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2013-10-30 06:32:38.461017+00

Keady

615 F.Supp. 456 (1985) Oliver JONES and John Wilchie, Plaintiffs, v. MISSISSIPPI DEPARTMENT OF CORRECTIONS and Morris Thigpen, Commissioner of Corrections, Defendants. Civ. A. No. GC82-115-WK-O. United States District Court, N.D. Mississippi, Greenville Division. August 15, 1985. *457 *458 Charles Victor McTeer, Willie Griffin, Greenville, Miss., for plaintiffs. Sidney J. Martin, John Kitchens, Mississippi Atty. Gen. Office, Jackson, Miss., for defendants. MEMORANDUM OF DECISION KEADY, District Judge. On May 21, 1982, plaintiffs, Oliver Jones and John Wilchie, blacks, sued the Mississippi Department of Corrections (MDOC) and Morris Thigpen, Commissioner of Corrections, defendants,[1] to redress claims of racial discrimination in promotion employment practices. Federal jurisdiction was founded upon 28 U.S.C. § 1343(a)(4) for causes of action arising under 42 U.S.C. § 2000e, et seq., and 42 U.S.C. §§ 1981 and 1983. Plaintiffs sought back pay, reinstatement, injunctive relief, and attorney's fees and costs. Defendants denied the allegations of the complaint and in turn moved for an award of attorney's fees against plaintiffs for defending the action. After discovery and pretrial conference, the parties entered into a stipulation of facts contained in a pretrial order dated August 31, 1984. The court conducted an evidentiary hearing on August 12 and 13, 1985, at which time the parties appeared personally and by their attorneys, offered oral and documentary evidence, and the court heard argument of counsel. Being advised in the premises, the court now makes findings of fact and conclusions of law pursuant to Rule 52(a), Fed.R.Civ.P., as follows. FINDINGS OF FACT Oliver Jones Plaintiff Jones was initially employed by MDOC on July 15, 1974, as a Correctional Officer I (CO-I), the entry level position for employment as a guard at the Mississippi State Penitentiary. Jones's education consisted of two years of junior college, four years at Mississippi Valley State University, and two years in the United States Army, where he attained the rank of sergeant. He successfully completed training prescribed for correctional officers. On December 21, 1979, he applied for and was promoted to the position of Correctional Officer II/Correctional Administrator I (CO-II/CA-I), or sergeant. He served in that capacity until March 9, 1981, when he applied for promotion to the position of Correctional Officer III/Correctional Administrator II (CO-III/CA-II), or lieutenant, for Unit 22. Pursuant to a vacancy announcement for this position, Jones submitted a written application setting forth his educational background but left blank the sections on prior employment or work experience. The minimum job requirements set forth in the vacancy announcement were as follows: (2) Considerable knowledge of the custody and care of inmates at a state correctional institution; knowledge of *459 the principles and elements of supervision. (3) Ability to supervise and direct the work of subordinate officers; to plan work assignments; to command respect and obedience; to act quickly in an emergency; and to judge situations accurately. (4) Thorough knowledge of the rules and regulations, and policies of the institution or prison where employed. (P. Ex. 7). On March 31, 1981, the Mississippi State Personnel Board (Personnel Board) advised Jones by post card that his application was disapproved because of his failure to meet the experience requirement of "1½ years employment as a Correctional Officer II or Correctional Administrator I." (P. Ex. 20). Hence, Jones was not interviewed. The applications of several others were disapproved for the same reason. Jones made no inquiry of the Personnel Board and took no other steps until he learned that Tony Champion, a white male, had been promoted on July 1, 1981, to the position for which he had applied. During the next month, Jones discussed with James Harris, a penitentiary personnel officer, the fact that the job vacancy announcement had not mentioned a requirement of one and one-half years' experience as sergeant. Harris made inquiry of the State Personnel Board. On instructions from his superior, Hardy James, he prepared a letter stating that, effective July 1, 1981, the minimum qualifications for the lieutenant's position had been revised by the State Personnel Board to require one year and six months' employment as a sergeant to be eligible for a lieutenant's position. In September 1981, Jones talked to Associate Warden Upchurch and wrote to the Personnel Board complaining that Champion had less education, experience and work seniority than Jones and that the experience requirement set forth in Harris' directive had not been contained in the vacancy announcement. Jones also went to Jackson, where he conferred with J. Terrell May, an official with the State Personnel Board. May offered plaintiff an opportunity to submit supplemental data in order that the Personnel Board might re-evaluate him for the lieutenant's position; however, by that time the vacancy had been filled. The evidence shows that on June 4, 1980, the Mississippi Classification Commission, the state agency having the authority and responsibility to promulgate policies, rules, and regulations for the hiring and promotion of state employees, including MDOC employees, had established a job description for the position of CA-II, or lieutenant, requiring, among other things, one year and six months' employment as a CO-II or CA-I (i.e., sergeant). On February 1, 1981, by change in Mississippi statute, the functions of the Classification Commission were taken over by the State Personnel Board, which adopted the same policies, rules, and regulations governing the employment, promotion, and termination of state employees, including the job descriptions and minimum requirements which the Classification Commission had previously adopted. No applicant could be accepted for employment or promotion unless he was found to be eligible and was certified by the State Personnel Board. At the time Jones submitted his application, he had served for one year and three months as a sergeant, and thus fell three months short of the minimum qualifications prescribed by the State Personnel Board. "The revision" which Harris referred to as effective July 1, 1981, was merely a restatement of the requirements established in 1980 for the lieutenant's position. Eddie Lucas, black, the penitentiary warden, reviewed the several applicants for lieutenant who were certified as eligible by the Personnel Board and selected Champion as the applicant most qualified to be recommended to the Commissioner for promotion. Champion had been employed by MDOC since January 1974 and had been named sergeant on July 1, 1978. He had completed the MDOC basic and supervisory training and Mississippi law enforcement officer's training. His personnel file contained evaluations of satisfactory job performance. *460 At the time Champion submitted his application, he had satisfied the one and one-half years' requirement as a sergeant. On September 9, 1981, Jones filed a charge with the Equal Employment Opportunity Commission (EEOC) alleging racial discrimination because of his failure to be promoted since the position was awarded to a white person less qualified than he. The EEOC on February 18, 1982, issued a right-to-sue letter and advised Jones that it was unable to investigate and conciliate the charge within the time prescribed by law. The present action was timely filed. At trial Jones testified that he felt that he had been discriminated against on account of race and was of the opinion that white applicants were more readily promoted than blacks. He also testified that he actually served as lieutenant from November 1981 to March 1982 at Unit 24, where he performed the duties of unit administrator but received no increase in salary. He estimated that a lieutenant's compensation was 5% to 10% more than a sergeant's. The rules and regulations of the State Personnel Board, placed in evidence by Jones, specified in section 3.21(b), dealing with Applicant Processing, that "Incomplete Experience and Training Records shall be returned to individuals with instructions concerning proper completion." Jones did not timely receive instructions from the State Personnel Board on how to complete his application for lieutenant. He had, however, disclosed his work experience in earlier applications. Had such instructions been given, Jones could not have satisfied the prescribed minimum requirement. The court finds as a fact that Jones was not qualified for the lieutenant's position at the time he applied for it in March 1981. Jones is still employed as sergeant by MDOC. He is of the opinion that his work shift was changed and that he has been harassed in other ways by the penitentiary officials because of this suit. John Wilchie Plaintiff Wilchie was initially employed by MDOC in May 1977 as a CO-I, or guard. On August 24, 1981, he applied for the position of CO-II/CA-I, or sergeant, at Unit 29. He met the minimum requirements, was certified by the State Personnel Board as eligible for promotion, and appeared before a panel for oral interview on September 1, 1981. The promotion panel consisted of James Upchurch, Jerry Upton, and Kenneth Wayne Fleming, whites, and Thomas McDaniel, black. Each of the fifty-two applicants received an individual hearing at which questions were asked about the duties of sergeant and the penitentiary rules and regulations. At the commencement of the interview, James Upchurch, associate warden, handed each member of the panel a list of questions and a sheet headed "Promotion Scoring Profile," specifying nine criteria, to be rated on a score of one to five, enumerated as follows: 1. Attendance and Punctuality 2. Self-improvement efforts 3. Prior performance of duties at MDC [sic] 4. Current job knowledge 5. Knowledge of new grade responsibilities 6. Command presence/leadership qualities 7. Personal appearance and overall manner 8. Educational level (1 pt.-Complete high school; 2 pts.-some college; 3 pts.-complete college; 4 pts.-some graduate work; 5 pts.-complete graduate school.) (P.Ex. 23). For purposes of scoring each applicant, panel members were instructed that a "five" was the highest possible score in any category, with "one" being the lowest. Panel members were given no standard criteria regarding the meaning of each rating. For example, a "three" might denote a rating of "average" performance in the opinion of one panel member, while it might mean only "fair" in the opinion of *461 another interviewer. Moreover, the panel members received no guidance as to what criteria they should look for in answers given by the interviewees. Warden Eddie Lucas testified that, in fact, there were really no definitively correct or incorrect answers to the questions. The evidence shows that each panel member made an independent judgment in each category that resulted in a combined score for Wilchie of 102. In August 1981, there were twenty-nine positions of lieutenant to be filled in Unit 29, a new inmate facility scheduled to open in the fall of 1981. The State Personnel Board determined from the applications submitted that there were fifty-two applicants, including Wilchie, who were eligible for the positions. All fifty-two applicants were, as Wilchie, granted oral interviews and scored on the basis of their records, the information in their personnel files and their answers to questions. The highest score was 149 and the lowest score 61 (D.Ex. 10). After interviews, Warden Lucas made the selections for recommendation to the commissioner. He selected the twenty-nine applicants with the highest scores. Of this number, nineteen were black and ten were white. Eventually, four of the twenty-nine selected applicants declined promotion. In an attempt to fill those four vacancies, Lucas reviewed the applicants who ranked thirty to thirty-three numerically on the list. One white and one black, numbers thirty and thirty-two, respectively, were not selected because of problems reflected in their personnel files. Numbers thirty-one and thirty-three, a white and a black, were selected for promotion, thus filling two of the four remaining vacancies. William Turner, black, was the lowest-scoring applicant promoted from the pool of fifty-two, with a score of 107. Lucas, who held a master's degree and had nine years' experience at the prison before being named warden, testified that he decided that scores below 107 were unsatisfactory; therefore, Wilchie, with a score of 102, was not considered further for promotion. The remaining two vacancies were filled with two blacks from another applicant pool on January 1, 1982.[2] Lucas affirmed that he did not consider race as a factor in the selection process. No white applicant having a score lower than Wilchie was recommended by Lucas for promotion. In 1981, MDOC had 1,152 employees, 78% of whom were black, 21% of whom were white and 1% of other race. At that time, MDOC had a warden, who was black, two associate wardens, one white and the other black, a white deputy warden, five white majors and two black majors, six white lieutenants and one black lieutenant, fourteen white sergeants and twelve black sergeants. After Unit 29 was opened in the fall of 1981, the staff was substantially enlarged with seven black lieutenants and five white lieutenants added. Also, thirteen white sergeants and thirty-two black sergeants were added. A large number of the black administrative personnel was assigned to Unit 29. Plaintiff Wilchie filed a charge with the EEOC on February 16, 1982, alleging that he felt that he was discriminated against because of race since he had four years' experience as a CO-I and met the job requirements and, further, that a white officer, Herman Parker, with less experience was selected for the vacancy. On May 11, 1982, the EEOC made a determination that no reasonable cause was found to believe that the allegations in Wilchie's charge were true and issued the right-to-sue letter. The present action was timely filed. At trial, Wilchie testified that he had four and one-half years' experience as a *462 justice court judge, a part-time position he held while serving as a correctional officer, and that he had training at the University of Mississippi Judicial College for Justice Court Judges. He stated that the questions asked of him at the time of interview did not relate to the duties of the job that he was seeking. He felt that Upton, a member of the panel interviewing him, was biased against him since he had filed an incident report against Upton and another officer regarding an assault on an inmate. Wilchie stated that he was never called to testify although an investigator had looked into the matter. Jerry Upton testified that he was unaware of the charge at the time he served on the interview panel and affirmed that race had no part in the scoring he made of Wilchie or other applicants. Upton served only once on the promotion board and was obviously inexperienced in the task to which he had been assigned. Major McDaniel, the black member of the panel, who had veteran service on fifteen to twenty promotion panels, testified impressively as to the questions asked and that the scoring was on the basis of independent perception without prior consultation with other panel members. McDaniel also stated that race played no part in the scores he assigned to Wilchie and other applicants. In Wilchie's case, McDaniel gave Wilchie a score of twenty-nine points as compared to a range of twenty-two to twenty-six points by the white members of the panel. The court finds as a fact that the scoring procedure of the promotion panel was based in part on objective factors such as punctuality and attendance, education, training, work experience, and seniority of service. It also included subjective factors like current job knowledge, knowledge of new grade responsibilities, command presence, personal appearance, self-improvement efforts, and prior performance of duties at MDOC. Necessarily, a determination in these areas rested upon the perception of each interviewer. The court finds as a fact that the selection process was without racial bias or discriminatory intent. Defendants, however, failed to establish what were the specific questions and whether they were job related and were necessary to fairly assess one's ability to perform the duties of the sergeant's job. Wilchie contended that a white male, Herman Parker, who had scored 127 in the oral interview, was less qualified than he. According to Warden Lucas, Parker was promoted to sergeant after being employed by MDOC since May 1980 and was promoted to CA-I on October 1, 1981. Although Parker had not received academy training for a correctional officer, that requirement was not in effect at the date of his promotion. He had, however, several times attended the Mississippi Law Enforcement Training Academy, had served four years as a deputy sheriff of Sunflower County, and as the Ruleville police chief. His personnel file reflects that he had received excellent job performance evaluations. Had Wilchie been promoted to the rank of sergeant, he would have begun work in that position when Unit 29 opened on November 1, 1981. His earnings as a CO-I were $1,081.14 per month. As a sergeant, Wilchie would have earned $1,211.00 per month, amounting to a monthly increase of $129.86. On June 29, 1983, Wilchie was terminated for cause due to matters unrelated to his present suit. CONCLUSIONS OF LAW Oliver Jones In a disparate treatment case involving allegations of discrimination in promotion employment practices, a Title VII plaintiff carries the initial burden of establishing a prima facie case of discrimination. See Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 252-53, 101 S.Ct. 1089, 1093, 67 L.Ed.2d 207 (1981). Generally, the plaintiff must show that (1) he belongs to a group protected by the *463 statute; (2) he was qualified for the position to which he sought promotion; (3) he was not promoted; and (4) after his nonpromotion, the employer continued to seek applicants not in plaintiff's protected class or promoted those, having comparable or lesser qualifications, not in plaintiff's protected class. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973). Once a plaintiff has established a prima facie case, the defendant must attempt rebuttal by clearly articulating a legitimate, nondiscriminatory reason for the employment decision. Burdine, 450 U.S. at 254, 101 S.Ct. at 1094. A defendant does not bear the burden of persuading the court that he was actually motivated by the proferred reasons; rather, an employer need only raise a genuine issue of fact as to whether there was illegal discrimination involved in plaintiff's discharge. If an employer satisfies its burden of production, the burden again shifts to the plaintiff to prove that the proffered reasons are not merely pretextual. Id. at 254-56, 101 S.Ct. at 1094-1095. When Title VII and 42 U.S.C. § 1983 are used as parallel remedies in a disparate treatment suit, the same substantive elements are applicable for recovery under both statutes. Nilsen v. City of Moss Point, 701 F.2d 556, 559 n. 3 (5th Cir.1983). The same principles also apply when Title VII disparate treatment claims are brought in conjunction with claims under 42 U.S.C. § 1981. Adams v. McDougal, 695 F.2d 104, 109 (5th Cir.1983). As regards the instant suit, we conclude that Oliver Jones did not present a prima facie case of disparate treatment as defined under Title VII. Clearly, at the time that he applied for promotion to lieutenant, Jones lacked the requisite one year and six months' experience as a sergeant; therefore, he was not qualified for the position to which he sought promotion. Plaintiff's failure to meet the experience requirement for the lieutenant's position was the sole reason given by the Personnel Board for his non-certification. Although Jones suggests that the one year and six months' requirement was arbitrary and not job-related, the record is devoid of evidence to support such a contention. A cursory review of the job description for the position of CA-II, or lieutenant, discloses the many responsible duties required of one holding that position and the need for a well-rounded experience in dealing with penitentiary inmates. We hold that the experience requirement was reasonable and was job-related. Upon plaintiff's failure to establish a prima facie case under Title VII, we must also conclude that no recovery is available under 42 U.S.C. §§ 1981 and 1983. Defendants moved, in the event that judgment was granted in their favor, that plaintiff be required to pay their attorneys' fees and expenses pursuant to 42 U.S.C. § 1988. The motion is not well taken and is denied. Jones's suit was not frivolously brought. To the contrary, it was brought in good faith based on the omission of the one and one-half years' experience requirement from the vacancy announcement which prompted plaintiff's application for a lieutenancy. See E.E.O.C. v. Christianburg Garment Co., Inc., 550 F.2d 949, 951-52 (4th Cir.1977). John Wilchie Plaintiff Wilchie attacks the MDOC oral examination and scoring procedure on the basis of its disparate impact upon blacks seeking promotions.[3] To establish a prima facie case of disparate impact as defined under Title VII, a plaintiff must show that the challenged facially neutral *464 employment practice operates more harshly on one group than another. Carpenter v. Stephen F. Austin State University, 706 F.2d 608, 621 (5th Cir.1983). See also, Dothard v. Rawlinson, 433 U.S. 321, 329, 97 S.Ct. 2720, 2726-27, 53 L.Ed.2d 786 (1977). The employer then bears the burden of showing that the specific procedure bears "a demonstrable relationship to successful performance of the jobs for which it was used," Griggs v. Duke Power Co., 401 U.S. 424, 431, 91 S.Ct. 849, 853, 28 L.Ed.2d 158 (1971), for if "an employment practice which operates to exclude [the protected class] cannot be shown to be related to job performance, the practice is prohibited." Id. Besides providing evidence of the business necessity of an examination process, and thereby validating it, an employer may also attack the plaintiff's case by showing that the statistical proof is unacceptable. Johnson v. Uncle Ben's, Inc., 628 F.2d 419, 424 (5th Cir.1980), vacated on other grounds, 451 U.S. 902, 101 S.Ct. 1967, 68 L.Ed.2d 290 (1981). In the present case, plaintiff has presented a prima facie case under the Title VII disparate impact theory. The statistics for the promotion applicant pool of which Wilchie was a part show a significant 32.6% selection differential between blacks and whites. Also significant is the fact that the promotion rate for black applicants was only 58% that of white applicants. That more blacks than whites were actually promoted does not adversely affect Wilchie's prima facie case, since "bottom-line" adequate minority representation does not validate selection procedures that disproportionately exclude individual members of the protected class. See Connecticut v. Teal, 457 U.S. 440, 453-56, 102 S.Ct. 2525, 2533-35, 73 L.Ed.2d 130 (1982).[4] Defendants have not attacked these statistics' acceptability. The court concludes further that the defendants have not met their burden of showing that the oral examination process was job-related. Although Major McDaniel testified that the questions asked during the oral interview were job-related, the evidence of record as a whole highlights serious deficiencies in the interview process used by MDOC. Minimal evidence was available as to what questions were actually asked of each applicant for promotion, thereby making content validation of the process virtually impossible.[5] Moreover, no evidence was presented as to the criterion validity of the questions and scoring methods, i.e., their relationship to job performance. Defendants contend that any deficiencies in the oral examination process are remedied by the warden's independent examination of applicants' scores and personnel files prior to making his recommendations of candidates for promotion. We disagree. Few standards were provided by which the panel members could score interviewees consistently, and no criteria were set out to define proper and improper answers. Warden Lucas admittedly relied heavily on the scores reached in this manner in choosing those applicants who would be promoted. A further infirmity exists in the fact that there was no particular cutoff score for determining who had passed the oral exam and who had failed. No particular correlation was shown between scores lower than 107, the lowest score selected by Warden Lucas, and poor job performance. Having determined that Wilchie has prevailed on his Title VII disparate impact claim, we conclude that declaratory relief, back pay, and attorney's fees constitute reasonable remedial measures in this case. However, reinstatement will not be granted since Wilchie was terminated for cause unrelated to the instant suit. An award of *465 back pay is appropriate for the twenty months between November 1, 1981, and June 29, 1983, the date of Wilchie's termination; therefore, the recoverable sum amounts to $2,597.20.[6] Wilchie has made no showing of disparate treatment and thus is not entitled to relief under 42 U.S.C. §§ 1981 and 1983, which require proof of intentional discrimination. Let an order issue accordingly. JUDGMENT Pursuant to Memorandum of Decision this date issued, it is ORDERED as follows: 1. Plaintiff Oliver Jones take nothing from his suit, and his complaint is hereby DISMISSED with prejudice. 2. Plaintiff John Wilchie shall have of and recover from the defendants, Mississippi Department of Corrections and Morris Thigpen, Commissioner of Corrections, the sum of $2,597.20, together with interest from June 29, 1983, at the rate of 8.18% per annum until paid, and reasonable attorneys' fees against the defendants as the prevailing party, motion therefor to be made pursuant to Local Rule C-13 unless the parties can agree within ten (10) days on the amount of such award. Plaintiff Wilchie is further granted declaratory relief that the use of oral interviews which are not validated or directly related to the job in question as a selection device for promotion of Mississippi Department of Corrections employees is invalid because of racially discriminatory impact. Plaintiff Wilchie, however, is DENIED reinstatement or other injunctive relief. 3. The costs of this action, other than attorneys' fees assessed to plaintiff Wilchie against the defendants, shall be borne as follows: one-half by plaintiff Jones and one-half by defendants. NOTES [1] The suit was commenced as a Rule 23 class action on behalf of all past, present and future black applicants for employment and employees of the Mississippi State Department of Corrections. The class action allegations were abandoned by plaintiffs and the court has heretofore ordered that plaintiffs proceed in their individual capacities only. Also dismissed from the original suit are the individual members of the Board of Corrections. [2] The statistics reflecting promotions made from Wilchie's applicant pool are as follows: Applicants Numbers Actually Percentage Promotion Promoted Rate Black 39 White 13 17 44.4% __ 10 77% 52 __ 27 This indicates a 32.6% selection differential between blacks and whites. The promotion rate for black applicants was 58% that of white applicants. [3] Defendants argued at trial that Wilchie had asserted a disparate treatment, rather than a disparate impact, claim. However, the issues of law listed in the pretrial order do not so limit plaintiff's case, and the court believes that Wilchie has properly stated an impact claim. [4] The statistics cannot be viewed in terms of how many blacks passed or failed the oral examination as compared to whites since MDOC did not designate any particular cutoff score. [5] Content validity concerns the relationship of the interview questions to the knowledge/skills/abilities of an applicant at entry for successful performance of job duties. [6] Twenty months × $129.86 (the difference in pay per month between the rank of CO-I and sergeant).

