Court Opinion

ID: 9468924
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:26:52.58339+00
Date Added: 2024-06-11T17:41:07.071343
License: Public Domain

OAKES, Circuit Judge
(concurring and dissenting).
I would affirm on the direct appeal and reverse and remand for a new trial on the cross appeal. Accordingly, I respectfully dissent.
As stated in Judge Meskill’s opinion for the court in Contemporary Mission, Inc. v. United States Postal Service, 648 F.2d 97, 100 (2d Cir. 1981), a civil rights action brought by Contemporary Mission, Inc. (CMI), against the Postal Service, CMI “purports to be a not-for-profit corporation engaged in religious and charitable pursuits, and maintains its principal place of business in the State of Connecticut.” It consists of a small group of Roman Catholic and Easternrite priests who through a “communications apostolate” support their organization with revenue generated from a mail-order business. CMI’s line of products has included weight-reducing bath treatments, golf lessons, and tax-saving tips; CMI has used different pseudonyms in connection with the different mailing enterprises. Id. at 100. Involved below were alleged oral contracts by Bonded to mail 1.5 million pieces of a “Guaranteed Tax Plan” (selling for $9.95 with a “guarantee of savings of $500 or more”) and 1.1 million copies of another book entitled the “Edgar Cayce Handbook of Health,” a book about the life and teachings of one Edgar Cayce.
Evidently the jury found that there was an oral agreement between Reverend John T. O’Reilly, Vice President of CMI, and Bonded’s President, Max Houss, to mail the Cayce solicitation pieces by the first week of November 1977, and that Bonded delayed its performance, resulting in a late mailing for the Christmas season and the loss of anticipated profits. The jury also found that Bonded agreed to mail the tax solicitation material by the middle of November 1977 so that prospective customers could receive it by the end of the tax year, but that again the mailing was delayed with a resultant loss of profits that test mailings undertaken the previous year had shown to be probable. The jury apparently rejected Bonded’s defense that CMI prevented performance by not furnishing postage, various materials, and documentation in time for the mailings. But Bonded had also asserted affirmative defenses based on fraud and illegality in connection with CMI’s procurement of its non-profit mailing permit. Nevertheless, the trial court excluded evidence offered to support those defenses, finding them “frivolous.”
*86I agree with the majority and the court below that there was sufficient evidence of the oral contracts, their breach, and damages therefrom to take the case to the jury, but on the cross-appeal by Bonded I would reverse on the basis of a cumulation of what I consider were three errors occurring in the conduct of the trial, any one of which could have prejudiced the verdict. The first concerns Bonded’s affirmative defense that the alleged agreements were invalid and unenforceable because CMI made them to defraud the United States Postal Service of postage and falsely represented to Bonded and the United States Postal Service that CMI was entitled to a non-profit mailing permit. In fact, as appears in Contemporary Mission, Inc. v. United States Postal Service, 648 F.2d at 103, the Postal Service departmentally revoked CMI’s special bulk third-class mail authorization following an investigation that indicated CMI had falsely represented an affiliation with the Missionary Society of the Holy Apostles. On the basis of this representation the IRS initially in 1970 had granted CMI an exemption that CMI had used in 1975 in applying for and obtaining a permit allowing it to mail at special bulk third-class rates. An administrative appeal of the Postal Service revocation was pending at the time of Contemporary Mission, Inc., supra, and apparently during the trial of the case below, but CMI misled both Bonded and the court with respect to the status of CMI’s exemption with the IRS. The IRS revoked CMI’s “nonprofit” status on September 11, 1979, and the petition to review that decision is pending before the Court of Claims. Reverend O’Reilly, Vice President of CMI, had testified in a deposition taken in January 1980 that the non-profit status was the subject of an IRS “investigation” when in fact the status had already been revoked and a petition to review had been filed on December 10, 1979.
