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https://www.courtlistener.com/api/rest/v3/opinions/4126705/ | RENDERED: FEBRUARY 16, 2017
TO BE PUBLISHED
§Supreme Tourf of Benluckg
2016-SC-00024Q-WC
COMMONWEALTH OF KENTUCKY, APPELLANT
UNINSURED EMPLOYERS’ FUND ~
ON APPEAL FROM COURT OF APPEALS
V. CASE NO. 2015-CA-001854-WC
WORKERS’ COMPENSATION NO. 11-WC-002 11
KARA SIDEBOTTOM (A/ K/A KARA APPELLEES
HARVILLE); WHITNEY BRAND INC.;
HON. GRANT ROARK, ADMINISTRATIVE
LAW JUDGE; AND WORKERS’
COMPENSATION BOARD
OPINION OF THE COURT BY JUSTICE VENTERS
AFFIRMING
The Commonwealth of Kentucky, Uninsured Employers’ Fund (UEF)
appeals from a decision of the Court of Appeals that upheld an opinion issued
by the Workers’ Compensation Board (Board). The Board determined that the
Administrative LaW Judge (ALJ) had properly calculated Sidebottom’s average
Weekly wage, affirming the conclusion of the ALJ. that Appellee, Kara
Sidebottom, Was a variable Wage employee (salary plus tips) at the time of her
work-related injury and that her Workers’ compensation benefits must,
therefore, be calculated according to KRS 342.140(d), rather than KRS
342.140(1)(a), which applies to claimants who are paid a fixed weekly wage.1
Our review on appeal proceeds under the following standards, “An
award or order of the administrative law judge . . . shall be conclusive and
binding as to all questions of fact . . . .” KRS 342.285. When reviewing a
decision of the Board, we will affirm absent a finding that the Board has
misconstrued or overlooked controlling law or has so flagrantly erred in
evaluating the evidence that a gross injustice has occurred. Westem Baptist
Hospital v. Kelly, 827 S.W.2d 685, 687-688 (Ky. 1992).
We find no significant disagreement about the facts as determined by the
ALJ; the issue in dispute is Whether the ALJ, and hence the Board, applied the
correct statute to those facts in determining Sidebottom’s average weekly wage.
For the reasons stated below, we affirm the Court of Appeals.
I. FACTUAL AND PROCEDURAL BACKGROUND
When Kara Sidebottom began her job as a waiter at Whitney’s Diner in
2009, her duties included seating customers, taking orders, serving customers,
stocking the salad bar, bussing tables, and collecting payment from customers,
She was paid $2. 10 per hour plus tips and she generally worked at least forty
hours per Week and often “much more.”
1 The Board’s decision, affirmed by the Court of Appeals, also vacated part of
the ALJ’s award not pertinent to this appeal and remanded the matter to the ALJ for
further consideration regarding the application of the three-times multiplier provided
by KRS 342.730(1)(0)1.
Beginning May 1, 2010, the owner of the business gave Sidebottom
increased employment responsibilities in addition to the ordinary duties she
performed as a waiter. Concurrent with the increased responsibilities,
Sidebottom’s pay structure was changed from the hourly rate of $2. 10 plus tips
to a weekly rate of $100.00 plus tips.
Prior to the May 1 transition, Sidebottom’s employer reported her income
from tips to the Internal Revenue Service as required by law. Afterwards,
although Sidebottom continued to report her tips to her employer, the employer
failed to report her income from tips to the IRS. Sidebottom did not learn that
her employer had not reported her tips until she received her 2010 W-2 form.
Sidebottom did not include her unreported tip income on her 2010 personal
income tax return.
On December 3, 2010, seven months after her “promotion,” Sidebottom
fell during the course of her employment and injured her spine. She eventually
underwent spinal fusion surgery. In due course, she filed a workers’
compensation claim in connection with the work-related injury,
In determining Sidebottom’s weekly compensation benefit, the ALJ
applied KRS 342.140(1)(d). This statute sets forth the process for calculating
the average weekly wage for a claimant who, at the time of her injury, was
being paid a wage that varied “by the output of the employee,” Which includes
workers being compensated through tips. The ALJ determined that even
though Sidebottom’s tips at the time of her injury were not reported to the IRS,
she was still at that time a variable Wage employee working on a “Wage plus
tips” arrangement2
The UEF maintained that at the time of her injury Sidebottom was a
salaried, or fixed wage, employee whose average weekly Wage should have been
determined in accordance with KRS 342.140(1)(a) using the amount of $100.00
per week. The calculation advocated by UEF would have yielded a
substantially lower benefit award for Sidebottom. The Board disagreed and
affirmed the ALJ’s application of KRS 342.140(1)(d) for determining
Sidebottom’s average weekly wage. The Court of Appeals affirmed, and the
appeal to this Court ensued.
II. ANALYSIS
In support of its argument that Sidebottom’s average weekly wage should
have been calculated in accordance with KRS 342.140(1)(a) as if she was a
fixed weekly Wage employee, the UEF relies upon KRS 342.140(6). That statute
defines “wages” for purposes of determining workers’ compensation benefits as
follows:
The term “wages” as used in this section and KRS 342. 143 means,
in addition to money payments for services rendered, the
reasonable value of board, rent, housing, lodging, and fuel or
similar advantage received from the employer, and gratuities
2 The ALJ initially awarded temporary total disability benefits at the rate of
$172.81 per week from December 2010 through December 2012, and ultimately
awarded permanent partial disability benefits in the amount of $103.69 per week for
425 weeks beginning January 1, 2013. In calculating these benefits, pursuant to the
“most favorable to the employee” look-back provision contained in KRS 342.140(1)(d),
the ALJ used Sidebottom’s wage circumstances prior to her transition from hourly pay
plus tips to weekly pay plus tips because doing so was more favorable to Sidebottom.
4
received in the course of employment from others than the employer
to the extent the gratuities are reported for income tax purposes.
(Emphasis added.)
Because Sidebottom’s “gratuities,” or tips, at the time of her injury were
not “reported for income tax purposes,” the UEF contends that they cannot be
considered as part of her “wages” for calculating her average weekly wage to
determine her workers’ compensation benefit. The UEF further argues that
because Sidebottom’s income was reported to the IRS as a fixed salary of
$100.00 per week, the ALJ Was required to calculate her average weekly wage
pursuant to KRS 342.140(1)(a). KRS 342.140(1)(a) provides that when an
injured employee’s “wages [at the time her injury] were fixed by the week, the
amount so fixed shall be the average weekly wage.”
Sidebottom acknowledges the effect of KRS 342.140(6) and agrees that
the unreported tips she received between May 1 and her December 3 injury
may not be used in the computation of her average weekly wage, There is no
doubt that gratuities not reported for tax purposes may not be counted as
income when calculating an injured employee’s average weekly wage
calculation. But as the ALJ concluded, the application of KRS 342.140(6) does
not alter the reality that she is an employee with variable income derived from
gratuities; it does not convert her to an employee earning a fixed weekly wage,
In contrast with KRS 342.140(1)(a), KRS 342.140(1)(d) governs the
calculation of the applicable average weekly wage for employees whose weekly
pay may vary because they are paid by “the day, hour, or by the output of the
employee.” KRS 342.140(1)(d) provides that for such employees
5
the average weekly wage shall be the wage most favorable to the
employee computed by dividing by thirteen (13) the wages (not
including overtime or premium pay) of said employee earned in the
employ of the employer in the jirst, second, third, or fourth period of
thirteen (13) consecutive calendar Weeks in the fifty-two (52) weeks
immediately preceding the injury,
(Emphasis added.)
Under KRS 342.140(1)(d), the 52-week year preceding the injury is
divided into thirteen-Week quarters. The average Weekly earnings for each
quarter is then calculated and the quarter With the highest (“most favorable”)
average weekly wage is the one used to compute the weekly compensation
benefit for the injured employee, The ALJ used that method to determine
Sidebottom’s average weekly wage.
Of course, Sidebottom’s actual income for the entire 52 weeks that
preceded her injury included her tips. But because KRS 342.140(6) forbids
consideration of unreported tips, the ALJ included her tip income only for the
weeks that preceded May 1 because those are the only weeks for which tip
income was reported for tax purposes. The tips earned by Sidebottom after
May 1 were not reported, and were therefore excluded. Despite the fact that
she may have actually been taking home more earnings after May 1 than
before, with the exclusion of unreported tips after May 1, 2010, it naturally
follows that her quarter of most advantageous earnings would have occurred
before May 1, 2010,
Nevertheless, the UEF contends that because the only income being
reported for Sidebottom after May 1 was $100.00 per week, with nothing extra
6
in tips, she is bound to that amount as her average weekly wage. In effect,
UEF argues that the income being reported to the IRS at the time of the injury
is dispositive of the average weekly wage to be used in calculating Sidebottom’s
workers’ compensation benefits. We conclude that a proper application of KRS
342.140(6) does not produce that result. We agree with the Board and Court of
Appeals that the ALJ properly calculated Sidebottom’s average weekly wage
based upon KRS 342.140(1)(d) rather than KRS 342.140(1)(a).
The average weekly wage of an injured Worker must be decided on a
case-by-case basis, and must take into account the unique facts and
circumstances of each case. Huff v. Smith Trucking, 6 S.W.3d 819, 822 (Ky.
1999). Ultimately, the goal in calculating the average weekly Wage is to ensure
that the claimant’s benefit rate is based upon what the worker would have
expected to earn had the injury not occurred. Desa International, Inc. v.
Barlow, 59 S.W.3d 872, 875 (Ky. 2001).
It is not disputed that Sidebottom was compensated by tips from
customers up until the date of her injury and that those tips were a significant
share of her actual earnings. The fact that Sidebottom’s tip income was not
reported for tax purposes does not alter the reality that she was paid a variable
wage based upon a “wage plus tips” arrangement The UEF’s position Would
require us to ignore that reality.
_ By excluding unreported income from a worker’s average weekly wage
calculation, KRS 342.140(6) reduces the amount of earnings that can be
considered; it does not change the nature of the worker’s pay or the method to
7
be used for calculating the average weekly wage based upon the nature of the
worker’s pay. The application of the UEF’s theory of this case would
unjustifiany expand the rule beyond the Words of the statute, which require
only the exclusion of unreported income, and extend it to create the legal
fiction that one who is actually paid a variable wage is instead deemed to be a
fixed weekly wage employee,
In strict compliance with KRS 342.140(6), the ALJ did not include
Sidebottom’s unreported tip income in his calculation of her average weekly
wage, Thus, Sidebottom is properly deprived of the benefit she could otherwise
have gained by applying the potentially higher total income she received after
the May 1, 2010 transition.3 Concurrently, the UEF received a corresponding
advantage in the form of a lower payment obligation.
We reject UEF’s argument that as an additional consequence of the tax
reporting rule, the ALJ was further compelled to disregard Sidebottom’s true
status as a variable wage employee and calculate Sidebottom’s average weekly
wage as if she was a fixed weekly wage employee. We do not perceive the
adoption of that legal fiction as a necessary and statutorily-mandated
consequence of the tax reporting rule of KRS 342.140(6). See Jones v.
Crummies Creek Coal Co., 264 S.W.2d 294, 296 (Ky. 1953) (“It is a familiar rule
3 As a component of its argument UEF asserts that “an employee should not
benefit from his own wrongdoing.” However, again, Sidebottom was punished for her
wrongdoing by not being allowed to calculate her income based upon her post-raise
earnings, which would have resulted in a higher award. Presumably she also suffered
adverse consequences imposed by the IRS for failing to report her tips on her 2010 tax
return.
of construction that the Workmen’s Compensation law should be liberally
construed in favor of injured employees and their dependents.” (citations
omitted)).
After properly excluding all unreported earnings, the ALJ correctly
utilized Sidebottom’s wage data from the most advantageous quarter of the 52-
week period preceding her injury, pursuant to KRS 342.140(1)(d), and
calculated her average weekly wage accordingly. The Board and the Court of
Appeals properly affirmed that decision.
III. CONCLUSION
For the foregoing reasons the opinion of the Court of Appeals is affirmed.
Pursuant to that opinion, this matter is remanded to the ALJ for additional
findings relating to the three-times multiplier as set forth in the decision of the
Workers’ Compensation Board,
All sitting. All concur.
COUNSEL FOR APPELLANT COMMONWEALTH OF KENTUCKY, UNINSURED
EMPLOYERS’ FUND:
Charles Davis Batson
Assistant Attorney General
Uninsured Employers’ Fund
COUNSEL FOR APPELLEE KARA SIDEBOTTOM, A/ K/A KARA HARVILLE:
Tamara Todd Cotton
Stephanie Nicole Wolfinbarger
Cotton Wolfinbarger & Associates PLLC
COUNSEL FOR APPELLEE WHITNEY BRAND INC.:
Not Represented By Counsel
10 | 01-03-2023 | 02-16-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4126722/ | FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 16, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
GERALD H. PHIPPS, INC., d/b/a GH
Phipps Construction Company, a Colorado
corporation,
Plaintiff - Appellant,
v. No. 16-1039
(D.C. No. 1:14-CV-01642-PAB-KLM)
TRAVELERS PROPERTY CASUALTY (D. Colo.)
COMPANY OF AMERICA, a Connecticut
corporation,
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before MATHESON, McKAY, and MORITZ, Circuit Judges.
_________________________________
After water damaged a building it was renovating, Gerald H. Phipps, Inc.,
d/b/a GH Phipps Construction Company, (“GHP”) sought coverage under its
builders’ risk insurance policy. GHP’s insurer, Travelers Property Casualty Company
of America (“Travelers”), denied the claim, and GHP sued for breach of contract,
common law bad faith, and statutory bad faith. GHP also sought a declaratory
judgment regarding coverage. The district court granted summary judgment for
*
This order and judgment isn’t binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. But it may be cited for its
persuasive value. See Fed. R. App. P. 32.1; 10th Cir. R. 32.1.
Travelers on all claims, and GHP appeals. Because we agree with the district court
that GHP doesn’t seek damages for a loss to covered property, we affirm.
BACKGROUND
The University of Denver hired GHP to renovate and expand the University’s
library. Because the library contained asbestos, the University hired two companies—
Excel Environmental and Herron Enterprises—to perform environmental testing and
asbestos mitigation in conjunction with the renovation. But the University wanted to
avoid the cost of removing asbestos in two elevator shafts and four stairwells, so it
limited the scope of GHP’s renovations in those areas. Specifically, GHP planned to
remove and replace handrails in the stairwells; update lighting fixtures; repair
existing concrete floors; patch and paint the existing drywall; and install new or
reroute existing mechanical, plumbing, and electrical systems.
GHP was completing installation of a new roof on the library when water from
melting snow leaked into the building. The water damaged existing drywall and
insulation in the stairwells and elevator shafts that GHP planned to preserve and
update (“the damaged areas”). Before the snowmelt mishap, GHP had completed
some preliminary work in the damaged areas to designate locations for future
installation of mechanical, plumbing, and electrical systems. But GHP hadn’t yet
installed any new materials, updated any lighting fixtures, or patched and painted any
existing drywall in the damaged areas.
GHP notified Travelers of the water damage and initiated a claim under its
builders’ risk insurance policy (“the policy”). Following an initial inspection,
2
Travelers advised GHP the loss was covered. GHP then hired Excel and Herron to
perform environmental testing and asbestos removal in the damaged areas, ultimately
incurring $804,661.76 in costs to remove asbestos, remove and replace drywall, and
install new fire-proofing materials in the damaged areas before it could proceed with
its planned renovations in those areas.
But after further review of the policy, Travelers notified GHP the loss wasn’t
covered after all; it explained that “the damage was only to the existing building and
not to [GHP’s] work.” App. vol. 1, 116. Citing the policy’s definition of “Builders’
Risk,” which expressly excludes “[b]uildings or structures that existed at the ‘job
site’ prior to the inception of th[e] policy,” id., Travelers formally denied GHP’s
claim.
Almost one year later, GHP asked Travelers to reconsider its denial of
coverage. In response, Travelers acknowledged that GHP had completed preliminary
work in the damaged areas before the water damage occurred. But Travelers
explained that the policy would cover GHP’s completed work only if “the water
damaged material or items installed by GHP” in the damaged areas. App. vol. 4, 412.
Because its investigation showed that the water instead damaged only “portions of
the existing structure” and that GHP’s preliminary work didn’t include installing any
new materials or items in the damaged areas, Travelers reaffirmed its initial decision
to deny coverage. Id. at 404.
GHP sued Travelers, seeking a declaratory judgment on coverage and also
asserting claims for breach of contract, common law insurance bad faith, and
3
statutory insurance bad faith. Travelers moved for partial summary judgment on the
statutory bad faith claim. The district court granted the motion, concluding that
Colorado’s one-year statute of limitations barred the statutory claim.
Travelers then moved for summary judgment on the remaining claims. The
district granted that motion as well, concluding that GHP failed to demonstrate a loss
to covered property. The court reasoned that GHP didn’t introduce evidence
establishing (1) that the water damaged GHP’s own work in the damaged areas or (2)
that GHP sought damages for the costs of redoing its own work in those areas. The
court further reasoned that the damaged areas, as existing structures, were excluded
from coverage under the policy’s definition of “Builders’ Risk.” App. vol. 5, 501.
GHP appeals both summary judgment orders.
DISCUSSION
We review the district court’s decision to grant summary judgment de novo,
applying the same legal standard as the district court and viewing the record, and all
reasonable inferences that might be drawn from it, in GHP’s favor. Forney Indus.,
Inc. v. Daco of Mo., Inc., 835 F.3d 1238, 1251 (10th Cir. 2016). Summary judgment
is appropriate if “the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
GHP first challenges the district court’s order granting summary judgment on
its breach of contract, common law bad faith, and declaratory judgment claims,
arguing that the district court incorrectly interpreted the policy. Thus, we begin our
analysis by considering the policy’s plain language. See State Farm Mut. Auto. Ins. v.
4
Stein, 940 P.2d 384, 387 (Colo. 1997) (noting that Colorado courts enforce insurance
policies as written, unless the policy language is ambiguous).1
The policy provides that Travelers “will pay for direct physical loss of or
damage to Covered Property from any of the Covered Causes of Loss.” App. vol. 3,
277. The policy defines “Covered Property” as “Builders’ Risk.” Id. The policy then
defines “Builders’ Risk” as
Property described in the Declarations under “Builders’ Risk” owned by
[GHP] or for which [GHP is] legally liable consisting of:
a. Buildings or structures including temporary structures while being
constructed, erected or fabricated at the “job site”;
b. Property that will become a permanent part of the buildings or
structures at the “job site”:
(1) While in transit to the “job site” or temporary storage location;
(2) While at the “job site” or at a temporary storage location.
Id. at 293.
Critically, the policy expressly provides that “‘Builders’ Risk’ does not
include . . . [b]uildings or structures that existed at the ‘job site’ prior to the inception
of th[e] policy.” Id.
As the insured, GHP has the initial burden of demonstrating coverage. See
Rodriguez ex rel. Rodriguez v. Safeco Ins. Co. of Am., 821 P.2d 849, 853 (Colo. App.
1991). If GHP meets this burden, the burden shifts to Travelers to “establish the
1
Colorado law applies in this diversity action. See Houston Gen. Ins. Co. v.
Am. Fence Co., 115 F.3d 805, 806 (10th Cir. 1997) (“The interpretation of an
insurance contract is governed by state law and, sitting in diversity, we look to the
law of the forum state.”).
5
applicability of an exclusion from coverage.” Leprino Foods Co. v. Factory Mut. Ins.
Co., 453 F.3d 1281, 1287 (10th Cir. 2006) (quoting Fire Ins. Exch. v. Bentley, 953 P.2d
1297, 1301 (Colo. App. 1998)). And, if Travelers shows that an exclusion applies, the
burden shifts back to GHP to show the applicability of an exception to the exclusion. See
Rodriguez, 821 P.2d at 853.
At the outset, we note that GHP doesn’t even attempt to argue in its opening
brief that the damaged areas come within section (a) of the “Builders’ Risk”
definition as either a building or structure that was “being constructed, erected or
fabricated at the ‘job site.’” App. vol. 3, 293. Other than pointing out that the policy
fails to define “structure,” GHP makes no discernible argument about this language.
Aplt. Br. 25. In its reply brief, GHP argues that section (a)’s reference to a building
“while being constructed” is broad enough to include a building under renovation.
Aplt. Reply Br. 11. Thus, GHP argues, the policy necessarily covers the entire
building while it is being renovated, not just “the specific component of the building
that the contractor is working on or has worked on at the time of the loss.” Id.
Because GHP didn’t make this argument in its opening brief, we ordinarily would
decline to address it. See Starkey ex rel. A.B. v. Boulder Cty. Soc. Servs., 569 F.3d
1244, 1259 (10th Cir. 2009) (stating this court ordinarily declines to review new
arguments made in reply brief).
But, as Travelers argues, even assuming GHP could demonstrate that section (a)’s
plain language provides coverage for the damaged areas, there’s no question that the
damaged areas already existed at the job site before the policy’s inception. Thus, the
6
damaged areas would be excluded from coverage under the “Builders’ Risk” definition’s
exclusionary language. And we aren’t persuaded by GHP’s argument that this
exclusionary language wouldn’t apply because, in GHP’s view, the damaged areas are
“merely building or structure components.” Aplt. Br. 25. As the district court reasoned,
whether the damaged areas are either “structures[,] or components of a structure or
building, the fact remains that [the damaged areas] . . . existed before the inception of the
policy.” App. vol. 5, 501.
Next, we address the parties’ shared assumption that section (a) implicitly
provides coverage for damage to GHP’s “work,” which, according to Travelers,
means materials and items that GHP installs on existing structures or in the existing
building during renovations. App. vol. 4, 412; see also Aplt. Br. 23 (asserting,
“Travelers has admitted that coverage exists under its policy in the event that GHP
worked on any of the walls damaged by water intrusion.”); Aplee. Br. 27 (“The plain
language of the policy thus insures GHP’s work at the site . . . .”). Relying on that
shared assumption, GHP argues that it raised a genuine dispute of material fact about
the nature and scope of the preliminary work it performed in the damaged areas, thus
precluding summary judgment.
But even if we assume that (1) section (a) implicitly provides coverage for a
loss to any materials or items GHP installed on or in the damaged areas, (2) the water
damaged GHP’s preliminary work in those areas, and (3) GHP had to redo that
preliminary work, these assumptions don’t advance GHP’s assertion that it seeks
damages for a covered loss. Instead, GHP seeks the costs of removing existing
7
asbestos, replacing damaged insulation, and removing and replacing existing,
damaged drywall.2 Thus, GHP seeks recovery for the loss to the damaged areas
themselves, not for any loss to its preliminary “work” in those areas. And, as we’ve
discussed, the policy expressly excludes the damaged areas from coverage as
“[b]uildings or structures that existed at the ‘job site’ prior to the inception of th[e]
policy.” App. vol. 3, 293.
Thus, whether GHP seeks coverage for the damaged areas under section (a)’s
explicit language or under some shared assumption that section (a) implicitly covers
GHP’s “work” to existing buildings or structures during a renovation project, the
policy’s exclusionary language applies.
Finally, GHP makes no cogent argument that the damaged areas come within
section (b) of the “Builders’ Risk” definition. GHP points out that the policy doesn’t
2
In attempting to establish that it seeks costs for redoing its preliminary work
in the damaged areas, GHP directs us to three portions of the record: (1) a summary
of damages attached to its proposed supplement to the civil scheduling order, (2) its
entire response to Travelers’ summary judgment motion, and (3) testimony from
GHP’s superintendent, Don Johnson, and GHP’s president, Kurt Klanderud. But
those portions of the record don’t establish that GHP seeks anything other than
restoration costs. First, GHP’s summary of damages only lists invoices GHP paid for
water and asbestos mitigation, not for redoing any layout and penetration work.