2023-08-22 21:19:58.384513+00

Harris

HARRIS, Associate Judge: This is an appeal from the trial court’s order refusing to set aside a tax deed issued by appellee, the Mayor-Commissioner, to appellees Theodore and Geraldine Scheve. The property at issue had been owned by appellants (a mother and her daughter) since 1951, and was their family residence. The property was sold to satisfy delinquent real estate taxes. Appellants *137failed to redeem the property within the allowable two-year time period, and thereby forfeited ownership. They contend that the notification procedure followed by the District of Columbia concerning the tax sale and the expiration of the redemption period did not conform to the principles of due process, even though they concede that statutory requirements were satisfied. While we recognize appellants’ hardship, we reject their arguments as being contrary to established law in this jurisdiction and unsupported by decisions of the Supreme Court. For many years prior to 1971, real property on which District of Columbia taxes were in arrears was sold in January. Thus, a property owner would have until the month of January, two years after the property had been sold for nonpayment of taxes, within which to redeem it. D.C. Code 1973, § 47-1003. Over the years, appellants’ frequent tax delinquency had resulted in the sale of their property on 11 prior occasions. In each of those instances, appellants redeemed their property by paying the taxes due just as the two-year redemption period was about to expire. In May of 1971, pursuant to D.C.Code 1973, § 47-1001, the District of Columbia City Council changed the date for the sale of real property on which fiscal year 1971 taxes were in arrears to October 26, 1971. As a result of this change, appellants’ property was sold in October of 1971. When Mrs. Coleman, as had been her practice, attempted to redeem the property in January of 1974, the Assessment Services Division informed her that the time within which she legally could have done so had expired in October of 1973. The procedure followed by the District tax officials in giving notice of pending tax sales was outlined at trial by a representative of the assessor’s office. According to his undisputed testimony, appellants were sent a tax assessment in September 1970 which set forth the real property taxes owed for 1971 and warned of the consequences for nonpayment thereof. A similar notification was sent in February or March of 1971. In May or June of 1971, a third notice, reflecting the fact that the taxes were delinquent, was sent to appellants. In September 1971, the District mailed appellants a “tax sale notice”, advising them that if their taxes remained in arrears, their property would be sold in October 1971. Finally, the District’s records indicate that a “courtesy” letter (not required by statute) was sent to Mrs. Coleman informing her of the October 1973 expiration date of the two-year redemption period.1 *138Appellants do not contend that they were unaware that their property taxes were owing. Mrs. Coleman acknowledged having received notice that their 1971 taxes were delinquent, both through the mail and in person at the time she visited the Office of the Assessor to pay their 1970 real estate taxes. Appellants also knew that the continuance of such delinquency would result in the sale of their property. As noted, appellants’ failure to meet their tax obligations on time had resulted in the sale of their home on 11 previous occasions. Mrs. Coleman testified that she was familiar with the newspaper advertisement of tax sales, and had seen such publications often in the past, but that she did not see the notices for 1971. It is undisputed that the District of Columbia properly advertised the October 1971 tax sale by newspaper publication in compliance with the statutory requirements of D.C.Code 1973, § 47-1001, requirements which we construe stringently in order to protect the constitutional rights of property owners.2 Potomac Building Corp. v. Karkenny, D.C.App., 364 A.2d 809, 812 (1976). Appellants seem to argue that notice by publication, even though accompanied by notice through the mail, is per se deficient to permit divesting an individual of property consistent with due process of law. However, the question of whether the demands of due process have been satisfied in a given case cannot be answered by the mere recitation of concern as to the adequacy of notice by publication. While reasonable notice is, of course, constitutionally required, what constitutes such notice must be determined by the nature of the proceedings and all other attendant circumstances. See Walker v. City of Hutchinson, 352 U.S. 112, 115, 77 S.Ct. 200, 1 L. Ed.2d 178 (1956); Dodson v. Scheve, D.C.App., 339 A.2d 39, 40 (1975), cert. denied, 424 U.S. 909, 96 S.Ct. 1103, 47 L.Ed.2d 312 (1976). The existence of procedures for the assessment of taxes, for the collection of taxes, and for the imposition of penalties for nonpayment of taxes is a matter of common knowledge. Such procedures are particularly familiar to property owners, who are responsible for meeting annual— and often more frequent — tax obligations. In light of these facts, courts have found that taxation proceedings may be accompanied by less stringent notification provisions than may be required for other proceedings affecting property interests. See, e. g., City of Auburn v. Mandarelli, 320 A.2d 22, 29 (Me.), appeal dismissed for want of a substantial fed. question, 419 U. S. 810, 95 S.Ct. 25, 42 L.Ed.2d 37 (1974); Botens v. Aronauer, 32 N.Y.2d 243, 248-49, 344 N.Y.S.2d 892, 895, 298 N.E.2d 73, 74-75, appeal dismissed for want of a substantial fed. question, 414 U.S. 1059, 94 S.Ct. 562, 38 L.Ed.2d 464 (1973).3 Cf. Dodson v. Scheve, supra, 339 A.2d at 40 n.3. In this case, in addition to the notice provided in accordance with the tax statutes and by widespread public familiarity with the consequences of tax delinquency, the District of Columbia utilized a notice procedure which was “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950). Appellants had actual knowledge of (1) the tax debt, (2) the manner in which tax sales are announced, (3) the fact that a sale had occurred, and (4) the existence *139of the two-year redemption period. These circumstances readily distinguish this case from those in which the Supreme Court has found a deprivation of due process. Our dissenting colleague cites inapposite cases which dealt with indirect notice to individuals who had little or no reason to expect that their property interests were being affected and who did not, therefore, have adequate opportunity to protect themselves from forfeiture. The same hardly may be said in the case of appellants, in view of their extensive experience with tax sales and redemptions. The two-year redemption period following the sale provided appellants with ample opportunity to protect their property interests, particularly in light of Mrs. Coleman’s personal visits to the assessor’s office before the redemption period had expired. The only factor in this case which differentiates it from other cases in which we consistently have rejected a due process challenge to the tax sale notice procedure is the change in the date of the sale and appellants’ erroneous reliance on a redemption period which had been legislatively modified. This factor was not present in Dodson v. Scheve, supra, and Moore v. District of Columbia, D.C.App., 332 A.2d 749 (1975). However, this circumstance does not rise to the level of a due process deprivation, particularly in light of the District’s efforts to acquaint appellants with the expiring redemption period. Cf. Nelson v. City of New York, 352 U.S. 103, 109-09, 77 S.Ct. 195, 1 L.Ed.2d 171 (1956). Appellants can claim no vested right to a specific sale date, nor even to a constant length of the redemption period. As Justice (later Chief Justice) Stone wrote for a unanimous Supreme Court: Such [land taxation and condemnation] statutes are universally in force and are general in their application, facts of which the land owner must take account in providing for the management of his property and safeguarding his interest in it. Owners of real estate may so order their affairs that they may be informed of tax or condemnation proceedings of which there is published notice, and the law may be framed in recognition of that fact. In consequence, it has been uniformly held that statutes providing for taxation or condemnation of land may adopt a procedure summary in character, and that notice of such proceedings may be indirect, provided only that the period of notice of the initiation of proceedings and the method of giving it are reasonably adapted to the nature of the proceedings and their subject matter and afford to the property owner reasonable opportunity at some stage of the proceedings to protect his property from an arbitrary or unjust appropriation. [North Laramie Land Co. v. Hoffman, 268 U.S. 276, 283, 45 S.Ct. 491, 494, 69 L.Ed. 953 (1925). Cf. Mullane v. Central Hanover Bank & Trust Co., supra, 339 U.S. at 316, 70 S.Ct. 652.] The procedures employed by the District were reasonably calculated to notify appellants of the actions taken against their property, and afforded them adequate opportunity to protect their interests. The notices which were provided satisfied constitutional requirements. While we reiterate our suggestion that the tax laws might well be remodeled to better apprise possibly unwitting owners of the harsh consequences of delinquency, see Moore v. District of Columbia, supra, 332 A.2d at 751-52, that is a task for the legislature.4 The severe penalty of a loss of property for nonpayment of taxes which may be but a fraction of the property’s val*140ue does not constitute a denial of due process. See Nelson v. City of New York, supra, 352 U.S. at 109-11, 77 S.Ct. 195. While we share our dissenting colleague’s sensitivity to the personal loss which resulted to appellants because of their course of conduct, we are not free to redress the situation when we could do so only by declaring a perfectly valid procedure to be unconstitutional.5 Affirmed. . Mrs. Coleman claimed never to have received the letter advising her of the expiring redemption period, and the trial court found her testimony credible. The tax official’s testimony at trial was that the letter had been sent by regular mail, because the assessor’s office had experienced difficulty with the use of registered mail. According to the witness, registered letters often are unclaimed. In determining whether the District’s procedures were “reasonably calculated” to give proper notice to appellants, the’ fact that the letter was not received by Mrs. Coleman is only one factor to be considered, and is not dispositive of the case. See Dodson v. Scheve, D.C.App., 339 A.2d 39, 40 (1975), cert. denied, 424 U.S. 909, 96 S.Ct. 1103, 47 L.Ed.2d 312 (1976). Service by mail is reasonably calculated to give notice in most circumstances. See Schroeder v. City of New York, 371 U.S. 208, 214, 83 S.Ct. 279, 9 L.Ed.2d 255 (1962); Mullane v. Central Hanover Bank & Trust Co., 389 U.S. 306, 318, 70 S.Ct. 652, 94 L.Ed. 865 (1950). [For the exceptional cases, see Robinson v. Hanrahan, 409 U.S. 38, 93 S.Ct. 30, 34 L.Ed.2d 47 (1972); Covey v. Town of Somers, 351 U.S. 141, 76 S.Ct. 724, 100 L.Ed. 1021 (1956).] Assuming the accuracy of Mrs. Coleman’s testimony, the District government should not be charged with the Postal Service’s failure to deliver the letter. Cf. Nelson v. City of New York, 352 U.S. 103, 108, 77 S.Ct. 195, 1 L.Ed.2d 171 (1956). The government has sent such “courtesy” letters to taxpayers in other cases. Dodson v. Scheve, supra, 339 A.2d at 40; Moore v. District of Columbia, D.C.App., 332 A.2d 749, 751 n. 5 (1975). The record indicates that this is a regular practice. . The requirements were revised after this ease arose. See D.C.Code 1975 Supp., § 47-1001. . A Supreme Court decision dismissing an appeal for want of a substantial federal question is an adjudication on the merits and binds lower courts. Hicks v. Miranda, 422 U.S. 332, 343-45, 95 S.Ct. 2281, 45 L.Ed.2d 223 (1975); Cullinane v. Geisha House, Inc., D.C.App., 354 A.2d 515, cert. denied, - U.S. -, 96 S.Ct. 3234, 49 L.Ed.2d 1226 (1976). See McCarthy v. Philadelphia Civil Service Commission, 424 U.S. 645, 96 S.Ct. 1154, 47 L.Ed.2d 366 (1976). . Chapter 9 of Title 47 contains special provisions for owner-occupied family dwellings. This chapter authorizes quarterly tax payments, D.C.Code 1973, § 47-901, and, in proper circumstances, provides for special notice prior to a tax sale. Id. § 47-903. However, these sections are inapplicable unless a taxpayer has filed an affidavit of domicile and ownership. Id. § 47-905. Appellants concededly have not filed such a document. The dissent urges that it is the District’s obligation to advise all taxpayers of *140the provisions of Chapter 9 and provide them with the affidavit if they are eligible. Such an argument reads into an otherwise unambiguous statute a requirement which Congress easily could have stated affirmatively had it intended to impose such an obligation. Further, the dissent seems to suggest that its interpretation of §§ 47-903 and 47-905 is necessary to save the statute from due process attack. In our view, .the more natural reading of these legislative provisions is simply that those homeowners who wish to bring themselves within Chapter 9 must comply with the filing requirement of § 47-905. . The facts of this case — in which the statutory notice requirements were met and appellants had actual notice of everything except the legislatively altered tax sale date — make it an inappropriate vehicle for addressing the more difficult due process issue which would be presented if a completely uninformed or incompetent individual were subjected to a tax sale proceeding which ultimately resulted in the loss of property, see Covey v. Town of Somers, 351 U.S. 141, 76 S.Ct. 724, 100 L. Ed. 1021 (1956), or if the government knew ,the property owner was not at the place to which notice has been sent. See Robinson v. Hanrahan, 409 U.S. 38, 93 S.Ct. 30, 34 L.Ed.2d 47 (1972).