If in fact that CMI tax exemption and third-class mail permit were obtained by fraud, not only should evidence of these facts be admissible, but as a matter of law the defense should be available to Bonded that at the time of the alleged oral contracts CMI knew that its mailing operations were illegal and that performance would constitute a fraud on the Postal Service. Under McConnell v. Commonwealth Pictures Corp., 7 N.Y.2d 465, 166 N.E.2d 494, 199 N.Y.S.2d 483 (1960), a party to an illegal contract cannot ask a court of law to help him carry out his legal object. As a matter of public policy, fraud and deception practiced on a third party (here the Postal Service) will invalidate a New York contract, at least where there is a “direct connection between the illegal transaction [here obtaining a third-class mailing permit] and the obligation sued upon [breach of an oral contract to make bulk mailings].” Id. at 471, 166 N.E.2d at 497, 199 N.Y.S.2d at 487. See also Reiner v. North American Newspaper Alliance, 259 N.Y. 250, 181 N.E. 561 (1932). The district court held and the majority agrees that any illegality was merely incidental because at the time of the oral contracts to mail the permits had not been revoked, and at the time of trial the revocations were still under review, but I think the entire issue was a question for the jury below. That the non-profit status was in effect at the time the alleged oral contracts were entered into does not destroy any direct link between the alleged fraud on the Postal Service and the IRS and the contracts on which suit was brought.
In this connection I believe it was also erroneous not to permit more extensive cross-examination of Vice President O’Reilly of CMI who was the chief witness to the alleged oral contracts. He and three other officers, two of whom were witnesses, were present at the trial dressed in their clerical garb and the jury was advised that they were Roman Catholic priests. The vice president testified on direct examination that the other four members of CMI or its communications apostolate were Roman Catholic priests and that he was of the Eastern-rite Catholic Church, which he joined because priests in the Eastern-rite Church are permitted to be married. Cross-examination about whether Vice President O’Reilly and the other members of CMI were in fact Roman Catholic priests was cut *87off by the court as irrelevant and as involving a “religious problem.” This issue, however, is germane to the original issuance of the CMI tax exemption by the IRS as well as to its third-class mailing permit. After argument and outside the record counsel for CMI did submit to us a copy of an affidavit dated in Rome, Italy from a Reverend Diaz who purports to be a member of the Missionary Society of the Holy Apostles, a Catholic organization in Peru that maintains a seminary and college in Cromwell, Connecticut, and who states that on the Society’s behalf he has maintained “constant contact” with the Contemporary Mission in order to “strengthen the spiritual association” and “foster this affiliation” between the Society and the Contemporary Mission. But I do not think this demonstrates for our purposes anything substantive bearing on the genuineness of the claims made on direct examination by Vice President O’Reilly about the Roman Catholic priesthood of the CMI members.
Furthermore, cross-examination of Vice President O’Reilly should have been permitted with regard to an action against CMI in Connecticut by Dependable Lists, Inc., another mailer. O’Reilly testified on cross examination that Dependable Lists had supplied the test list that was used to calculate the damages caused by Bonded. Dependable Lists in its Connecticut action sought damages against CMI for furnishing CMI with mailing lists at an aggregate rental value of some $322,000 on which only $3,000 had been paid. CMI had counterclaimed for some $588,000 in damages, alleging that the lists supplied by Dependable were not in accordance with test lists and that CMI consequently received a lower response than represented by Dependable when it supplied the test lists. In essence CMI was claiming the same sort of damages in defense of its Connecticut action that it was claiming as plaintiff in its Eastern District action. Although the court below was correct that the Connecticut action was a “different cause of action,” the answer of CMI in the Connecticut action was an admission against interest bearing directly on what damages, if any, CMI suffered as a result of Bonded’s breach. If the Dependable lists were defective, as CMI claimed in the Connecticut action, any damages CMI suffered with respect to the Bonded mailing could have resulted from CMI’s supplying Bonded with these same allegedly defective lists rather than from Bonded’s alleged late mailing. CMI’s Connecticut counterclaim was in my view thus admissible at least on the subject of damages. In addition, when coupled with the other material in the case that was excluded, CMI’s claims in the Dependable action were relevant with respect to CMI’s overall credibility in the action below.
Accordingly, I would reverse the judgment and remand for a new trial. In this regard I would also note that the credibility of CMI and its witnesses, irrespective of the wearing of clerical collars, is in issue if evidence to that point is properly introduced, see Faulkner Radio, Inc. v. FCC, 557 F.2d 866, 870-73 (D.C.Cir.1977) (trier of fact may not be permitted automatically to credit or repudiate testimony of a witness simply because he is one of a group pursuing a particular vocation).