Second, while GHP fails to point us to a specific page or portion of its response to
Travelers’ summary judgment motion, we did find a conclusory assertion that “GHP
now seeks recovery of amounts expended to remove the drywall and perform the
necessary abatement work, which was necessary to restore the [damaged areas] to
their pre-water intrusion condition.” App. vol. 5, 430. But that statement supports our
conclusion that GHP seeks restoration costs, not GHP’s assertion that it seeks costs
for redoing its own work. Finally, Johnson and Klanderud both testified that GHP
completed preliminary work in the damaged areas. But neither Johnson nor
Klanderud testified that GHP incurred or sought costs for redoing that work. Thus,
we agree with the district court’s conclusion that GHP doesn’t seek damages for the
costs of redoing its own work.
8
define the term “structure” and argues that the damaged areas must therefore
constitute “[p]roperty that will become a permanent part of the buildings or structures
at the ‘job site.’” Aplt. Br. 25 (emphasis omitted) (quoting App. vol. 3, 293). It
further argues that because the “Builders’ Risk” definition excludes existing
“buildings or structures” but doesn’t exclude existing “property,” treating the
damaged areas as “property” renders the exclusionary language inapplicable. Aplt.
Br. 25-26. But we agree with Travelers that section (b) provides coverage for
personal property—i.e., fixtures or building materials—that will become part of the
permanent buildings or structures “being constructed, erected, or fabricated at the
‘job site.’” App. vol. 3, 293. See, e.g., 5-50 New Appleman on Insurance Law
Library Edition § 50.02[c][i] (2016) (“Property covered under a builders risk policy
usually includes the structures on the construction site, as well as materials that have
not yet been incorporated into the structure.”). Because, GHP makes no claim for
damage to its personal property at the job site, the second basis for “Builders’ Risk”
coverage is also inapplicable.
In sum, because GHP doesn’t seek damages for a loss to covered property, we
affirm the district court’s order granting summary judgment in favor of Travelers on
GHP’s claims for breach of contract and common law bad faith, and on GHP’s
request for a declaratory judgment on coverage. And this conclusion makes it
unnecessary for us to resolve whether, as GHP argues, the district court erroneously
concluded that GHP’s statutory bad faith claim was time-barred. Instead, we affirm
the district court’s order granting summary judgment to Travelers on that claim
9
because—for the reasons discussed above—GHP failed to demonstrate a loss to
covered property. See MarkWest Hydrocarbon, Inc. v. Liberty Mut. Ins. Co., 558 F.3d
1184, 1193 (10th Cir. 2009) (“It is settled law in Colorado that a bad faith claim must
fail if, as in the case here, coverage was properly denied and the plaintiff’s only
claimed damages flowed from the denial of coverage.”); see also Richison v. Ernest
Grp., Inc., 634 F.3d 1123, 1130 (10th Cir. 2011) (“We have long said that we may
affirm on any basis supported by the record, even if it requires ruling on arguments
not reached by the district court or even presented to us on appeal.”).
Affirmed.
Entered for the Court
Nancy L. Moritz
Circuit Judge
10 | 01-03-2023 | 02-16-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4023451/ | STATE OF MICHIGAN
COURT OF APPEALS
SOUTHEAST MICHIGAN SURGICAL FOR PUBLICATION
HOSPITAL, LLC, doing business as August 9, 2016
SOUTHEAST MICHIGAN SURGICAL
HOSPITAL, and JAMIE LETKEMANN,
Plaintiffs-Appellees,
v No. 323425
Wayne Circuit Court
ALLSTATE INSURANCE COMPANY, LC No. 11-015300-NF
Defendant-Appellant.
Before: RONAYNE KRAUSE, P.J., and SAWYER and STEPHENS, JJ.
SAWYER, J. (concurring in part and dissenting in part).
I concur with the majority’s conclusion that this case is controlled by our decision in
Bazzi v Sentinel Ins Co, ___ Mich App ___; ___ NW2d ___ (Docket No. 320518, issued June
14, 2016), and, therefore, we must reverse the trial court. Because Bazzi concluded that the
innocent third-party doctrine is no longer viable in light of the Supreme Court’s decision in Titan
Ins Co v Hyten, 491 Mich. 547; 817 NW2d 562 (2012), the trial court erred in denying summary
disposition to defendant. Once the trial court determined that the policy was obtained through
fraud, defendant was entitled to summary disposition. The record firmly establishes that Kreklau
made material misrepresentations in the application, and such misrepresentations were material
to the risk and hazard associated with the policy because they induced Allstate to charge
drastically lowered premiums. Thus, Allstate’s rescission was effective with regard to
Letkemann. Moreover, since Letkemann is barred from recovering no-fault benefits under the
rescinded policy, so is Southeast Michigan Surgical Hospital, L.L.C. See Bahri v IDS Prop Cas
Ins Co, 308 Mich. App. 420, 424; 864 NW2d 609 (2014).
I also agree with the majority’s conclusion that neither of the alternative grounds
advanced by plaintiff to affirm the case have merit. But, because I believe that Bazzi was
correctly decided, I disagree with the majority’s conclusion that it was incorrectly decided, and I
dissent from the majority’s call to convene a conflict panel pursuant to MCR 7.215(J)(2).
-1-
Accordingly, I would merely reverse the trial court’s grant of summary disposition to
plaintiffs and remand this matter to the trial court for entry of an order granting Allstate’s motion
for summary disposition under MCR 2.116(C)(10).
/s/ David H. Sawyer
-2- | 01-03-2023 | 08-11-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/4288723/ | Fourth Court of Appeals
San Antonio, Texas
June 21, 2018
No. 04-18-00205-CV
Trece MEUTH,
Appellant
v.
CITY OF SEGUIN,
Appellee
From the 25th Judicial District Court, Guadalupe County, Texas
Trial Court No. 14-0546-CV-A
Honorable William Old, Judge Presiding
ORDER
Appellant’s brief is due on July 9, 2018. Before the due date, Appellant moved this court
to extend the due date for Appellant’s brief by thirty days.
Appellant’s motion is GRANTED. Appellant’s brief is due on August 8, 2018.
_________________________________
Patricia O. Alvarez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 21st day of June, 2018.
___________________________________
KEITH E. HOTTLE,
Clerk of Court | 01-03-2023 | 06-26-2018 |
https://www.courtlistener.com/api/rest/v3/opinions/4128801/ | ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
January 19,200s
The Honorable G. E. “Buddy” West Opinion No. GA-0294
Chair, Committee on Energy Resources
Texas House of Representatives Re: Authority of the Railroad Commission to use
Post Office Box 2910 monies from the Oil Field Cleanup Fund to plug
Austin, Texas 78768-2910 oil and gas wells and perform other activities
(RQ-02%GA)
Dear Representative West:
You inquire about the authority ofthe Texas Railroad Commission (“Commission”) to make
certain expenditures from the Oil Field Cleanup Fund.’ By way of background, you state only that
questions have arisen “as to the Railroad Commission’s authority to use funds from the Oil Field
Cleanup Fund to plug oil and gas wells, to remediate surface sites associated with oil and gas
operations, and to provide for managerial overhead.” See Request Letter, supra note 1, at 1.
Specifically, you pose three questions:
1. Under what terms and conditions does the Railroad Commission
have the authority to use funds from the Oil Field Cleanup Fund
to plug an oil or gas well?
2. Under what terms and conditions does the Railroad Commission
have the authority to use funds from the Oil Field Cleanup Fund
to clean up or remediate a well-site or lease-site surface location
associated with oil or gas operations?
3. Under what terms and conditions does the Railroad Commission
have the authority to use funds from the Oil Field Cleanup Fund
to clean-up or remediate what has been commonly referred to as
a “commercial disposal site,” not associated with a particular
well or lease site?
See id.
‘SeeLetter fromHonorable G. E. ‘Buddy” West, Chair, Committee on Energy Resources,to Honorable Greg
Abbott,Texas Attorney General (Aug. 6,2004) (on file with Opinion Committee,also available nthttp:/lwww.oag.state
.tx.us) [hereinafter Request Letter].
The Honorable G. E. “Buddy” West - Page 2 (GA-0294)
I. Chapter 91. Natural Resources Code
We begin by briefly reviewing the relevant provisions of the Natural Resources Code. The
Commission has jurisdiction over all oil and gas wells in Texas. See TEX. NAT. I&S. CODEANN.
4 81.051(a)(2) (Vernon 2001). Chapter 91, subchapter D, pertaining to the prevention ofpollution
associated with oil and gas production, authorizes the Commission to adopt and enforce rules and
orders to “prevent pollution of surface water or subsurface water in the state.” Id. 5 91.101(a) (text
effective until delegation of Resource Conservation and Recovery Act (“RCRA”) authority to the
Commission)? SubchapterD also establishes the Oil Field Cleanup Fund. See id. 5 91.111 (Vernon
Supp. 2004-05). The Oil Field Cleanup Fund (“fund”) is to be used by the Commission (and its
employees or agents) to:
(1) conduct[] a site investigation or environmental assessment to
determine:
(A) the nature and extent of contamination caused by oil
and gas wastes or other substances or materials regulated by
the commission under Section 91.101; and
(B) the measures that should be taken to control or clean
up the wastes, substances, or materials described in
Paragraph (A);
(2) control[] or clean[] up oil and gas wastes or other substances or
materials regulated by the commission under Section 91.101 that are
causing or are likely to cause the pollution of surface or subsurface
water, consistent with Section 91 .l 13;3
(3) plug[] abandoned wells and administer[] or enforc[e] permits,
orders, and rules relating to the commission’s authority to prevent
%me are two sections in the Natural Resources Code enumerated 91.101, and they are practically identical.
The two w&m differ only in the delegation of jurisdiction over hazardous waste. Certain hazardous wastes are
currently subject to the jurisdiction of the Texas Commission on EnvironmentalQuality. See 16 TEX.ADMIN. CODE 5
3.30(b)(2)(B)(2004). Once the Environmental Protection Agency (“EPA”)authorizes the Railroad Commission to
administerRCRA, “‘jurisdictionover such hazardous wastes will transfer from the TCEQ” to the Commission. Id.
The version cited here is effective untilthe EPA so authorizesthe Commission. The other version is effective
upon EPA’s authorization of the Commission. However, the language cited in this opinion is the same in both versions
of section 91.101 so that the issue of EPA authorizationof the Commissiondoes not impact the analysis in this opinion.
‘Section 91.113 is entitled “Investigation,Assessment, or Cleanup by Commission.”
The Honorable G. E. “Buddy” West - Page 3 (GA-0294)
pollution under this chapter, Chapter 89: or any other law
administered or enforced by the commission under Title 3;’
.
(6) prepar[e] the report required under subsection (b).
Id. 3 91.112(a) (footnotes added). Where “oil and gas wastes or other substances or materials
regulated” by the Commission cause or are likely to cause pollution of surface or subsurface water,
section 91.113 expressly authorizes the Commission to
use money in the oil-field cleanup fund to conduct a site investigation
or environmental assessment or control or clean up the oil and gas
wastes or other substances or materials if:
(1) the responsible persod has failed or refused to control
or clean up the oil and gas wastes or other substances or
materials after notice and opportunity for hearing;
(2) the responsible person is unknown, cannot be found,
or has no assets with which to control or clean up the oil
and gas wastes or other substances or materials; or
(3) the oil and gas wastes or other substances or materials
are causing the pollution of surface or subsurface water.
Id. 5 91.113(a) (Vernon 2001) (footnote added).
The Commission is directed to establish specific performance goals for the fund, including
the number of site investigations and environmental assessments to be conducted, the number
of abandoned wells to be plugged, and the number of surface locations to be remediated. See id.
3 91.11 l(e)(l)-(3) (Vernon Supp. 2004-05). The Commission is further directed to report to the
legislature on “the extent to which [the fund] has enabled the commission to better protect the
environment and enhance the income of the [fund].” Id. § 91.112(b). The report is to include
information on, among other things, the number of wells abandoned, the number of wells plugged,
and the number of surface locations remediated. See id.
‘Chapter 89, Natural Resources Code, pertains to abandoned wells.
‘Title 3, Natural Resources Code, contains the provisions relating to oil and gas
6“‘Responsibleperson’means any operator or other person required by law, rules adopted by the commission,
or a valid order of the commission to control OIclean up the oil and gas wastes or other substances OImaterials.” Tu(.
NAT.RES.CODEANN.5 91.113(b) (Vemon 2001).
The Honorable G. E. “Buddy” West - Page 4 (GA-0294)
II. Use of the Oil Field CleanuD Fund
A. Plugging of Oil and Gas Wells
You first inquire about the terms and conditions under which the Commission has
authority to use the fund to plug an oil or gas well. See Request Letter, supru note 1, at 1. The
answer to this inquiry is governed by the plain language of the statute. Where language in a statute
is unambiguous, the intent of the legislature is found in the “plain and common meaning of the
words and terms used.” Monsanto Co. v. CornerstonesMun. Util. Dist., 865 S.W.2d 937,939 (Tex.
1993). Words in statutes are given their ordinary meaning unless the statute defines them or they
are connected with and used with reference to a particular trade or subject matter or are a term of art.
See TEX. GOV’T CODE ANN. 5 3 11 ,011 (Vernon 1998); see also Dallas Morning News Co. v. Bd. of
Trs. ofDallasZndep. Sch. Dist., 861 S.W.2d 532,535 (Tex. App.-Dallas 1993, writ denied). Here,
section 91.112(a)(3) expressly and unambiguously states that the fund is to be used by the
Commission to plug abandoned’ wells. See TEX. NAT. RES. CODE ANN. 5 91.112(a)(3) (Vernon
Supp. 2004-05). Accordingly, we conclude that the Commission has authority to plug an abandoned
oil or gas well with these expenditures from the fund provided the Commission follows the plugging
procedures set forth in chapter 89.
Chapter 89, pertaining to the Commission’s authority over abandoned wells, first requires
the Commission to determine whether an abandoned or nonoperating well that is “causing or is likely
to cause pollution. or [where] gas or oil is escaping” was properly plugged. Id. 5 89.041 (Vernon
2001). The determination is to be made at a hearing after due notice. See id. If the Commission
determines that the well was not properly plugged, the Commission shall order the operator (or the
nonoperator in certain instances) to plug the well. See id. 5 89.042(a)-(b). The Commission may
plug or replug the well if:
(1) the well was properly plugged according to rules in effect at the
time the well was abandoned or ceased to be operated; or
(2) neither the operator nor nonoperator properly plugged the well,
and
(A) neither the operator nor nonoperator can be found; or
(B) neither the operator nor nonoperator has assets with
which to properly plug the well.’
‘In the oil and gas context, the term “abandoned”means to “abandon all work upon such a well in pursuance
of the search for oil or gas.” Struss v. Stoddard, 258 S.W.2d 413,417 (Tex. Civ. App.- Fort Worth 1953,wit refd
IILL?.).
‘Wherethe well is leaking salt water, oil or gas, or is likely to do so, and the leakage will cause a serious threat
of pollution or injury, the Commission may direct the operator to take remedial action or to plug the well, OI the
Commission may plug the well without notice and hearing. See TEX.NAT.RES.CODEANN.5 89.043(b)(Vernon Supp.
2004.05).
The Honorable G. E. “Buddy” West - Page 5 (GA-0294)
Id. 5 89.043(a) (Vernon Supp. 2004-05) (footnote added). Ifthe Commission plugs the well, it may
seek to recover its costs by issuing an order to the operator for reimbursement of plugging costs
or by requesting that the attorney general tile suit against the operator to recover the costs. See id.
3 89.043(c).
B. Remediation of Oil or Gas Well- or Lease-site Surface Locations
You next inquire about the terms and conditions under which the Commission may
use the fund to remediate oil or gas well-site or lease-site surface locations. See Request Letter,
supra note 1, at 1. As with the plugging of wells, section 91.112(a) expressly authorizes the fund
to be used by the Commission, as provided by section 9 I. I 13, to control or cleanup “oil and gas
wastes or other substances or materials that are causing or are likely to cause the pollution of
surface or subsurface water.” TEX. NAT. RES. CODEANN. 5 91 .112(a)(2) (Vernon Supp. 2004-05).
The language of section 91 ,112 is clear and unambiguous. Accordingly, we construe it by its plain
language and conclude that the Commission may utilize funds in the fund to remediate oil and gas
well sites so long as the Commission follows the provisions of section 9 1.11 3.9
C. Remediation of Commercial Disposal Sites
Your final inquiry relates to the Commission’s ability to use the fund to clean up or
remediate “commercial disposal sites.” Request Letter, supra note 1, at 1. Neither the Natural
Resources Code nor the Texas Administrative Code defines the term “commercial disposal site.”
However, the Commission, in its oil and gas regulations, has defined the term “commercial
facility”” as a
‘Our conclusion is bolstered by other provisions in subchapterD. Section 91.112(b) requires the Commission
to provide the legislature with an annual report on the fund. See id. 5 91.I 12(b). The repolt is to include information
on “the number of surface locations remediated, by region.” Id. § 91.112(b)(S). Section 91.111 requires that the
Commission create performance goals for the use of the fund to include surface locations to be remediated. See id. 5
91.11l(e)(3). Additionally,the Commissionmust report quarterlyon the “numberof sites remediated with money from
the fund” to the Oil-Field Cleanup Fund Advisory Committee. Id. 5 91,1135(e)(l)(E). Clearly, subchapter D
contemplates that abandoned well sites be remediated by the Commission through the fund.
Our conclusion is also consistent with the Commission’s construction of subchapter D. It is apparent that the
Commission construes subchapterD as authority to use the fund to remediate oil and gas well and lease sites. In 2002
the Commission used the fund to conduct 355 cleanup activities, including 187 routine remediation operations. See
RAILROAD COMMLQXON OFTEXAS,OILFIELDCLEANUP PROGRAM, ANNUAL REPORT-FISCAL YEAR2002, OILANDGAS
DIVISION, 5 V, at 9. In 2003, the Commission conducted 326 cleanup activities, including 189 routine remediation
operations, using the fund. See RAILROAD COMMLSSION OF TEXAS,OIL FIELDCLEANUP PROGRAM, ANNUAL
REPORT-FISCALYEAR 2003, OILANDGASDIVISION, 5 V, at 11. While an agency’s construction is not controlling, it
is entitled to serious consideration. See Quick”. City ofhsfin, 7 S.W.3d 109, 123 (Tex. 1998)(“Whilenot controlling,
the contemporaneous construction of a statute by the administrativeagency charged with its enforcement is entitled to
great weight.“).
‘@Ibeterm “commercial disposal well”is defined as a “well whose owner or operator receives compensation
t?om others for the disposal of oil field fluids or oil and gas wastes that are wholly or partially trucked or hauled to the
well, and the primary business purpose for the well is to provide these services for compensation.” 16 TEX.ADMIN.
CODE5 3.9(4) (2004) (Tex. R.R. Corn&n, Disposal Wells).
The Honorable G. E. “Buddy” West - Page 6 (GA-0294)
facility whose owner or operator receives compensation from others
for the storage, reclamation, treatment, or disposal of oil field fluids
or oil and gas wastes that are wholly or partially trucked or hauled to
the facility and whose primary business purpose is to provide these
services for compensation if [the facility is permitted under sections
3.8, 3.9, 3.46 or 3.57 ofthis title.]
29 Tex. Reg. 6006 (2004), adopted 29 Tex. Reg. 8271 (2004) (to be codified as an amendment to
16 TEX. ADMIN. CODE 5 3.78(a)(3) at 5 3.78(a)(4)). For purposes of this opinion, we assume the
term “commercial facility” encompasses the term commercial disposal sites.
An express purpose of the fund is the “controlling or cleaning up [of] oil and gas wastes or
other substances or materials regulated by the commission under Section 91,101 that are causing or
are likely to cause the pollution of surface or subsurface water, consistent with section 91,113.” TEX.
NAT. RES. CODE ANN. 5 91,112(a)(2) (Vernon Supp. 2004-05). Section 91.101 gives the
Commission authority over, among other things, the
discharge, storage, handling, transportation, reclamation, or disposal
of oil and gas waste as defined in section 91 .lOll of this subchapter,
or of any other substance or material associated with any operation or
activity regulated by the commission under subdivisions (l), (2), and
(3) of this section.
Id. 5 91.101(a)(4) (Vernon 2001) (text effective until delegation of RCRA authority to the
Commission).” Section 91.1011 defines “oil and gas waste” as “waste that arises out of or
incidental to the drilling for or producing of oil or gas.” Id. 5 91.1011(a) (text effective until
delegation of RCRA authority to the Commission).‘* “Oil and gas waste” also includes “salt water,
brine, sludge, drilling mud, and other liquid, semiliquid, or solid waste material.” Id. 5 91.101 l(b).
Pursuant to section 91.101(a)(4), the Commission also has authority over other substances and
materials “associated with any operation or activity regulated by the commission under subdivisions
(l), (2) and (3) of [section 91.101].” Id. 5 91.101(a)(4). Subdivision (1) pertains to the drilling of
exploratory wells; subdivision (2) relates to oil and gas production; and subdivision (3) deals with
theoperation, abandonment, andpluggingofwells. Id. 5 91.101(a)(l)-(3). Thus, the Commission’s
jurisdiction includes substances and materials involved with oil and gas production; drilling of
exploratory wells; and the operation, abandonment and plugging of wells. By operation of sections
91.112(a)(2), sections 91,101(a)(l)-(4) and 91.1011, the fund can be used to remediate oil and gas
waste and other substances and materials associated with certain oil and gas operations (collectively,
“pollutant” or “pollutants”) where they are causing or are likely to cause pollution of surface or
subsurface water.
%~ere are two sections 91.1011. They are almostidenticalexcept intheirtieatment ofjurisdictionovercertain
hazardouswastes. As with section 91.101,seesupra note 2, the languageofbothoftheprovision cited here is identical
and the issue of EPA authorization does not impact our analysis.
The Honorable G. E. “Buddy” West - Page 7 (GA-0294)
The focus of the fond is on the pollutant (oil and gas waste or other substances or materials)
and the activity that caused it (operation or activity regulated by the Commission under subdivisions
(1), (2) and (3)), rather than on the location (commercial disposal facility) of the pollutant. While
the fund statute limits the use ofthe fund to pollutants resulting from one ofthe specified operations
or activities within the jurisdiction of the Commission, i’ it does not limit the use of the fund to oil
and gas well and lease sites. If the oil and gas waste or substance or material associated with the
specified oil and gas activity within the jurisdiction of the Commission is causing or likely to cause
pollution to surface or subsurface water, the fund may be used to clean up the pollutant. Therefore,
we are of the opinion that the Commission may use the fund to remediate commercial disposal sites
not associated with a particular well or lease site, but only to the extent that the site is contaminated
with oil and gas wastes or other substances or materials associated with oil and gas production, the
drilling of exploratory wells, and the operation, abandonment and plugging of wells.
‘3Juisdiction of the Railroad Commission in oil and gas matters does not attach to land if there is no oil and
gas activity in the area. R.R. Comm h of Tex v. Delhi-Taylor Oil Corp., 302 S.W.2d 273,276 (Tex. Civ. App.-Austin
1957, wit ref d n.r.e.).
The Honorable G. E. “Buddy” West - Page 8 (GA-0294)
SUMMARY
The Texas Railroad Commission is authorized to use the Oil
Field Cleanup Fund to plug abandoned oil and gas wells and to
rem&ate oil and gas well sites,provided the activities are conducted
in compliance with other provisions of the Natural Resources Code.