2023-08-22 21:19:58.38926+00

Mack

MACK, Associate Judge (dissenting): Two elderly District of Columbia women have been deprived of the home that they have struggled, financially, for twenty-three years to maintain. The loss of their domicile — representing a personal investment of over $20,000 — has come approximately one year after the mortgage was paid in full, and as a result of a sale for delinquent taxes netting the District of Columbia $294.09. These two “delinquent taxpayers” did not receive any personal notice of the pendency of the sale which took place three months earlier than the date which, for forty years, had been the customary date for tax sales. Their loss is one which the majority dismisses as not “ris[ing] to the level of a due process deprivation.” I respectfully disagree. One would find it hard to believe, from the majority’s recitation, that appellants have never received actual notice of the sale of their home or the expiration date for redemption.1 The fact is that the only notice given appellants of the actual date fixed for the sale was by newspaper publication. Such notice was concededly in compliance with Section 47-1001 of the D.C.Code. It does not follow that such notice, under the circumstances presented here, comports with due process. In Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), the Supreme Court considered the constitutional sufficiency of notice by publication prior to depriving known persons, whose whereabouts are also known, of substantial property rights, and found such notice incompatible with the requirements of due process. “An elementary and fundamental requirement of due process ... is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” 339 U.S. *141at 314, 70 S.Ct. at 657. “[P]rocess which is a mere gesture is not due process,” and “[i]t would be idle to pretend that publication . . . is a reliable means” of informing someone that a certain matter is pending, so that he or she may decide how to respond. Id. at 315, 70 S.Ct. at 657. The general rule that emerges from Múlleme is that notice by publication is unacceptable with respect to a person whose name and address are known or very easily ascertainable and whose legally protected interests are directly affected by the action in question. “Where the names and post-office addresses of those affected by a proceeding are at hand, the reasons disappear for resort to means less likely than the mails to apprise them of its pendency.” Id. Accord, Schroeder v. City of New York, 371 U.S. 208, 213, 83 S.Ct. 279, 9 L.Ed.2d 255 (1962); Walker v. City of Hutchinson, 352 U.S. 112, 115-16, 77 S.Ct. 200, 1 L.Ed.2d 178 (1956); New York v. New York, N. H. & H. R.R., 344 U.S. 293, 296, 73 S.Ct. 299, 97 L.Ed. 333 (1953).2 I think the decision in the case before us is controlled by the rule enunciated in Mul-lane and applied ofttimes since. I would hold that the notice (by publication) given appellants prior to the tax sale of their home was constitutionally deficient and that the tax sale was therefore invalid.3 The sale, under the circumstances here, is, moreover, contrary to the scheme and purpose of statutory enactments. Thus D.C.Code 1973, § 47-903, states that: No family dwelling-house occupied by the owner thereof shall be sold for delinquent personal or real-estate taxes or special assessments unless notice has been personally served upon such owner or sent by registered mail, addressed to him at such dwelling-house, not less than thirty days prior to the date of such sale. However, appellees argue, and the majority seems to agree, that Section 47-903 is inapplicable to appellants by virtue of Section 47-905: This chapter shall be deemed as applying only to such occupant and owner as shall have filed with the assessor of the District of Columbia an affidavit as to domicile and ownership. The form of the affidavit shall be prepared by the assessor of the District of Columbia, and shall show the beginning of domicile, the time when ownership began, the street number, the number of the square and lot, and all trusts, if any, against the property. Appellees’ restrictive reading of Section 47-905 exalts form over substance. Moreover, it exposes the tax sale procedure to grave constitutional attack since by its operation, homeowners are denied any notice of sale other than by publication. But the statute’s constitutionality can be upheld and the intent of Congress furthered by a common sense interpretation. The provisions of Title 47, Chapter 9, directed to “Family Dwellings Occupied by Owners,” reflect a special concern for resident homeowners. The evident congressional intent was to prevent forfeiture whenever possible. Such intent, however, is totally defeated by *142the interpretation adopted by the majority. In order for Section 47-903 to have the effect Congress clearly intended, Section 47-905’s statement that “The form of the affidavit shall be prepared by the assessor of the District of Columbia . . must, I think, be read as placing on the District the burden of notifying resident homeowners of the provisions of Chapter 9 or at the very least providing them with the requisite affidavit.4 Certainly all of the information required by the affidavit was available in the Tax Assessor’s Office. Ms. Coleman went to that office in 1960 after her aunt’s death specifically to ensure that all official records were accurate. Moreover, she has visited that office many times since. It is inherently and grossly unfair for the District now to assert that her home can be sold without prior notice to her because she failed to file a paper which only it could provide.5 For all these reasons I am singularly unimpressed by the majority’s assertion that it feels constrained to affirm because of two prior decisions of this court, Dodson v. Scheve, D.C.App., 339 A.2d 39 (1975), and Moore v. District of Columbia, D.C.App., 332 A.2d 749 (1975). Neither decision is controlling here. Moore involved a challenge by nonresident heirs whose names did not appear as record owners in the Office of the Recorder of Deeds nor in the Office of the Tax Assessor, and the government showed that in that instance a notice of the impending tax sale had been sent to the record owner (decedent) at his last known address. In Dodson v. Scheve, the court expressly declined to reach either of the two grounds on which I would base reversal, namely, the constitutional sufficiency of notice prior to the sale and the proper construction of Sections 47-903 and 47-905.6 I share the sentiments expressed by Judge Pair in Dodson: I perceive basic unfairness in the system which on the one hand frustrates, in effect, the will of the Congress as expressed in D.C.Code 1973, § 47-903, and on the other gives aid and comfort to those who are permitted to profit a thousandfold at the expense of the poor, the ignorant and the less alert.7 [Dodson v. Scheve, supra, 339 A.2d at 42 (Pair, Associate Judge, Retired, concurring and dissenting).] I would reverse. . The lack of actual notice has been the basis of appellants’ claim from the beginning. The majority recitals as to purported mailings of notices by the District do nothing ,to diminish this claim. As the majority recognizes (likewise in a footnote) the trial court made a specific finding that appellant Coleman did not receive .the notice of expiration “courtesy” letter which is a part of the record. The purported “tax-sale notice” — described by a witness at first as a document which “would have been . . . mailed” and later as having been “mailed” — is not a part of the record and thus understandably was not treated in the trial court’s memorandum opinion, holding, “regrettably,” that compliance with publication requirements resulted in effective transfer. . “Notice by publication is a poor and sometimes a hopeless substitute for actual service of notice. Its justification is difficult at best.” New York v. New York, N. H. & H. R.R., supra at 296, 73 S.Ct. at 301. . Accord, Scoggin v. Schrunk, 344 F.Supp. 463 (D.Ore.1971), rev’d on other grounds, 622 F.2d 436 (9th Cir. 1975), cert. denied, 423 U.S. 1066, 96 S.Ct. 807, 46 L.Ed.2d 657 (1976); Johnson v. Hock, 19 Ariz.App. 283, 506 P.2d 1068 (1973); Laz v. Southwestern Land Co., 97 Ariz. 69, 397 P.2d 52 (1964) (en banc); Chapin v. Aylward, 204 Kan. 448, 464 P.2d 177 (1970); Pierce v. Bd. of County Comm’rs of Leavenworth County, 200 Kan. 74, 434 P.2d 858 (1967). See also Wisconsin Elec. Power Co. v. City of Milwaukee, 352 U.S. 948, 77 S.Ct. 324, 1 L.Ed. 2d 241 (1956) (per curiam), on remand, 275 Wis. 121, 81 N.W.2d 298 (1957); Wager v. Lind, 389 F.Supp. 213 (S.D.N.Y.1975). See generally Note, The Constitutionality of Notice by Publication in Tax Sale Proceedings, 84 Yale L.J. 1505 (1975). . According to the trial testimony of Mr. Alfred L. Richards of ,the D.C. Department of Finance and Revenue, Assessment Services Division, the District of Columbia Government makes no effort to inform citizens of • any of the special provisions of Title 47, Chapter 9. . Appellees suggest that the harshness of the result here is somehow mitigated by the fact that Ms. Coleman was familiar with tax sale and redemption procedures. It seems to me that the fact that she or other homeowners had for many years taken advantage of the two year redemption period is an added reason why personal notice was required, particularly when the sale date was changed after forty years. . See Dodson v. Scheve, supra 339 A.2d at 40 and nn. 1 & 3. . When Ms. Coleman called appellee Scheve to implore him to allow her to redeem her property, Mr. Scheve flatly rejected her request and instead offered to permit her to buy it back from him at its current market value or, alternatively, to lease it from him for two hundred dollars ($200.) per month. As noted above, Mr. Scheve paid $294.09 for the property.

2013-10-30 06:32:38.496634+00

Rogers

852 S.W.2d 150 (1993) 42 Ark.App. 5 James P. O'FLARITY, Conservator of the Estate of Jessie E. O'Flarity, Appellant, v. Gloria M. O'FLARITY, Appellee. No. CA 92-912. Court of Appeals of Arkansas, Division II. April 28, 1993. *152 W.J. Walker, Leonard L. Scott, Little Rock, for appellant. Robert S. Laney, Camden, for appellee. ROGERS, Judge. At issue in this appeal is the extent to which two co-depositors, Jessie E. O'Flarity and Gloria M. O'Flarity, appellee, own the funds in a joint account. Appellant, James P. O'Flarity, is conservator of the estate of his mother, Jessie E. O'Flarity. Appellant brings this appeal from the ruling of the probate judge that Jessie O'Flarity and appellee own fifty percent of the funds in the account in question. Because of Jessie O'Flarity's failing health, appellant was appointed conservator of her estate in 1991. Acting in that capacity, he then withdrew all the funds from the joint account in question held in the names of "Gloria M. or Jessie E. O'Flarity." Appellee then brought suit to recover such sums, claiming ownership of the money in the account she and her mother had. The probate judge found that all of the funds in the account, which had an ending balance of $106,262.31, could not be traced but concluded that appellee and her mother, Jessie, each were entitled to fifty percent of the account. On appeal, appellant first argues the probate judge erred in determining appellee was entitled to one-half of the joint account. In this regard, he asserts that appellee failed to carry the burden of proving a gift of the funds was made to her. We do not agree. Appellee and her mother lived together from 1968 to 1991. In 1968, appellee opened an account under the names of "Gloria M. or Jessie E. O'Flarity." The account was taxed under appellee's social security number, and deposits to the account were made from appellee's social security, disability, and retirement Veteran's payments, as well as other sources. Jessie O'Flarity purchased a house in 1969 and a second house in 1970. In 1971, she deeded both properties to Jessie E. O'Flarity and Gloria Marie O'Flarity as joint tenants with right of survivorship. Jessie and Gloria lived in one house and rented the other. In 1989, both properties were sold, and the proceeds were ultimately deposited in the joint account. In connection with the sale of one of the properties, the buyer executed a promissory note payable to both Jessie and Gloria, and the monthly payments were deposited in their joint account. Other funds contributed to the account were proceeds from the sale of school bonds originally purchased by Jessie and held jointly by Jessie and Gloria. Appellee testified that she made additional deposits to the account from the proceeds of her individual savings account, the sale of personal property, and various insurance proceeds. She also stated that, during the twenty-three years she and her mother lived together, she took care of making all the deposits to and withdrawals from their joint account and that their living expenses were paid for in part from the account. She testified that she and her mother both provided the funds deposited in the account and that her mother had told her she wanted appellee to have such funds. Appellee testified that she was the one that opened the bank account in 1968; because she was disabled, she put her mother's name on the account so that, if appellee died, her mother would have access to the money. She testified that all of her disability and social security checks were deposited into the account and that, in 1968, the monthly amount of those checks was approximately $1,000.00 and had increased to over $2,200.00 by the time of the hearing. She also testified that her mother had a separate bank account of her own, to which her mother deposited her own social security checks and various other funds. Gloria testified that she and her mother lived in one of the houses her mother had *153 purchased and rented the other and that Gloria paid all of the taxes, insurance, and upkeep on the rental house. She stated that she was aware that her mother deeded both pieces of property to Jessie E. O'Flarity and Gloria Marie O'Flarity as joint tenants with right of survivorship and that her mother did so because she wanted appellee to have that property. She also testified that, upon the sale of one of those properties, she and her mother received $3,648.00 as a down payment and subsequently received the balance of the amount due on the property in the sum of $65,487.50. These sums were deposited in the joint account. Appellee stated the money was placed in that account because she paid all the bills and "[M]other wanted me to have it." She testified that the furniture from one of the houses was subsequently sold for approximately $8,000.00 and that those proceeds were also placed in the joint checking account. Appellee testified that, when the second piece of property was sold, she and her mother received a down payment of $3,904.50, which was deposited in the joint account. The buyers of the property also executed a promissory note in the sum of $70,000.00 payable to appellee and her mother; those monthly payments of $629.18 were also deposited in the joint account. Appellee also indicated that, in 1968, she had her own savings account at First Federal with a balance of $10,267.50 and that she subsequently closed out that account and transferred the money to the joint account she shared with her mother. Appellee also testified that her mother had placed appellee's name on a Merrill Lynch account consisting of tax-free school bonds. She stated that, in January 1990, her mother sold the bonds and indicated she wanted appellee to have those proceeds. Appellee testified that, when her mother sold the bonds, Merrill Lynch sent the proceeds to her mother; her mother then gave the money to appellee and instructed her to deposit the funds in the joint account. Gloria testified that her mother had also given money and property to other family members. In this regard, Gloria testified: [My mother] has refused to make a will because she said, "I want to distribute my stuff and take care of all my children and make sure they all have a home and everything they need before I go." And that's what she thought she had done. She said, "I don't want anybody fighting over my estate when I'm gone." And she said, "I'll give everybody their houses, homes, money, whatever they need." And she had just enough. She said, "I have enough in my account now to bury me, and everybody else has their own share now, and I'm happy." Appellee indicated that she considered the funds in the joint account to be hers and that the only reason she initially put her mother's name on the account in 1968 was because "I wasn't expected to live when I got out of the service and I wanted whatever I had to go to Mother." She stated that her mother never exercised any control over the joint bank account, never wrote a check off of it, and never personally made any deposits into the account. Beverly Stamper, one of Jessie O'Flarity's daughters, testified that she lived in the Little Rock area until 1985. She testified she was aware of the transactions concerning the two pieces of real estate in question and that her mother had told her that, because appellee had taken care of the rental house, it should go to her and that the house in which the two of them lived was "their home." She stated that her mother was very generous with all of her children and had given each of them money or property from time to time. James P. O'Flarity testified that, although he borrowed $25,000.00 from his mother on one occasion, he subsequently repaid it and that his mother never gave him large sums of money. He also testified that, in 1986 or 1987, his mother telephoned him and indicated that she was in dire financial straits and also indicated that Gloria "does her own thing." Therefore, appellant testified that, for the following year, he sent his mother $750.00 to *154 $1,500.00 per month for her living expenses. He also testified that his mother had given him thirty-nine acres of property in east Mississippi, on which he has paid taxes since she deeded it to him. He stated that, when his mother's health failed to the point that he believed she needed additional care, Gloria refused to cooperate with family members concerning the records on his mother's bank account so that they could have access to funds to pay for her care. He testified that his mother put bank accounts and real estate in joint names for testamentary purposes and never intended to give away any of it during her lifetime. He also testified that, when the two parcels of property held in appellee's and his mother's names were sold, his mother did not endorse the checks and had no recollection of signing the deeds. Mary Kathryn Rogers, another daughter of Jessie O'Flarity, testified that she has lived a few doors away from her mother since 1970 and that her mother and appellee took care of each other. She testified that her mother deeded a house on Louisiana Street to her in 1986, which she and her mother had previously owned as joint tenants with right of survivorship. She testified that her mother did not intend for Gloria to have all the funds in the joint account. In this regard, Mary Kathryn stated: "[My mother is] alert and she knows that all of this is going on and it grieves her greatly. She says, `I trusted Gloria with everything I had. I didn't think she could do this to me.' She knows that Gloria wants all of it and it's really grieving her." The rule in Arkansas is that the law presumes a gift when the donor registers legal title in a family member's name. Perrin v. Perrin, 9 Ark.App. 170, 176, 656 S.W.2d 245, 248 (1983). Therefore, with regard to the proceeds from the sale of both parcels of real estate which were owned jointly by appellee and her mother, it is presumed that appellee is entitled to one-half of these amounts. Whether elements of an effective inter vivos gift have been proven with regard to the school bonds and other sources of revenue to the account is a question of fact. See Warren v. Warren, 33 Ark.App. 65, 800 S.W.2d 730, 731 (1990). The required elements for an effective inter vivos gift are that the donor knew and understood the effect of his act, and intended that effect; that the donor made actual delivery of the chattel to the donee or his agent; that the donor, by delivery, intended to pass title immediately; and that the donee actually accepted the chattel as a gift. McCune v. Brown, 8 Ark.App. 51, 57, 648 S.W.2d 811, 814 (1983). These elements must be proved by clear and convincing evidence. Id. Accord Kelley v. Pipkin, 268 Ark. 1009, 1014, 598 S.W.2d 102, 105 (1980). Even where the burden of proof is by clear and convincing evidence, we defer to the superior position of the chancellor to evaluate the evidence. Akin v. First Nat'l Bank, 25 Ark.App. 341, 345, 758 S.W.2d 14, 19 (1988). A requirement that the evidence be clear and convincing does not mean that the evidence must be uncontradicted. Freeman v. Freeman, 20 Ark.App. 12, 15, 722 S.W.2d 877, 879 (1987). Although probate cases are reviewed de novo on the record, we will not reverse the finding of the probate judge unless clearly erroneous. Winters v. Winters, 24 Ark.App. 29, 34, 747 S.W.2d 583, 586 (1988); Birch v. Coleman, 15 Ark.App. 215, 221, 691 S.W.2d 875, 878-79 (1985); Ark.R.Civ.P. 52(a). In this regard, we give due deference to the probate judge's superior position to determine the credibility of the witnesses and the weight to be accorded their testimony. Thomas v. Thomas, 30 Ark.App. 152, 156, 784 S.W.2d 173, 175 (1990). We find the evidence sufficient to prove the elements of a gift regarding appellee's interest in the joint account and cannot say that the finding of the probate judge that appellee is entitled to a fiftypercent share of the account is clearly erroneous. The creation of joint bank accounts is addressed in Ark.Code Ann. § 23-32-1005(1)(A) (1987). However, the present wording of subparagraph (1)(A) was included by amendment, Act 843 of 1983, and the amendment does not apply to deposits established *155 prior to the effective date of Act 843. Courtney v. Courtney, 296 Ark. 91, 95, 752 S.W.2d 40, 42 (1988); see also Martin v. First Security Bank, 279 Ark. 273, 274, 651 S.W.2d 70, 71 (1983). Instead, the former statute, Ark.Stat.Ann. § 67-521 (Repl.1980), applies. That statute provides in pertinent part: When a deposit shall have been made in the names of two (2) or more persons and in form to be paid to any of the persons so named, such deposit and any additions thereto made by any of the persons named in the account, shall become the property of such persons as joint tenants.... In Park v. McClemmens, 231 Ark. 983, 334 S.W.2d 709 (1960), the supreme court held that § 67-521 should be considered together with the testimony, facts, and circumstances disclosed by the record to arrive at the intent of the depositor. 231 Ark. at 986, 334 S.W.2d at 712. Based on this, the trial court could find that appellee intended to establish a joint tenancy when she created the account in question. Additionally, the record reflects that the actions of Jessie O'Flarity in commingling her funds with those of appellee in the account establish her intent to share such funds with appellee. Commingling of funds in a joint account leads to the conclusion that the parties intended all deposits to the account from whatever source to be held jointly by the parties, and it takes clear and convincing evidence to overcome this presumption. See Lofton v. Lofton, 23 Ark.App. 203, 209-10, 745 S.W.2d 635, 639 (1988). We cannot say that the actions of Jessie O'Flarity and appellee in dealing with the funds placed in the account fail to show an intent to own such funds jointly. We find there was insufficient evidence presented to overcome a presumption of owning the funds jointly. Appellant also argues that Jessie O'Flarity, as a joint tenant to the account, had the right to withdraw all of the funds in question and that, therefore, James P. O'Flarity, as conservator of the estate of Jessie E. O'Flarity, was equally entitled to exercise his mother's right to withdraw all of the funds in the account. While he may be entitled to withdraw the funds on her behalf, we cannot agree that he is entitled to retain the funds. Although a bank or savings and loan may rightfully pay all the funds in an account to either of the two co-depositors in a joint account, it does not necessarily follow that either of the co-depositors may withdraw such funds without accounting to the other co-depositor for such action. See Savage v. McCain, 21 Ark.App. 50, 52, 728 S.W.2d 203, 204 (1987); see also McEntire v. McEntire, 267 Ark. 169, 175, 590 S.W.2d 241, 244-45 (1979). Each depositor's right to the funds may depend on an agreement among the co-depositors as to their respective ownership rights in the account. See Haseman v. Union Bank of Mena & Haseman, 262 Ark. 803, 807, 562 S.W.2d 45, 48 (1978). Appellant also asserts that the probate judge erred in finding that appellee was entitled to one-half of the proceeds of the promissory note from the sale of the property made payable to appellee and her mother. In this regard, appellant argues that the ownership of the note was not an issue before the court. We cannot agree. Appellee correctly points out that appellant's own counsel asked the judge about the disposition of the real estate promissory note. At the conclusion of the hearing, the judge announced her findings regarding the joint account and asked if there were any additional questions. Appellant's counsel responded: "Judge, we have a real estate note involving one of the sales, about '75." The court then responded: "Well, that would mean each one of you get one-half of that real estate note." No further discussion of the note took place. Not only did appellant's counsel fail to object to the issue being addressed by the court, but it was appellant's own counsel who invited a ruling on the issue. Additionally, we disagree with appellant's alternative argument that the evidence does not support a finding that appellee owns fifty percent of the proceeds of the note. When considering ownership of a note payable to two parties, we can look to cases dealing *156 with notes payable to a husband and wife for guidance. In such a case, there is a presumption that the taking is by the parties as tenants by the entirety. See Ramsey v. Ramsey, 259 Ark. 16, 19, 531 S.W.2d 28, 30 (1975). The fact that the consideration for the note taken in the two names was given by only one of the parties is of little significance where that party is responsible for the note being taken in both names, and the presumption is that there was a gift of an interest by that party to the other. See 259 Ark. at 19, 531 S.W.2d at 30-31. Finally, appellant argues that the court erred in failing to grant a new trial pursuant to appellant's motion for rehearing and new trial. Arkansas Rule of Civil Procedure 59(a) (1992) provides in part: (a) Grounds. A new trial may be granted to all or any of the parties and on all or part of the issues on the application of the party aggrieved, for any of the following grounds materially affecting the substantial rights of such party: (1) any irregularity in the proceedings or any order of court or abuse of discretion by which the party was prevented from having a fair trial; (2) misconduct of the jury or prevailing party; (3) accident or surprise which ordinary prudence could not have prevented; (4) excessive damages appearing to have been given under the influence of passion or prejudice; (5) error in the assessment of the amount of recovery, whether too large or too small; (6) the verdict or decision is clearly contrary to the preponderance of the evidence or is contrary to the law; (7) newly discovered evidence material for the party applying, which he could not, with reasonable diligence, have discovered and produced at the trial; (8) error of law occurring at the trial and objected to by the party making the application. Appellant, however, fails to state any of the reasons listed in Rule 59, which would provide a basis for granting a new trial. Further, appellant stated in his motion that a new trial should be granted so Jessie O'Flarity could have an opportunity to testify as to her intent concerning ownership of the funds in question. In this regard, appellant stated in his motion: "It was not deemed wise by counsel to put [Jessie O'Flarity] through the trauma of coming to court to testify inasmuch as no allegation of the petition of Gloria O'Flarity was support [sic] at trial." The fact that appellant failed to call Jessie O'Flarity as a witness at trial is not an adequate ground for granting a new trial. It is well settled that the granting of a new trial addresses itself to the sound discretion of the trial court, and this court will not reverse unless it appears that the trial court abused its discretion. Franklin v. Griffith Estate, 11 Ark.App. 124, 128, 666 S.W.2d 723, 725-26 (1984). We find no abuse in the denial of appellant's motion. Affirmed. MAYFIELD and COOPER, JJ., agree.

