. Saint-Bell's joint tenancy interest in the property. Therefore, if Ms. Saint-Bell did intend to hinder or delay Fick, she selected an odd and ineffectual way to do it. Likewise, there was no showing made by Fick that the Bourquins had actual or constructive knowledge that Ms. Saint-Bell's April 5, 1993, sale of the property to them for $263,000 was to "hinder, delay or defraud creditors." Ms. Saint-Bell and her daughter had over $47,000 in equity in the property as of the May 7, 1993, settlement, and the Bourquins were shown to have had no reason to believe that Ms. Saint-Bell would not pay her just debts.
Appellant thus failed to prove that the Bourquins had actual or constructive knowledge of Ms. Saint-Bell's alleged fraudulent intent or that they participated in Ms. Saint-Bell's fraud. The Bourquins, who paid fair value for the property, were therefore protected by the provisions of section 15-209 of the Act. Great Western is likewise protected because it was a grantee who took "immediately" from the Bourquins.
RESOLUTION OF QUESTION II
As previously mentioned, the trial court dismissed Count III against CAF and Count IV against Forman but gave Fick leave to amend within twenty days. In his brief, Fick overlooked this and incorrectly says that the court, "at the conclusion of the proceedings" (i.e., the April 11, 1996, trial), "rendered a verdict" in favor of CAF, Forman and Perpetual. In the question-presented section of his brief, Fick poses no question as to CAF or Forman, but nevertheless makes the argument: "[A] verdict in favor of the Title Company and ... [Forman] and Forman's law firm was clearly erroneous." Because appellant misperceived what transpired in the lower court, he did not even bother to brief the issue of whether the trial judge erred in dismissing Counts III and IV.[4]
Assuming the issue is appropriately before us, the trial judge did not err in dismissing those counts. Counts III and IV are based on the premise that Forman, when he checked the title to the property, failed to make note that Fick had a valid lien against the property. Fick alleges that, as a consequence of the valid lien, Forman (and vicariously, CAF) breached his (their) duty to "pay valid liens" prior to releasing the funds to the sellers.
If any valid lien had existed, and if Forman negligently failed to discover it, Forman would have breached no duty owed to Fick. Foreman owed a duty only to Perpetual and the Bourquins because, with exceptions not here applicable, Maryland adheres to the strict privity rule in attorney malpractice cases. Flaherty v. Weinberg, 303 Md. 116, 125, 492 A.2d 618 (1985). Furthermore, even if there was a valid lien as *150 alleged, Fick would not have been harmed by Forman's actions because, by definition, the lien would continue to encumber the land and Fick could thereafter execute on the lien just as if the Bourquins had not gone to settlement.
RESOLUTION OF QUESTION III
At the conclusion of Fick's case against Perpetual, the trial judge granted judgment in favor of Perpetual. Appellant claims that the trial court erred in granting judgment. His argument has two prongs: 1) Perpetual was negligent in conducting its title search and in failing to discover that Fick had a valid lien against the property as of May 7, 1993, when the Bourquins and Great Western went to settlement and 2) Perpetual owed Fick a duty to conduct a non-negligent title search of the property. We need not reach the second prong, because at trial Fick did not prove that he had a valid lien against the property.
As mentioned earlier, because the property was owned as joint tenants at the time Fick obtained a judgment against Ms. Saint-Bell (in June 1992), no lien attached until Fick executed against the property. Fick, on April 30, 1993, filed a Writ of Execution against the property. But, under Maryland law, filing the writ does not constitute an "execution" of the writ; the writ is considered executed only when it is delivered into the hands of the sheriff. American Sec. & Trust Co. v. New Amsterdam Casualty Co., 246 Md. 36, 40, 227 A.2d 214 (1967). At trial, appellant failed to prove when the writ was received by the sheriff. He only showed that he filed, in the debt suit, a writ of execution on April 30, 1993, and that the sheriff levied against the property three days after the May 7, 1993, settlement. Therefore, appellant failed to prove a valid lien against the property. Absent proof of a valid lien, neither Perpetual nor its agents could possibly have been negligent in conducting the title search.
JUDGMENT AFFIRMED; COSTS TO BE PAID BY APPELLANT.
NOTES
[1] All states that have repealed the Act have replaced it with the Uniform Fraudulent Transfer Act. See, supra, 7A U.L.A. 209-11 (1985).
[2] According to Black's Law Dictionary 439 (4th ed. 1968), the word "covin" means: "A secret conspiracy or agreement between two or more persons to injure or defraud another."
[3] Mrs. Bourquin said in her deposition that she did not know of the judgments against Ms. Saint-Bell until after the May 7, 1993, settlement.
[4] In order for plaintiff to withstand a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Md. Rule 2-322(b)(2), the complaint must "`allege facts which, if proven, would entitle [the plaintiff] to relief.'" Dick v. Mercantile-Safe Deposit & Trust Co., 63 Md.App. 270, 273, 492 A.2d 674 (1985) (quoting Tadjer v. Montgomery County, 61 Md. App. 492, 502-03, 487 A.2d 658 (1985)). In reviewing the plaintiff's complaint, "we accept as true the well-pleaded factual allegations" and inferences that could reasonably be drawn from those facts. Id. at 273, 492 A.2d 674; Stone v. Chicago Title Ins. Co., 330 Md. 329, 333-34, 624 A.2d 496 (1993). The Court, however, need not consider conclusory charges that have no factual support. Berman v. Karvounis, 308 Md. 259, 265, 518 A.2d 726 (1987). | 01-03-2023 | 10-30-2013 |
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