The Texas Railroad Commission is also authorized to expend
funds from the Oil Field Cleanup Fund to remediate commercial
disposal sites to the extent a site is contaminated with oil and gas
wastes or other substances or materials produced from oil and
gas production, the drilling of exploratory wells, and the operation,
abandonment and plugging of wells.
BARRY R. MCBEE
First Assistant Attorney General
DON R. WILLETT
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
Charlotte M. Harper
Assistant Attorney General, Opinion Committee | 01-03-2023 | 02-18-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4143394/ | OFFICE OF THE AlTQRNEY GENERAL OF TEXAS
AUSTIN
Honorsblr 5. 1. fia8hburn
County Auditor
Her.r~~oounty
Hourrton,Texer
Daar Sir: opinion ao. o-
it.: Should a
r to l
rp p a int.6
Of ml4 oourt.
l abore ratter
said atdoter provider that an
hall reoeivo certain fee8 for
dome, and Artida 2326 therid
owing proririont
ial rborthand reporter 8i each
JuaioioJ,dlstriat in this State anU the Offb3ial
ahorthaad reporter of esoh oouaty oourt, either
oivil or oridnal, in thir State, #hall rooairr
789
Honorable H. L. Washburn, Page 2
a salary of $2,100 par annum, In addition to
the ooappclnaatloufor tranaoript fees as
proribs& for in this Aot. Suoh salary ohs&l
be paid monthly by tho Commiaalonera~ Court
of th0 County, out 0r the gbnaral fund of
the oounty on the oartlfloataof tho dotriot
JUaa;O l*
Artiola 232bo of aald l$atutoa proribaa that the
offlolal shorthand reportor of eaoh Dlatrlot Court in aaoh
oounty having a population in lx o o a oif 290,000 shall
rooairoa salaryof $3~600~00 par annum In addition to
the oompu4a6tlon for tranooript fear.
Artiolr 2324 of l6ld ltatutsa provibes that the
offioial oourt reporter shall attend all aeoalonaof the
Court, taka shorthand note8 of 8ll t88tlmnJ OffertM, ~to-
gother with all objootionr thuato, rulings md remrkr
by the Court, pnemne said notoa and mnke transorlpt of
aaid erldenoe upon applioation thorefor.
3b Texas Jurlaprudenoe, Seotlon 155, RaGa bob
is as follaar
The appolntaant of a bputy who 10 not
within tho oonatituti05al ~lalona, and whloh
10 not for a partloular bur tlon of tlma, ia
ooextenalvo in &ration with the tumre of MO
offloer appointing him, and, unloaa sooner rm-
mred, ho holds until thr mplratlon 0r tho
offloar*s term, an& oeaaea to ho14 at that
tlma unless ho is reappointed.*
In the oaaa of Trinkle VS. State, 127 9. W.
1060, the Court of Criminal Appeals of Texas, in paoaiB&
UpOn the validity Of an indietmOnt signed a8 fOrmtIM
by one C. A, Green who wae alleged to have been a (Ieputy
sheriff at the time the same was signed and roturnod,
790
Honorable H. L. kWhburn, Pago 3
held that sold Croon was not a deputy lherlff at sold
time under the SoUowing faota, to-wit: L. A. Eatoh
toatlflea that ha was ahorlff aad appolutod Green
daputp aherlff on #ommbar 2&e 1906; that Graaa quall-
fled as luoh and had oontlnuod to lo tas luoh @for
alnoa) that ha, Latoh, was raaleoted *harIfTin Norom-
bar,~l908,but bi4 not raooniaaion Graan as doput?,
and that Onan has boon sotin undar the ort~inal
lppoint5mit. Tha Court of OriJnal Appaala hald
that Grean~a appoiutmant as daputJ aharlff OeOOed to
be sffeotlra at tha end of tha term of sold Latoh
as aharlff.
In the *a00 0r Finbla ot al vs. rlallowag,
2b6 S. w. 681 the Court woo 800 L with the d&t of
a 6eplltrPUbliO n-r to rotaln his OffiQO MdOP
g~~~~~t~ub~,~~*~f~~ $,g:
anothor bputx. The ti0U.t hold that #B id
l&QOinhOlit
was not for a partloetar duration of tlma, and, un-
lass tho oommioaloa of said deputy woo ravekod or
otharwlas auaullod, it us aloar thet ha would oou-
tlnua ooextoaairoly in dumtion with the term of
offioe Of WI public waId@ar.
Xa tho oaaa of Tamall vs. Sparks, 135 6. 1.
519 tha Suprama Court of Toua was dosling with the
right of,the than Attorney Canare of Tens to ontar
into a oontraot ulth one Johu L.+Torrrll to patio=
lagal lerrl.oaafor tha State of Tana for a ltatod
oampanaatian. ILi holding that said OO@.O$'~ORtwas
lagal, the Supram Court mado the fo'o2lOw~ atatamnt
which is l
&@iOObh hanto, to-wit:
aDoea the egrommit betwean Tarroll end
the AttorneyGanaral, Lightfoot, OOufar UpOn
Terre11 the cfflalaJ.oharaater of Assistant
Attorney 5eneral? If the effeot of that
Eionorabla I%. L. Washburn, Page 4
warn to oonatltutrTwroll M
aflrarpunt
offloor of the 6tate, then his appointment
ULd OOntinUMOO in Offi WOad dOpM& UpM
the oontlnuauoe of tho tana of the Attoznry
Go no r awh
l,olppOiIitO& h im,
ana hia, authority
tarainatea when thr Attornoy Oumal qualifl04
for his auooeralng trrm and Oororrror Oampboll
want out of cffiaa by ruaon of th eluoo~aalon
of the pnaont governor.*
It la our opinion, tharefon that when Judge
Allen ZE. Nomay ooaaod to be Ju&e of .& llyth Dirtrlet
Oourt tha offiolal oourt nportrr thwetefon appointed
by him as offioial oourt npfktor for aal& Piatriot
Court alao ooaaoa to ba luoh OfflOial roux-t ro rtof.
We are not pcti.1~ UpOn w &ht ha Yy hare r o trclg-
aorlbe lvldauioe and eolleot faoa thenfor! in oaaoa ro-
port04 by hia during the him0 Judge Eenm~ .waa upaa
tho banoh of said Court ‘8s a Dietriot fu&+ It fo
our hol&ln& that the tXmmiaa~eN* Omurt wo\ilb not
ba authorlsad to approve a ol.aisD for aaUx for tha
parlob of ray auoh vaoanoy .Sar the offiol8 I ahorthmul
nportar appOiak#d by the Judp of rid Oourt.
Trusting that this aatlafaotorlly anawora
your lnqulry , wo 833
Vary thly yeura
AT- ,GNRNIUL OF !BXAt3
Jaa. Uo.Baasott
AF'PROVEDPJG29, 1942 Aaoistrnt | 01-03-2023 | 02-18-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4126718/ | IN THE SUPREME COURT, STATE OF WYOMING
2017 WY 16
OCTOBER TERM, A.D. 2016
February 16, 2017
IN THE MATTER OF THE WORKER’S
COMPENSATION CLAIM OF:
VALERIE PRICE,
Appellant
(Petitioner),
v. S-16-0160
STATE OF WYOMING, ex rel.,
DEPARTMENT OF WORKFORCE
SERVICES, WORKERS’
COMPENSATION DIVISION,
Appellee
(Respondent).
Appeal from the District Court of Fremont County
The Honorable Norman E. Young, Judge
Representing Appellant:
Sky D Phifer, Phifer Law Office, Lander, Wyoming.
Representing Appellee:
Peter K. Michael, Wyoming Attorney General; Daniel E. White, Deputy Attorney
General; Michael J. Finn, Senior Assistant Attorney General; James M. Causey,
Senior Assistant Attorney General.
Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third.
Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building,
Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be
made before final publication in the permanent volume.
FOX, Justice.
[¶1] Valerie Price suffered a work injury in 2004. As a result, she had shoulder surgery
in 2005, which was covered by the Wyoming Workers’ Compensation Division
(Division). In 2013, Ms. Price sought benefits for surgery on the same shoulder to treat
calcific tendinitis. Her surgeon found a hole in the fascia over the acromioclavicular joint
during the 2013 surgery, which may have occurred during the 2005 surgery. She
therefore contended that the 2013 surgery was a second compensable injury. The
Division denied her claim. After a hearing, the Medical Commission (Commission)
determined that Ms. Price had not proven the 2013 surgery was causally related to her
2004 injury and subsequent treatment. Ms. Price appealed, and the district court affirmed
the Commission’s ruling. Ms. Price timely appealed, and we affirm.
ISSUES
[¶2] We rephrase the issues as:
1. Was the Medical Commission Hearing Panel’s conclusion that there was no
causal link between Ms. Price’s work-related injury and the need for her 2013 surgery
supported by substantial evidence?
2. Did the Medical Commission Hearing Panel improperly apply apportionment
when it concluded that Ms. Price’s 2013 surgery was not compensable?
FACTS
[¶3] Valerie Price hurt her right shoulder at work in 2004 when she took the trash
outside and slipped and fell on ice. As a result, in 2005 she had a right shoulder
arthroscopy, which was covered by the Division. She reported continued right shoulder
pain over the following years. In 2013, she saw Dr. Bienz for right shoulder pain, and he
diagnosed calcification and recommended arthroscopic debridement. Dr. Bienz noted
that he had reviewed “the x-rays from 2005, and at that time, there was not much
calcification in the rotator cuff, but on today’s images, there is a significant amount of
soft tissue calcification . . . .” He observed:
The other question here, of course, is whether this is truly
related to the initial injury. She is of the impression that her
shoulder “would always be covered” because of the initial
incident that led to the [2005 surgery], however, the fact that
she had no calcific tissue in 2005 when she was last treated
by me and has since developed substantial calcific tendinitis
would suggest that this calcific tissue developed since her last
incident, not necessarily because of her last incident.
1
The Division denied coverage for the surgery. Dr. Bienz performed the right shoulder
arthroscopy with debridement on May 17, 2013. During the course of that surgery, he
noted “a large hole in the acromioclavicular joint where the previous procedure
apparently caused the fascia to separate or perhaps it was never repaired.” He determined
that the hole was communicating fluid to the joint surface and repaired it.
[¶4] Dr. Bienz testified that he did not believe the calcific tendinitis for which he
treated Ms. Price in 2013 was caused by her 2004 workplace injury.
Q. Okay. Now, do you have any opinion as to
whether Ms. Price’s calcific tendinitis is related to her
workplace injury?
A. Well, I mean, it is -- it’s certainly related. I mean,
it’s in the same side. It’s the same joint. You know, there is
some relationship there. But for a variety of reasons outlined
in that other note, I don’t think it likely that the fall carrying
the garbage caused her to later develop calcific tendinitis.
And part of that is also even more information than what we
had in April, is that she has subsequently developed rather
significant calcific tendinitis in the opposite shoulder, as well,
which was treated by my partner, Dr. Carlson. And you
know, there was no injury to the opposite shoulder when she
fell.
[¶5] Dr. Bienz testified that he assumed the hole in the acromioclavicular joint, which
he repaired, was most likely caused by the original 2004 surgery, “unless she developed a
tear . . . after the fact . . . .” When asked why it was necessary to do that repair, he
responded:
A. I don’t know if “necessary” is the right word, but
basically when you’re doing a procedure, especially on a
patient like this who has pain but you’re never quite sure why
they have pain, you do attempt to correct any abnormality that
you find so that you can minimize the chance that they’re
going to continue to have pain.
And in this case, you know, what I noticed is that there
was fluid coming down from up there, which shouldn’t be
happening, because normally that’s a sealed area. And so we
went up and looked, and we did in fact find a communication
to the subacromial space through that fascial tear.
2
Q. And could -- could this be causing part of the pain
that Ms. Price was suffering from that caused you to go in and
try to do the repair?
A. I guess it’s possible. It didn’t seem real likely, but
that’s certainly possible . . . .
....
Q. So in your opinion, it was something that needed
to be done?
A. I think it should have been done, yes. If you find
an opening communicating the subacromial space to the
subcutaneous space, it should be sealed if possible.
Q. And you feel that this was related to the previous
surgery done in 2005 that was preceded by the fall and caused
by the fall. Is that safe to say?
A. I do believe that the defect in the fascia over the
AC joint was related to and caused by the original surgery
done with an arthroscope in 2005, yes.
[¶6] Ms. Price’s providers submitted bills for her 2013 surgery, and the Division denied
payment. Ms. Price appealed and after an evidentiary hearing, the Commission
determined that she had “failed to prove by a preponderance of the evidence that the
medical treatment she received was causally related either to her work place injury on
December 25, 2004, or the initial surgery she received on her right shoulder on March 11,
2005” for that injury. The district court affirmed the Commission’s ruling. Ms. Price
timely appealed to this Court.
STANDARD OF REVIEW
[¶7] We treat an appeal from a district court’s review of an administrative agency’s
decision as if it had come directly from the administrative agency and give no deference
to the district court’s decision. Kenyon v. State ex rel. Wyo. Workers’ Safety & Comp.
Div., 2011 WY 14, ¶ 10, 247 P.3d 845, 848 (Wyo. 2011); Dale v. S & S Builders, LLC,
2008 WY 84, ¶ 8, 188 P.3d 554, 557 (Wyo. 2008). Our review is controlled by Wyo.
Stat. Ann. § 16-3-114(c) (LexisNexis 2015):
3
(c) . . . the reviewing court shall decide all relevant
questions of law, interpret constitutional and statutory
provisions, and determine the meaning or applicability of the
terms of an agency action. In making the following
determinations, the court shall review the whole record or
those parts of it cited by a party and due account shall be
taken of the rule of prejudicial error. The reviewing court
shall:
....
(ii) Hold unlawful and set aside agency action, findings
and conclusions found to be:
(A) Arbitrary, capricious, an abuse of discretion or
otherwise not in accordance with law;
....
(C) In excess of statutory jurisdiction, authority or
limitations or lacking statutory right;
(D) Without observance of procedure required by
law; or
(E) Unsupported by substantial evidence in a case
reviewed on the record of an agency hearing
provided by statute.
Accordingly, we review the agency’s findings of fact by applying the substantial
evidence standard. Worker’s Comp. Claim of Bailey v. State ex rel. Wyo. Dep't of
Workforce Servs., 2015 WY 20, ¶¶ 10-12, 342 P.3d 1210, 1213 (Wyo. 2015); Dale, 2008
WY 84, ¶ 21, 188 P.3d at 561. Substantial evidence means “such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.” Matter of Worker’s
Comp. Claim of Jensen v. State, 2016 WY 87, ¶ 13, 378 P.3d 298, 303 (Wyo. 2016)
(citing Bush v. State ex rel. Wyo. Workers’ Comp. Div., 2005 WY 120, ¶ 5, 120 P.3d 176,
179 (Wyo. 2005)). “Findings of fact are supported by substantial evidence if, from the
evidence preserved in the record, we can discern a rational premise for those findings.”
Id. (citing Kenyon, 2011 WY 14, ¶ 11, 247 P.3d at 849; Bush, 2005 WY 120, ¶ 5, 120
P.3d at 179).
4
If the hearing examiner determines that the burdened
party failed to meet his burden of proof, we will decide
whether there is substantial evidence to support the
agency’s decision to reject the evidence offered by the
burdened party by considering whether that conclusion
was contrary to the overwhelming weight of the
evidence in the record as a whole. If, in the course of
its decision making process, the agency disregards
certain evidence and explains its reasons for doing so
based upon determinations of credibility or other
factors contained in the record, its decision will be
sustainable under the substantial evidence test.
Importantly, our review of any particular decision
turns not on whether we agree with the outcome, but
on whether the agency could reasonably conclude as it
did, based on all the evidence before it.
Worker’s Comp. Claim of Bailey, 2015 WY 20, ¶ 11, 342 P.3d at 1213 (citations
omitted). Finally, “we review an agency’s conclusions of law de novo, and will affirm
only if the agency’s conclusions are in accordance with the law.” Id. at ¶ 12, 342 P.3d at
1213 (citations omitted).
DISCUSSION
I. Was the Medical Commission Hearing Panel’s conclusion that there was no causal
link between Ms. Price’s work-related injury and the need for her 2013 surgery
supported by substantial evidence?
[¶8] Ms. Price asserts that the Commission’s conclusion that she had not established a
causal connection between her workplace injury and her 2013 surgery was not supported
by substantial evidence. Although she concedes that the calcific tendinitis which the
2013 surgery was aimed at resolving was not work related, she claims that the “defect in
the fascia over the AC joint was related to and caused by” her 2005 arthroscopic surgery.
(Emphasis omitted.) She therefore contends that she demonstrated by a preponderance of
the evidence that her second injury was caused by the original injury, as required under
the second compensable injury rule. The Division counters that the Commission properly
considered and rejected testimony by Ms. Price’s physician, Dr. Bienz, regarding the
causal connection between her first and subsequent injuries.
[¶9] The parties do not dispute that the second compensable injury rule governs. “The
second compensable injury rule applies when ‘an initial compensable injury has resulted
in an injury or condition that requires additional medical intervention.’” Worker’s Comp.
Claim of Jensen, 2016 WY 87, ¶ 17, 378 P.3d at 304 (quoting Ball v. State ex rel. Wyo.
5
Workers’ Safety & Comp. Div., 2010 WY 128, ¶ 24, 239 P.3d 621, 628 (Wyo. 2010)).
“Under the rule, a subsequent injury is compensable if it is causally related to the initial
compensable work injury.” Rogers v. State ex rel. Wyo. Workers’ Safety & Comp. Div.,
2012 WY 117, ¶ 14, 284 P.3d 815, 819 (Wyo. 2012) (quoting Alvarez v. State ex rel.
Wyo. Workers’ Safety & Comp. Div., 2007 WY 126, ¶ 18, 164 P.3d 548, 552 (Wyo.
2007)). An employee claiming benefits under the second compensable injury rule has the
burden of proving by a preponderance of the evidence that there is a causal connection
between the first and second injuries. Guerrero v. State ex rel. Dep’t of Workforce
Servs., Workers’ Comp. Div., 2015 WY 88, ¶ 29, 352 P.3d 262, 271 (Wyo. 2015). To
receive benefits, Ms. Price had to prove by a preponderance of the evidence that the
condition treated in her 2013 surgery was causally connected to her 2004 work injury.
See Hoffman v. State ex rel. Wyo. Workers’ Safety & Comp. Div., 2012 WY 164, ¶ 9, 291
P.3d 297, 301-02 (Wyo. 2012) (explaining that to recover, the employee “had to prove
that his initial work injury ripened into a condition requiring additional medical
intervention”).
[¶10] The Commission concluded that the evidence did not reveal that the opening in the
fascial tissue was caused by the initial injury or subsequent 2005 surgery:
In this case the work injury occurred in 2004 and involved
Price’s right shoulder. In 2005 surgery was performed by Dr.
Harp to repair the shoulder. Price continued to experience
pain and went to see Dr. Bienz. In 2005-2006 Dr. Bienz was
unable to determine the source of the complaints of shoulder
pain, but did not see calcific tendonitis, or a need for further
surgery. After a hiatus in treatment, in 2013 Dr. Bienz found
significant calcific tendonitis in the right shoulder and
performed surgery for that condition. Dr. Bienz did not
attribute the condition to either the work injury or the 2005
surgery. In the process of the surgery for calcific tendonitis
Dr. Bienz discovered a hole in the fascial tissue over the
acromioclavicular joint and repaired it with a couple sutures.
Dr. Bienz “assumed” the hole was the result of the 2005
surgery or some later trauma. This is a case in which medical
testimony is necessary to establish causation. The causal
connection between Price’s right shoulder condition in 2013
and the work injury or 2005 surgery cannot be established by
testimony alone.
(Emphasis added.)
6
[¶11] The Commission then supplied some of its own medical testimony:
Some drainage of fluids during an arthroscopic surgery
is entirely normal. The repair to close the hole by Dr. Bienz
amounted to no more than a couple sutures. Medical
necessity is more than this.
[¶12] The Commission then went on to conclude:
The medical treatment must not only be necessary but
causally related to the work injury or a second compensable
injury. Dr. Bienz “assumed” the hole in the fascial tissue
was caused by the surgery in 2005, but he never explained
why he assumed this. He seemed equally prepared to believe
that the hole was caused by some other unrelated trauma after
2005.
....
The testimony of Dr. Bienz that the opening in the fascial
tissue over the acromioclavicular joint was possibly caused
during the surgery in 2005 or some other trauma suffered by
Price, is unpersuasive and insufficient to show the causal
relationship necessary to make the surgery compensable.
(Emphasis added.)
[¶13] Ms. Price argues that the Commission improperly supplemented its conclusions
with its own evidence that was not contained in the record. Ms. Price also contends that
the Commission erroneously selected portions of Dr. Bienz’s testimony while ignoring
others. She claims that his testimony “unequivocally” stated that the hole in the fascia
was caused by the 2005 surgery.
[¶14] After a thorough review of the record and the Commission’s findings, we
conclude that Ms. Price is correct in her arguments that the Commission erroneously
supplemented the facts with evidence that was not in the record, and the Commission’s
conclusion that Dr. Bienz “assumed” the hole in the fascial tissue was a result of the prior
surgery was not supported by substantial evidence. Although we find that Ms. Price is
correct on both points, we will affirm the Commission’s denial of benefits because there
is not sufficient evidence in the record to demonstrate that the repair of the hole in the
fascial tissue was necessary.
7
[¶15] We first examine the Commission’s supplementation of the evidence. In addition
to observing that drainage was normal and the repair only required a couple of sutures,
the Commission commented that closing the hole “was a minor technical matter.” There
was no evidence in the record to support these statements. We recognize that members of
the Commission have medical expertise which enables them to understand and render
decisions in technical cases like this one. As the trier of fact, the Commission must
weigh the evidence and determine witness credibility. See Hoffman, 2012 WY 164, ¶ 23,
291 P.3d at 305; Brierley v. State ex rel. Wyo. Workers’ Safety & Comp. Div., 2002 WY
121, ¶ 16, 52 P.3d 564, 571 (Wyo. 2002). The Commission is entitled to disregard expert
medical opinion if it “finds the opinion unreasonable, not adequately supported by the
facts upon which the opinion is based, or based upon an incomplete or inaccurate medical
history . . . .” Johnson v. State ex rel. Wyo. Workers’ Safety & Comp. Div., 2014 WY 33,
¶ 25, 321 P.3d 318, 325 (Wyo. 2014) (citations omitted). However, the Commission is
not free to provide its own version of the facts or to supplement the facts with evidence
that is not contained in the record. It was improper for the Commission to do so here.
We agree that the Commission acted in excess of its authority when it relied upon its own
expert opinions and facts that were not in the record.
[¶16] We now turn to the state of the record regarding the cause of the hole in Ms.
Price’s fascia. Dr. Bienz’s testimony regarding the genesis of the hole in the fascia
included the following:
Q: [By Mr. Phifer, attorney for Ms. Price] So in your
notes . . . you talk about, we then elevated the skin flap and
went up into the acromioclavicular joint. There was a large
hole in the acromioclavicular joint where the previous
procedure had apparently caused the fascia to separate or
perhaps it was never repaired. In this case, this was
communicating fluid to the joint surface, so I closed this by
advancing the deltoid into the defect and then proceeded to
close the deltoid in linear fashion with running zero dash --
A: [By Dr. Bienz] Zero Vicryl is a type of suture. It’s
an absorbable suture. And zero just refers to the size of the
suture.
Q: Very good. So -- so was this portion here that I just
read, was that a repair, then, that you feel was related to or
caused by the original surgery that was done after that 2004
fall?
8
A: I would assume so, yeah, unless she developed a
tear, you know, after the fact in that region. But most likely
that was related to the original arthroscopic release or
removal of the end of the clavicle. Sometimes if you go a
little bit high, it actually ends up cutting through the fascial
tissue, which is hard to recognize if you’re in the scope.