2013-10-30 06:32:38.5306+00

Weinfeld

615 F.Supp. 1465 (1985) A.P.N. HOLDINGS CORP., Plaintiff, v. Ronald HART, Thelma Hart and Barbara Bergen, as Trustees of the Testamentary Trust of Mark M. Hart, deceased; Beatric Hart, as Custodian for Penny Hart and Dean Hart, Infants, Under the New York Uniform Gifts for Minors Act; Ronald Hart and Thelma Hart, Defendants, Counterclaim Plaintiffs, and Third Party Plaintiffs, v. Abe J. LIEBER; Miriam P. Lieber; Amford Bank & Trust Company, Ltd.; ABT Investments, Limited; Amdall Properties, Inc.; London Capital Corporation; Logistics Control Group International, Ltd., Third Party Defendants. No. 83 Civ. 4397 (EW). United States District Court, S.D. New York. August 22, 1985. *1466 Pollack & Kaminsky, New York City, for plaintiff and counterclaim defendant and third party defendants; Frederick P. Schaffer, New York City, of counsel. Hayt, Hayt & Landau, Great Neck, N.Y., for defendants and counterclaim plaintiffs and third party plaintiffs; Clifford J. Chu, Ralph Pernick, Great Neck, N.Y., of counsel. OPINION EDWARD WEINFELD, District Judge. This action arises from the 1982 sale of a controlling interest in the American Plan Corporation ("American Plan" or the "Company"), a New York corporation engaged through its subsidiaries in the property and casualty insurance business. Defendants Ronald, Thelma, and Beatrice Hart and Barbara Bergen, individually and in representative capacities, collectively controlled 520,691 shares, approximately thirty-five percent of the outstanding stock of American Plan. On June 25, 1982, plaintiff A.P.N. Holdings Corp. and defendants executed a stock purchase agreement (the "Agreement") whereby plaintiff agreed to purchase defendants' interest at a price of $10 per share, which totalled $5,206,910. Plaintiff paid defendants $520,000 when the Agreement was executed; an additional $1,230,000 when the transaction closed on October 5, 1982; and executed a promissory note for the balance of $3,456,910, which is unpaid and now past due. The Agreement was negotiated by Abe Lieber, plaintiff's principal shareholder, president, and chairman of the board, and Ronald Hart, then a director and paid consultant of American Plan and formerly its president and chairman of the board, who acted on behalf of all defendants. Plaintiff claims that Lieber and Hart agreed upon a purchase price of $10 per share with the understanding that such price was approximately twice the book value per share of American Plan stock as reflected in the Company's then most recent financial statements filed with the Securities and Exchange Commission ("SEC"); that Hart denied plaintiff access to the Company's books and records prior to the closing date but assured it that the SEC filings fairly and accurately represented the Company's financial condition and, indeed, so warranted *1467 in the Agreement; and that after the closing date when plaintiff gained access to the Company's books and records it discovered that the true book value of American Plan prior to the closing date was $0.51 per share, more than five dollars less than that reflected in the Company's most recent financial statements. In short, plaintiff charges that in assessing the Company's book value, which the parties allegedly understood was the basis of the $10 per share purchase price, it had no choice but to rely entirely upon the Company's publicly filed financial statements and that these statements were inaccurate and incomplete and far overstated the book value of American Plan. Plaintiff seeks to recover damages of $4,675,805, the difference between the purchase price of $10 per share of American Plan stock and the alleged true value of that stock. In the alternative, plaintiff seeks reformation of the Agreement to reflect a purchase price of $1.02 per share, or twice the Company's alleged true book value of $0.51 per share, and restitution in the amount of $1,218,895, the difference between the purchase price as reformed and the amount plaintiff previously paid defendants as of the closing date. Defendants, in addition to a general denial of plaintiff's claims, emphasize that under paragraph 3.1(c) of the Agreement plaintiff disclaimed reliance upon any representation or warranty by defendants concerning the financial condition of American Plan other than a limited warranty that, to the best of defendants' knowledge, no material adverse change had occurred after the first quarterly report was filed in 1982. Defendants also assert a counterclaim to recover $3,456,910, the balance of the agreed purchase price, from plaintiff under its promissory note and a third party claim against Abe Lieber, his wife, and various affiliates who executed a guaranty of payment by plaintiff (the "Guarantors"). The complaint alleges federal claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934[1] and section 17(a) of the Securities Act of 1933[2] and state claims for breach of contract, breach of warranty, mistake of fact, common law fraud, negligent misrepresentation, and violation of section 352-c of the New York General Business Law.[3] These claims involve different standards of culpability. For example, defendants may not be held liable under section 10(b) of the Securities Exchange Act of 1934 without proof of "scienter,"[4] whereas they may be held liable for damages caused by a breach of warranty upon proof that the warranted facts did not exist.[5] Yet, despite these differences, all these claims essentially rest upon the factual charge that the Company's publicly filed financial statements, upon which plaintiff allegedly relied in agreeing to pay defendants $10 per share for their interest in American Plan, contained errors that misrepresented the Company's book value. Thus, to recover upon any of the asserted grounds, plaintiff must establish by a preponderance of the evidence that the financial statements at issue in fact contained the errors as charged. Plaintiff's claims in large measure center about the application of accounting principles in the insurance industry and alleged errors in American Plan's financial filings, which served as the basis for restating those statements in subsequent filings. The specific financial statements in issue are those contained in the Company's Form 10K for 1981 ("1981 10K") and Forms 10Q for the first three quarters of 1982 ("1982 10Q's"). All parties acknowledge that annual and quarterly financial statements filed with the SEC must be prepared in *1468 accordance with generally accepted accounting principles ("GAAP"). Plaintiff contends that after it took control of the Company, new management and outside auditors discovered, during two successive audits, that these financial statements contained errors under GAAP. First, in conducting the 1982 annual audit, new management and the accounting firm of Alexander Grant & Company ("Alexander Grant") allegedly found the 1982 10Q's in error with respect to the adequacy of the Company's loss and loss adjustment expense reserves and to bad debts owed the Company by two of its agents. Thereafter, in conducting the 1983 annual audit, new management and Peat, Marwick, Mitchell & Company ("Peat, Marwick"), retained in place of Alexander Grant, allegedly found errors in the 1981 10K and additional errors in the 1982 10Q's. These alleged errors concerned reinsurance recoverable by the Company, contingent commissions owed to a leading agent, and the way the Company accounted for two surplus relief treaties, discussed hereafter. Plaintiff further contends that all of these discoveries were based upon information that was available to old management when it prepared the 1981 10K and 1982 10Q's and that therefore, under GAAP, they constituted "errors" and warranted restatements of the financial statements contained in those filings. As a result of these restatements, which new management included in the Company's Form 10K for 1982 and Form 10K for 1983, the book value of American Plan for the nine months ended September 30, 1982 — the last statement date before the closing—allegedly dropped more than $5 per share to $0.51 per share. An observation is warranted at the outset. After the occurrence of events in issue, Abe Lieber called in one "expert" after another who scrutinized the Company's financial statements and whose efforts, one is justified in concluding, were directed to turning up some "error" that would sustain plaintiff's claim that the book value of American Plan had been overstated. Many of the views of these experts who testified were highly conceptualized and were based upon their opinions as accountants. Against this testimony was that of American Plan's officers, who had been active in the day to day management of the Company's affairs and were familiar with the Company's insurance experience record, accounting practices and requirements. The fact that plaintiff's experts opined as to what they believed were errors in the Company's various financial projections and assignments of debits and credits does not entitle their views to greater consideration than that to be accorded lay persons who demonstrated a thorough understanding of the basic facts in issue.[6] Their credibility as witnesses is subject to appraisal by the same standards as those applied to ordinary witnesses. The Court accepts in substance the judgment of the Company's officers who had the experience of many years in evaluating the various financial matters to which the plaintiff's attack is directed. They were the day to day workers in the vineyard. Based upon the Court's trial notes, which include its contemporaneous appraisal of each witness, a word by word reading of the stenographic transcript of the trial, the demeanor of the witnesses, an evaluation of their credibility — which in this case played a critical role — and the reasonable inferences to be drawn from established facts and surrounding circumstances, the Court concludes that plaintiff has failed to discharge its burden of proof on the central factual charge in the complaint. It has not established that the old management of American Plan — and thus defendants — acted without justification in preparing the financial statements under attack or that these statements contained the errors charged. As to defendants' counterclaim, and third party claim, there is no dispute that plaintiff has defaulted on two installments of its promissory note. Its only defense — and that of the Guarantors — is *1469 the central charge set forth in the complaint, that the 1981 10K and 1982 10Q's contained errors under GAAP that misrepresented the book value of American Plan. Plaintiff's failure to sustain this charge is therefore dispositive of all claims, counterclaims and third party claims. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES After the closing, Richard Pluschau, a certified public accountant who had served as the Company's outside auditor for over ten years and had considerable experience in the field of insurance, was engaged by new management of American Plan as chief financial officer. He conducted a statistical analysis of the Company's historical claim activity for several prior years in order to determine whether the Company's reserves for unpaid losses and loss adjustment expenses were adequate. Pluschau concluded that as of December 31, 1982 the reserves were inadequate and should be increased by between $2 million and $2.5 million. Thereafter, at Pluschau's suggestion, Huggins & Co., Inc. ("Huggins"), an actuarial firm, was retained by the Company to conduct an independent review of the reserves and it issued an opinion certifying the adequacy of the reserves as revised upward by Pluschau. The question then arose whether this revision should be reflected solely in the fourth quarter of 1982 or also in the first three quarters of that year, as to which the financial statements had already been filed. Pluschau specifically requested Alexander Grant, retained to conduct the 1982 annual audit, to determine whether the Company's financial statements in the 1982 10Q's filed previously should be restated in view of the revision of reserves. Alexander Grant concluded that the financial statements for the first two quarters of 1982 should be restated to reflect an increase in reserves of $774,108 and $1,322,130, respectively.[7] Plaintiff contends that the restatements were warranted under GAAP because the inadequacy of the reserves could have been discovered by old management when it prepared the 1982 10Q's. Pluschau so concluded because he found no evidence that old management had conducted an analysis of the company's "formula" reserves during the 1982 quarterly financial statement periods. Formula reserves, as distinct from case reserves, which are based upon individual claims already filed with the Company, are estimates of losses incurred but not yet reported to the Company ("IBNR's"), the cost of settling claims ("loss adjustment expense"), and the inflationary impact upon the case reserves. Unlike the case reserves, which are set on a case by case basis as claims are filed with the Company, formula reserves are determined by applying certain formulae to historical claim data; they require an empirical judgement about the likelihood that past loss experience will be repeated. In Pluschau's view, had old management reviewed the formula reserves as of September 30, 1982, it would have found them inadequate. Dominic Esposito, the Alexander Grant partner in charge of the 1982 annual audit, also found no evidence that old management had conducted an overall review of the formula reserves during 1982 and concurred in Pluschau's decision to restate the 1982 10Q's, although he also would have concurred in confining the revision to the final quarter of 1982.[8] The conclusion of Pluschau, Huggins, and Alexander Grant that the 1982 loss and loss adjustment expense reserves were inadequate was disputed by Murray Lemonik, who was president, chief executive officer, and chairman of the board of American Plan prior to the closing and has been in the service of the Company for fifteen years. While Lemonik did not participate *1470 in the reserves review conducted by new management, he opposed the decision to increase the 1982 reserves for two reasons. First, the New York State Department of Insurance had only recently, in mid-1980, completed its triennial examination of the Company and reported that the reserves were adequate, as Lemonik put it, "very close" to being "on the button."[9] Since there had been no change in the Company's personnel who analyzed the case and formula reserves, no change in the instructions given them, and no change in the Company's operations, Lemonik saw no reason to believe that a reserve adjustment was necessary. Second, new management did not conduct a review of "stale" claims in 1983. Stale claims are reported claims as to which the Company has set reserves but which are no longer active and may be closed out. In Lemonik's view, had new management conducted a case by case review of reported claims in order to identify stale claims, as had been done routinely by old management and as he urged new management to do in 1983, a large number of case reserves would have been reduced or eliminated. Lemonik asserted that his belief had been borne out when new management finally conducted a stale claim review in 1984 and found that case reserves should be reduced by approximately $3.5 million. Based upon prior Company experience, Lemonik stated, some sixty-five to seventy-five percent of that reduction would have related back to claims filed in 1982 or earlier. Lemonik also emphasized that in comparison to case reserves, which new management had not reviewed for stale claims, the formula reserves were only a small part of the Company's total reserves. In charging that the 1982 10Qs were in error concerning loss and loss adjustment expense reserves, plaintiff assumes that old management reasonably should have conducted a review of formula reserves in 1982. However, in view of Lemonik's testimony, which was highly persuasive, plaintiff has failed to show that old management acted without justification. Essentially, the Court is presented with a difference of opinion, that of the so-called experts from outside the Company, Pluschau, Huggins, and Alexander Grant, and that of Lemonik, an insider who, while not a certified public accountant, was involved in the day to day operations of the Company for fifteen years and had a realistic view of loss potential based upon his experience. As already noted, the Court is satisfied that this credibility issue should not be resolved in plaintiff's favor. Plaintiff's further argument that old management conducted a "one way" review of stale claims in the spring of 1982 — that is, a review designed to eliminate reserves on inactive claims without assessing the adequacy of reserves on active claims — adds nothing to its charge that the 1982 reserves were inadequate. Alan Brinn, the head of the Company's liability claims department in 1982, testified that such reviews were conducted routinely, though normally at year-end, and that this one was conducted in the usual and ordinary manner. The purpose and effect of such reviews are to bring the Company's reserves up to date to enhance their accuracy, at least with respect to case reserves. Nor is there any significance to Brinn's statement that sometime in 1982 he came to believe that the reserves set for claims under special multiperil policies "might have been a bit light," perhaps by as much as $750,000. He acknowledged that his belief was based upon "speculation" and that "nothing specifically [was] done" to verify it.[10] In sum, plaintiff has failed to prove that the reserves for losses and loss adjustment expenses reflected in the 1981 10K and 1982 10Q's were inadequate. BAD DEBTS OWED BY ESSEX AND BANKERS WAY Plaintiff charges that prior to the closing date, the Company should have established reserves to cover premiums owed by two *1471 agents, Essex Insurance Brokers, Inc. ("Essex") and Bankers Way Insurance Agency, Inc. ("Bankers Way"), that were not collectible. Because such reserves were not set up, plaintiff contends, the 1982 10Q's failed to reflect a potential loss of $650,000 in bad debts. Based upon the information available in 1982, however, the Court finds that old management did not act unreasonably in concluding that the bulk of these debts was collectible. As to Essex, new management and its auditors determined that a $400,000 reserve should have been set up during the third quarter of 1982 to cover premiums owed to American Plan by Essex when the agency was placed in conservatorship by the California Department of Insurance on August 20, 1982. Those involved in the day to day operations of the Company at that time, however, estimated that Essex's premium balance totalled between $250,000 and $300,000 and was fully collectible — a view that had substantial support. The principals of Essex had personally guaranteed payment of the agency premium balance, their guarantee was covered in part by an errors and omissions insurance policy, and they had posted collateral to secure some $118,000 of that balance. Moreover, the premiums in issue had been deposited into a trust account in favor of an American Plan subsidiary. In May 1982, Richard Sumner, then a vice president of American Plan, learned that Bankers Way had ceased producing business for the Company and that its principal, who had personally guaranteed the agency agreement with the Company, "had been removed from the Bankers Way corporate picture."[11] The following month, Sumner met with the principals of the successor corporation and, after determining that the Bankers Way premium balance totalled as much as $200,000, entered into an agreement with them whereby they promised to pay $50,000 to American Plan and to guarantee payment of an additional $50,000 if the premium balance could not be collected from the former principal of the agency. The Company in fact received the initial $50,000 under this agreement during the next eight months; previously, in June 1982, it had commenced an action to recover the remaining balance from the former principal who, in Lemonik's view, was not judgment proof. Plaintiff has offered no evidence to undermine old management's judgment that the Bankers Way debt was collectible. Rather, it relies solely on new management's contrary judgment that a reserve of $250,000 was necessary to cover the debt. Neither judgment is inherently unreasonable and both may be appropriate under GAAP. GAAP requires that a loss be recognized and a reserve established in a financial statement only when [i]nformation available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss.[12] This standard leaves considerable room for judgment in deciding whether a reserve is needed. Indeed, Alexander Grant emphasized that estimating when a loss occurs for GAAP purposes is a difficult task and that new management had taken a "conservative approach" to both the Essex and Bankers Way debts.[13] Plaintiff has not shown it was probable in 1982 that the Essex and Bankers Way debts were uncollectible and that the 1982 10Q's should have reflected a reserve for bad debts. REINSURANCE RECOVERABLE FROM SECURITY MUTUAL In December 1981, the Security Mutual Insurance Co. ("Security Mutual"), one of American Plan's reinsurers, was placed in *1472 liquidation by the Illinois Department of Insurance. Despite this fact, American Plan continued to carry reinsurance recoverable from Security Mutual on its books throughout 1982. Peat, Marwick, which American Plan had retained in place of Alexander Grant to conduct the 1983 annual audit, concluded after an investigation that no reinsurance was recoverable from Security Mutual as a result of the liquidation. Accordingly, the auditors concurred in new management's determination that a net receivable of $329,178 listed on American Plan's books as reinsurance due from Security Mutual for losses incurred by the Company prior to the liquidation should have been written off during 1982. In addition, Peat, Marwick concurred in new management's determination that the Company had failed to take account of the fact that these prior losses would continue to develop and would involve loss adjustment expense, and thus would cost the Company even more in terms of unrecoverable reinsurance. Accordingly, Peat, Marwick found proper new management's conclusion that a total of $746,465 should have been written off during 1982 as a result of the liquidation of Security Mutual. The auditors further concluded that, because the write-off was based upon information available in 1982, new management's decision to restate the 1982 quarterly financial statements a second time, now in the Company's Form 10K for 1983, was proper and in accordance with GAAP.[14] Members of the Company's old management who were familiar with the Security Mutual reinsurance treaty testified that the liquidation of the reinsurer did not have a negative effect on American Plan. According to Luther Williams — who had been with the Company for thirty years, most recently as president and then vice chairman of the subsidiaries, and had primary responsibility for reinsurance — and Murray Lemonik, the Security Mutual treaty provided that when the loss ratio on the reinsured portfolio reached a certain level the Company became obligated to pay an additional, or penalty, premium to the reinsurer until such time as the total premium paid reached a maximum point. This penalty premium, referred to as the "burn cost," amounted to $1.33 for every $1.00 of losses recoverable as reinsurance from Security Mutual. Since the loss experience on the reinsured portfolio had placed the Company in a "penalty situation" at the time of the liquidation, the Company was required under the treaty to pay Security Mutual $1.33 in premiums for every $1.00 of reinsurance it otherwise would have received after the liquidation date, at least until the total premiums paid by the Company reached the maximum.[15] Old management determined, therefore, that any reinsurance receivable from Security Mutual was more than offset by the penalty premiums payable to Security Mutual, so that on balance the amount of reinsurance no longer recoverable from Security Mutual did not represent a net *1473 loss to American Plan and did not require a reserve.[16] According to Paul Zucconi, the Peat, Marwick partner in charge of the 1983 audit, and Robert McCausland, who joined American Plan in 1983 and served as the Company's liaison with Peat, Marwick during the 1983 audit, their determination that a reserve should have been established for reinsurance receivable but no longer recoverable from Security Mutual did take account of the burn cost — that even after a setoff in favor of American Plan, the net receivable from Security Mutual still amounted to $746,465, which should have been written off. However, several factors weaken the force of this testimony. First, and most important, neither Zucconi nor McCausland had the experience that Lemonik and Williams had in calculating the burn cost under the Security Mutual treaty over a period of many years. Although Zucconi stated that he was familiar with this type of reinsurance treaty, his testimony raised doubt about whether he fully understood the significance of the burn cost and how premiums payable were calculated under the treaty. As to McCausland, his accounting background did not include any work with insurance companies when he joined American Plan in 1983. The expertise of these men as certified public accountants is no substitute for a thorough understanding of the Security Mutual treaty, which Lemonik and particularly Williams demonstrated by their testimony. Second, Alexander Grant, which had conducted the 1982 audit for new management, disagreed with Peat, Marwick's determination that a reserve should have been set up with respect to Security Mutual. Thus, the dispute here is not only a battle between old management and new but in some instances a battle among plaintiff's own experts as well, each of whom plaintiff has chosen to rely on at different times and for different reasons. It should be noted that accounting principles themselves are by no means fixed or immutable. At times they are the subject of sharp controversy between the accounting profession and the business community and are revised accordingly from time to time.[17] This fact calls into question not only the authoritativeness of these experts' opinions but also, as was observed previously, the motives of plaintiff in retaining first one accounting firm and then another. Ultimately, plaintiff's claim that old management erred in failing to include a reserve for reinsurance unrecoverable from Security Mutual in the 1982 10Q's arises from a difference of opinion that the Court must resolve on the basis of evaluation of the witnesses. In this instance, the experience of Lemonik and Williams carries at least as much weight as the expertise of Zucconi and McCausland. Thus, it cannot be said that plaintiff has carried its burden of proof that old management acted unreasonably or erroneously in its treatment of the Security Mutual reinsurance treaty. CONTINGENT COMMISSIONS PAYABLE TO MARKET In the late 1960's, an American Plan subsidiary and Market Insurance Corp. ("Market"), a California based insurance agent, entered into an agency agreement that provided for a contingent commission payable to Market based upon the profitability of the book of business Market produced for *1474 the Company. Under this agreement, known as a retrospective commission agreement, Market retained thirty percent of the premiums it produced as a provisional advance commission and paid the remainder to American Plan, which allocated fifteen percent for profit and expenses and the remaining fifty-five percent for prospective payment of claims. Whatever portion of this fifty-five percent was not needed to pay claims was paid back to Market as an additional, or contingent, commission; conversely, if claims exceeded fifty-five percent of premiums, Market was required to return a portion of its provisional advance commission to the Company to make up the difference. Thus, Market's commission depended on the loss experience of the business it produced for the Company. In or about 1979, a dispute arose between the Company and Market over the determination of the contingent commission. Essentially, Market disagreed with the Company's projections as to losses on the Market book of business that had been incurred but not yet reported. Market believed that the reserves set by the Company for these so-called IBNR losses were excessive and should be reduced and that it was entitled to additional commissions. This dispute persisted until at some point in 1982 Market withdrew a major portion of its business from American Plan and the Company issued a notice of termination of the agency agreement. Thereafter, the termination became effective and Market took legal action against the Company to recover contingent commissions. In conducting the 1983 annual audit, new management and Peat, Marwick determined that the IBNR reserves set by the Company on the Market book of business in 1981 and 1982 were excessive in view of the loss experience on that book in prior years. As of December 31, 1982, they concluded, the Market IBNR reserves should have been reduced by approximately $1.23 million. Had the reserves been set at the proper levels, they determined, the Company's financial statements for 1981 and 1982 would have reflected contingent commissions payable to Market. Instead, the financial statements reflected no such payables in 1981 or 1982 and, indeed, in 1982 allegedly showed commissions receivable from Market in the amount of $780,000. Because the prior loss history on which this reserve adjustment was based was available to the Company in 1981 and 1982, new management and Peat, Marwick concluded, the financial statements were in error under GAAP for failing to reflect contingent commissions payable in 1981 and 1982 and for showing commissions receivable in 1982. Consequently, the fourth quarter results in both years were restated in the 1983 Form 10K to reflect a reduction in earnings of $389,000 and $841,000, respectively. The charge that old management erred by overstating the IBNR reserves on the Market book, and thereby failing to show contingent commissions payable to the agent in either year and showing commissions receivable from it in 1982, is without merit. The essential premise of the charge is that old management's projections as to losses incurred but not reported on the Market book were unjustified. Paul Zucconi, the Peat, Marwick audit partner, testified that the Company had available in 1981 and 1982 a lengthy history of claims actually reported on the Market book over a period of many years, and that this history indicated a steady reduction in loss ratio after 1979. In view of this trend, he asserted, old management should have set lower IBNR reserves. As Zucconi acknowledged, however, setting an IBNR reserve is a matter of judgment based upon historical experience — a projection must be made as to the frequency and severity of future claims. Consequently, in determining whether the Market IBNR was justified, the personal familiarity with the Market book of those who set the IBNR reserves and their reasoning are crucial factors to be considered. According to Murray Lemonik, the 1981 and 1982 IBNR reserves reflected the lessons that old management had learned as a result of past mistakes. In or about 1976, the Company had paid Market contingent commissions of approximately one million dollars only to see the loss ratio on the *1475 Market book rise steadily thereafter and place the Company for a long period in the position of having to seek recovery of the contingent commissions back from the agent. Old management had found the history of claims actually reported to be an unreliable indicator of future experience. Lemonik explained that because of the nature of the Market book — surety bond coverage — claims often were not reported until many years after the losses had been incurred. Thus, the Market loss experience matured slowly — for instance, what appeared to be a very favorable loss ratio of two percent in 1973 had risen to fifty or fifty-five percent by 1979. In order to protect itself against this phenomenon, known as the "long tail," the Company decided back in 1976, after prematurely paying contingent commissions to Market, to set up a very high supplemental reserve to cover claims incurred but not reported. In short, old management set the reserves for unreported claims at the disputed levels precisely because it had found the history of reported claims — the very history new management and Peat, Marwick relied upon in determining that the IBNR reserves were excessive — to be misleading. Indeed, Richard Pluschau, who joined new management in 1983, described old management's decision in 1976 to increase the Market IBNR reserves substantially as "a prudent business decision to make sure that the agent was not going to continue to receive contingent commission payments where the reserves might be underestimated."[18] While new management recognized that these reserves might have been redundant as of December 31, 1982, it, too, was reluctant to eliminate the potential redundancy in order to pay Market contingent commissions. Thus, even new management realized, at least initially, that the Company's only hedge against the "long tail" on the surety bond business was to set the IBNR reserves at a high level. Paul Zucconi emphasized that the loss ratio on the Market book had declined between 1979 and 1982, but Lemonik stated that this ratio had not "matured" enough to be reliable in 1981 and 1982.[19] Whether old management should have changed its view of the Market loss history between 1979 and 1982 is a matter of business judgment. Plaintiff has not shown that old management acted without justification in continuing to set the Market IBNR reserves at higher levels as they did in 1981 and 1982. THE SURPLUS RELIEF TREATY WITH CONTINENTAL This dispute centers about the accounting treatment given two treaties, or contracts, between American Plan and Continental Casualty Insurance Company ("Continental") in American Plan's 1981 10K and 1982 10Q's. In preparing the 1983 annual audit, new management determined, and Peat, Marwick concurred, that these treaties should not have been accounted for as reinsurance treaties because they did not provide for a transfer of risk from American Plan to Continental as required under GAAP — that they did not, as a practical matter, obligate Continental to indemnify the Company for losses the Company incurred under the policies covered by the treaties. In effect, they assert that the economic substance of the transactions governs rather than the terms of the treaty. In the view of new management and Peat, Marwick, the Continental treaties were intended merely to provide surplus relief,[20] not reinsurance, and should have been accounted for as such. They further determined that by accounting for the treaties as if reinsurance were in effect with Continental, the Company was able to defer *1476 more acquisition costs — costs such as taxes and commissions payable upon issuing the policies covered by the treaties — than was proper under GAAP, thereby overstating its earnings by $1,230,000 as of December 31, 1981 and by $2,433,000 as of December 31, 1982. Paul Zucconi and Robert McCausland testified that whether or not a transfer of risk occurs under GAAP is to be determined by examining the substance of a treaty rather than its form: A theoretical possibility that indemnification will occur under the treaty is not sufficient; GAAP requires that it be likely or probable. Both men found that no indemnification was likely because, while the terms of the treaties provided for indemnification under certain circumstances, none had occurred since at least 1970. Murray Lemonik, a member of old management, confirmed this history. During this prior period, Zucconi found, the only funds that had been transferred between American Plan and Continental had involved interest payments by the Company to Continental in return for surplus relief. In addition, McCausland calculated that under the terms of the treaties the indemnification provisions could not have come into play in 1981 or 1982 unless the loss ratios on the reinsured policies in those years had been double the historical average dating back to the mid-1970's. He further noted that, because Continental's obligation to indemnify the Company depended upon the cumulative loss experience on the reinsured portfolio, indemnification became less and less likely with each passing year of favorable loss experience. Murray Lemonik, Luther Williams, and Richard Pluschau, each of whom, as previously noted, had worked with the Continental treaties over a period of years, unequivocally testified that the treaties involved a transfer of risk. They all emphasized that just because no indemnification had occurred in the past did not mean that none could occur in the future and that it could occur if losses on the reinsured policies exceeded certain limits. Pluschau calculated that Continental would have incurred an underwriting loss under one of the treaties had the loss ratio on its own exposure exceeded approximately seventy percent. He acknowledged that the loss ratio as to American Plan's exposure would have to be higher because of the deductibles the Company was required to pay under the treaties, and he did not indicate whether the seventy percent figure reflected annual or cumulative loss experience. Nevertheless, even if indemnification would have occurred only when the annual losses reached unusually high levels, even double the historical average, as McCausland claimed, it is not unrealistic to conclude that such levels could be reached in the event of a catastrophic loss such as might result from a flood, landslide, lightening storm, or brushfire, with which, it may be noticed, certain parts of the country have recently been plagued. Plaintiff's witnesses did not address this possibility. It is also significant that the New York State Department of Insurance, to which the Continental treaties were submitted for regulatory approval, had in 1978 refused to approve one of them because in effect it did not provide for a transfer of risk. The treaty was redrafted in light of the Department's objections and thereafter was approved. Prior to the closing the most recent approval given by the Department was in 1981. Paul Zucconi emphasized that state regulators apply statutory accounting principles and are not concerned about transfer of risk, which is significant for accounting purposes only under GAAP. Nevertheless, that state regulators may not be concerned about transfer of risk in general does not mean that when they do consider the issue, as they did here, their views are entitled to no weight. As in many of the matters discussed herein, the dispute over the accounting treatment given the Continental treaties is, at bottom, one of opinion. Each side presented evidence that contradicted and in some degree weakened the force of the other side's position but ultimately did not disprove it. As noted earlier, the business judgment and personal experience of those responsible for managing the Company's affairs on a daily basis carry considerable *1477 weight when their conduct of those affairs is at issue. The Court finds that plaintiff has not shown that the accounting treatment given the Continental treaties was erroneous. In sum, plaintiff has failed to carry its burden of proof on the central factual charge in the complaint — that the 1981 10K and 1982 10Q's contained errors that misrepresented American Plan's book value. Thus, the degree of defendants' personal involvement, if any, in the preparation of those financial statements and of plaintiff's reliance upon them need not be determined. For the reasons that plaintiff has failed to sustain its claims, it and the Guarantors have failed to establish their affirmative defenses to defendants' counterclaim and third party claim. Judgment may be entered in defendants' favor, therefore, on the principal claims, the counterclaim against plaintiff, and the third party claim against the Guarantors in accordance with the terms of the guaranty. The foregoing shall constitute the Court's findings of fact and conclusions of law. Judgment may be entered accordingly. NOTES [1] 15 U.S.C. §§ 78j(b), 78t(a). [2] 15 U.S.C. § 77q(a). [3] N.Y.Gen.Bus.Law § 352-c (McKinney 1984). [4] Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976). [5] See Metropolitan Coal Co. v. Howard, 155 F.2d 780, 784 (2d Cir.1946); Pittsburgh Coke & Chemical Co. v. Bollo, 421 F.Supp. 908, 928 (E.D.N.Y. 1976), aff'd, 560 F.2d 1089 (2d Cir.1977). [6] See Salem v. United States Lines Co., 370 U.S. 31, 35, 82 S.Ct. 1119, 1122, 8 L.Ed.2d 313 (1962) (quoting United States Smelting Co. v. Parry, 166 Fed. 407, 415 (8th Cir.1909)). [7] These restatements were included in note 13 to the Form 10K for 1982. Plaintiff's exhibit 6, at 43-44. [8] Later in 1983, a second actuarial firm, Tillinghast & Co. ("Tillinghast"), was retained to evaluate the adequacy of the reserves as of December 31, 1982 and concluded that they should be increased an additional $1.5 million beyond the increase recommended by Pluschau and Huggins. Tillinghast based its conclusion, however, on information that was not available until 1983. Record at 753 (testimony of Robert McCausland). [9] Id. at 412 (testimony of Murray Lemonik). [10] Id. at 106-07, 116-17 (testimony of Alan Brinn). [11] Id. at 173 (testimony of Richard Sumner). [12] Standards of Financial Accounting & Reporting, § 4311.08(a) (1978) (quoted in plaintiff's exhibit 10(a), at 1046) (footnote omitted). [13] Plaintiff's exhibit 10(a), at 1045, 1052; see record at 152 (testimony of Dominic Esposito). [14] This second restatement of the 1982 10Q's was contained, along with the restatement of the 1981 10K, in note 2 to the 1983 Form 10K. Plaintiff's exhibit 7, at 84-88. The evidence does not indicate precisely when the information on which the Security Mutual write-off was based became available or which of the quarterly statements for 1982 were in error and by how much. Note 2 to the 1983 Form 10K states that according to current management a reserve of one million dollars should have been established in the first quarter of 1982 as a result of the Security Mutual liquidation. Id. at 84-85. However, the work papers prepared by Peat, Marwick in connection with the 1983 audit focus on whether or not the information on which the Security Mutual write-off was based was available to the Company "at the time the 12/31/82 financial statements were being prepared" and conclude that "an oversight of information available in March 1983 appears to have occurred." Plaintiff's exhibit 11(a) (emphasis added). In view of these work papers, it is unclear whether the "oversight" was that of old management or of new management and its prior auditors, Alexander Grant, or of both groups. [15] Although neither side offered a precise calculation, Murray Lemonik estimated that once in the penalty situation the Company could incur losses amounting to hundreds of thousands of dollars and pay penalty premiums in the corresponding amount before the maximum would be reached. Absent other evidence, it cannot be assumed that the premiums paid were at or near the maximum and that the burn cost was not a significant factor in this instance. [16] Of course, as both Lemonik and Williams noted, the Company would still carry a net payable to Security Mutual in the amount of $0.33 for every dollar of reinsured loss incurred, to which the liquidator could lay claim. Plaintiff did not inquire into whether the Company had properly accounted for this net payable, although Lemonik indicated that the Company did have adequate funds and reserves to make good any claim by the liquidator. In any event, although the testimony is hazy on this point, it appears that as long as the Company was in the penalty situation it would have had to carry the $0.33 net payable on its books whether or not reinsurance was recoverable from Security Mutual. Based on old management's calculation of the burn cost, the mere fact of liquidation did not appear to have a negative effect upon the Company's financial condition. [17] For a recent example of the periodic controversies over accounting procedures, see N.Y. Times, Aug. 18, 1985, § 3 (Business), at 4. [18] Record at 677 (testimoney of Richard Pluschau). [19] Id. at 519 (testimony of Murray Lemonik). [20] A surplus relief treaty is a form of reinsurance treaty whereby the insurance company cedes a portion of a policy to a reinsurer in return for a ceding commission that minimizes the drain on the ceding company's surplus and allows it to write more policies. The ceding company pays the reinsurer a guaranteed profit — or interest — over the term of the ceded policy. Generally, surplus relief treaties do not provide for a transfer of risk.