....
Q: Okay. And a little clarification on the testimony
you’ve given regarding the recent May 2013 surgery. We
were talking about a defect in the fascia over the AC joint.
And it was your opinion that that was related to the original
surgery, is that correct?
A: That is correct.
(Emphasis added.)
[¶17] The Division argues that the Commission considered the entirety of Dr. Bienz’s
testimony and properly concluded that it did not establish a causal connection. It argues
that the Commission used the terms “assumed” and “possibly” to describe Dr. Bienz’s
testimony and explain its concerns that the testimony did not adequately explain why he
believed the hole in the fascia was caused during the 2005 surgery, as opposed to some
other event after that surgery. We find that the Commission’s conclusion was contrary to
the overwhelming weight of the evidence and the record as a whole, and the
Commission’s neglect of that evidence was not explained in its findings. “If, in the
course of its decision making process, the agency disregards certain evidence and
explains its reasons for doing so based upon determinations of credibility or other factors
contained in the record, its decision will be sustainable under the substantial evidence
test.” Worker’s Comp. Claim of Jensen, 2016 WY 87, ¶ 13, 378 P.3d at 304 (quoting
Dale, 2008 WY 84, ¶ 22, 188 P.3d at 561 (citations omitted)). However, if the agency
disregards certain evidence and fails to explain its rationale, its decision may not be
supported by substantial evidence.
[¶18] Dr. Bienz’s testimony was that “most likely” the prior surgery created the hole in
the fascia that was repaired in conjunction with the 2013 procedure. Generally, an expert
will sufficiently establish a nexus between work activities and an injury by testifying
“that the work ‘contributed to’ the injury or that the injury is ‘most likely’ or ‘probably’
is the product of the workplace suffices.” Boyce v. State ex rel. Wyo. Workers’ Safety &
Comp. Div., 2005 WY 9, ¶ 11, 105 P.3d 451, 455 (Wyo. 2005). The Commission’s
determination that there was no causal link between the 2005 surgery and the hole
discovered during the 2013 surgery is not sustainable under the substantial evidence test.
However, the Commission correctly questioned the necessity of repairing the hole.
9
[¶19] Although the record supports the existence of a causal connection between the
2005 surgery and the hole in the fascia, it did not establish that the repair to the hole was
necessary. Dr. Bienz was not aware of the hole in Ms. Price’s fascia until he had
completed the repair of the calcification in her shoulder. He explained, “when we were
done, I noticed that there was fluid flowing from the subcutaneous space a bit more than
there should be, so we kind of were able to look up in there and we saw that irregularity”
and repaired it. He testified that the repair was not in any way related to the calcific
tendinitis.
[¶20] When questioned about whether the repair of the hole was necessary, Dr. Bienz
responded, “I don’t know if ‘necessary’ is the right word.” He went on to explain that
when you’re doing a procedure especially on a patient like
this who has pain but you’re never quite sure why they have
pain, you do attempt to correct any abnormality that you find
so that you can minimize the chance that they’re going to
continue to have pain.
Ms. Price’s attorney then asked Dr. Bienz whether the hole could have been causing
some of her pain. Dr. Bienz responded that it was unlikely: “I guess it’s possible. It
didn’t seem real likely, but that’s certainly possible. But still I wasn’t -- finding that
defect, I didn’t think it would be wise to leave it open . . . .”
[¶21] The Wyoming’s Worker’s Compensation Act requires an employee’s medical and
hospital care to be “reasonable and necessary” in order to be covered. Wyo. Stat. Ann.
§ 27-14-102(a)(xii) (LexisNexis 2015). To receive compensation for care, the employee
is “required to establish that [the treatment] was reasonable and necessary medical
treatment related to his workplace injury.” Beall v. Sky Blue Enterprises, Inc., 2012 WY
38, ¶ 23, 271 P.3d 1022, 1032 (Wyo. 2012).
[¶22] The evidence reveals that the condition giving rise to Ms. Price’s subsequent
shoulder surgery was calcific tendinitis, which was not related to her work injury. There
was no evidence that the hole in the fascia contributed to her pain or that its repair was
necessary to treat her symptoms. Thus, the Commission’s conclusion that the 2013
treatment and surgery were not compensable by worker’s compensation is supported by
substantial evidence.
10
II. Did the Medical Commission Hearing Panel improperly apply apportionment
when it concluded that Ms. Price’s 2013 surgery was not compensable?
[¶23] Ms. Price also argues that the Commission improperly apportioned the relative
contributions of conditions requiring medical intervention. We have recognized and
rejected application of apportionment in cases involving preexisting conditions. Because
we have determined that there was no necessity for the portion of the surgery directed to
repairing the hole, we need not consider whether apportionment was applied improperly
in this case.
CONCLUSION
[¶24] Ms. Price did not establish by a preponderance of the evidence that the repair to
the hole in the fascia over her acromioclavicular joint performed during her 2013 surgery
was necessary. Therefore, the Commission’s conclusion that her medical treatment was
not compensable is supported by substantial evidence. Because her treatment is not
compensable, apportionment is not an issue. Affirmed.
11 | 01-03-2023 | 02-16-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4142505/ | .
OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
GE-C. MANN
Anomlmv
Gil”m*L
X’onorablaGeorga E. Sheppard
ColriptroLler
of Yublic Aocounts
Dear Clrt
.
Honorable George k 'heppard, Page 2
'*(a) The informtim desired is wh~thrr
or hot it in mcGatory thet thie dupwtmmt
oenoel 1iOGncG to sell L6fur.dXotor Fuel whioh
has l>Cc!l !:GEUMI to c pcroon who ha8 been e,iven
,. e suopcndedmntebcc under the pmmlty proVl-
aiou 3ct out.in %hlou 27(k) sria %kotion 27(L)
of tho Act rdfurroc?tc above.
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to i5611e lio~nsctto Q person who tes bc:eccoh-
vloted of 6 falony undr?rthe sbOV~6Aot during
the the the scuta;oo'issuspended? At the eli
pir&ticn of tbe susvended sontonoe, then would
this bepertrrentbe authorized to lrsue lloense
to suoh PttlOxkO
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suspended nentenoo forfeit the right to fS1o a
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the dete of sdoh oonviatlon?~
'M~thou~hthz obore statute has not been before
the courts of this -"t&t8or before this department rcr
+ we believe a review of the dooIsiana 0r
aonslaeratio-
the oourts of thin and other state8 end OS opinions of,
this departxontupon aiailar statutes, elthougtinot coh-
trollit& will be helpful in arriving at the intmtion
of the Legislature in the enaotvmnt of the instant statute.
your gueatfou resolve6 itself to a oonatruotlon~
of the words nfclony cooVv!yttlon* a8 used in the quoted
portlx of Csotlon 13(d) or".iutlols7065b, Vem on's Texas
Clvll :%stuteo; thst is to say, do.suoh terma meen a mere
fiadlng of the fact of ol,uiLC, either byverdiot of jury
or by a plea of guilty, but upon whioh flnel judscnt or
sentence bus beon euspcr:dact, u?gar the oontrollin&Cus-
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pO!ldWl .Tk3~tt?I3,Qe
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of the lsw. Th6 w<>rd"conviotlonWhas been used in vrrious
legislativeennotrrc-nts, to m&n both at these phasun, ttm
firs-tte:::r:! Iho ~~oplar ixcinin;: 6scrtbed thereto 0uZ thf;.
h~;L~r b6IhC th6 t6oliuios.I 6W?@5 111which the fiord is en-
Nwd. +<
Th$n io Illu:4ratud I&>ha folloui;lgquotetion
.
Xanorable Ceorgo B:~hepparb, Page )
_ Vbo tc;;rr:
aonwiatian 1PrIntlmtely bound
up with the crl:iml luw, and It hen been cl%id
thet iu critinal prooedure the war@ i~.of agtiv-
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nice1 lkqal ei~liiiic6ti.Oil,
the oonstruotion not
el\ragshelcs wlforn, but hpendirrg upon en in-
torprcbotlonor the partloular I&w or utstute
under oansiderntion; , . . . It may, however,
for th0 purpose of classlflootlonbe said to
hsvs three montngo: (1) bnerali (2) ordinary;
end (3) Cechnicel.
"33 its genorel or ooxprehendve, alao ro-
ferred to OS its pop+&sr, 881166,the tern Ces
been ilerinea as the overthrow or e dsfclndant
by the eotebll0hmentof his guilt, according
to sow of the known legal mocbs; a verdict, or
flm.?ill~,Of guilty; . . . ;
qlAaorclinarllyemployed in la& phraeeologg,
or in ito ordinary legal aenfm, the ten *eon-
. vlotionf is used to desii',nete
that particuler
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of a oriklnal pro~eou$lon, *:on a plea ot
_' @lty la entered in open court, or e vsrdlot la
returned by 8 Jury, . . .
.
-wXn'a atrlot legal sense, or v&on uesd in
its zor6 reotrlcte% anS teohnlaal sl6@~lcatlon,
the word hna been Cefined so denoting the final
judaent of the court end as'ln?portin& tbc final
connummtlon of the prosecution, rron tbo ootc-
plaint to the jud@zent of the court of scintenoej
sonfd&ms fnolud2ng, and acPr.etLmesnot inoluding,
the sentence; end in thi:;sense It is mid to
aoncern the statesof'Snfeay resultlne frorzthm
flncl judgmnt of cnndwmtloa for ortie. . . SW
Yhere c cuspenCed~sont%ncehas been mrantsd weither
the verdict of cmv:ctlon nor the judf.??ent entered t,barcon
shall bccom firxl... . .R fi.rtiale T@,' Code of Cri5Lnal Pro-
OBdUrC, 1525. "i'3c:or t&e tex.xBox-C,U.i‘:IL~tut#c
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Cnder atetutsa prhcreaclviotloo is made the ground
ot come dlsabillty or spaoi~l peacrlty,itbs been gonerolly
buld that the term ~*oonviotlGn'l mm% a fins1 edjud~ontion
by judgment of the court retrim then a mt'r~vcrCiat of guilty.
16 C. 5. X266-67; i%3b@s v. :"ebian,85 H. 7. 672, 18 L. R. k.
(u.x.) 634.
This idbptibn of'the strlot teahniaal moaning bf
the terR “oonviatlon” rather then the .~opulerE~38tlilIf.& whe,n
such oonvlctlbn io follon#d, unc‘;crpcrtlmnt statutes, by
certein civil penalties and aonmquenoee, Is illustratkd
by the stetsmmt of the aourt in tb% CHSB, eupra, thetr
". . . where disabilities,disqu%lificetions,
and forr%"eitures are to rollow upon e cagviotlon,
in the oy% of tho law it is thEt ccnvfcblon which
in %vLdenaed by sentenoo and 'judgz.ent.; %Mt thnt,
whheresentanoe ia auopended,am? oo'tm dlreot
oonsequttnoes ot fi.m end Imprisonmmt mm suupernd-
rd or postponca tfmporerilyor indetlnitely,8uT
f&b, the indirect conoqucinoes%ro likewise post-
ponod." ',<
?.
,'.:
.. Tids rule %ppc%re to hsv6 bcsn epproved by the:
fer~rTexne deoisions avelleble upon this question. The Su-
rem Court of Tezas in zhe early cene oi G%llaeher V. -tote,
PO Tcx. ct. APT).469, upon annctrtin~:oanntitutionaland
statutory provi~jion~ dingu%lifyfng sernons- frownvoting is
Taxes Q&O hive bc+cn'*oomiotedof any felony," held that
the word macxivictedw has a 4~fin13e si~~nlrfcntlon in few
nnd deans t,hr:t B ~udtg%xlt of'rlnal t?c?lCh~iatiOn haa been
pronounced tr:jalnst the acaused.
HOnorsble George IL phsppsrd,Pege 5
thc ouspennionWOB void and th0 vot%r WCB not qtmimd, -
no4 heviag been pnr Answa’rin~your oeoor,dque&ion~‘and‘baaingour
allswe~upwn the prinOip~e# bsroiriabove dlsousaed, pw ed-
vise that ywu would ‘be aul;horlzed to iesue a liaonae for
~tbepurpono OS sellirrgrelund motor fuel.,to a deelcr
whono aentcnce of felony oanvfction bee boon nuspsndsd
uncor the !Xspendod :kntanoo i.tiw, during who Cloneof Eil&
euny*aeion, provided t.het,dor.inEsuch period tts dhelor
in not convicted of my other felony. Zf, on the ot!ter
hand, sef& deelar ie oonvictod of enwther felony during
tho pexIwd wf suspension aC eantenoo for hie first felony
0rfOmi0, fine1 judgment Is, under cert+in ntetutory pro-
cuedin~e,,pronounsed uoon the .origj..neJ canvi.ction,an%
thenceforthE J--Y& ju;i~~~~lt of cc~viction wovld erlst
wt1lctl would 4WJCo:sLiLiCUll.y
forf’ultt.kolioeiluela question.
This re.t3ultn fros t#bc.provislone of Article 379, Code of
Crir:inid iYooedtm3, rcoCi~g; as f 011~~3:
“‘JPCQthe fi!sll.
oo;i-~iction
of ttc Ccfond-
ant of my other falony pcr.dingLho sua~~cnoion
of sen~tcnco,tkc c:>urt,~~nCiu:?cuci:suspcn5lOn
shell CUUE~ e cr-,&txi
to 1~3~s for tke arrrst 0r
.
.
Honorable Cieorga Ii. Gheppord, Fage 8
5%~ cmsv~erto yaw t!airdqueetion la Koverned by
the ikcislv~!~ naci Opitifoii8
herckobovc diacustied,under
which we held thet n suspended sentmae on.81.Selonycon-
vlction on verdict or pXae.OS gu,il.ty, i8 not a ‘Telony oonvla-
tioo” wJ.tblnthe r::ennla~g OS reul;ion.U(A) of ktlole 70&b,
v~raot5~6Tmas Civil ftntutea. Aa in the cum of the Sor-
felturc 0S tf.0refund clwiler~s1icwm0, the denial of the
rlE;fit of ecy person to S1l.aa claim md obtuin a tax refund
ror a ~~rforl of cm yeor frca the bite of a felony convlo-’
tLan dwondu, under such statute, upon a fluul cc.miction
and not n a(360where centencc of awmlctlon 1.3ouopondcd.
Ye aaoordlrqly aanaor your third question in ttm nogativa.
tozefplng fully anawera your inquiry,
h
c.1:.
Ft.i:.c. | 01-03-2023 | 02-18-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4129238/ | OFFICE OF THE ATTORNEY GEPU’ERAL. STATE OF TEXAS
JOHN CORNYN
December 20,200l
The Honorable Charles D. Penick Opinion No. JC-0443
Bastrop County Criminal District Attorney
804 Pecan Street Re: Whether a county that contracts with an
Bastrop, Texas 78602 attorney for the collection of delinquent taxes may
accept a gift from that attorney (RQ-0410-JC)
Dear Mr. Penick:
You ask whether an attorney that contracts with a county to collect delinquent taxes may
donate personnel, equipment, or dollars back to the county to enhance the county’s collection of
delinquent taxes. ’ When a county contracts with an attorney to collect delinquent taxes pursuant to
section 6.30 of the Tax Code, section 33.07 authorizes the county to impose an additional penalty
on the delinquent taxes to provide compensation for the contract attorney. An attorney who is
compensated under section 33.07 of the Tax Code may not make a donation to the county if the
donation in effect refunds part of the compensation to the county. Whether a particular donation is
a refund of the attorney’s compensation under section 33.07 is a fact question that cannot be resolved
in an attorney general opinion.
A county may contract with a private attorney to represent it in collecting delinquent taxes.
See TEX. TAX CODE ANN. 8 6.30(c) (Vernon 1992) (authority for “taxing unit” to contract for
collection of delinquent taxes); see also id. 8 1.04( 12) (Vernon Supp. 2001) (“taxing unit” defined
to include “county”). The attorney’s compensation is set in the contract, but the total amount of
compensation provided may not exceed twenty percent of the amount of delinquent tax, penalty, and
interest collected. Id. § 6.30(c) (Vernon 1992). Section 33.07 of the Tax Code authorizes the taxing
unit to provide that the delinquent taxes incur an additional penalty “to defray costs of collection,
if the unit . . . has contracted with an attorney pursuant to Section 6.30” of the code. Id. fj 33.07(a)
(Vernon Supp. 2001). “The amount of the penalty may not exceed the amount of the compensation
specified in the contract with the attorney to be paid in connection with the collection of the
delinquent taxes.” Id., as amended by Act of May 17,2001,77th Leg., R-S., ch. 1430, 5 14,200l
Tex. Sess. Law Serv. 4819,4823 (added language in italics). If a penalty is imposed pursuant to
section 33.07, “a taxing unit may not recover attorney’s fees in a suit to collect delinquent taxes
subject to the penalty.” Id. 0 33.07(c). Section 33.48 of the Tax Code provides for recovery of
“attorney’s fees in the amount of 15 percent of the total amount of taxes, penalties, and interest due
‘Letter from Charles D. Penick, Bastrop County Criminal District Attorney, to Opinions Division
(July 3 1,200l) (on file with Opinion Committee) [hereinafter Request Letter].
The Honorable Charles D. Penick - Page 2 (JC-0443)
the unit,” see id. 8 33.48(a)(5), but a taxing unit may collect attorney’s compensation under only one
of the two provisions. See City of Houston v. First City, 827 S. W.2d 462,474 (Tex. App.-Houston
[ 1st Dist.] 1992, writ denied).
Until it was amended by the Seventy-seventh Legislature, Tax Code section 33 -07 provided
that the additional penalty “may not exceed 15 percent of the amount of taxes, penalty, and interest
due.” See TEX. TAX CODE ANN. 9 33.07 (Vernon Supp. 2001). A prior opinion of this office
determined that the full amount of the penalty collected under section 33.07 must be used to
compensate the attorney with whom the taxing unit had contracted. See Tex. Att’y Gen. Op. No.
JM-857 (1988) at 7. It concluded that the county had no authority to allocate only part of the section
33.07 penalty to the attorney’s compensation and keep the rest to pay its own costs of collecting
delinquent taxes. See id. at 2-3,7. Section 33.07 of the Tax Code now expressly ties the penalty to
the attorney’s compensation, stating that the “amount of the penalty may not exceed the amount of
the compensation specijied in the contract with the attorney.” See Act of May 17,200 1,77th Leg.,
R-S., ch. 1430, 9 14, 2001 Tex. Sess. Law Serv. 4819, 4823 (added language in italics). This
language confirms the conclusion of Attorney General Opinion JM-857 that the entire penalty was
to be paid as compensation to the contract attorney.
You suggest, however, that an attorney who is compensated pursuant to section 33.07 of the
Tax Code may give the county money to use for collecting delinquent taxes and that section 81.032
of the Local Government Code authorizes the county to accept the gift. This payment is .
characterized as a “gift” or “donation” in the request letter, but it could also be characterized as a
rebate from the attorney’s compensation. See XIII OXFORDENGLISH DICTIONARY 297 (2d ed. 1989)
(“rebate” defined as “[a] deduction from a sum of money to be paid, a discount”).
Section 81.032 provides that “[tlhe commissioners court may accept a gift, grant, donation,
bequest, or devise of money or other property on behalf of the county for the purpose of performing
a function conferred by law on the county or a county officer.” TEX. Lot. GOV’T CODE ANN.
5 81.032 (Vernon Supp. 2001). Absent such express legislative authority, counties could not
accept gifts of money or other personal property to use for county purposes. See Tex. Att’y Gen.
LO’s 97-032 (county may not accept gifts of videotapes, books, or cash on behalf of alternative
dispute center); 88-106 (county may not collect funds and disburse them to local law enforcement
agencies to combat drug abuse in county). But see TEX. LOC. GOV’T CODEANN. 5 270.001 (Vernon
1999); TEX. TFUNSP.CODEANN. 8 252.214 (Vernon 1999); Bell County v. Alexander, 22 Tex. 351
(1858) (authority of county to accept donation of land). The question to be addressed is whether the
enactment of Local Government Code section 8 1.032 changes the analysis of Tax Code section
33.07 stated in Attorney General Opinion JM-857.
Section 81.032 of the Local Government Code must be construed in harmony with
other statutes. See generally Acker v. Tex. Water Comm iz, 790 S.W.2d 299, 301 (Tex. 1990);
Standard v. Sadler, 383 S.W.2d 391, 395 (Tex. 1964). Section 81.032 does not authorize the
cornmissioners court to accept a donation for purposes inconsistent with the constitution or laws.
See Tex. Att’y Gen. Op. No. JC-0073 (1999) at 2-3 (commissioners court authorized by statute to
The Honorable Charles D. Penick - Page 3 (JC-0443)
accept donation of land for road-building subject to reasonable conditions, but court may not accept
a condition that is contrary to the constitution or statutes); see also 10 EUGENEMCQUILLIN, THELAW
OF MUNICIPAL CORPORATIONS: Corporate Property, Gifts and bequests 0 28.16, at 47 (3d ed. 1999)
(illegal condition attached to gift to municipality may vitiate the gift). An attorney who contracts
with a county to collect delinquent taxes for compensation derived from the section 33.07 penalty
may not donate any of the section 33.07 compensation to the county, whether the donation is to
enhance the collection of delinquent taxes or for another county purpose. The purpose of the penalty
authorized by section 33.07 of the Tax Code is to compensate the attorney and not to pay other
county expenses.
A brief submitted in connection with this request states that a number of firms and taxing
units “have negotiated contracts in which the firm either directly pays or reimburses a taxing unit
for specific types of ‘costs of collections,“‘2 in reliance on language in Attorney General Opinion
JM-857. This opinion, after pointing out that nothing required the taxing unit to impose the full
fifteen percent penalty, stated that “[i]n drafting the contract, the taxing unit has the opportunity to
include specific terms on the ‘costs of collection’ which the attorney will absorb.” Tex. Att’y Gen.
Op. No. JM-857 (1988) at 7.
The sentence from Attorney General Opinion JM-857 must be read in the context of the
entire opinion, which emphasizes that the penalty imposed under section 33.07 may not be spent to
defray the taxing unit’s costs of collection. Id. This places a significant limit on the power of the
county to contract regarding costs of collection. Moreover, the Tax Code expressly allocates certain
costs, and these may not be reallocated by contract. Section 33.48 authorizes the taxing unit to
recover usual court costs, including service of process, filing notice of lis pendens against property,
foreclosure sale, and other reasonable expenses incurred by the taxing unit to determine the name,
identity, and location of parties and to secure legal descriptions of the property, as well as reasonable
court-approved attorney ad litem fees. See TEX. TAX CODEANN. 5 33.48 (Vernon Supp. 2001), as
amended by Act of May 17,2001,77th Leg., R.S., ch. 1430,§ 23,200l Tex. Sess. Law Serv. 4819,
4826; see also TEX. TAX CODE ANN. 6 33.07(c) (Vernon 2001) (if penalty is imposed pursuant to
section 33.07, taxing unit may not recover attorney fees in suit to collect delinquent taxes subject
to penalty). Subsection 33.49(a) of the Tax Code provides that a taxing unit is not “liable in a suit
to collect taxes for court costs, including any fees for service of process, an attorney ad Zitem,
arbitration, or mediation, and may not be required to post security for costs,” except that a “taxing
unit shall pay the cost of publishing citations, notices of sale, or other notices from the unit’s general
fund.” TEX. TAX CODE ANN. 8 33.49(a), as amended by Act of May 17,2001,77th Leg., R-S., ch.
1430, § 24,200l Tex. Sess. Law Serv. 4819,4826; id. 8 33.49(b). Accordingly, the quoted language
firom Attorney General Opinion JM-837 is limited by the holding of that opinion and by Tax Code
provisions.