2013-10-30 06:32:38.538845+00

Montgomery

852 S.W.2d 172 (1993) STATE of Missouri, Respondent, v. Martin John HIGGINS, Appellant. No. 18145. Missouri Court of Appeals, Southern District, Division Two. April 27, 1993. *174 John T. McMullan, Pelts, Stokley and Turnbow, Kennett, for appellant. Jeremiah W. (Jay) Nixon, Atty. Gen., Hugh L. Marshall, Asst. Atty. Gen., Jefferson City, for respondent. MONTGOMERY, Presiding Judge. Martin John Higgins (Defendant) waived jury trial and, upon trial by court, was found guilty of the class B felony of sodomy, in violation of § 566.060.[1] He was sentenced to three years' imprisonment and now brings this appeal. The information charged in pertinent part that on or about August 17, 1990, Defendant had deviate sexual intercourse with C.H. who was then less than fourteen years of age and to whom Defendant was not married. Defendant is the paternal grandfather of C.H. C.H. was eleven years old at the time she testified at trial and was nine years of age at the time of the incident charged. Prior to August 17, 1990, C.H. and her brother (an eighth grader at the time of trial) often visited with their paternal grandparents who lived in Clarkton, Missouri. During that time C.H. and her brother lived with their mother in Dexter, Missouri. C.H. testified that two weeks before school started in Dexter on August 21, 1990, her grandmother Higgins (wife of Defendant), her aunt Annette and cousin Brittany picked her and her brother up to go to her grandparents' home. They stopped at Wal-Mart, where her two-year-old cousin Brittany fell from a shopping cart and required an emergency trip to the hospital. C.H. and her brother were returned to Dexter rather than spending the night with their grandparents. That date was August 7, 1990. The weekend after the weekend following the Wal-Mart incident, C.H. testified her grandmother took her with her brother to Clarkton. That weekend commenced on Friday, August 17, 1990. They stopped at their grandparents' bar in Clarkton where her grandmother remained to work the evening shift. Defendant *175 took the children to the grandparents' home where supper was prepared. After supper Defendant and the children watched TV. Later, C.H.'s brother went to bed. Defendant was lying on the couch and asked C.H. to come over and sit with him. She testified that Defendant "played with my boobs and my vagina" after he "put his hands down my panties." She stated Defendant had done this about fifteen to twenty times previously. The deposition of C.H. was taken on February 27, 1992, before the trial commenced on March 11, 1992. In the deposition C.H. testified contrary to her trial testimony in that she stated the incident with Defendant occurred on the date of Brittany's injury. Defendant's first point claims the "trial court erred by admitting, over the objection of the [Defendant], testimonial evidence presented by the alleged victim which directly contradicted her deposition testimony, causing the [Defendant], who was improperly not apprised of such a change of testimony until the trial, unfair and prejudicial surprise." This point does not comply with Rule 30.06[2] which sets forth the requirements for briefs in appeals of criminal cases. Paragraph (d) of the rule provides, in part: The points relied on shall state briefly and concisely what actions or rulings of the court are sought to be reviewed and wherein and why they are claimed to be erroneous with citations of authorities thereunder. Defendant's point relied on does not state wherein and why the trial testimony of the victim caused Defendant to suffer "unfair and prejudicial surprise," nor does it reveal wherein and why it was improper that Defendant was not notified of such change in testimony. A point written in violation of Rule 30.06(d) that cannot be understood without resorting to the transcript or argument section of the brief preserves nothing for appellate review. State v. Smith, 770 S.W.2d 469, 472 (Mo.App. 1989); State v. Gamble, 649 S.W.2d 573, 576 (Mo.App. 1983). In addition, the only two cases cited by Defendant under this point are Pulitzer v. Chapman, 337 Mo. 298, 85 S.W.2d 400 (1935), and Woelfle v. Connecticut Mut. Life Ins. Co., 234 Mo.App. 135, 112 S.W.2d 865 (1938). Neither case is authority for the point made by Defendant, thus violating another requirement of Rule 30.06(d). We are not required to review points or arguments thereunder when they appear without citation of applicable authority. Gamble, 649 S.W.2d at 576. Absent proper explanation concerning why no authority is cited, points relied on without citations are deemed waived or abandoned. State v. Meadows, 785 S.W.2d 635, 641 (Mo.App.1990). Regardless, we may exercise our discretion to review this point for plain error resulting in manifest injustice or a miscarriage of justice. Rule 30.20. Resorting to Defendant's argument, the best we can determine is that he claims the prosecutor violated § 491.075.3.[3] Apparently the prosecutor talked to C.H. three days before trial and learned she would testify the incident in question occurred on August 17, 1990, in opposition to her deposition testimony. Defendant claims § 491.075.3 required the prosecutor to reveal the change in the child's testimony before trial which would have allowed him to prepare his alibi defense. Section 491.075 pertains to the admissibility of statements of a child under twelve years of age when certain offenses are involved. It reads, in pertinent part: 1. A statement made by a child under the age of twelve relating to an offense under chapter 565, 566 or 568, RSMo, performed with or on a child by another, not otherwise admissible by statute or court rule, is admissible in evidence in criminal proceedings in the courts of this state as substantive evidence to prove the truth of the matter asserted if: (1) The court finds, in a hearing conducted outside the presence of the jury that the time, content and circumstances of the statement provide sufficient indicia of reliability; and *176 (2) The child either: (a) Testifies at the proceedings; or (b) Is unavailable as a witness. .... 3. A statement may not be admitted under this section unless the prosecuting attorney makes known to the accused or his counsel his intention to offer the statement and the particulars of the statement sufficiently in advance of the proceedings to provide the accused or his counsel with a fair opportunity to prepare to meet the statement. (Emphasis added.) When subsection 3 is read in context with the entire statute, it is obvious that Defendant incorrectly views the purpose of the statute. Section 491.075 only involves admissibility of a child victim's statement to another person which would ordinarily be inadmissible as hearsay except for the statute. See, e.g., State v. Blue, 811 S.W.2d 405, 407-08 (Mo.App. 1991); State v. Zamora, 809 S.W.2d 83, 86 (Mo.App.1991). The statute has no application to the child's own testimony at trial. C.H.'s testimony as to the date of the offense was admissible without regard to any assistance from § 491.075. Therefore, the prosecutor had no obligation to comply with subsection 3 to render C.H.'s testimony admissible. Furthermore, Defendant was not hindered in presenting his alibi defense. Both he and his wife testified that preparations for a fish fry to occur on August 18, 1990, made it necessary to return the children to their home on the 17th about 1:00 p.m. The information charged the crime occurred on August 17, 1990, and the State's evidence revealed it occurred that evening. Defendant's alibi defense squarely met the State's evidence. We find no plain error resulting in manifest injustice or a miscarriage of justice regarding Point I and it is denied. In Point II, Defendant asserts the "trial court erred by allowing into evidence out of court statements by the alleged victim that did not qualify as admissible non-hearsay statements as defined in § 801(d)(C) of the Missouri Rules of Evidence." Like Point I, this point is penned in complete disregard of Rule 30.06(d) and, for the reasons stated in Point I, preserves nothing for appellate review. As written, the point fails to state wherein and why the unspecified out-of-court statements by the victim do not qualify as admissible non-hearsay statements. Our review is further thwarted by our inability to locate any treatise or publication entitled Missouri Rules of Evidence. Believing Defendant would enlighten us with the contents of § 801(d)(C), we turned to the argument section of his brief and learned nothing. No further reference to this publication is found there. The State's brief surmises that "no such provisions exist." Reluctantly, we review for plain error. Defendant argues his hearsay objection to the testimony of Corporal Shirley Alexander should have been sustained. She testified of her interview with C.H. in October 1990 in which C.H. related her grandfather had touched her in a private area. From Defendant's discussion of State v. Wright, 751 S.W.2d 48 (Mo. banc 1988), we assume the error addressed is the failure of the trial court to hold a hearing as required by § 491.075.1(1). In State v. Langlois, 785 S.W.2d 679 (Mo.App.1990), the Court reviewed a point for plain error which alleged the trial court failed to conduct a hearing under § 491.075 in order to determine if a child victim's statements were reliable. Relying on State v. Fogle, 743 S.W.2d 468, 470 (Mo. App.1987), Defendant's point was denied, regardless of the lack of a hearing, because the challenged testimony was cumulative to the evidence elicited from the child victim who testified at trial and was competently cross-examined by defendant's counsel. Here, the challenged testimony of Corporal Alexander was cumulative to the trial testimony of C.H. who was fully cross-examined by Defendant's counsel. We find no manifest injustice or miscarriage of justice will result if plain error relief is not granted. Point II is without merit. Defendant's last point reads: *177 The trial court erred in finding the [Defendant] guilty beyond a reasonable doubt because insufficient evidence to support such a finding was presented by the State. The infirmities of this point and its violation of Rule 30.06(d) are readily apparent. The point does not state wherein and why the evidence was insufficient to support the trial court's finding of guilt. In State v. Keith, 811 S.W.2d 70 (Mo.App.1991), we ruled a similar point preserved nothing for our review and we so rule here. Nevertheless, we have carefully read the entire transcript of 197 pages to determine if plain error relief is warranted. Rule 30.20. Examination of Defendant's one-page argument leaves us convinced the matters complained of did not result in manifest injustice or miscarriage of justice. Defendant is not entitled to plain error relief on this point. Judgment affirmed. FLANIGAN and PREWITT, JJ., concur. NOTES [1] Statutory references are to RSMo 1986 unless otherwise indicated. [2] Rule references are to Missouri Rules of Court (1993). [3] Statutory references are to RSMo 1986.

2023-08-22 21:20:03.405605+00

Price

Dissenting Opinion by Price, J.: Without reaching the merits of the appeal, I would reverse the action of the lower court due to a procedural error. The docket entries most immediately relevant to the present case indicate that on July 26, 1974, appellants filed a petition in the lower court to replace the district attorney with a private prosecutor. This petition was denied by the trial court by order dated December 2, 1974. Appellants appealed this denial to the Pennsylvania Supreme Court and on December 20, 1974, certiorari was granted.1 This divested the lower court of *443jurisdiction over the case. Commonwealth v. Johnson, 431 Pa. 522, 246 A.2d 345 (1968); DeMatteo v. White, 233 Pa. Superior Ct. 339, 336 A.2d 355 (1975). However, on December 30, 1974, the lower court accepted a guilty plea and sentenced the defendant. Because jurisdiction rested with the supreme court at that time, the lower court had no power over the proceedings and could not dispose of the case. The proceedings in the lower court were a nullity during the pendency of that appeal. The guilty plea was improperly accepted and sentence could not have been imposed. I would remand the case for a proper determination of the defendant’s guilt and a proper sentence. Again, without reaching the merits, I must also note an inconsistency in the majority opinion. At the outset, the majority acknowledges that the facts of the case are “sketchy,” but later concludes that “the posture of this case compels the conclusion that the lower court acted properly in denying the petition.” (Majority opinion at page 439). When faced with evidence as “sketchy,” as well as conflicting, as that found here, the action of the lower court does not immediately appear to comply with the American Bar Association standards discussed by the majority. Under the circumstances of the instant case, we should not so readily affirm the actions of the lower court. Reversing and remanding would be neither senseless nor would it simply ensure jurisdictional adequacy, but is rather mandated in this situation. . That appeal, which was on March 5, 1975, transferred to this court, is the appeal at 419 April Term, 1975. Two subsequent appeals were taken to the supreme court and also transferred to this court, the *443appeal at 420 April Term, 1975 from an order of the lower court entered December 23, 1975, and the appeal at 421 April Term, 1975 from the proceedings in the lower court on December 30, 1975.

2013-10-30 06:32:38.742892+00

Dillin

615 F.Supp. 491 (1985) MILWAUKEE MUTUAL INSURANCE COMPANY, Plaintiff, v. Daniel R. BUTLER, Defendant. No. IP 82-926-C. United States District Court, S.D. Indiana, Indianapolis Division. August 15, 1985. *492 Frank I. Magers, Indianapolis, Ind., for plaintiff. William V. Barteau, Speedway, Ind., for defendant. MEMORANDUM OF DECISION DILLIN, District Judge. The Court, having heretofore heard the evidence in this cause, limited to the issue of liability, now makes its findings of fact and conclusions of law in the form of this memorandum. Rule 52(a), Federal Rules of Civil Procedure. Background On October 28, 1979, defendant, Daniel R. Butler, was struck by an automobile near the intersection of West 34th Street and High School Road in Indianapolis, Indiana. The striking followed an altercation between defendant and one of his friends with two unidentified young males, one of whom was the driver of the car which struck the defendant. The vehicle that struck defendant did not stop following the incident and thus was a "hit and run" automobile within the meaning of the term as defined in the insurance policies written by plaintiff, Milwaukee Mutual Insurance Company. Defendant received extensive injuries as a result of the striking, was hospitalized *493 for over three weeks and was confined to his bed at home for several months thereafter. The incident was reported to the Indianapolis Police Department and an investigation was undertaken by that department immediately following the striking. With the assistance of a Marion County Deputy Sheriff, a relative of defendant, a tentative identification of the driver and owner of the vehicle that struck defendant was made and charges were filed against the alleged driver, a juvenile, in the Juvenile Division of the Marion County Superior Court. A hearing was held in such juvenile case in May, 1980, at which time defendant was unable to identify the charged juvenile as the driver of the vehicle which had struck him, and he was unable to make positive identification of the juvenile's automobile as such vehicle. As a result, the charges against the juvenile were dismissed. Until the time of the hearing in Juvenile Court, defendant was operating under the belief that the driver and owner of the vehicle which had struck him were known, and he was unaware that he could have insurance coverage under insurance policies held by his relatives occupying the same household, if the identity of the owner and driver of the vehicle which struck him were unknown. Thereafter he hired counsel, who put plaintiff on notice by a letter dated June 24, 1980, following by a telephone call on July 1, 1980. At the time of his injuries, defendant was residing with his parents, Samuel P. and Barbara Butler, and his sister, Judith Butler, in his parents' residence. His father had an insurance policy in effect with Milwaukee Mutual which provided uninsured motorist coverage with $15,000/30,000 limits. This policy also provided for medical services coverage of $2,000. It was as to this policy which defendant originally claimed benefits. Defendant's sister, Judith Butler, also had had an insurance policy in effect with Milwaukee Mutual which provided for $15,000/30,000 uninsured motorist coverage and $1,000 medical services coverage. Under the terms of the policies, defendant was included within the definition of "insured" in that he was a resident of the same household with his father and his sister, and he was not otherwise excluded by the terms of the policy. Ms. Butler's original policy with the plaintiff covered the period from April 23, 1979, to October 23, 1979. Before the termination date of October 23, 1979, she received a "renewal certificate" from plaintiff which stated, in pertinent part, that: "In consideration of the payment of the premium shown below, this policy is hereby extended for the Policy Period designated." The policy period so designated was from October 23, 1979, to April 23, 1980, and the premium payment was $176.80. No such payment was ever made. After receiving a final notice that the renewal premium had not been received by plaintiff, Ms. Butler received a notice from plaintiff that her policy had lapsed. In January, 1980 she applied for and was issued a new policy from plaintiff covering her for the period of January 14, 1980, to July 14, 1980. Plaintiff's local representative, Jerry Jenkins, responded to defendant's notice on August 20, 1980 by letter. Mr. Jenkins testified in deposition that he opened a file on the case, but he took no further action on the claim until approximately a year later when he contracted with an independent adjusting company, Crawford and Company, to investigate and adjust the claim. Crawford and Company representatives met with defendant's attorney on several occasions, and said attorney supplied Crawford and Company with all available medical and other information available. Two appointments were made to obtain defendant's statement, as requested by Crawford and Company, but the Crawford and Company representative failed to appear. Defendant's attorney then contacted Mr. Jenkins by letter of October 19, 1981 and informed him of the status of the case and requested that immediate action be taken. Following this, the Crawford and Company representative appeared and took a written statement from defendant. *494 Defendant filed a John Doe complaint against the unknown defendants and plaintiff in the Marion County Superior Court on October 23, 1981. Plaintiff appeared in that case and filed various motions. Plaintiff then filed this action, seeking a declaratory judgment that it was not liable to defendant under the policies above mentioned. Defendant filed a counterclaim for relief under the policies. The Samuel P. Butler Policy I. Initially, the Court must determine whether the defendant gave sufficient notice to plaintiff of his claim under the insurance contract. Under Indiana law, the failure of the insured to give reasonable notice constitutes a material breach of the terms of the policy; however, if the insured can sustain his burden of proving that the insurer was not prejudiced by the late notice, then coverage may not be denied on that basis. Miller v. Dilts, 463 N.E.2d 257, 265-66 (Ind.1984). It is not completely clear under the instant contract as to when Mr. Butler was required to notify his insurer of his claim. On page three of the contract it is provided that if the identity of the driver or owner of a hit-and-run automobile cannot be ascertained, then the insured must report the accident within 24 hours to a police officer and must file with the company within thirty days thereafter a sworn statement that he has a cause of action arising out of the accident. Later, on page four of the policy, it states that written notice must be given within twenty days following the date of the accident, occurrence or loss, provided that the failure to give such notice within the time specified shall not invalidate any claim made by the insured if it shall be shown not to have been reasonably possible to give such notice within the prescribed time and that such notice was given as soon as reasonably possible. This Court need not decide whether or not the notice given by defendant was reasonable under the contract and facts of this case because it is clear that, even if the notice was late, the plaintiff, as insurer, was not prejudiced thereby. The incident at issue was promptly reported to the Indianapolis Police Department as well as the Marion County Sheriff's Department. A thorough investigation ensued which resulted in an arrest of a suspect who was subsequently released because of the inability of the witnesses to identify him. It is doubtful that the plaintiff, even had it been given more prompt notice, could have or would have conducted a more effective investigation. This is manifested by the actions which Milwaukee Mutual did take (or failed to take) once it was actually notified of defendant's claim. The plaintiff's claims manager opened a file on the matter after receiving notification of the claim but took no real action other than to request copies of defendant's medical bills and reports. Such reports, even if submitted much earlier, would not have aided the plaintiff in identifying the hit-and-run vehicle. Not until a year after being notified of the claim did Milwaukee Mutual assign the case to an independent adjusting company for investigation of the claim. Four months after this assignment, the independent adjuster finally took the insured's statement, but only after missing two previous appointments for that purpose. The insured has established that the insurer was not prejudiced, under the facts of this case, by the timing of the claim notification even assuming that it was late, because it is unlikely that Milwaukee Mutual could have identified the driver and/or owner of the offending vehicle even given an earlier opportunity to do so. Thus, defendant's claim cannot be denied on the basis of untimely notice. II. The second issue before the Court is whether a victim covered under an uninsured motorist provision of an automobile liability policy may recover from his own carrier for injuries resulting from the intentional wrong of an uninsured motorist when the policy protects the insured from damages "caused by accident." This appears *495 to be a case of first impression under Indiana law, which is the law to be applied in this action. Essentially, the determination of whether an intentional act constitutes an "accident" within the meaning of an uninsured motorist provision depends upon whether such an act is viewed from the standpoint of the victim or from the standpoint of the intentional wrongdoer. It seems clear to this Court that the proper standpoint from which to view such an occurrence is that of the victim. A victim's injuries are just as unexpected and unwelcome — accidental, if you will — to him whether they are intentionally, negligently, or otherwise delivered. This Court believes that, given the opportunity, the Indiana Supreme Court would take the "victim viewpoint" approach, thus aligning itself with the rule that injuries intentionally inflicted by an uninsured motorist fall within the meaning of damages "caused by accident" in the insured victim's uninsured motorist coverage. State Farm Fire & Casualty Company v. Tringali, 686 F.2d 821, 824 (9th Cir.1982) (construing Hawaii law); Sciascia v. American Insurance Company, 183 N.J.Super. 352, 443 A.2d 1118, 1120 (1982); Kish v. Central National Insurance Group of Omaha, 67 Ohio St.2d 41, 424 N.E.2d 288, 291 (1981); Tomlin v. State Farm Mutual Automobile Liability Insurance Company, 95 Wis.2d 215, 290 N.W.2d 285, 288 (1980) (construing automobile liability provision other than that for uninsured motorist); Leatherby Insurance Company v. Willoughby, 315 So.2d 553, 555 (Fla.Dist.Ct.App.1975); Davis v. State Farm Mutual Automobile Insurance Company, 264 Or. 547, 507 P.2d 9, 10 (1973) (construing Michigan law). The Indiana Court of Appeals, by focusing on the insured victim, has implicitly recognized the rationale behind this position by noting that "the duty of the insurer to pay damages arises solely out of its contract with its insured and not by reason of any special relationship between the insurer and the uninsured motorist." Bocek v. Inter-Insurance Exchange of Chicago Motor Club, 175 Ind.App. 69, 369 N.E.2d 1093, 1096 (1977). This interpretation of the language "caused by accident" is also supported by the declaration of the Indiana Supreme Court that "[i]t is the rule ... that an ambiguous term in an insurance policy will be resolved in favor of the insured." Freeman v. Commonwealth Life Insurance Company, 259 Ind. 237, 286 N.E.2d 396, 397 (1972). That the incident at bar was "caused by accident" within the meaning of the policy under Indiana law is further evidenced by the fact that Indiana is a compulsory automobile liability insurance state. Ind.Code § 9-1-4-3.5 (Supp.1984). Compulsory insurance statutes manifest a social policy to guarantee compensation for victims of traffic mishaps. Other jurisdictions which require such insurance, recognizing that its purpose is to provide broad protection, have held that injuries suffered as the result of an intentional act by the insured are caused "by accident" and thus are covered by policies utilizing such language. State Farm Fire and Casualty Company v. Tringali, supra; Sciascia v. American Insurance Company, supra; Hartford Accident and Indemnity Company v. Wolbarst, 95 N.H. 40, 57 A.2d 151, 153 (1948). The general rule of insurance law that voids a policy indemnifying an insured against liability for his willful wrong does not apply to compulsory automobile liability insurance because "[t]he statute itself is declaratory of public policy applicable to compulsory insurance and supersedes any rule of public policy which obtains in ordinary insurance law." Wheeler v. O'Connell, 297 Mass. 549, 9 N.E.2d 544, 547 (1937). This Court need not decide whether a victim of intentional harm may recover under the intentional wrongdoer's own insurance coverage because the case at bar concerns the distinct situation in which the victim and the insured are one and the same, by virtue of uninsured motorist coverage. However, given Indiana's compulsory insurance statute and the fact that intentional harm is just as "accidental" to the victim whether it is he or the tortfeasor who is insured, this distinction is not of critical importance and it would not change our conclusion on this issue. *496 Defendant's injuries in this case were "caused by accident" within the meaning of the instant uninsured motorist provision, thus causing plaintiff to be liable to defendant thereunder. The maximum amount of such insurance is in the amount of $15,000 for bodily injury and $2,000 for medical expenses. Although the issue of the amount of damages was reserved, it is obvious from material in the file that defendant's loss in each category is substantially more than the amount of insurance. The Judith Butler Policy The final issue which confronts the Court is whether the defendant's sister's policy with plaintiff, covering the defendant as an insured, was in effect at the time of the hit-and-run incident. We hold that it was not. The credible evidence shows that Ms. Butler did receive communications from plaintiff, prior to her brother's mishap, stating that her insurance protection was being terminated at the expiration of her policy period for nonpayment of premium. However, it is ultimately irrelevant whether or not she received such notice. Plaintiff is not required to give notice, since the policy was not "cancelled" within the meaning of Ind.Code § 27-7-6-1 et seq., but rather was "not renewed" due to Ms. Butler's failure to pay the renewal premium. American Family Mutual Insurance Company v. Ramsey, 425 N.E.2d 243, 244 (Ind.Ct.App.1981). Defendant argues that plaintiff renewed the policy by issuing a "renewal certificate" to Ms. Butler and therefore a notice of cancellation was subsequently required prior to the termination of the policy. However, this is not the case. The Indiana Court of Appeals has recognized the general rule that "the delivery of a policy by the insurer to the insured upon the expiration of a policy without request by the insured is an offer which must be accepted by the insured before a contract of insurance is effective." Cook v. Michigan Mutual Liability Company, 154 Ind.App. 346, 289 N.E.2d 754, 757 (1972). Applying this rule to the facts of the case, the court went on to hold that when a renewal policy recites the payment of a premium as consideration, and there is no intention to pay the required premium, there is no valid insurance policy. Id. Here, as in Cook, the "renewal policy" recites the payment of the premium as consideration for the extension of the policy. Ms. Butler did not pay, nor did she have any intention of paying the required premium. Therefore, no renewal took place and the policy lapsed as of October 23, 1979, five days before her brother's accident. Summary For all the foregoing reasons, the plaintiff is liable under the insurance policy purchased by Samuel P. Butler for the injuries suffered in the accident of October 28, 1979, by Daniel R. Butler in an amount not to exceed $15,000 for personal injuries and $2,000 for medical expenses. There is no such liability under the policy purchased by Judith Butler.

2013-10-30 06:32:38.78287+00

Melvin

34 Md. App. 357 (1977) 367 A.2d 548 RICKY LYNN TROVINGER, PATRICIA KAY LANE AND ALLAN TOMBAUGH HEALEY v. STATE OF MARYLAND. No. 62, September Term, 1976. Court of Special Appeals of Maryland. Decided January 3, 1977. *358 The cause was argued before THOMPSON, MENCHINE and MELVIN, JJ. Richard M. Karceski, with whom was Harold I. Glaser on the brief, for appellants. Gilbert H. Robinette, Assistant Attorney General, with whom were Francis B. Burch, Attorney General, and John S. Hollyday, State's Attorney for Washington County, on the brief, for appellee. MELVIN, J., delivered the opinion of the Court. Appellants were convicted of multiple violations of the Controlled Dangerous Substance Laws, Art. 27, Md. Code Ann. § 276 et seq. (1976), in a non-jury trial in the Circuit Court for Washington County (Rutledge, J.). Under separate indictments appellants Trovinger and Lane, and Trovinger and Healey, were convicted of conspiracy to distribute cocaine. Trovinger was also convicted of conspiracy to distribute marijuana. All three appellants were convicted of possession of cocaine with intent to distribute. An informant's tip, relayed by Pennsylvania State Police Officer Prough to the Maryland State Police, set the stage for the investigation which resulted in the appellants' arrests. This information was presented in an affidavit pursuant to 18 U.S.C., § 2518 (1970) in support of an Ex Parte wiretap order. The affidavit alleged that the informant was negotiating, via telephone, to purchase 500 pounds of marijuana from Trovinger, and that Trovinger was in telephone contact with his supplier in Wisconsin. The affidavit further averred that the informant had been supplying information to the Pennsylvania State Police since 1973, and that this information had led to fifteen separate arrests for narcotics violations. The application for an Ex Parte order was granted on 17 October 1974, allowing interception of Trovinger's telephone calls for a period of not more than thirty days. From this date until 10 November 1974, when appellants were arrested, twenty-eight *359 drug-related telephone calls were intercepted. Of these calls, twenty were admitted as evidence at trial over appellant's timely objections. The content of these conversations, coupled with testimony from the Maryland State Police, presented a scenario of ongoing drug traffic. Information gleaned from these phone calls disclosed that on 10 November 1974 the scenario would reach its climax when Trovinger would return to Washington's National Airport from a drug-buying trip, and would be met there by appellants Healey and Lane. On that date, after following their car from National Airport to the Hagerstown area, the Maryland State Police arrested the appellants. The curtain fell when a search of Trovinger revealed 177.008 grams of cocaine concealed on his person. Testimony established the resale value of this amount of cocaine to be in excess of $30,000. The instant indictments were issued on 26 November 1974. On 13 August 1975 and again on 21 August 1975 appellant Trovinger voluntarily appeared, without counsel, at the Baltimore office of the Federal Drug Enforcement Administration. On 21 August 1975 he wrote out a 26-page statement relating his drug enterprise experiences for a period of several years. This statement contained no information concerning the case at bar. The statement was admitted only against Trovinger at his trial. At trial, the appellants stipulated that the cocaine had been seized from Trovinger's person, that the car in which he was then a passenger was owned and operated by appellant Lane, and that appellant Healey was also present in the car at the time of the arrest. A motion to suppress the intercepted telephone conversations was denied. After a two-day trial, at which the three appellants were jointly represented by two attorneys, the appellants were convicted. This appeal followed. The questions presented for our consideration may be summarized as follows: (1) Was the Ex Parte order for the wiretap improperly granted? *360 (2) Was the statement of appellant Trovinger improperly admitted against him? (3) Was there a conflict of interest between counsel for the appellants? (4) Was the evidence insufficient to support the convictions? Because we answer each question in the negative we shall affirm the convictions. The Wiretap The privacy of telephone communication is guaranteed by the Fourth Amendment of the United States Constitution. Before this privacy may be invaded by the police, "probable cause for belief that an individual is committing, has committed, or is about to commit a particular offense ..." (including narcotic offenses) must be demonstrated. Other statutory requirements must also be met. See 18 U.S.C., § 2518 (1970). Appellant Trovinger claims that his motion to suppress the intercepted telephone conversations was improperly denied because the underlying Ex Parte Order does not meet statutory standards. He challenges the legal sufficiency of the required affidavit for failure to adequately demonstrate the informant's reliability as well as the necessity for a wiretap. After independently reviewing the record and the affidavit we find these contentions to be without merit. Appellant concedes the credibility of Cpl. Prough of the Pennsylvania State Police, but maintains that his informant's basis of knowledge was not proven. We disagree. The affidavit adequately demonstrates the basis for the informant's knowledge and amply supports his conclusions of the presence of criminal activity. It is evident within the four corners of the affidavit that the informant was dealing personally with Trovinger and was negotiating via telephone to purchase 500 lbs. of marijuana from him. The personal knowledge of the informant presented in the affidavit provides a sufficient basis for probable cause. See Spinelli v. U.S., 393 U.S. 410, 89 S.Ct. 584 (1969); Bolesta v. State, 9 *361 Md. App. 408, 264 A.2d 878 (1970). Compare, Collins v. State, 17 Md. App. 376, 302 A.2d 693 (1972). We hold further that the need for a wiretap was adequately demonstrated. The affidavit describes in detail the means of surveillance attempted to be used, and why these means had been, or would be, unsuccessful. The State need not exhaust all conceivable investigative possibilities before seeking a wiretap. In U.S. v. Lanza, 356 F. Supp. 27 (M.D. Fla. 1973), the granting of an Ex Parte order was challenged for failure to exhaust other investigative possibilities. In rejecting this argument, the court stated: "The purpose of the exhaustion requirements is not to foreclose the use of electronic surveillance until the State has exhausted every possible means of obtaining a viable case against the subjects, but merely to inform the authorizing magistrate or judge of the nature and progress of the investigation and the difficulties inherent in the use of normal techniques." 356 F. Supp. at 30. See also U.S. v. Leta, 332 F. Supp. 1357 (M.D.Pa. 1971). In all other respects the matter contained in the affidavit conforms to the standards set forth in Haina v. State, 30 Md. App. 295, 352 A.2d 874 (1976). Appellant Trovinger further contends that the affidavit was fatally defective for failure to aver that the communication would be of a continuing nature. Although this issue is not properly raised on appeal, Md. Rule 1085, after examination of the affidavit, we find the argument without merit. Trovinger's Statement On 13 and 21 August 1975 appellant Trovinger visited the Baltimore office of the Drug Enforcement Administration. At that time the appellant made a statement which detailed his traffic in narcotics, but omitted any reference to the activities for which he was then under indictment. His attorney was not present. This statement was admitted only *362 against appellant Trovinger at trial. He now attacks the admission of this statement on the sole ground that his Sixth Amendment right to counsel was violated. He does not question the relevancy or materiality of the statements. Appellant initially relies upon Blizzard v. State, 30 Md. App. 156, 351 A.2d 443 (1976) (Blizzard I.) Blizzard I adopted a liberal exclusionary rule for uncounseled, post-indictment statements. The thrust of this rule is that all uncounseled statements, elicited by the police after indictment, must be excluded from evidence. See, e.g., United States v. Thomas, 474 F.2d 110 (10th Cir.), cert. den. 412 U.S. 932 (1973). After the argument in the instant case, Blizzard was reversed by the Court of Appeals. State v. Blizzard, 278 Md. 556 (1976), (Blizzard II). In Blizzard II the Court, through Judge Smith, rejected the liberal exclusionary rule for uncounseled, post-indictment statements. The Court stated that, "... such a sweeping rule [requiring exclusion of all uncounseled, post-indictment statements] is hazardous in that it fails to take account of the special facts that arise in each new case". Blizzard II, at 22, citing Commonwealth v. Frongillo, 359 Mass. 132, 136, 268 N.E.2d 341 (1971). Thus it is clear that a challenged, uncounseled post-indictment statement is not automatically constitutionally vitiated, but rather must be evaluated in the light of its own peculiar facts. Based upon our independent analysis of the present case, we hold Trovinger's statement to be without constitutional taint. Preliminarily, we point out that insofar as the instant charges are concerned, the statement is not inculpatory. It contains a detailed description of his dealings in drugs for many years prior to his arrest, but omits any reference to the offense for which he was then under indictment. Second, it is patent that the statement was not induced, elicited, or solicited, by the prosecution. To the contrary, it appears that Trovinger himself sought out the federal authorities and that his statement was palpably voluntary. Trovinger first made contact with the Drug Enforcement Administration at their office in Philadelphia. He was there told to contact the Baltimore office. Trovinger visited the *363 Baltimore office on 13 August 1975. It was not until his second visit, one week later, on 21 August 1975, that Trovinger tendered his 26 page statement. There is some confusion on the point, but it appears that Trovinger was also advised of his right to counsel. Based upon these facts, we do not perceive that Trovinger's right to counsel has been violated. Not only was his statement not inculpatory for the charges for which he was tried, but it also appears that the statement was voluntarily made. See United States v. DeLoy, 421 F.2d 900 (5th Cir.1970), Blizzard II, supra. Appellants Healey and Lane also cite as error the admission of Trovinger's statement. It is their claim that the improper admission of the statement prejudiced their defense. Assuming arguendo that the statement was improperly admitted against Trovinger, the contentions of Healey and Lane must nevertheless fail. We have long followed the common law rule that in a non-jury trial the judge may both rule on the admissibility of evidence and act as trier of fact with no prejudice to the respective parties, State v. Hutchinson, 260 Md. 227, 271 A.2d 641 (1970); In Re Appeal No. 977, 22 Md. App. 511, 323 A.2d 663 (1974). Moreover, because the statement does not implicate appellants Lane and Healey, and the statement was offered only against appellant Trovinger, the exclusionary rule of Bruton v. United States, 391 U.S. 123, 85 S.Ct. 1620 (1968), is inapplicable. Conflict of Interest Our careful review of the record leads us to conclude that there was no fatally prejudicial conflict of interest present in this case. The State's evidence was subjected, as it was presented, to strict scrutiny by appellants' attorneys. The intercepted telephone calls, which comprised the State's case in chief, were all objected to and ultimately admitted only against respective parties identified in each phone call. None of the appellants presented a defense. There is no showing of a possible conflict among counsel and defendants as to theories or tactics of defense. We hold, therefore, that no conflict of interest resulted from the three appellants' representation by the same two attorneys. *364 Sufficiency of the Evidence Appellants claim that there was insufficient evidence to support their respective conspiracy convictions as well as Lane and Healey's convictions of possession of cocaine with intent to distribute. After carefully reviewing the record, we find that these contentions are without merit. It was proper for the court to infer from the uncontradicted evidence adduced at trial that the alleged conspiracies were formed and that Lane and Healey did have possession of cocaine. Seidman v. State, 230 Md. 305, 187 A.2d 109, cert. den. 374 U.S. 807 (1963); Greenwald v. State, 221 Md. 245, 157 A.2d 119, App. dismissed, 363 U.S. 721 (1960). Appellants Lane and Healey initially contend that their voices were not adequately identified from the intercepted telephone calls. Absent this identification, they argued, it could not be proven that they conspired together and therefore the conspiracy convictions must fail. Whether the voices of appellants Lane and Healey were properly identified was a question of fact for the court to determine. Judge Rutledge had the opportunity to listen to the taped conversations and to observe and judge the demeanor of the State's witnesses who identified the respective voices. The appellants neither testified nor presented any evidence in their behalf. This, of course, is their constitutional right, but the voice identifications are nonetheless uncontroverted. Upon our review of the record we find ample evidence from which the judge could find that the taped voices were those of the appellants. Appellants Lane and Healey further claim that their possession of the cocaine was not adequately proven.[1] We disagree. Our cases do not require actual possession of contraband; constructive possession will support a conviction. At the time of their arrest Lane and Healey were returning from the airport where they had traveled to meet Trovinger, knowing fully the illegal purpose of his travel. Based upon these facts, it was proper for the court to infer *365 Lane and Healey were participating in "the mutual use and enjoyment of the contraband". Folk v. State, 11 Md. App. 508, 518, 275 A.2d 184 (1971); Anderson v. State, 9 Md. App. 639, 267 A.2d 302 (1970). Because we are unable to find that the trial judge was clearly erroneous in his conclusions of fact, or that he erred in applying the law, we shall affirm the judgments. Williams v. State, 5 Md. App. 450, 247 A.2d 731 (1968); Maryland Rule 1086. Judgments affirmed. Costs to be paid by appellants. NOTES [1] It was stipulated at trial that Trovinger had possession of the contraband.