2Brief fromR. Bruce Medley, Perdue, Brandon, Fielder, Collins & Mott, L.L.P., to Opinion Committee, Office
of the Attorney General of Texas (Sept. 10,200l) (on file with Opinion Committee) [hereinafter Briefl.
The Honorable Charles D. Penick - Page 4 (JC-0443)
In conclusion, we point out that we cannot determine whether a particular donation to the
county constitutes an allocation of the section 33 -07 penalty to the county. This determination raises
questions of fact, which cannot be resolved in an attorney general opinion. See, e.g., Tex. Att’y Gen.
Op. Nos. JC-0328 (2000) at 6; JC-0152 (1999) at 12; JC-0020 at 2; DM-98 (1992) at 3; H-56 (1973)
at 3; M-l 87 (1968) at 3; O-291 1 (1940) at 2. If, however, a county tax-collection contract provides
for a “donation” to the county by the attorney, we believe this provision would certainly raise the
issue that the contract impermissibly allocates some of the article 33.07 penalty to the county.
The Honorable Charles D. Penick - Page 5 (JC-0443)
SUMMARY
When a county contracts with an attorney to collect delinquent
taxes pursuant to section 6.30 of the Tax Code, section 33.07
authorizes the county to impose an additional penalty on the
delinquent taxes to provide compensation for the contract attorney.
The additional penalty authorized by section 33.07 of the Tax Code
is solely for the purpose of providing compensation to the contract
attorney, and the attorney may not make a donation to the county that
in effect refunds part of his or her compensation to the county.
Whether a particular donation is a refund of the attorney’s
compensation under section 33.07 is a fact question.
Attorney General of Texas
HOWARD G. BALDWIN, JR.
First Assistant Attorney General
NANCY FULLER
Deputy Attorney General - General Counsel
SUSAN D. GUSKY
Chair, Opinion Committee
Susan L. Garrison
Assistant Attorney General, Opinion Committee | 01-03-2023 | 02-18-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4409364/ | Corrected Opinion issued April 18, 2019
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-18-00498-CR
———————————
LOSTON MOORE, JR., Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 185th District Court
Harris County, Texas
Trial Court Case No. 1572146
CORRECTED MEMORANDUM OPINION
Appellant Loston Moore, Jr. filed a motion to dismiss the appeal in
compliance with Texas Rule of Appellate Procedure 42.2(a). See TEX. R. APP. P.
42.2(a). The State has not opposed this motion. We have not issued a decision in the
appeal.
Accordingly, we dismiss the appeal. See TEX. R. APP. P. 43.2(f). We dismiss
any pending motions as moot.
PER CURIAM
Panel consists of Justices Lloyd, Kelly, and Hightower.
Do not publish. TEX. R. APP. P. 47.2(b).
2 | 01-03-2023 | 06-24-2019 |
https://www.courtlistener.com/api/rest/v3/opinions/4399607/ | Order Michigan Supreme Court
Lansing, Michigan
May 22, 2019 Bridget M. McCormack,
Chief Justice
David F. Viviano,
Chief Justice Pro Tem
158383
Stephen J. Markman
Brian K. Zahra
Richard H. Bernstein
PEOPLE OF THE STATE OF MICHIGAN, Elizabeth T. Clement
Plaintiff-Appellee, Megan K. Cavanagh,
Justices
v SC: 158383
COA: 335731
Oakland CC: 2016-258387-FC
JASON MICHAEL MILES,
Defendant-Appellant.
_________________________________________/
On order of the Court, the application for leave to appeal the July 17, 2018
judgment of the Court of Appeals is considered, and it is DENIED, because we are not
persuaded that the questions presented should be reviewed by this Court.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
May 22, 2019
s0515
Clerk | 01-03-2023 | 05-23-2019 |
https://www.courtlistener.com/api/rest/v3/opinions/1246631/ | 130 Mich. App. 452 (1983)
344 N.W.2d 582
GAGNON
v.
DRESSER INDUSTRIES CORPORATION
Docket No. 59910.
Michigan Court of Appeals.
Decided September 1, 1983.
Kelman, Loria, Downing, Schneider & Simpson (by Nicholas J. Rine), for plaintiff.
Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. (by Thomas F. Myers), and Gromek, Bendure & Thomas (by Mark R. Bendure), for defendant.
Before: GRIBBS, P.J., and BRONSON and BEASLEY, JJ.
PER CURIAM.
Both plaintiff and defendant Dresser Industries Corporation appeal as of right from a judgment entered on the jury's verdict in favor of plaintiff. The jury found that plaintiff had suffered $200,000 in damages, but that plaintiff had been 50% negligent, reducing his entitlement to $100,000. Plaintiff had received a $100,000 settlement award from third parties in connection with his injuries. The trial court, taking the settlement award into account, entered judgment for plaintiff for only $50,000 plus interest.
*455 On appeal, plaintiff raises two issues, neither of which require reversal. First, plaintiff urges that the defense of comparative negligence, Placek v Sterling Heights, 405 Mich. 638; 275 NW2d 511 (1979); MCL 600.2945; MSA 27A.2945, does not apply to actions such as the present one, where the plaintiff brings his action under a theory of breach of implied warranty. Plaintiff cites "implied warranty" provisions of the Uniform Commercial Code (UCC), MCL 440.2314; MSA 19.2314, in making this argument. These provisions are not apposite. Plaintiff has apparently confused contractual doctrines of implied warranty with the tort-based products liability doctrine of the same name. See Williams v Detroit Edison Co, 63 Mich. App. 559, 565; 234 NW2d 702 (1975), noting the distinction and pointing out the inapplicability of the UCC. Plaintiff's implied warranty theory is not contractual, but a products liability action as defined by MCL 600.2945; MSA 27A.2945. Recent authority indicates that under this statute comparative negligence applies "irrespective of the fact that a plaintiff is injured by the breach of an implied warranty". Karl v Bryant Air Conditioning Co, 416 Mich. 558, 569; 331 NW2d 456 (1982). We also note that comparative negligence is a defense to any claim of inadequate safety devices. Hardy v Monsanto Enviro-Chem Systems, Inc, 414 Mich. 29; 323 NW2d 270 (1979). Accordingly, given that plaintiff's claim is not contractual in nature, Williams, supra, comparative negligence was properly found applicable regardless of whether the claim is characterized as a products liability action for breach of implied warranty on the one hand, or a claim of inadequate safety devices on the other.
Plaintiff raises an alternative argument with respect to the applicability of comparative negligence: *456 that the doctrine does not apply because he filed his original action before the enactment of MCL 600.2945; MSA 27A.2945, establishing products liability actions and their defenses, including comparative negligence. Defendant responds that comparative negligence does apply because it was not added as a party defendant until after the statute became effective. Neither party has addressed the crucial aspect of this issue: namely, that comparative negligence applies retroactively as a defense to both negligence, Placek, supra, and products liability, Karl, supra. Under Placek, comparative negligence was declared applicable to any case in which trial had yet to commence; the trial in this case began in 1981, two years after the date the Placek opinion was released, February 8, 1979. Similarly, in Karl, supra, the Court held that comparative negligence applies to all actions brought to trial after the products liability statute's effective date, MCL 600.2945; MSA 27A.2945, 1978 PA 495, effective December 13, 1978. As noted above, this action was pending as of that date. There is no merit to plaintiff's claim that the application of comparative negligence amounts to a deprivation of due process. In Karl, supra, the Court held that the statute does not deprive a plaintiff of his claim for injuries, but that it merely revises the method of computing his damages. As a remedial statute, it does not deprive defendant of any vested rights. Id., pp 579-580.
From the foregoing, we conclude that the issues raised in plaintiff's appeal are without merit.
Defendant's cross-appeal raises several additional issues, which also lack merit. First, defendant contends that the trial court erred in computing plaintiff's comparative damages. According to defendant, the court should have applied the following formula:
*457
$200,000 Total damages found by the jury
-100,000 Deduction for 50% comparative negligence
________
$100,000 Remaining amount equals plaintiff's
entitlement
-10,000 Settlement amount received by third
parties
________
-0- Amount left awardable on the verdict
Plaintiff, on the other hand, urges this Court to uphold the trial court's application of the following formula:
$200,000 Total damages found by the jury
-100,000 Settlement amount
________
$100,000 Remaining amount awardable by any
verdict
31,580 Interest from original filing
________
$131,580 Total amount awardable, with interest
-65,670 Deduction for 50% comparative negligence
________
$ 65,670 Judgment amount properly entered in
plaintiff's favor
We agree with plaintiff that the trial court acted properly in adopting the latter formula. It is true that, under the language of some cases cited by defendant, settlement amounts may be deducted from the net recovery (computed after deducting for comparative negligence), rather than from gross damages. However, defendant's proposed formula would allow defendant to derive the windfall of escaping liability for its negligence merely because a third party had made prior settlements to which defendant had not contributed.
It is true that under Placek, supra, as between a plaintiff and a nonsettling tortfeasor, the plaintiff *458 must bear responsibility for his losses in proportion to the amount by which plaintiff shares blame with that nonsettling tortfeasor. However, nothing in the Placek language cited by defendant suggests that the plaintiff must deduct amounts received in settling with other tortfeasors. Such a result would be particularly inappropriate where, as here, the matter of the other tortfeasors' degree of fault was not before the jury.
The foregoing reasoning has recently been applied by the Supreme Court in Mayhew v Berrien County Road Comm, 414 Mich. 399; 326 NW2d 366 (1982). There, the Supreme Court expressed a policy against requiring a plaintiff and his adversaries to litigate the relative degree of fault of third parties not represented in the action:
"[N]umerous difficulties would be presented if we were to allow the jury to apportion damages among all tortfeasors, including a settling non-party. It would mean that the settling tortfeasor's liability would be assessed without anyone adequately representing that interest. It would put the plaintiff in a unique trial situation. The plaintiff would not only have to advocate that he was not at fault, he would have to convince the jury that the non-party was only minimally at fault. Otherwise, there might be too great a percentage of fault attributed to the non-party, thus reducing the plaintiff's recovery." 414 Mich. 412.
The foregoing policy would be fulfilled by the application of a formula which allows prior settlements to remove the issue of a third party's liability from any litigation between the plaintiff and the nonsettling tortfeasor. Such a formula can readily be derived as follows. The court could characterize plaintiff's entire claim for injuries as the amount of total damages which the jury has found, in the present case, $200,000. The court *459 could then conclude that this "claim" should be reduced by the amount of the settlement, $100,000 here, recognizing that the settlement represented satisfaction of the third party's liability, thus removing the issue of that third party's fault from the subsequent litigation between plaintiff and the nonsettling tortfeasor, Mayhew, supra. Applying this analysis, the trial would then be confined to the issue of how to apportion fault as between the plaintiff and the nonsettling tortfeasor for the remaining $100,000 in damages. The jury would not have to face the problem of determining the liability of non-parties; its sole duty would be to allocate fault among the parties who were represented at trial, plaintiff and the nonsettling tortfeasor. The trial court's formula is consistent with the foregoing analysis.
The court's formula is also consistent with the language of MCL 600.2925d; MSA 27A.2925(4), which, while expressly preserving the doctrine of joint and several liability, specifically discharges settling tortfeasors from continued liability for contribution. The statute's reference to the discharge of settling tortfeasors is consistent with the application of a formula which presupposes that their negligence is no longer an issue at a trial involving the plaintiff and the nonsettling party.
The court's formula is certainly consistent with the parties' understanding of the issues which remained viable at trial. Neither of the parties made any effort to litigate the fault of the settling third party. The only issue was the relative liability as between plaintiff and defendant Dresser Industries, Inc.
Given the foregoing, we find that the trial court acted properly in applying the above-described formula advocated by plaintiff, under which the *460 settlement amount received from third parties is deducted from gross damages, before deducting for plaintiff's relative degree of fault. Defendant's proposed formula would have required jurors to consider plaintiff's degree of fault relative to all parties involved in the incident, including nonparty settling tortfeasors, contrary to the policies announced in Mayhew. Accordingly, we conclude that there is no merit to this aspect of defendant's appeal.
Defendant next urges that the trial court erred in computing interest from the date of filing, rather than from the date defendant was added as a party. We find this argument to be totally without merit. Although MCL 600.6013; MSA 27A.6013 authorizes a trial court to add interest "from the date of filing the complaint", the statute does not differentiate between original filing and an amendment which adds a new party defendant. Twice this Court has construed the statute to refer to a period from the date of original filing rather than an amended complaint, even where it was the amendment rather than the original complaint which added the defendant in question. Michigan Mutual Liability Co v Staal Buick, Inc, 41 Mich. App. 625, 627-628; 200 NW2d 726 (1972); Awedian v Theorodre Efron Manufacturing Co, 66 Mich. App. 353, 356-357; 239 NW2d 611 (1976), lv den 396 Mich. 856 (1976). In each case, the Court noted the general rule that amendments relate back to the date of an original pleading, GCR 1963, 118.4. We find no occasion to depart from this reasoning here. Accord, Oakwood Homeowners Ass'n, Inc v Marathon Oil Co, 104 Mich. App. 689, 693; 305 NW2d 567 (1981).
Defendant's remaining issues on appeal involve evidentiary rulings made by the trial court. We *461 find no reversible error in any of those rulings. First, the court did not err in allowing the jury to consider plaintiff's lost earning capacity as an element of damages. There was sufficient evidence to go to the jury on the issue of whether plaintiff's disabling back problems were causally related to the leg injury which was in turn caused by defendant's negligence. Plaintiff's expert gave testimony which indicated a causal link between plaintiff's back condition and the leg injury. He specifically stated that the leg injury caused plaintiff to face a physical "disadvantage" when he attempted to continue his heavy work duties, and that, as a result of this disadvantage, plaintiff's back was strained and eventually injured to the point of impairing plaintiff's earning capacity.
We note further that there was sufficient evidence from which the jury could estimate plaintiff's lost earning capacity. Plaintiff introduced testimony regarding amounts which he would have made had he continued in his preinjury employment, and contrasted amounts which he has earned since the injury. Plaintiff also submitted evidence as to the amount of time which he had to take off from work as the result of his injury, as well as the time which elapsed before he was finally dismissed from work as a result of his disabilities. The forgoing evidence, taken together with plaintiff's evidence as to life expectancy, formed a sufficient basis from which the jury could estimate his lost earning capacity in a manner which went beyond mere conjecture, Vogue v Shopping Centers, Inc (After Remand), 402 Mich. 546, 550-552; 266 NW2d 148 (1978). In concluding review of the earning capacity issue, we note that there is no merit whatsoever to defendant's claim that plaintiff had potential earnings "as a psychologist". *462 Plaintiff's training in that field was limited to a bachelor's degree, and nothing in the record suggests that plaintiff was in any way qualified to earn a living as a "psychologist". The record reveals no earning capacity in this field at all.
The trial court did not abuse its discretion in excluding evidence of certain safety regulations promulgated under the Occupational Safety and Health Act (OSHA) and its Michigan equivalent, MIOSHA. Any error as to this issue was harmless. Defendant's only purpose in submitting these regulations as evidence was to establish plaintiff's negligence in handling the overhead crane; the sole manner in which defendant claimed such negligence was in the fact that plaintiff had left the crane's controls unattended with a suspended load. The standard of care which prohibits this course of action is embodied in ANSI standard 23.2.35, of which the jury was informed. Defendant's purpose in introducing the regulatory codes was already fulfilled by other evidence. Accordingly, the court's decision to exclude them was proper under MRE 403, which specifically allows exclusion of "cumulative" evidence. The court's decision to exclude the regulatory language was particularly appropriate in light of its highly technical language. The court was laudably sensitive to the possibility of jury confusion, MRE 403, noting that any peripheral reference which the regulations may have to plaintiff's conduct "would certainly be far outweighed by the confusion to the jury" which would result from exposure to all of the regulations' "gobbledegook".
One additional factor supports the court's decision to exclude certain regulations. The MIOSHA code contains a prerequisite to a finding of worker negligence: namely, training in the applicable *463 standards. Defendant never tried to lay any foundation that plaintiff had received the requisite training; the record establishes that plaintiff did not. Accordingly, plaintiff could not have been found negligent in failing to adhere to the MIOSHA code's standards, and the court's refusal to allow reference to that standard was thus at most harmless error.
Given the foregoing, together with the fact that defendant's expert was still permitted to testify that plaintiff's conduct violated the regulations, we find no abuse of discretion in the court's decision to exclude the language of the regulations themselves.
Defendant's final contention on appeal is that the court erred in permitting cross-examination about the American Standards Association (ASA) safety code. We find no error. Defendant was the party which opened the inquiry into this standard by cross-examining one of plaintiff's witnesses about ASA standards 1043(b) and 1043(c). As noted above, defendant also introduced ANSI section 23.2.35, governing the conduct of crane operators. The record does not reveal that plaintiff in any way prevailed upon the trial court to introduce evidence of any such standards. In short, since defendant was the party who introduced these standards it cannot be heard now to complain of unfair treatment in the trial court's decision to permit cross-examination on the subject.
We conclude that there is no merit to any of the issues raised in defendants' cross-appeal. The trial court's disposition must be affirmed in all respects.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4023452/ | STATE OF MICHIGAN
COURT OF APPEALS
SOUTHEAST MICHIGAN SURGICAL FOR PUBLICATION
HOSPITAL, LLC, doing business as August 9, 2016
SOUTHEAST MICHIGAN SURGICAL 9:00 a.m.
HOSPITAL, and JAMIE LETKEMANN,
Plaintiffs-Appellees,
v No. 323425
Wayne Circuit Court
ALLSTATE INSURANCE COMPANY, LC No. 11-015300-NF
Defendant-Appellant.
Before: RONAYNE KRAUSE, P.J., and SAWYER and STEPHENS, JJ.
RONAYNE KRAUSE, P.J.
In this no-fault insurance action, the parties filed cross-motions for summary disposition;
the trial court denied Allstate Insurance Company’s (Allstate) motion and granted summary
disposition in favor of Southeast Michigan Surgical Hospital LLC (SEMSH) and Jamie
Letkemann (collectively plaintiffs). The trial court concluded that, even though the vehicle’s
owner and primary driver committed fraud that induced Allstate to issue a no-fault policy
covering the vehicle involved in the accident, the innocent third party doctrine precluded Allstate
from rescinding the policy to deny coverage of Letkemann’s injuries. Allstate appeals by leave
granted.1 We are bound, pursuant to MCR 7.215(J)(1), by this Court’s recent opinion in Bazzi v
Sentinel Ins Co, ___ Mich App ___; ___ NW2d ___ (Docket No. 320518, issued June 14, 2016),
to hold that the trial court’s decision must be reversed and the matter remanded. However, we
agree with the dissenting opinion in that case and, were we not bound, we would decline to
continue the trend of eroding injured plaintiffs’ recovery options and conclude that the innocent
third party doctrine remains a viable part of the law in Michigan; we would therefore affirm.
Consequently, we declare a conflict with Bazzi pursuant to MCR 7.215(J)(2).
The proceedings arose out of injuries Letkemann suffered as a passenger in a vehicle that
was rear-ended. SEMSH provided medical treatment to Letkemann for those injuries and then
1
Southeast Michigan Surgical Hospital LLC v Allstate Insurance Co, unpublished order of the
Court of Appeals, entered November 25, 2014 (Docket No. 323425).
-1-
asserted the instant third-party no-fault claim against Allstate. Letkemann filed his own action
against SEMSH for first-party no-fault benefits, and the claims were consolidated for discovery
purposes. During discovery, Allstate discovered that the no-fault policy covering the vehicle in
which Letkemann had been a passenger had been obtained on the basis of fraudulent
misrepresentations the driver made on behalf of Letkemann’s former wife. Allstate then moved
for summary disposition, arguing that it was entitled to rescind the policy because of the fraud
and thus avoid plaintiffs’ claims. Plaintiffs responded by asserting that even if the policy had
been procured by fraud, Letkemann was an innocent third party, so Allstate could not rescind the
policy as to him. The trial court found that the policy had been procured by fraud, but agreed
with plaintiffs that Letkemann was an innocent third party to that fraud and protected against
rescission by the innocent third party doctrine. Accordingly, the trial court denied Allstate’s
motion for summary disposition and instead granted summary disposition to plaintiffs under
MCR 2.116(I)(2).
A trial court’s resolution of a motion for summary disposition is reviewed de novo to
determine if the moving party is entitled to judgment as a matter of law. Maiden v Rozwood, 461
Mich. 109, 118; 597 NW2d 817 (1999). When reviewing a motion under MCR 2.116(C)(10),
which tests the factual sufficiency of the complaint, this Court considers all evidence submitted
by the parties in the light most favorable to the non-moving party and grants summary
disposition only where the evidence fails to establish a genuine issue regarding any material fact.
Id. at 120. Summary disposition is granted “in favor of an opposing party under MCR
2.116(I)(2) if there is no genuine issue of material fact and the opposing party is entitled to
judgment as a matter of law.” City of Holland v Consumers Energy Co, 308 Mich. App. 675, 681-
682; 866 NW2d 871 (2015). We review de novo, as a question of law, the proper interpretation
and application of the no-fault act. MCL 500.3101 et seq.; Farmers Ins Exch v AAA of Mich,
256 Mich. App. 691, 694; 671 NW2d 89 (2003). “Equitable issues, such as arguments for
rescission or reformation, are also reviewed de novo.” Kaftan v Kaftan, 300 Mich. App. 661, 665;
834 NW2d 657 (2013).
As an initial matter, we affirm the trial court’s conclusion that Letkemann was an
innocent third party. The parties functionally agree on the material facts. The vehicle at issue is
a 2010 Ford escape owned and insured by David Kreklau. In obtaining insurance for the vehicle,
Kreklau represented to Allstate that the vehicle would be garaged at his residence and that he
would be the principal driver. However, within days of purchasing the vehicle and obtaining
insurance, Kreklau turned the car over to his sister-in-law, Danielle Riordan. For the next six
months, the vehicle was driven primarily by Riordan and garaged at her residence. During this
time, Riordan made monthly car and insurance payments to Kreklau. Given this evidence, the
trial court correctly determined that the insurance policy was procured by Kreklau’s fraudulent
representations to the insurer, Allstate.
At the time this arrangement was established, Letkemann was living in North Carolina.
He did not participate in Riordan and Kreklau’s scheme to defraud Allstate and made no
representations to Allstate. Subsequently, Letkemann moved into Riordan’s residence and later
married Riordan. Letkemann owned and insured his own vehicle without the assistance of
Kreklau but would occasionally drive the 2010 Escape insured under Kreklau’s name. During
the few months they were married, Letkemann and Riordan would both contribute money to the
payments made to Kreklau. Letkemann testified that he understood that the Escape was in
-2-
Kreklau’s name because it would be cheaper than naming Riordan as the driver. During the time
in which Riordan and Letkemann were cohabitating prior to marriage, Allstate informed Kreklau
that the policy needed to be renewed. Kreklau signed the renewal and Allstate did not personally
ask him for additional information. Allstate’s investigation at the time of renewal relied
primarily on Kreklau’s statements made when initially obtaining the policy.
Clearly, Letkemann was not involved in, or knowledgeable of, the initial obtaining of
coverage. Equally clearly, Letkemann received a benefit from the fraudulently obtained
insurance. The innocent third party doctrine—presuming its continued viability for the
moment—assumes that the third party will receive benefits that he or she otherwise would not be
entitled to as a result of the fraud. The public policy allowing the third party’s receipt of these
benefits is undergirded by the third party’s innocence in the fraudulent procurement of the
policy. Notwithstanding the renewal of the policy during Letkemann’s cohabitation with
Riordan, there is no evidence that Letkemann was aware of that renewal, and there is no
evidence that even Kreklau made any representations at that time. Because Letkemann did not
make a fraudulent misrepresentation nor allow such a misrepresentation to be made to the
insurer, Letkemann should be protected by the innocent third party doctrine despite Kreklau and
Riordan’s fraud in obtaining the policy. The trial court’s factual findings are affirmed.
Before addressing the innocent third party doctrine, we also note that plaintiffs have
asserted two alternative grounds for affirmance that are unrelated to the innocent third party
doctrine and would therefore, if applicable, render any analysis of that doctrine moot. This Court
will, after all, affirm a correct result whether or not the trial court employed proper reasoning to
achieve it. Neville v Neville (On Remand), 295 Mich. App. 460, 470; 812 NW2d 816 (2012).
Plaintiffs first argue that Allstate never validly asserted fraud in the inducement as an
affirmative defense and, therefore, waived it. Plaintiffs correctly note that fraud in the
inducement of a policy is an affirmative defense as a mechanism for avoiding the enforcement of
an insurance policy. Stein v Home-Owners Ins Co, 303 Mich. App. 382, 387-388; 843 NW2d 780
(2013). Furthermore, we agree with plaintiffs that Allstate did not validly assert fraud in the
inducement; although it generally described plaintiffs’ claims as “fraudulent,” it did not explain
why, how, or any implications thereof. However, “[a]lthough affirmative defenses are not
‘pleadings,’ McCracken v City of Detroit, 291 Mich. App. 522, 528; 806 NW2d 337 (2011), the
court rules unambiguously permit them to be amended in the same manner as pleadings.” Tyra v
Organ Procurement Agency of Mich, 302 Mich. App. 208, 213; 850 NW2d 667 (2013), rev’d in
part on other grounds 498 Mich. 68 (2015).
Rather, a party’s failure to set forth a valid statement of an affirmative defense in its first
responsive pleading does not necessarily result in waiver of the defense. Id. at 213-214. A party
“may move to amend [his or her] affirmative defenses to add any that become apparent at any
time, and any such motion should be granted as a matter of course so long as doing so would not
prejudice the plaintiff.” Id. at 213 (emphasis added), citing MCR 2.118(A)(2) (providing that,
where a party requires leave to amend a pleading, “[l]eave shall be freely given when justice so
requires.”). Under MCR 2.118(A)(2), a plaintiff is prejudiced where an amendment adds an
affirmative defense “after the expiration of the limitations period,” thereby precluding the
plaintiff from a recovery that could have been secured had the affirmative defense been timely
-3-
asserted. Id. at 214. It appears undisputed that the fraud at issue did not become apparent until
discovery took place.
A one-year statute of limitations generally applies to an insured’s claim for personal
protection insurance (PIP) benefits, measured from “the date of the accident causing the injury,”
with two exceptions: (1) “when ‘written notice of injury as provided herein has been given to the
insurer within 1 year after the accident,’” and (2) “when ‘the insurer has previously made a
payment of [PIP] benefits for the injury.’” Jesperson v Auto Club Ins Ass’n, 306 Mich. App. 632,
642; 858 NW2d 105 (2014), lv gtd 497 Mich. 987 (2015), quoting MCL 500.3145(1). Where a
responsible insurer cannot be identified, or there is a dispute regarding the priority of various
insurers, an insured can submit an Assigned Claims Facility (ACF) claim under MCL 500.3172.
To do so, however, the insured must “notify the Michigan automobile insurance placement
facility of [the] claim within the time that would have been allowed for filing an action for [PIP]
benefits if identifiable coverage applicable to the claim had been in effect.” MCL 500.3174;
Spencer v Citizens Ins Co, 239 Mich. App. 291, 309; 608 NW2d 113 (2000).
Other than Allstate, there is no evidence that any no-fault insurer in the chain of priority
to pay plaintiffs’ claims was ever identified, or that such an insurer made a payment of PIP
benefits or received written notice of Letkemann’s injuries. Likewise, there is no evidence that
Allstate ever made a payment of PIP benefits for Letkemann’s injuries (LCF), but it was, within
a year of the accident, evidently provided with notice of the injuries. The accident at issue
occurred on December 12, 2010, and plaintiffs did not file suit against Allstate until December
18, 2011. Because this was more than one year after the accident causing Letkemann’s injuries,
they evidently relied on the notice exception in MCL 500.3145(1).
As a consequence, plaintiffs were already time-barred by the time Allstate became a
party. Had Allstate asserted a valid affirmative defense immediately, the result would have been
the same: it would have been too late for plaintiffs to file a new claim against a different insurer,
MCL 500.3145(1), and also too late to file the requisite notice for an ACF claim, MCL
500.3174; Spencer, 239 Mich. App. at 309. Accordingly, whether or not Allstate’s delay in
asserting the claim could be considered good practice, it did not have a practically prejudicial
effect. See Jesperson, 306 Mich. App. at 647 (“[H]ad the trial court found that [the] defendant
had failed to plead the statute of limitations defense with sufficient clarity, it could have, in its
discretion, granted [the] defendant leave to amend . . . in which case the result would be the
same—the limitations period of MCL 500.3145(1) would still bar plaintiff’s claim.”).
Plaintiffs also assert that Allstate is equitably estopped from rescinding the policy.
Plaintiffs argue that Allstate’s initial representations that it insured the vehicle induced plaintiffs
to believe that it was in fact insured, plaintiffs justifiably relied on that belief, and if Allstate
could not deny that it insured the vehicle, plaintiffs would be prejudiced because it was too late
for them to file a claim seeking payment of no-fault benefits for the accident from the ACF. As
discussed, plaintiffs were already time-barred from pursuing an ACF claim before the complaint
was filed in this action. Prejudice is an essential element of establishing an equitable estoppel.
Hughes v Almena Twp, 284 Mich. App. 50, 78; 771 NW2d 453 (2009). The party seeking
equitable estoppel bears “a heavy burden” of proving its applicability. Genesee Co Drain
Comm’r v Genesee Co, 309 Mich. App. 317, 333; 869 NW2d 635 (2015). Because plaintiffs
cannot establish prejudice, they cannot establish an equitable estoppel.
-4-
Therefore, remaining at issue is whether the innocent third party doctrine is legally
available. “Insurance policies are contracts and, in the absence of an applicable statute, are
‘subject to the same contract construction principles that apply to any other species of contract.’”
Titan Ins Co v Hyten, 491 Mich. 547, 554, 817 NW2d 562, 567 (2012); quoting Rory v
Continental Ins Co, 473 Mich. 457, 461, 703 NW2d 23 (2005). Under the common law of this
state, an insurer may deny coverage under an insurance contract where that insurance policy was
procured by the policy holder’s fraudulent “misrepresentation material to the risk and hazard”
attendant in the policy. Keys v Pace, 358 Mich. 74, 82-83; 99 NW2d 547 (1959). In State Farm
Mut Auto Ins Co v Kurlyowicz, 67 Mich. App. 568, 578-79; 242 NW2d 530 (1976), this Court
held that an insurer may not invoke this common law exception where the insurer has not
undertaken a reasonable discovery to uncover easily ascertainable fraud within the 55 day
window in which MCL 500.3220 allows an insurer to cancel a policy.
Applicable to this case, Michigan’s insurance statutes separate personal liability coverage
from personal protection insurance. Under MCL 257.520, an insurer is required to insure the
owner of the policy and authorized persons driving the covered vehicle at a minimum dollar
amount for liability arising from injury to other persons or property. MCL 257.520(b)(2).
Further, under MCL 257.520(f)(1), “[o]nce an innocent third party is injured in an accident in
which coverage was in effect with respect to the relevant vehicle,” the insurer cannot invoke the
common law rule to avoid mandatory coverage, and “is estopped from asserting fraud to rescind
the insurance contract.” Lake States Ins Co v Wilson, 231 Mich. App. 327, 331; 586 NW2d 113
(1998).
Nonetheless, the parties to an insurance contract are free to contract for personal liability
coverage in excess of the statutory minimums. In Hyten, our Supreme Court was faced with the
question of whether an insurer may avail itself of the traditional common law remedy to avoid
liability coverage amounts in excess of the statutory minimum where the insurance contract was
procured by fraud and coverage extended to an innocent third party. The insurer in Hyten
challenged only its responsibility for the liability coverage in excess of the statutory minimum,
acknowledging its responsibility for the statutory minimum liability coverage. Hyten, 491 Mich.
at 552 n 2. Our Supreme Court overruled Kurlyowicz, holding that when an insurance contract
providing coverage in excess of the statutory minimum is procured via fraudulent
misrepresentation, the insurer may invoke the traditional remedy to rescind the excess coverage
“notwithstanding that the fraud was easily ascertainable and the claimant is a third party.” Id. at
572-73.
What Hyten did not address is an insurer’s responsibility for personal protection coverage
(aka, PIP benefits) under Michigan’s statutory “no-fault” insurance regime. Michigan’s “no-
fault” insurance regulations require vehicle owners to obtain personal protection insurance.
MCL 500.3101(1). A “person suffering accidental bodily injury arising from a motor vehicle
accident while an occupant of a motor vehicle” may seek personal protection insurance benefits
from “the insurer of the owner or registrant of the vehicle occupied.” MCL 500.3114(4)(a). An
injured occupant is entitled to certain unlimited benefits covering the medical expenses resulting
from the accident. MCL 500.3105; MCL 500.3107. The insurance company will pay the
entirety of the claim but may be reimbursed by the Michigan Catastrophic Claims Association
for expenses incurred in excess of a specified dollar amount. MCL 500.3104. Accordingly,
there is no need to contract for excess personal protection benefits coverage.
-5-
An insurer may invoke the common law rule above to avoid payment of PIP benefits
when the policy was procured by fraud. Lake States Ins, 231 Mich. App. at 331. However, this
Court has issued a “long line of published opinions indicating that, although fraud in the
inducement was generally a valid basis to rescind a no-fault policy, such rescission did not avoid
a no-fault insurer’s obligation to pay benefits to innocent third parties.” See, e.g., Hammoud v
Metro Prop & Cas Ins Co, 222 Mich. App. 485, 488; 563 NW2d 716 (1997); Katinsky v Auto
Club Ins Ass’n, 201 Mich. App. 167, 171; 505 NW2d 895 (1993); Darnell v Auto-Owners Ins Co,
142 Mich. App. 1, 9; 369 NW2d 243 (1985); Kurlyowicz, 67 Mich. App. at 578, overruled in part
by Hyten, 491 Mich. at 572-73.
We are bound by Bazzi’s holding that the innocent third party doctrine is no longer viable
in any situation after our Supreme Court’s decision in Hyten. Nevertheless, Hyten involved the
avoidance of contractual insurance entitlements in excess of the statutory minimum; here, the
alleged innocent third party’s insurance entitlement is statutorily mandated, not contractual. As
this court observed in State Farm Mut Auto Ins Co v Michigan Muni Risk Mgmt Auth:
“The insurer in Titan did not seek to avoid payment of statutorily mandated no-
fault benefits; in fact, that insurer acknowledged its liability for the minimum
liability coverage limits. [Hyten, 491 Mich. at 552 n 2.] Nor did Titan address a
claim for PIP benefits from an innocent third party. Thus, the holding of Titan,
that an insurance carrier may seek reformation to avoid liability for contractual
amounts in excess of statutory minimums, does not compel a finding that Titan
overruled the many binding decisions of this Court applying the ‘innocent third-
party rule’ in the context of PIP benefits and an injured third party who is
statutorily entitled to such benefits. [Id. at 552.]” [State Farm Mut Auto Ins Co v
Michigan Muni Risk Mgmt Auth, unpublished opinion per curiam of the Court of
Appeals, issued February 19, 2015 (Docket Nos. 319709 & 319710) slip op. at 9.]
We have not found any authority other than Bazzi that invalidates the innocent third party
doctrine in the context of an insurer’s responsibility for statutorily mandated personal protection
benefits, and were we not bound by Bazzi, we would find that the innocent third party doctrine is
still viable in the context of an innocent third party’s claim for PIP benefits under Michigan’s no-
fault insurance act. Furthermore, we agree completely with the dissenting opinion authored by
Judge BECKERING in Bazzi, and we adopt it in its entirety herein.
We are required to reverse the trial court and remand for further proceedings consistent
with this opinion. However, we do so strictly because MCR 7.215(J)(1) requires us to do so, and
we call for the convening of a special conflict panel pursuant to MCR 7.215(J)(2).
/s/ Amy Ronayne Krause
/s/ Cynthia Diane Stephens
-6- | 01-03-2023 | 08-11-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/4124992/ | KEN PAXTON
ATTORNEY GENERAL OF TEXAS
March 17, 2016
The Honorable Jane Nelson Opinion No. KP-0072
Chair, Committee on Finance
Texas State Senate Re: Whether a school district, municipality,
Post Office Box 12068 or county may reduce or repeal the local
Austin, Texas 78711-2068 option homestead exemption from the amount
that was adopted for the 2014 tax year through
the 2019 tax year (RQ-0082-KP)
Dear Senator Nelson:
You seek our opinion on whether a school district, municipality, or county may reduce or
repeal the local option homestead exemption from the amount that was adopted for the 2014 tax
year through the 2019 tax year. 1
Among other things, Senate Bill 1 ("S.B. 1"), enacted by the Eighty-fourth Legislature,
amended section 11.13 of the Tax Code. See Act of May 29, 2015, 84th Leg., R.S., ch. 465, § 1,
2015 Tex. Gen. Laws 1779 (codified at TEX. TAX CODE§ 11.13). Prior to S.B. 1, subsection
l l.13(b) provided that the amount of homestead exemption was $15,000 for purposes of school
district taxation. 2 Subsection 1l.13(n) authorizes a governing body of a taxing unit to provide an
additional homestead exemption. TEX. TAX CODE § 1l .13(n). In S.B. 1, subsection 11.13(b) was
amended to increase the amount of homestead tax exemption to $25,000. See id. § 1l.13(b). S.B:
1 also added subsection 11.13(n-1 ), which provides that the "governing body of a school district,
municipality or county that adopted an exemption under Subsection (n) for the 2014 tax year may
not reduce the amount of or repeal the exemption. This subsection expires December 31, 2019."
Id. § l l.13(n-1 ). S.,13. 1 provides that th~ Act "applies beginning with the 2015 tax year." Act of
May 29, 2015, 84th Leg., R.S., ch. 465, § 26, 2015 Tex. Gen. Laws 1779, 1786. Yet, most
provisions in S.B. 1, including the new subsection 1l.13(n-1 ), are effective on the date on which
the "constitutional amendment proposed by S.J.R. 1 ... takes effect." See id. § 27(a)(l) at 1786.
1
Letter from Honorable Jane Nelson, Chair, Senate Fin. Comm., to Honorable Ken Paxton, Tex. Att'y Gen.
at I (Dec. 15, 2015), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").
2
See Act of May 31, 1997, 75th Leg., R.S., ch. 592, § 2.0 I, sec. I 1.13(b), 1997 Tex. Gen. Laws 2061, 2067,
amended by Act of May 29, 2015, 84th Leg., R.S., ch. 465, §I, 2015 Tex. Gen. Laws 1779.
The Honorable Jane Nelson - Page 2 (KP-0072)
The constitutional amendment proposed by Senate Joint Resolution 1 ("S.R.J. l ")amends
article VIII, subsection 1-b(c) of the Texas Constitution to increase the amount of the homestead
exemption from $15,000 to $25,000. See Tex. S.J. Res. 1, 84th Leg., R.S., § 1, 2015 Tex. Gen.
Laws 5412. The proposed amendment also authorizes the Legislature to prohibit a governing body
that adopts an exemption from ad valorem taxation of a percentage of the market value of a
homestead from reducing the amount of or repealing the exemption. See id. at 5413-14. Texas
voters approved the constitutional amendment on November 3, 2015. 3 As a result, S.B. 1's
effective date is November 3, 2015. Your question arises from the possibility of a local government
reducing the amount of or repealing its local option exemption during the 2015 tax year, before
the effective date of subsection 1l.l3(n-1 ).
The cardinal rule in statutory construction is to ascertain and effectuate the Legislature's
intent. See Zanchi v. Lane, 408 S.W.3d 373, 376 (Tex. 2013). "The best guide to that determination
is usually the plain language of the statute." Tex. Adjutant Gen. .'s· Office v. Ngakoue, 408 S.W.3d
350, 354 (Tex. 2013). Here, the statute's plain language clearly indicates that the Legislature
intended to set a floor for the local option exemption rates at the level they were in 2014 until the
end of the 2019 tax year. See TEX. TAX CODE§ 11.13(n-l). Accordingly, any repeal of or reduction
in the amount of a local option homestead exemption by a school district, municipality, or county
in 2015 would have no effect under subsection 11.13(n-1 )'s express terms.
Briefing submitted in response to this request argues that in certain instances application
of subsection 11.13(n-1) violates article 1, section 16, of the Texas Constitution. 4 The briefing
explains that prior to the November 3, 2015 election, no statute prevented a taxing unit from
repealing or reducing the local option homestead exemption. Wood Brief at 2. Thus, if a taxing
entity took formal action to repeal the exemption prior to July 1, 2015, no homeowner would be
entitled to the exemption for the 2015 tax year under the law at that time. See id. If effective,
however, subsection 11.13(n-1) would retroactively void any repeal or reduction in the amount of
the exemption.
Article 1, section 16 provides "[n]o bill of attainder, ex post facto law, retroactive law, or
any law impairing the obligation of contracts, shall be made." TEX. CONST. art. I, § 16. A
retroactive law is one that "acts on things which are past." Union Carbide Corp. v. Synatzske, 438
S.W.3d 39, 55 (Tex. 2014). Here, subsection 11.13(n-1) renders ineffective a repeal or reduction
in the amount of a local homestead exemption made in 2015 by a school district, municipality, or
county made prior to the subsection's November 3, 2015 effective date. "But retroactive effect
alone will not make a statute unconstitutional." Id. In addition, a challenge to a statute's
3 See TEX. SEC'Y OF STATE, ELECTION INFORMATION, HISTORICAL ELECTION RESULTS (1992-CURRENT),
www.sos.state.tx.us://elections.sos.tx.us/ (2015 Constitutional Amendynent Election).
4See Brief from Randall 8. Wood, Ray & Wood, to Honorable Ken Paxton, Tex. Att'y Gen. at 2-3 (Jan. 14,
2016) (on file with the Op. Comm.) ("Wood Brief').
The Honorable Jane Nelson - Page 3 (KP-0072)
constitutionality begins with a presumption that the statute is constitutional with the burden to
establish otherwise on the challenging party. Id.
The Texas Supreme Court has identified a three-part test for consideration of challenges
under article I, section 16. 5 See Robinson v. Crown Cork & Seal Co., 335 S.W.3d 126, 138-47
(Tex. 2010) (discussing myriad prior cases and recognizing the difficulty in utilizing the "impairs
vested rights" test for unconstitutional retroactivity); see also Tenet Hasps. Ltd. v. Rivera, 445
S.W.3d 698, 707 (Tex. 2014) (following three-part test established in Robinson). In doing so, the
court stated that constitutional provisions limiting retroactive legislation must be applied to
achieve "their intended objectives-protecting settled expectations and preventing abuse of
legislative power." Robinson, 335 S.W.3d at 139. It further recognized that "[n]o bright-line test
for unconstitutional retroactivity is possible." Id. at 145. In lieu of the "impairs vested rights"
analysis, the court said that "courts must consider three factors in light of the prohibition's dual
objectives: the nature and strength of the public interest served by the statute as evidenced by the
Legislature's factual findings; the nature of the prior right impaired by the statute; and the extent
of the impairment." Id. The court advised that "[t]he perceived public advantage of a retroactive
law is not simply to be balanced against its relatively small impact on private interests . . . . There
must be a compelling public interest to overcome the heavy presumption against retroactive laws."
Id. at 145-46. The analysis also "encompasses the notion that statutes are not to be set aside
lightly." Tenet Hasps. Ltd., 445 S.W.3d at 707 (internal quotation marks omitted).
In accordance with the Robinson opinion, a court would first consider the nature and
strength of the public interest served by the statute as evidenced by the Legislature's factual
findings, mindful that the public interest in section 11.13 must also serve a compelling interest.
See Robinson, 335 S.W.3d at 145-46. The purpose of S.B., 1 was to reduce "the property tax
burden on homeowners by increasing the homestead exemption for school district taxes" as well
as to reduce the limitation on school district property taxes that may be imposed on the homestead
of an elderly or disabled person. See SENATE RESEARCH CTR., BILL ANALYSIS, Tex. S.B. 1, 84th
Leg., R.S. (2015) at 1, HOUSE RESEARCH 0RG., BILL ANALYSIS, Tex. S.B. 1, 84th Leg., R.S. (2015)
at 1. It is presumed that a consequence of reducing homeowners' property tax burden is to
stimulate real economic growth by increasing consumption, which in turn drives job growth. See
HOUSE RESEARCH ORG., BILL ANALYSIS, Tex. S.B. 1, 84th Leg., R.S. (2015) at 3. "Increasing the
homestead exemption would put more money in consumers' pockets, allowing more money to be
used more efficiently in the economy." Id. at 3-4. And reducing the limitation for those who are
elderly or disabled enhances their ability to be able to stay in their homes instead of being forced
to sell due to an inability to pay taxes. In contrast to the situation in Robinson, wherein only one
party was benefited by the challenged statute, the legislative purpose in enacting S.B. 1 is to
5
The briefing argues that the test for unconstitutional retroactivity is whether a retroactive law destroys or
impairs a vested right and that a school district has a vested right to the taxes once any exemptions are determined.
See Wood Brief at 2-3 (stating that "[f]or any school district that repealed or reduced its homestead exemption before
July 1, 2015, the exemption would have been determined based upon the amount adopted by the school district and
would have been determined on July 1, 2015," a date prior to the effective date of subsection l l. l 3(n- l )) (citing
Corpus Christi People's Church, Inc. v. Nueces Cty. Appraisal Dist., 904 S.W.2d 621, 626 (Tex. 1995)).
The Honorable Jane Nelson - Page 4 (KP-0072)
address a concern important to all Texas homeowners (and to a degree Texas renters) and to
improve the state's overall economy. See generally Tenet Hasps. Ltd., 445 S.W.3d at 707
(contrasting legislation that was a comprehensive overhaul of Texas's medical malpractice laws
with legislation at issue in Robinson, which was enacted solely to benefit one company); Union
Carbide Corp., 438 S.W.3d at 58 (contrasting similar comprehensive legislative scheme
addressing asbestos litigation with legislation benefiting a particular entity). A court would likely
find that legislation addressing property tax relief for Texas citizens to improve the state's economy
is a strong public purpose and serves a compelling public interest.
A court would next consider the nature of the prior right impaired by the statute. See
Robinson, 335 S.W.3d at 145. Here, the right purportedly affected is that of local taxing entities
such as school districts, municipalities, and counties to receive additional tax revenues prior to the
effective date of a law that prohibited them from doing so by reducing or repealing the local option
homestead exemption. See TEX. TAX CODE § 11.13(n), (n-1 ). However, the extent to which any
particular local taxing entity had a concrete expectation of exercising its right to reduce or repeal
its local option homestead exemption is unclear. See TEX. Ass'N OF SCH. Bos., S.J.R. 1, S.B. 1,
AND THE LOCAL OPTION HOMESTEAD EXEMPTION (2015) 6 (noting arguments against attempting to
repeal or reduce a local option exemption and advising school boards to consult with attorney prior
to making any changes). Furthermore, given that S.B. 1 was passed by the Legislature on May 29,
2015, local taxing entities were on notice at thatpoint that the Legislature intended for reductions
or repeals to be ineffective, and any action taken after that date to reduce or repeal a local option
homestead exemption would be in direct conflict with that intent. Moreover, to the extent the
vested rights analysis may still be relevant to this aspect of the inquiry, the taxing authorities' right
to file suit for property taxes is not ripe until the taxes are delinquent. See Gribble v. Layton, 389
S.W.3d 882, 890-96 (Tex. App.-Houston [14th Dist.] 2012, pet. denied) (utilizing Robinson
analysis but still conducting vested rights analysis as part of second prong of three-part test).