2013-10-30 06:32:38.819185+00

Breckenridge

852 S.W.2d 396 (1993) HAGGARD HAULING & RIGGING CO., INC., Appellant, v. STONEWALL INSURANCE COMPANY, Respondent. No. WD 45938. Missouri Court of Appeals, Western District. April 27, 1993. *397 Norman E. Beal, Kansas City, for appellant. Gary A. Schafersman, Niewald, Waldeck & Brown, Kansas City, for respondent. Before BRECKENRIDGE, P.J., and SHANGLER and KENNEDY, JJ. BRECKENRIDGE, Presiding Judge. Haggard Hauling & Rigging Co., Inc. appeals from the trial court's order granting Stonewall Insurance Company's motion for summary judgment. Haggard raises five points on appeal alleging that the trial court erred in granting Stonewall summary judgment because: (1) genuine issues of material fact existed; (2) the policy provided coverage for Haggard's defense of a lawsuit and the amount Haggard paid to settle the lawsuit; (3) Endorsement No. 3 (the Following Form Endorsement) did not preclude coverage by converting the policy to a pure excess policy; (4) the policy included coverage for loss of business revenues in its coverage for loss of use; and (5) the policy was ambiguous and should have been construed in the light most favorable to the insured. The judgment is affirmed. Haggard purchased an umbrella liability insurance policy from Stonewall which covered occurrences during the period of March 1, 1984 to March 1, 1985. Haggard was required to maintain certain underlying insurance in accordance with the Schedule of Underlying Insurance. Haggard maintained a cargo liability policy and a general liability policy during the term of the Stonewall policy. On or about August 14, 1984, Haggard was moving a five-color printing press owned by Harmony Printing Company and damaged it. Harmony demanded remuneration for damage to the printing press and for business Harmony lost due to its inability to use the damaged press. Haggard's cargo liability carrier provided coverage for the physical damage to the press and settled that portion of Harmony's claim. Although the cargo liability policy covered actual physical damage to the press, it did not cover loss of business revenues. Harmony filed suit against Haggard to recover for the loss of business revenues. Harmony sought to recover $93,081. Haggard's general liability insurance policy did not cover Harmony's loss of business revenues because such policy only covered property damage that occurred "on premises owned or rented" by Haggard. Haggard tendered the defense of the lawsuit to Stonewall and requested that Stonewall indemnify Haggard under the terms of the umbrella liability policy. In a letter dated September 3, 1987, Stonewall declined defense of the action. Pursuant to Stonewall's decision, Haggard retained defense counsel and a settlement was negotiated. Haggard filed this case to recover the amount it was forced to expend in the defense and settlement of the Harmony lawsuit. Stonewall filed its motion for summary judgment. Haggard did not file a cross-motion for summary judgment. The trial court granted Stonewall's motion for summary judgment and Haggard appeals from that order. When reviewing the trial court's ruling on a motion for summary judgment, an appellate court must examine the record in *398 the light most favorable to the non-moving party and grant that party all reasonable inferences which may be drawn from the evidence. Maryland Cas. Co. v. Martinez, 812 S.W.2d 876, 879 (Mo.App.1991). This court must affirm the trial court's judgment if it can be sustained under any theory. Ernst v. Ford Motor Co., 813 S.W.2d 910, 915 (Mo.App.1991). Summary judgment is appropriate when the prevailing party has shown that he or she is entitled to judgment as a matter of law and there is no genuine dispute of the material facts required to support that right to judgment. Martinez, 812 S.W.2d at 879. Summary judgment is appropriate when an insurance policy is clear and unambiguous. Id. at 880. The moving party bears the burden of proving a right to judgment as a matter of law and the absence of a genuine dispute about the material facts supporting such judgment. Rule 74.04(c). It is no longer necessary for the moving party to show entitlement to summary judgment by unassailable proof. Herron v. Whiteside, 782 S.W.2d 414, 415 (Mo.App.1989). Although Haggard sets forth five Points Relied On prior to the argument portion of its brief, Haggard does not organize its argument accordingly. In its argument, Haggard raises one Point Relied On and four subpoints identified with letters. In response to Haggard's arguments, Stonewall devised its own Points Relied On system. To avoid confusion, this court will address the arguments without identifying them according to Points Relied On. The trial court sustained Stonewall's motion for summary judgment, finding that Endorsement No. 3 of the umbrella insurance policy precluded coverage for Haggard's loss. Haggard argues that the court erred because the plain language of the policy provided coverage and a right to defense for Haggard and Endorsement No. 3 does not negate coverage. Endorsement No. 3 reads as follows: In consideration of the premium charged, it is agreed that unless coverage is provided by the underlying insurance at the full limits of liability as shown on the schedule of underlying insurance and not otherwise specifically excluded by endorsement hereon, this policy shall not apply to: 2. Property damage, as defined in insuring agreement II. C. 3. Liability assumed by the insured under any contract or agreement. The two provisions Haggard relies on as providing coverage for its loss are the "Conditions" section and the Defense Coverage Endorsement. The applicable portion of the "Conditions" section of the policy reads as follows: 5. Limits of Liability A. The company shall only be liable for ultimate net loss in excess of either: (i) the applicable limits of liability of the policies of underlying insurance set forth in the Schedule of Underlying Insurance; or (ii) as respects an occurrence not covered by such underlying insurance, but covered under this policy; or where an occurrence covered by such underlying insurance but in recoverable amounts less than the self insured retention set forth in Item 3(c) of the Declarations, the amount of ultimate net loss set forth in Item 3(c) of the Declarations as "Self Insured Retention." (emphasis added). The pertinent part of the Defense Coverage Endorsement reads as follows: It is agreed that the policy to which this endorsement is attached is amended to include the following additional insuring agreement: Defense, settlement, supplementary payments. As respects occurrences covered under this policy, but not covered under the underlying insurance or under any other collectible insurance, the company shall: (a) Defend in his name and behalf any suit against the insured alleging liability insured under the provisions of this policy and seeking damages on account thereof: Even if such suit is groundless, false or fraudulent; but the company shall have the right to make such *399 investigation and negotiation and settlement of any claim or suit as may be deemed expedient by the company.... (emphasis added). When construing an insurance policy, the court must apply general contract construction rules because insurance policies are contracts. Herpel v. Farmers Ins. Co., Inc., 795 S.W.2d 508, 510 (Mo. App.1990). A policy is only subject to being construed under contractual rules of construction if it is ambiguous. American Family Mut. Ins. Co. v. Ward, 789 S.W.2d 791, 795 (Mo. banc 1990). Whether or not the language of an insurance contract is ambiguous is a question of law. West v. Jacobs, 790 S.W.2d 475, 480 (Mo.App.1990). When a contract is unambiguous, it is the trial court's responsibility to state its meaning. Id. An insurance policy that is unambiguous will be enforced as written and does not require application of the rules of construction. Krombach v. Mayflower Ins. Co., Ltd., 827 S.W.2d 208, 210 (Mo. banc 1992). An ambiguity exists when there is duplicity, indistinctness or uncertainty in the meaning of the language used in the policy. Id. If the language of the policy is ambiguous and reasonably open to different constructions then the language will be interpreted in the manner that would ordinarily be understood by the lay person who bought and paid for the policy. Id. Ambiguous provisions of an insurance policy will be construed against the insurer. Id. Haggard first asserts that the policy is not ambiguous. It argues that the policy provides primary coverage for the loss claimed by Harmony and that Endorsement No. 3 does not convert the policy to an excess policy.[1] Haggard interprets the "Conditions" section of the policy and the Defense Coverage Endorsement as providing coverage for occurrences not covered by the underlying insurance. Haggard relies on the phrase "as respects occurrences covered under this policy, but not covered under the underlying insurance" as an expression of intent to provide coverage for occurrences not covered by the underlying insurance. Haggard claims that the plain meaning of this language is that the policy contemplates primary coverage for occurrences rather than only providing excess coverage. Words or phrases in an insurance contract must be interpreted by the court in the context of the policy as a whole and are not to be considered in isolation. First Nat. Bank v. Farmers New World Life Ins. Co., 455 S.W.2d 517, 523 (Mo.App. 1970). Although the language Haggard relies on supports its argument when viewed in isolation, if read in context, the meaning is otherwise. The "Conditions" section and the Defense Coverage Endorsement both include language stating that coverage is only afforded if it is provided under the Stonewall policy. Neither section is intended to bestow primary coverage not otherwise provided for in the policy. Haggard then argues that Endorsement No. 3 only requires it to maintain the underlying insurance coverage set forth in the Schedule of Underlying Insurance, without requiring that the coverage of those policies be exhausted in order to receive coverage for the property damage at issue in this case. Haggard contends that the terms of the Schedule of Underlying Insurance and Endorsement No. 3 when read together provide that any policy which covers property damage is sufficient to satisfy the underlying insurance requirement. Such an interpretation would create coverage that does not exist. The plain meaning of the two provisions requires that, before the umbrella policy provides coverage for property damage, underlying insurance must be available to pay the full limits of liability required by the Schedule for Underlying Insurance. Therefore, the trial court properly concluded, as a matter of *400 law, that the policy required that the underlying insurance be exhausted before Stonewall was liable. Haggard did maintain primary general liability coverage and cargo liability coverage which it claims met the requirements of the Schedule for Underlying Insurance. Both of the underlying policies, however, provided narrower coverage for property damage than the Stonewall policy, since not all occurrences involving property damage covered by the Stonewall policy were covered by Haggard's underlying insurance policies. Under Haggard's cargo liability policy, the definition of property damage did not include coverage for loss of use. Haggard's general liability insurance policy did not cover any property damage which occurred away from the premises owned or leased by Haggard. Haggard is not entitled to coverage under the Stonewall umbrella policy because the underlying insurance policies which it chose to maintain did not provide property damage coverage as required by the condition precedent under the Stonewall policy. Haggard next argues that if its maintenance of underlying insurance did not satisfy the condition of Endorsement No. 3, the trial court still erred in granting Stonewall's motion for summary judgment because there were genuine disputes as to material facts essential to a judgment in favor of Stonewall. Haggard asserts that summary judgment could not be granted to Stonewall as a matter of law because the following genuine issues of material fact existed: 1) the expectations and intent of the parties as to coverage were in dispute; 2) the possibility for two different interpretations of Endorsement No. 3 created an ambiguity; and 3) Stonewall's interpretation of Endorsement No. 3 created a conflict with the policy's "Conditions" section and the Defense Coverage Endorsement which rendered the policy ambiguous. Haggard first contends that the policy is ambiguous and should be construed in favor of the insured, because the expectations and intent of the parties as to coverage were in dispute. Extrinsic evidence of the expectations and intent of the parties as to coverage is only to be considered if the policy language is ambiguous. Peterson v. Continental Boiler Works, Inc., 783 S.W.2d 896, 901 (Mo. banc 1990). The Missouri Supreme Court in Peterson quoted, with approval, the following language from Kalen v. Steele, 341 S.W.2d 343, 346 (Mo. App.1960): "Where there is no ambiguity in the contract the intention of the parties is to be gathered from it and it alone, and it becomes the duty of the court and not the jury to state its clear meaning." Peterson, 783 S.W.2d at 901. Contrary to Haggard's argument, the parties' subjective intent cannot be used to create an ambiguity. Only if the policy is ambiguous, can a question of fact arise requiring extrinsic evidence of the parties' intentions when the policy was purchased. If the policy is not ambiguous, the intent of the parties must be ascertained by the court from the policy itself. Haggard's second contention of ambiguity is based upon the fact that Stonewall and Haggard interpret Endorsement No. 3 differently, which Haggard asserts proves that the endorsement is open to two different interpretations. Haggard's contention is without merit. An insurance policy will not be rendered ambiguous by a dispute between the parties regarding interpretation of a policy provision. Crim v. National Life and Acc. Ins. Co., 605 S.W.2d 73, 76 (Mo. banc 1980). Whether the policy is ambiguous is a question of law for the court, without regard to whether the parties disagree as to its meaning. Haggard further claims that an ambiguity is created because the phrase "as respects occurrences covered under this policy, but not covered under the underlying insurance," contained in the "Conditions" section and the Defense Coverage Endorsement, conflicts with the language of Endorsement No. 3. Its argument is that the umbrella policy provides coverage in one place, i.e., the property damage definition and the Defense Coverage Endorsement, and takes it away in another place, i.e., Endorsement No. 3. Haggard cites Maxon v. Farmers Insurance Co., 791 S.W.2d 437, 438 (Mo.App.1990), for the premise that if a *401 contract promises something in one place and takes it away in another then an ambiguity results. "[E]very clause in an insurance policy must be given some meaning if it is reasonably possible to do so, and ... conflicting provisions in insurance policies should be reconciled if it is possible to do so consistently with the intention of the parties as ascertained from the terms used." Brugioni v. Maryland Casualty Company, 382 S.W.2d 707, 712 (Mo.1964); Surface v. Ranger Insurance Company, 526 S.W.2d 44, 47 (Mo.App.1975). In the event of a possible ambiguity, seeming contradictions must be harmonized away if reasonably possible. Ward v. Gregory, 305 S.W.2d 499, 504 (Mo.App.1957). The rule requiring that an insurance policy be construed favorably to an insured in cases of ambiguity does not permit a strained interpretation of the language of the policy in order to create an ambiguity where none exists. Id. The seeming contradiction of Endorsement No. 3 with the "Conditions" section and the Defense Coverage Endorsement is easily harmonized. The Stonewall policy provides coverage for property damage and for liability assumed by the insured under any contract or agreement, to which Endorsement No. 3 is applicable. The policy also provides liability coverage for personal injury and advertising liability. The language of the "Conditions" section of the policy and the Defense Coverage Endorsement is meaningful and does not conflict with Endorsement No. 3, because it is applicable to the liability coverage excepted from the conditions of Endorsement No. 3. Haggard's argument to the contrary ignores the plain meaning of the policy and the endorsements. The court cannot distort the plain language of the policy to create an ambiguity in a policy that is unambiguous. Krombach, 827 S.W.2d at 210. Endorsement No. 3 is not ambiguous and does not conflict with the Defense Coverage Endorsement or with the "Conditions" section of the policy, because it is possible for all three provisions to have independent application. Haggard's brief also includes an argument that Harmony's claim for loss of business revenues is actually a claim for loss of use which the Stonewall policy definition of property damage includes. It is unnecessary for this court to decide whether loss of business revenues is included in the definition of property damage under loss of use. Regardless of the definition, the Stonewall policy does not cover loss-of-use damages because the underlying policies did not cover the property damage at issue. Haggard finally contends that the Defense Coverage Endorsement provides that Stonewall will defend Haggard in those instances where there is no underlying insurance coverage. Haggard's argument regarding Stonewall's responsibility to defend is without merit. In instances where there is no underlying insurance, the Defense Coverage Endorsement requires that the occurrence be otherwise covered under the policy in order to require Stonewall to defend the action. Haggard claims that under Missouri law, even if there is only the potential for coverage, Stonewall has a duty to defend the suit. Haggard bases its argument on Missouri Terrazzo Co. v. Iowa National Mutual Insurance Co., 740 F.2d 647, 652 (8th Cir.1984) which says that an insurer, under Missouri law, has a broader duty to defend than to indemnify. The court in Missouri Terrazzo Co. stated that an insurer must defend when a comparison of the policy language and the allegations of the complaint "state a claim which is potentially or arguably within the policy's coverage." Id. Harmony's loss-of-use damages are not "potentially or arguably" within the coverage of the policy because such damages are excluded by Endorsement No. 3. Endorsement No. 3 specifically excludes liability for property damage not covered by the underlying insurance. Harmony's claim for loss-of-use damages against Haggard is not covered by the policy and, therefore, Stonewall was not required to defend the suit. Stonewall met its burden of proving that it was entitled to judgment as a matter of law and that there are no genuine disputes *402 of material facts essential to support the right to judgment. The policy is not ambiguous and summary judgment in favor of Stonewall is appropriate because Haggard failed to comply with a condition of coverage as set forth in Endorsement No. 3. The judgment is affirmed. All concur. NOTES [1] Umbrella policies are utilized to provide excess coverage over and above any type of primary coverage. 8A Appleman, Insurance Law and Practice § 4909.85 (Rev. ed. 1981). Umbrella policies also often provide primary coverage for those areas not covered by any of the underlying policies. Id. The language of the policy is determinative of the coverage provided. Id. at § 7381.