Under the Tax Code, property taxes are not delinquent until they are unpaid by February 1 of the
following tax year. See TEX. TAX CODE§ 33.41(a) (providing that a taxing entity may file suit to
collect tax at "any time after its tax on property becomes delinquent"), id. § 3 l.02(a) (providing
generally that taxes are delinquent "if not paid before February 1 of the year following the year in
which imposed"). For the 2015 tax year, taxes are not delinquent until they are unpaid by
February 1, 2016. Accordingly, while a court could determine that a prior right enjoyed by taxing
entities is impaired by subsection 1l.13(n-1 ), it would likely also determine that the legislation
does not have a significant detrimental impact on settled expectations.
Finally, a court would consider the extent of the impairment. See Robinson, 335 S.W.3d at
145. Provisions of the Education Code were added by S.B. 1 to require the state to cover certain
shortfalls that a school district may incur due to the changes to the exemption with state funds.
See, e.g., TEX. Eouc. CODE§§ 42.2518, 46.071. With the promise ·of additional funds from the
state to minimize the loss of revenue to the school districts, the extent of the expected impairment,
at least with respect to school districts, is slight. See FISCAL NOTE, Tex. S.B. 1, 84th Leg., R.S.
(2015) at 3 (stating that "[n]o fiscal impact to units of local government is anticipated"); FISCAL
6Available at www.tasb.org/Services/Legal-Services/TASB-School-Law-eSource/Business/documents/local
_option_homestead_exemptionJune 15.pdf.
The Honorable Jane Nelson - Page 5 (KP-0072)
NOTE, Tex. S.J. Res. 1, 84th Leg., R.S. (2015) (acknowledging some reduction in school district
tax revenue from the constitutional amendment likely offset by additional provisions in S.B. 1
requiring the state to hold school districts harmless for property tax losses). Moreover, the
Legislature's provision for making up the shortfall to the school districts mitigates against a finding
of any abuse of legislative power.
A court balancing these factors, while also effectuating the presumption against
unconstitutionality, would likely conclude that subsection 1l.13(n-1) is not unconstitutionally
retroactive. Accordingly, subsection 1l.13(n-1) of the Tax Code prohibits a school district,
municipality, or county from repealing or reducing the local option homestead exemption from the
amount that was adopted for the 2014 tax year through the 2019 tax year.
The Honorable Jane Nelson - Page 6 (KP-0072)
SUMMARY
Subsection l 1.13(n-1) of the Tax Code prohibits a school
district, municipality, or county from repealing or reducing the local
option homestead exemption from the amount that was adopted for
the 2014 tax year through the 2019 tax year.
Very truly yours,
~?~ KEN PAXTON
Attorney General of Texas
JEFFREY C. MATEER
First Assistant Attorney General
BRANTLEY STARR
Deputy Attorney General for Legal Counsel
VIRGINIA K. HOELSCHER
Chair, Opinion Committee
CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee | 01-03-2023 | 02-10-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4145706/ | OFFICEOFTHEATTORNEYGENERALOFTEXAS
AUSTIN
May 1, 1939
Ur. L I..Shelton
county AudItor
Johnac~on
Comty
Cleburne, ~OXAS
Dear Slrr
8 appronl or
n on the f01lorlng
r riolato a
th road aa-
eat or thy ooart?
in (ping ti.3
end
"The aountie~ or the stak are hwebp
de&rwed to have the authority to employ,
or ptirA1tto be hAfiOyOd, SJlyr0ea oon8truo-
tion or other meohinery or road equlpunsntin
the eerrlco of aoil cwumrrcrtion and grewon-
tion or soil waste through erosion, whemrex
Mr. E. L. Sheltoc, Xag I, 1939, FaRe 2
In the judment of the county commissioners
court, entered upon the minutes of the court,
such machinery or equipment is not demanded
for the service of building and the up-keep
of t3e roads of the county; and shall provide
for compensation to the county road fund, or
the road fund of any defined distriot or
aut?;orlzedsubdivision in the county, For
such employment of road equipment."
3eotlon 4'0r the same ertiole reads es roll-2
“15 the public ecmloe oi ooaservlng
the soil rertllity or the ua or the eou~ty,
the oommissioners*court shall hate the
authority to ooo#eratawith the landowners
and taxpayers or the 00untJ ln all judloicua
orforts ror the preserratlonor the proauotive-
nees ot the sot1 l"romavoidablewaste, and 108s
or pro&u@Areaesa or agriculturalcrops neoesa-
ary to the pub110 umlfare, through permlesfon
to ~110the maohbmry and equIptent that may be
made eva~lable bf the ccuaty ior suah purpcoeu.
tier written aontraat,and the aoumtf~shall
reaeive from mah lazidouners and 'taxpayers
mmpenaaticn, upon such unlfom baais a8 my be
doged wultable, and proper, ror the occpera-
tion ertende4 and serv%eer rerwleml, all auoh
atmperuatfonor runa to the aountp to be p&d
iato the R&d and BriQge Fund Of the 00t~~ty;
ana the aotmty comml~ricnera: court may protide
r0r payrmente from landownersand taxpwers or
the county atsuah stated intervals aud in
suoh smount8, as ana when the bounty tams are
solleotea,as nap be w&p:-$abU,,?or the use
or the equipment ror the protdation or land8.
against ocntlneinglmaeasweable~injury through
no11 eroelon~ priada timt the oemmlssioner,rsl
aourt or repreaentatitethereor shall not go
upon the land or any owner to improve, temaoe,
protect, or dltah such land until requested to
$43
m?g
..-i.
Mr. E. L. Shelton, b!ag 1, 1639, Page 9
do so in wrltlng by such owner; and provfied
further, that the aoabalssioners~oourt or
representativethcreot shall not be required
to do such improvin& terraoing, protecting
and dltchln~ unless.such court shall deter-
mine that such work ia of so- public benefit
and said court cleats todo the wmk."
Seotlon 3 ana Sootion 4 or hrtlole 237a0, Just
quc&ld, olear4 sets forth the manner in which, and the
olroumatenoesaad conditionsunder whioh the paohlnery
bdlm&ng to a aounty of this atate may be used 'forthe
$urpcse of preserving the preduetirenessla agricultural
prcbcts necessary to the publio welfare. Ecwever, we
know or no law, whfeh rould make a comlssioner rho per-
mits thecaaehineryoftheoountyto beuseddthoutmeet-
lag the requlrwti as set forth in Beations 3 ana 4 of
Art1018 23720, subjeot to pro8eentlcmfcm a penal ofiense.
We know or a0 authority for a ccmlasloner te
make spsolal aontraotwork with the'road machinery eS the
county rlthout the eonsent of the aebrt. FIoweveriit Is
.-ouropinion, t&et by so dolug t&e aoamlssloner.iloes
not
violate any penal s$atuta of this atate. r.nterestlng
questlona lnvolr~ng the ic(lerpretationand entbroeaant
of eontra&s would natural4 arise as a result of a om-
tidonsr aotlng dtbout authority in entsrlng into aa
-agreementwith an lndlvldualor lnditlauals,tc use
county road saohlnery in doing work ror said lnalrl6ual
or ladlvlduals,but such questions do not arlse'ln your
request ror an oplnlon in thlq instance.
In view Cf.the provlslonsof ArtZele SS7i3?of
the Revised Civil Statutes of the.state of Texas, ft i8
our opfntnion
thst a 00&8810ner does not vlolste a penal
statute of this state la uslag a pick-up bought an&paid
ror out Or oounty funds ln the admlnlstrbtlonor his
business as ocmelsslonerand in going to and from court
meetlnp3.
Mr. 2. L. Zhslton, Jay 1, 1939, Page 4
Article 23721 of Vernon's Eevised Clvil~L;ta-
tutes of the state of Texss, reads in part as follower
"The comnlssloners* court 18 hereby
authorized to allow each comuilasionerto
purchase a plckyap truok to be used in e*cb
respective precinot on official business and
it shall be paid for out of the~Road and
Bridge Fund of the respeatlre oomlesionera*
preclnctd, and seoh oommisaioner shall make
under oath an aotwunt of his expandlttmea
for auah purpose.*
Truattingthat the foregoing answers your in-
wirya am remain
--
ATTORNEY
GENERA OF - | 01-03-2023 | 02-18-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4126825/ | Filed 2/16/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
BANK OF NEW YORK MELLON, B262899
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC120390)
v.
CITIBANK, N.A.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Allan J. Goodman and H. Chester Horn,
Judges. Reversed and remanded.
Garrett & Tully, Ryan C. Squire and John C. Tully, for
Plaintiff and Appellant.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup
and Daniel G. Bath, for Defendant and Respondent.
______________________________
Bank of New York Melon appeals from the judgment of
dismissal of its lawsuit against respondent Citibank, N.A.
The case arose out of the simultaneous refinancing of a home
equity line of credit by two different lenders in 2006, which
resulted in a dispute over the priority of their recorded deeds
of trust. Appellant challenges the orders sustaining
respondent’s demurrers to appellant’s first and second
amended complaints. The demurrers alleged that all of
appellant’s causes of action were barred by the three-year
statute of limitations in Code of Civil Procedure section 338
(hereafter, section 338). We reverse the judgment because
appellant has stated a claim for equitable subrogation, which
is not subject to that statute.
FACTUAL AND PROCEDURAL SUMMARY
In May 2005, respondent’s predecessor in interest,
Citibank (West) FSB (hereafter, Citibank West) issued a
home equity line of credit of up to $500,000 (hereafter, first
line of credit) to James and Cathleen Lima and recorded a
deed of trust securing that line of credit against the Limas’
home in Pacific Palisades.
In January 2006, the Limas simultaneously negotiated
a refinancing of the first line of credit with both Citibank
West and appellant’s predecessor in interest, Countrywide
2
Home Loans, Inc. (hereafter, Countrywide) First American
Lenders Advantage (hereafter, First American) was
Countrywide’s escrow agent for the refinancing. The
agreement with the Limas was that Countrywide would pay
off Citibank West’s first line of credit, obtain a reconveyance
of Citibank West’s deed of trust, and receive a second deed of
trust on the property as security for its loan.1 Unbeknownst
to Countrywide, on January 17, 2006, the Limas signed loan
documents to refinance the first line of credit with a new line
of credit from Citibank West (hereafter, second line of
credit). The second line of credit had a limit of up to
$600,000 and was secured by a deed of trust recorded on
January 31, 2006.
On January 19, 2006, Citibank West issued a payoff
statement for $508,527.65, without disclosing that the first
line of credit was being refinanced. The payoff statement
indicated that the account on the first line of credit had been
“frozen.” The instruction sheet accompanying the statement
specified that an enclosed “close/termination letter” was to
“accompany the payoff funds in order to acquire a release of
lien. If this letter is not returned with the payoff funds, the
line will remain OPEN and will be considered a paydown
only.” The termination letter similarly directed the
borrowers to request “that the account be closed and the lien
1The first deed of trust on the property is held by a
non-party to this action.
3
released along with your payoff to ensure proper processing
of your transaction.”
The Limas’ February 7, 2006 loan application to
Countrywide sought a line of credit of up to $1 million. It
disclosed Citibank West’s first, but not its second, line of
credit. The second line of credit was not picked up in the
preliminary title report on which Countrywide relied. Also
on February 7, the Limas executed a line of credit agreement
and deed of trust in favor of Countrywide. Countrywide
recorded its deed of trust on the Limas’ property on
February 13, 2006, the day escrow closed on its line of credit.
The next day, First American disbursed the $508,567.65
payoff to Citibank West, $181,289.35 in cash to the Limas,
and the remaining funds to other creditors of the Limas.
First American transferred the Limas’ signed termination
letter to Citibank West. The letter instructed the bank to
close the first line of credit, which was identified by its
account number.
In March 2006, Citibank West returned the
$508,567.65 payoff amount to First American, notifying it
that the first line of credit had been closed. At First
American’s request, Citibank West issued a payoff statement
for the second line of credit in the amount of $612,513.98.
Like the first, the second payoff statement indicated that the
relevant account was frozen and warned that the line of
credit would remain open unless the Limas submitted a
signed termination letter with their payoff. After
negotiating down the amount due on the second line of
4
credit, First American obtained a partial refund from the
Limas and disbursed $599,567.65 to Citibank West; as a
result, Citibank West reduced the account balance on the
second line of credit to zero. The Limas did not sign the
termination letter that accompanied Citibank West’s payoff
statement as to the second line of credit, and Citibank West
did not close that account and did not reconvey the deed of
trust by which it was secured.
In 2007, the Limas borrowed $600,000 on their second
line of credit with Citibank West. In January 2011, Citibank
West’s trustee issued a notice of default and election to sell
the Limas’ home. In March 2013, appellant filed this action
against Citibank West and the Limas. The first amended
complaint substituted respondent as Citibank West’s
successor in interest. Against respondent, appellant
asserted claims for declaratory relief based on violation of
statute or statutory subordination (Civ. Code, § 2943),
equitable subordination or subrogation, unjust enrichment,
and constructive fraud; against the Limas, it asserted a
claim of actual fraud.
Respondent demurred on the sole ground that all
causes of action were barred by the three-year statute of
limitations in section 338, subdivisions (a) (violation of duty
imposed by statute) and (d) (fraud or mistake). Appellant
opposed the demurrer, arguing that Citibank West’s lien was
discharged by operation of law, that there was no actual
controversy until respondent claimed priority in 2011 and
appellant discovered its claims for fraud and unjust
5
enrichment, and that the 10- or 60-year statute of
limitations for enforcing a power of sale in a deed of trust
(Civ. Code, § 882.020) applied to its equitable subrogation
and subordination claims.
The court, Judge Allan J. Goodman, ruled Civil Code
section 882.020 did not apply because appellant’s claims
were not based on the power of sale in a deed of trust, and
the first amended complaint did not plead facts consistent
with delayed discovery. The court sustained the demurrer
as to all causes of action and allowed amendment only as to
the causes of action for unjust enrichment and fraud.
Accordingly, the only causes of action asserted against
respondent in the second amended complaint were for unjust
enrichment and constructive fraud. For the first time in
that complaint, appellant alleged that First American “and
its escrow officer were not agents of Countrywide in
undertaking actions [to pay off the second line of credit],
without Countrywide’s knowledge and authorization, after
the Countrywide loan closed and after the Countrywide deed
of trust was recorded.” Once again, respondent demurred on
statute of limitation grounds, and the court, Judge H.
Chester Horn, sustained the demurrer without leave to
amend. The court rejected appellant’s attempt to plead
around its original allegations in order to bring its claims
within the delayed discovery rule.
This appeal followed the entry of judgment dismissing
respondent from the action.
6
DISCUSSION
We review a ruling on demurrer de novo to determine
whether the complaint states a cause of action under any
legal theory. (Quelimane Co. v. Stewart Title Guaranty Co.
(1998) 19 Cal.4th 26, 38.) In doing so, we are not bound by
the trial court’s reasoning and may consider new legal
theories or pure questions of law presented by undisputed
facts for the first time on appeal. (Pierce v. San Mateo
County Sheriff’s Dept. (2014) 232 Cal.App.4th 995, 1006; B &
P Development Corp. v. City of Saratoga (1986) 185
Cal.App.3d 949, 959.)
We construe the complaint liberally, take all properly
pled facts as true, and draw all reasonable inferences in
favor of the plaintiff. (Coleman v. Medtronic, Inc. (2014) 223
Cal.App.4th 413, 422; Berg & Berg Enterprises, LLC v. Boyle
(2009) 178 Cal.App.4th 1020, 1034.) Inconsistent allegations
in amended complaints are disregarded unless the
inconsistency is explained. (Holland v. Morse Diesel
Internat., Inc. (2001) 86 Cal.App.4th 1443, 1447.) Exhibits
attached to the complaint take precedence to the extent they
contradict allegations in the complaint. (Ibid.)
To determine which statute of limitations applies to a
particular action, we consider the “gravamen” of the action
rather than its form or the relief demanded. (Yee v. Cheung
(2013) 220 Cal.App.4th 184, 194.) The gravamen of an
action depends on the nature of the right sued upon or the
principal purpose of the action. (Davies v. Krasna (1975) 14
Cal.3d 502, 515.)
7
I
Contrary to respondent’s perception, appellant has not
abandoned the claims in its first amended complaint, to
which respondent’s first demurrer was sustained without
leave to amend. Appellant’s opening brief makes clear that
it challenges the sustaining of both demurrers on the ground
that the three-year statute of limitations in section 338 does
not apply to any of its claims. We, therefore, consider
whether section 338 applies to the claims for declaratory
relief asserted in the first amended complaint.
A claim for declaratory relief is subject to the same
statute of limitations as the legal or equitable claim on
which it is based. (Mangini v. Aerojet-General Corp. (1991)
230 Cal.App.3d 1125, 1155.) Appellant argues that because
it seeks a declaration of its interest in the Limas’ property,
the claims for declaratory relief in effect seek to quiet title to
that property and are not subject to a statute of limitations.
It derives that proposition from the dissent in Ephraim v.
Metropolitan Trust Co. of Cal. (1946) 28 Cal.2d 824. (Id. at
p. 839 (dis. opn. of Carter, J.).) That is not the modern rule.
The majority in Ephraim held that where quiet title depends
upon another claim, it must stand or fall on that claim. (See
id. at p. 833; see also Leeper v. Beltrami (1959) 53 Cal.2d
195, 214 [“the modern tendency is to look beyond the relief
sought, and to view the matter from the basic cause of action
giving rise to the plaintiff’s right to relief”].) Thus, the
statute of limitations on a quiet title action is determined
with reference to the underlying theory of relief. (Muktarian
8
v. Barmby (1965) 63 Cal.2d 558, 560; Salazar v. Thomas
(2015) 236 Cal.App.4th 467, 476.) We, therefore, examine
the theories underlying the claims for declaratory relief.
A. Statutory Subordination
In the first amended complaint, appellant asserted a
claim variously titled as “VIOLATION OF STATUTORY
OBLIGATIONS” and “Declaratory relief re Statutory
Subordination of Trust Deed.” The claim was based on the
following allegations: under Civil Code section 2943,
subdivisions (a)(5) and (d)(1), Countrywide and its escrow
agent were entitled to rely on Citibank’s January 19, 2006
statement to determine the payoff amount for 30 days
following the date of that statement; under Civil Code
section 2941, Citibank was “obligated by statute” to reconvey
the deed of trust within 30 days of receiving Countrywide’s
payoff on March 17, 2006; and under Civil Code section
2943, subdivision (d)(3) any amount the borrower owed to
the lender that was not included in the payoff statement
became an “unsecured obligation.” Based on these
allegations, appellant requested a declaration that its deed
of trust was senior to respondent’s, to the extent respondent
had a valid security interest at all.
Respondent demurred under section 338, subdivision
(a) on the ground that appellant’s claim was based on a
violation of a duty imposed by statute. In opposition,
appellant retreated from its theory that Citibank West
violated its statutory duty to reconvey and argued instead,
as it does on appeal, that a reconveyance was not even
9
necessary because Citibank West’s lien on the second line of
credit was automatically extinguished at payoff. According
to appellant, the essence of its theory of statutory
subordination is that its deed of trust has priority “by
operation of law.”
We are not convinced that appellant’s claim to lien
priority sounds in law. “‘California follows the ‘first in time,
first in right’ system of lien priorities. ([Civ. Code,] § 2897.)’
(Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th
1093, 1099.) However, that rule is not without exceptions.
‘Other things being equal, different liens upon the same
property have priority according to the time of their creation
. . . .’ (Civ.Code, § 2897, italics added.) It appears the
Legislature used the words ‘other things being equal’ to refer
to the equities involved in a competing liens situation.” (JP
Morgan Chase Bank, N.A. v. Banc of America Practice
Solutions, Inc. (2012) 209 Cal.App.4th 855, 860.)
Appellant relies on Civil Code sections 2941 and 2943,
but those provisions do not establish the priority of its lien
as a matter of law.
Under Civil Code section 2943, subdivision (a)(5), a
payoff statement must set forth the amounts required “to
fully satisfy all obligations secured by the loan that is the
subject of [that] statement.” Such a statement may be relied
on “in accordance with its terms.” (Id., § 2943, subd. (d)(1).)
“[A]ny sums that were due and for any reason not included
in the statement” are “recoverable by the beneficiary as an
unsecured obligation.” (Id., § 2943, subd. (d)(3).) The
10
provision that a deficiency in the payoff of a loan is no longer
secured is a departure from the common law, which allowed
reinstatement of an erroneously retired loan. (See Freedom
Financial Thrift & Loan v. Golden Pacific Bank (1993) 20
Cal.App.4th 1305, 1314–1315, disapproved on another
ground in Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 53, fn.
5.)
Civil Code section 2943, subdivision (d)(3) has no
bearing on appellant’s claim. Citibank West issued the
January 2006 payoff statement as to its first line of credit.
Any amounts that may have been due on Citibank West’s
second line of credit were not required to be included in it
because that loan was not the subject of the payoff
statement. Moreover, any future advances on the second
line of credit could not have been due at all before they were
made, let alone be due on the first line of credit. Appellant
cannot claim that the second line of credit became unsecured
by virtue of the payoff statement issued on the first line of
credit.
The other statute on which appellant relies, Civil Code
section 2941, does not provide for lien priority at all. It
establishes deadlines and procedures for the reconveyance of
a lien after a mortgage has been satisfied and provides for
damages and a penalty. (Id., § 2941, subd. (d).) Appellant
denies seeking damages arising from Citibank West’s failure
to record a reconveyance. Civil Code section 2941 makes no
exception for lines of credit, and its procedures have been
11
applied to such loans. (See Serafin v. First Interstate Bank
(1997) 58 Cal.App.4th 785, 787, 790–796, superseded by
statute on another ground as stated in Markowitz v. Fidelity
Nat. Title Co. (2006) 142 Cal.App.4th 508, 524–525.)
However, nothing in the statute requires that a mortgage be
considered satisfied in all cases where the debt is reduced to
zero; nor is there support for such a blanket rule at common
law.
It is true that “[a] security interest cannot exist
without an underlying obligation, and therefore a mortgage
or deed of trust is generally extinguished by either payment
or sale of the property in an amount which satisfies the lien.
[Citations.]” (Alliance Mortgage Co. v. Rothwell (1995) 10
Cal.4th 1226, 1235, italics added.) However, it has long been
recognized that whether the payment of a debt operates to
release the lien of a mortgage depends on the mortgage’s
terms and conditions. (See Frank H. Buck Co. v. Buck (1912)
162 Cal. 300, 303, superseded by statute on another ground
as stated in Equitable Plan Co. v. Dix Box Co. (1958) 163
Cal.App.2d 705, 708.) When a mortgage is “designed by its
very terms . . . to afford the mortgagee security for his future
advances to the mortgagor, much more is required for the
extinguishment of the lien than the mere accidental
circumstance that the books of one or another of the parties
show a balance in favor of the mortgagor upon a given date.”
(Frank H. Buck Co., at p. 303–304; see also Rest.3d Property,
Mortgages, § 6.4, com. e, p. 428 [principle that mortgage is
not extinguished on payment of debt if loan or payment
12
documents provide to the contrary is most commonly applied
to line-of-credit loans].)
Here, Citibank West’s deed of trust on the second line
of credit expressly secures future loan advances and provides
that the lien will be released upon payment of all
obligations, and upon the expiration of the agreement or
upon the borrower’s request. Accordingly, the instructions
accompanying each of Citibank West’s payoff statements
required that the borrowers sign a termination letter, and
warned that the payoff would otherwise be considered a
paydown. Appellant’s own exhibits indicate that the
termination letter accompanying the March 2006 payoff
statement on the second line of credit was not signed by the
borrowers.
Appellant argues that the payoff statement was
misleading in several respects—for example, because it
indicated the account was “frozen,” even though the
termination letter required the borrowers’ authorization to
“freeze/close the account.” Appellant also argues Citibank
West did not strictly enforce the terms of its payoff
statement because it accepted a payoff amount lower than
the one listed on the statement. Assuming these arguments
support a claim of equitable estoppel against respondent,
they nevertheless fail to support a claim to statutory lien
priority as a matter of law. (See Vu v. Prudential Property &
Casualty Ins. Co. (2001) 26 Cal.4th 1142, 1152–1153 [claim
of equitable estoppel arises where a ‘““party has been
induced to refrain from using such means or taking such
13
action as lay in his power, by which [it] might have retrieved
[its] position and saved [it]self from loss””’]; City of Hollister
v. Monterey Ins. Co. (2008) 165 Cal.App.4th 455, 481 [claim
of equitable estoppel sounds in equity].)
Appellant calls our attention to Civil Code section
2943.1, enacted in 2014 through Assembly Bill No. 1770 to
codify a procedure for closing lines of credit, similar to the
one Citibank West had in place in 2006. The new statute
provides that a lender must close the line of credit and
release the lien on the property upon receipt of a payoff and
written instructions from the borrowers to suspend and close
the line of credit. (Id., § 2943.1, subds. (c)-(d).) Appellant
requsts that we take judicial notice of the legislative history
of this statute, and contends that, before the enactment of
section 2943.1, liens securing lines of credit were
automatically extinguished upon payoff by operation of law.
We grant the request for judicial notice, but disagree with
appellant’s contention.
The problem presented to the Legislature was that
when an equity line of credit is not shut down by the
borrower during the sale of a property, “the underlying lien
and loan become the debt of the innocent buyer.” (See
Assem. Floor Analysis, Sen. Conc. Amends. to Assem. Bill
No. 1770 (2013–2014 Reg. Sess.) as amended July 1, 2014,
p. 2.) That is because “the lien follows the real property
unless it is extinguished.” (Ibid.) The Legislature intended
to standardize the process for terminating a line of credit so
14
that it “will not inadvertently become the liability of the
subsequent homeowner.” (Ibid.)
The Legislature recognized that the problem was due
to the automated processing of payoff statements and the
lenders’ refusal to close lines of credit without instructions
from the borrowers to do so. Where a property was in the
process of being sold to a new owner or refinanced with a
lender who expected to have a first lien position, the failure
to close an existing line of credit resulted in the new owner
or lender “being subject to an apparent prior lien.” (Sen.
Rules Com., Off. of Sen. Floor Analyses, Analysis of Assem.
Bill No. 1770 (2013–2014 Reg. Sess.), as amended July 1,
2014, p. 5.)
Nothing in the bill analyses on which appellant relies
suggests that, under the law existing before the enactment
of Civil Code section 2943.1, the lien on a line of credit was
automatically extinguished on payoff by operation of law. To
the contrary, the problem was that the lien continued to
encumber the property, causing problems for subsequent
owners and lenders.
The priority of liens in that situation is determined not
at law, but in equity, under the doctrine of equitable
subrogation, which admittedly is the gravamen of
appellant’s action. We examine appellant’s request for
declaratory relief regarding the priority of its lien under that
doctrine next.
15
B. Equitable Subrogation
The doctrine of equitable subrogation implies a right to
recover from the principal debtor when the subrogee pays
the debtor’s obligation to a creditor in order to protect the
subrogee’s own interest. (See generally 13 Witkin, Summary
of Cal. Law (10th ed. 2005) Equity, § 183, pp. 514–515, and
cases cited.) The doctrine most typically applies in
insurance cases but is not limited to that context. (Id.,
§§ 183–185, at pp. 514–519.)
As applied in the real property context, equitable
subrogation provides an exception to the “first in time, first
in right” system of lien priorities where equity requires a
different result. (JP Morgan Chase Bank, N.A. v. Banc of
America Practice Solutions, Inc., supra, 209 Cal.App.4th at
p. 860; see also Branscomb v. JPMorgan Chase Bank N.A.
(2014) 223 Cal.App.4th 801, 806.) When a lender “‘advances
money to pay off an encumbrance on realty at the instance of
either the owner of the property or the holder of the
encumbrance, either on the express understanding, or under
circumstances from which an understanding will be implied,
that the advance made is to be secured by a first lien on the
property,’” and “‘the new security is for any reason not a first
lien on the property,’” then the lender who holds that
security, “‘if not chargeable with culpable and inexcusable
neglect, will be subrogated to the rights of the prior
encumbrancer under the security held by him, unless the
superior or equal equities of others would be prejudiced
thereby.’” (Simon Newman Co. v. Fink (1928) 206 Cal. 143,
16
146.) In short, equitable subrogation allows a lender who
pays off a borrower’s debt to a creditor “‘to succeed to the
rights and remedies of the creditor so paid.’” (Ibid.)
The right of subrogation is purely derivative: a party
entitled to subrogation has the same rights as an assignee of
the creditor’s claim, must stand in the creditor’s shoes, and
is subject to the same defenses. (Fireman’s Fund Ins. Co. v.
Maryland Cas. Co. (1998) 65 Cal.App.4th 1279, 1292.) A
claim for equitable subrogation is subject to the statute of
limitations that applies to the right to which the claimant is
subrogated. (See, e.g., Valley Crest Landscape Development,
Inc. v. Mission Pools of Escondido, Inc. (2015) 238
Cal.App.4th 468, 481 [equitable subrogation claim based on
contractual indemnity subject to statute of limitations for
breach of written contract].) In other words, “equity will
enforce subrogation only when the action is brought within
the time in which an action could have been brought to
enforce the original obligation to which the right of
subrogation is sought.” (Howell v. Dowling (1942) 52
Cal.App.2d 487, 498.)
Here, appellant seeks to be subrogated to respondent’s
position of priority by virtue of its payoff of the second line of
credit, which would allow it to assert Citibank West’s right
under the January 31, 2006 deed of trust securing that line
of credit. (See Simon Newman Co. v. Fink, supra, 206 Cal.
at p. 146 [holder of new security who pays off prior creditor
will be subrogated to that creditor’s rights under that
creditor’s security].) Because appellant’s right is derivative,
17
it is governed by the statute of limitations that would apply
to respondent’s rights under the January 31, 2006 deed of
trust.
In the trial court, appellant argued that the equitable
subrogation claim was subject to the statute of limitations in
Civil Code section 882.020, which applies to the right to
proceed under a power of sale in a deed of trust whether or
not enforcement of the debt itself is barred. (Miller v.
Provost (1994) 26 Cal.App.4th 1703, 1708.) Under that
statute, a deed of trust expires 10 years after the maturity
date of the obligation if that date “is ascertainable from the
recorded evidence of indebtedness,” or 60 years after
recordation of the deed, if “the last date fixed for payment of
the debt . . . is not ascertainable from the recorded evidence
of indebtedness.” (Civ. Code, § 882.020, subd. (a)(1) & (2);
Miller, at pp. 1708–1709.)
Neither party briefed Civil Code section 882.020 on
appeal. When asked to do so, appellant submitted a
supplemental brief, which suggested in part that appellant
had abandoned its reliance on Civil Code section 882.020 in
favor of other arguments. Appellant argued that it did not
seek to “revive” respondent’s lien, which it assumed was
extinguished by operation of law, allowing its own lien to
move into a position of priority. But even were the deed of
trust securing the second line of credit extinguished,
equitable subrogation “‘will set aside a cancellation of such
security, and revive’” it for appellant’s benefit, so long as
“[n]o rights of third persons who might be injured by the
18
revival of the first mortgage are involved; and no prejudice to
the creditor [whose security is revived], is shown.” (Simon
Newman Co. v. Fink, supra, 206 Cal. at pp. 146, 148.)
In other parts of its supplemental brief and at oral
argument, appellant recognized that equitable subrogation
allows it to assert respondent’s rights under respondent’s
security, rather than to assert its own rights under its own
security. Appellant argued that, if it were asserting
respondent’s rights under the second line of credit “to non-
judicially foreclose in second priority lien position,” its claim
for equitable subrogation would be timely under Civil Code
section 882.020 because the deed of trust has a 30-year
mortgage maturity date.
Whether or not appellant has abandoned its reliance
on Civil Code section 882.020 on appeal, respondent’s
demurrer to the equitable subrogation claim fails as a
matter of law because that claim, on its face, is not subject to
the three-year statute of limitations in section 338.
Respondent’s demurrer was based exclusively on section 338,
subdivisions (a), which applies to actions based upon “a
liability created by statute,” and (d), which applies to actions
“for relief on the ground of fraud or mistake.” But
respondent’s right to proceed against the Limas under the
deed of trust securing the second line of credit, to which
appellant seeks to be subrogated, is not created by statute.
(Brandenburg v. Eureka Redevelopment Agency (2007) 152
Cal.App.4th 1350, 1359.) Nor is respondent (or its
predecessor Citibank West) the alleged victim of fraud or
19
mistake as to its own security. Thus, respondent’s right, to
which appellant will be subrogated, is not in the nature of
relief from a statutory violation, fraud or mistake for
purposes of section 338, subdivisions (a) and (d).
In its supplemental brief, respondent incorrectly
argued that appellant would be subrogated to the Limas’
right to a reconveyance of Citibank West’s deed of trust, or to
the rights of the title insurer. As we have explained,
equitable subrogation would allow appellant to step into
respondent’s shoes and assert respondent’s rights against
the Limas under the deed of trust securing respondent’s
second line of credit. (See Simon Newman Co. v. Fink,
supra, 206 Cal. at p. 146.) Since appellant seeks only a
declaration of its rights, respondent’s alternative argument
that this is not an action to foreclose on a deed of trust is
beside the point. (See Canova v. Trustees of Imperial
Irrigation Dist. Employee Pension Plan (2007) 150
Cal.App.4th 1487, 1497 [“Declaratory relief operates
prospectively to declare future rights, rather than to redress
past wrongs”].)
At oral argument, for the first time, respondent
asserted that appellant had not stated a valid claim for
equitable subrogation because its allegations do not meet all
elements of that doctrine. Respondent cited Caito v. United
California Bank (1978) 20 Cal.3d 694 (Caito), and we gave
the parties an opportunity to submit additional briefing on
that case. After considering the parties’ additional briefing,
we find that respondent’s belated arguments against the
20
merits of appellant’s equitable subrogation claim are not
supported by Caito, and they improperly raise what for the
most part are factual issues that may not be resolved on
demurrer. (See Intengan v. BAC Home Loans Servicing LP
(2013) 214 Cal.App.4th 1047, 1058 [demurrer is not
appropriate vehicle for resolving disputed facts].)
In Caito, supra, 20 Cal.3d 694, two cotenant families
(the Caitos and the Caponis) cosigned on a bank loan; when
the bank foreclosed, the Caitos asserted priority over a
subsequent lender as to amounts they claimed to have lent
to the Caponis to keep the original loan current. The Caitos
claimed to have signed onto that loan only to accommodate
the Caponis. (Id. at pp. 698–700.) The court declined to
apply the doctrine of equitable subrogation based on an
undisclosed accommodation agreement between the two
cotenant families. (Id. at pp. 702–703.) Although the court
recited all elements of equitable subrogation, its holding
turned on the principle that a codebtor could not be
subrogated to the rights of a creditor since the “debt paid
must be one for which the subrogee was not primarily
liable.” (Id. at pp. 704, 707.) That is not the issue here
because Countrywide was not a codebtor on Citibank West’s
lines of credit.
Respondent’s argument that Countrywide acted as a
volunteer in refinancing those lines of credit finds no support
in Caito, supra, 20 Cal.3d 694. Under well-established
authority, a bank that refinances a loan at the debtor’s
request and with the understanding that it will receive
21
priority is not a volunteer. (See JP Morgan Chase Bank,
N.A. v. Banc of America Practice Solutions, Inc., supra, 209
Cal.App.4th at p. 861; Simon Newman Co. v. Fink, supra,
206 Cal. at pp. 146–147.)
The argument that Countrywide did not pay off the
Limas’ entire debt raises a factual issue that is beyond the
scope of our review on demurrer. We must deem true
appellant’s allegations that the escrow agent conferred with
both the Limas and Citibank West regarding the correct sum
required to obtain a reconveyance of the 2006 deed of trust
and determined that sum to be less than the amount
included in the March 10, 2006 payoff statement. We also
must deem true the allegation that Citibank West accepted
payment of the lesser amount and reduced the balance on
the second line of credit to zero. That the second line of
credit remained open for lack of a termination letter signed
by the Limas does not defeat appellant’s allegations that the
payment was offered and accepted in full satisfaction of the
Limas’ debt. (See Potter v. Pacific Coast Lumber Co. of Cal.
(1951) 37 Cal.2d 592, 607 [tender of lesser sum offered and
accepted in full satisfaction of debt results in discharge of
debt]; see also California Federal Bank v. Matreyek (1992) 8
Cal.App.4th 125, 134–135 [bank accepted full payment on
loan without prepayment penalty].)
Respondent relies on Caito, supra, 20 Cal.3d 694 to
argue that Countrywide’s loan resulted from a secret
agreement with the Limas, of which Citibank West had no
notice, and it would be unjust to invoke the doctrine of
22
equitable subrogation against respondent. Under the
“doctrine of superior equities,” the right to subrogation may
be invoked against a third party only if that party’s wrongful
conduct makes its equity inferior to the plaintiff’s. (Golden
Eagle Ins. Co. v. First Nationwide Financial Corp. (1994) 26
Cal.App.4th 160, 171; see JP Morgan Chase Bank, N.A. v.
Banc of America Practice Solutions, Inc., supra, 209
Cal.App.4th at p. 862 [subrogee’s equity superior if
intervening lienor has notice of subrogee’s lien].) The
holding of Caito, which was based on the fully litigated facts
of that case, cannot be used on demurrer to resolve what is
essentially a factual dispute about what notice Countrywide
and Citibank West each had of the other lender’s refinancing
of Citibank West’s first line of credit.
In the first amended complaint, appellant alleged “on
information and belief” that Citibank West knew
Countrywide was refinancing the Limas’ lines of credit with
an expectation of priority. In the second amended
complaint, it clarified that Citibank West must have been on
notice of the refinancing because Countrywide’s escrow
agent was well known in the loan industry as “an escrow
company that handled refinancing of loans.”
A “‘“[p]laintiff may allege on information and belief any
matters that are not within his personal knowledge, if he has
information leading him to believe that the allegations are
true.”’ [Citation.]” (Gomes v. Countrywide Home Loans, Inc.
(2011) 192 Cal.App.4th 1149, 1158.) On demurrer, we draw
all reasonable inferences in favor of the plaintiff. (Rickley v.
23
Goodfriend (2013) 212 Cal.App.4th 1136, 1141–1142.) It is
not unreasonable to infer that receiving payoff requests from
an escrow agent known to handle refinancing transactions
would have placed Citibank West on notice that the Limas
were involved in such a transaction with another lender.
Respondent argues appellant has not alleged that
Countrywide relied on any wrongful act by Citibank West.
However, both the first and second amended complaint
allege that, in closing escrow on its loan, Countrywide relied
on Citibank West’s payoff statement as to the first line of
credit, which was issued even though that line of credit was
in the process of being refinanced by Citibank West; the first
line of credit was allegedly closed and a second line of credit
opened without further notice to Countrywide. In essence,
appellant has alleged that Countrywide was misled by
Citibank West’s partial disclosure of the payoff amount due
on the first line of credit, absent additional disclosure that
Citibank West was in the process of refinancing that line of
credit.
In its initial brief on appeal, respondent relied on the
record notice Citibank West’s 2006 deed of trust gave
Countrywide. Respondent argued that the first amended
complaint showed Countrywide had “actual and imputed
knowledge” of Citibank West’s second line of credit and deed
of trust. Respondent also argued that the allegations to the
contrary in the second amended complaint were inconsistent
with those in the first amended complaint and should be
disregarded. In its second supplemental brief, respondent
24
does not challenge the allegation in the second amended
complaint that the escrow officer did not inform
Countrywide about Citibank West’s second line of credit
when she learned about it in February 2006.
Constructive or record notice of an intervening lien is
insufficient to defeat a claim of equitable subrogation under
California law; only actual notice may defeat such a claim.
(See JP Morgan Chase Bank, N.A. v. Banc of America
Practice Solutions, Inc., supra, 209 Cal.App.4th at p. 861.)
The allegations in the first amended complaint show only
that Countrywide acted “through its escrow agent” in paying
off the second line of credit. The agency relationship gives
rise to a presumptive imputation of constructive, but not
actual, notice. (See In re Marriage of Cloney (2001) 91
Cal.App.4th 429, 438–443; see also Han v. United States (9th
Cir. 1991) 944 F.2d 526, 529–530.)
In the second amended complaint, appellant attempted
to repudiate the agency relationship with the escrow agent.
That attempt may have resulted in an inconsistent, and
legally conclusory, allegation, which we need not accept as
true. (See Holland v. Morse Diesel Internat., Inc., supra, 86
Cal.App.4th at p. 1447 [inconsistent allegations in
subsequent pleadings may be disregarded]; Hill v. Roll
Internat. Corp. (2011) 195 Cal.App.4th 1295, 1300
[contentions, deductions, and conclusions of law need not be
accepted as true].) The allegation also defies logic because
appellant’s equitable subrogation claim is premised on the
25
escrow agent’s payoff of the second line of credit on behalf of
Countrywide.
Whether or not the escrow agent exceeded its authority
in negotiating the payoff of the second line of credit, nothing
in the first or second amended complaint shows that
Countrywide had actual knowledge of that line of credit at
any time before funding its own line of credit at the close of
escrow. (See, e.g., Lawyers Title Ins. Corp. v. Feldsher (1996)
42 Cal.App.4th 41, 54 [examining subrogee’s knowledge and
conduct at close of escrow].) Nor does the allegation in the
first amended complaint that Countrywide paid off the
second line of credit through its escrow agent necessarily
show that the escrow agent was in communication with
Countrywide after the close of escrow. Rather, the
allegations in the first and second amended complaints
consistently show that the additional funds used for the
payoff of Citibank West’s second line of credit came from
loan proceeds already disbursed to the Limas.
In sum, we disagree with respondent’s contentions that
appellant has either abandoned its claim for declaratory
relief based on equitable subrogation, or failed to state such
a claim on the factual allegations of the second amended
complaint. Nor do we agree that the claim is barred by the
statute of limitations in section 338.2
2
Whether the equities would ultimately favor
appellant and the extent of any priority it may be awarded
on the facts of this case are not issues properly before us,
and we express no view about them.
26
C. Equitable Subordination
Although appellant purported to assert a claim for
declaratory relief based on equitable subordination, it does
not address the elements of that theory on appeal, and the
factual allegations in the two amended complaints do not
state a claim under such a theory.3
Parker v. Tout (1929) 207 Cal. 590, the only authority
cited in support of the theory of equitable subordination in
the first amended complaint, is a case of “replacement and
modification” of a senior mortgage by the same lender. (See
Rest.3d Property, Mortgages, supra, § 7.3 [where lender
releases and replaces senior mortgage with new mortgage, it
retains priority except to extent material change in terms
prejudices junior lienholder].) In Parker, a bank had retired
its own loan in order to lend an increased amount, unaware
that a mechanic’s lien had been recorded in the meantime.
(Id. at p. 594.) The court held that “the lien of the bank
under its trust deed is superior in right to the mechanic’s
3
The doctrine of equitable subordination has been
codified in the Bankruptcy Code. (See 11 U.S.C. § 510(c).)
Appellant cites no authority for applying it outside the
bankruptcy context. (See, e.g., HBE Leasing Corp. v. Frank
(2d Cir. 1995) 48 F.3d 623, 634 [“Equitable subordination is
distinctly a power of federal bankruptcy courts, as courts of
equity, to subordinate the claims of one creditor to those of
others”].)
27
lien to the extent of the amount of the original note and
interest thereon.” (Ibid.)
Subsequent cases have made clear that a material
modification of a senior lien, such as an increase in the
principal or interest rate, does not result in loss of priority
absent contractual subordination. (See Friery v. Sutter
Buttes Sav. Bank (1998) 61Cal.App.4th 869, 877–879.)
Where a seller agrees to subordinate to construction loans, a
material modification of those loans may result in their total
loss of priority. (Gluskin v. Atlantic Savings & Loan Assn.
(1973) 32 Cal. App. 3d 307, 315.) However, in the case of a
subordinating junior lender, only the modification of the
senior lien loses priority. (Lennar Northeast Partners v.
Buice (1996) 49 Cal. App. 4th 1576, 1586–1587.)
These cases are based on the premise that the junior
lienholder has agreed to be in junior position and should be
protected from modifications in the senior lien to the extent
that those modifications materially increase the risk of
default. (See generally Comment, Subrogation of Mortgages
in California: A Comparison with the Restatement and
Proposals for Change (2001) 48 UCLA L. Rev. 1633, 1646–
1651.) Assuming Citibank West’s refinancing of its first line
of credit with a second line of credit with a higher limit
resulted in replacement and modification, appellant alleges
that Countrywide never agreed to be in a junior position to
Citibank West’s senior lien; rather, it bargained for retiring
that lien completely and taking its priority position. These
allegations do not fit the doctrine of replacement and
28
modification; rather, as we have explained, they state a
claim under the doctrine of equitable subrogation.4
II
In the second amended complaint, appellant asserted
causes of action for unjust enrichment, seeking restitution of
the $599,567.65 payoff amount, and for an injunction based
on a theory of constructive fraud, seeking to forestall
foreclosure on the property until respondent subordinates its
lien on the property to appellant’s. In its reply brief on
appeal, appellant maintains that all of its claims are
premised on respondent’s assertion of an apparently
superior lien to the property, to which appellant seeks to
subrogate (or which it seeks to subordinate to its own lien).
As we have explained, we are not bound by the form of
appellant’s claims or the relief demanded. (Yee v. Cheung,
4 Even were appellant a bona fide subordinating junior
lienhoder, California replacement and modification cases do
not appear to entitle it, as a hard money lender, to priority
over respondent’s entire lien, but only over the $100,000
limit increase between Citibank West’s first and second lines
of credit. (See Lennar Northeast Partners v. Buice, supra, 49
Cal. App. 4th at p. 1588; Comment, supra, 48 UCLA L. Rev.
at pp. 1647–1648.) In contrast, depending on the equities of
the case, the doctrine of equitable subrogation may allow
appellant to step into respondent’s shoes and assert
respondent’s rights under the deed of trust securing the
second line of credit, at least as to the payoff amount. (See
Simon Newman Co. v. Fink, supra, 206 Cal. at p. 146;
Comment, at p. 1655.)
29
supra, 220 Cal.App.4th at p. 194.) We see no basis for
distinguishing the causes of action asserted in the second
amended complaint from the claim for declaratory relief
based on equitable subrogation in the first amended
complaint. In their essence, the claims of unjust enrichment
and constructive fraud are premised on Countrywide’s
refinancing of Citibank West’s line of credit with the
expectation of lien priority, which did not materialize.
“Unjust enrichment is not a cause of action, . . . or even
a remedy, but rather ‘“‘a general principle, underlying
various legal doctrines and remedies.’” . . . . [Citation.] It is
synonymous with restitution. [Citation.]’ [Citation.]”
(McBride v. Boughton (2004) 123 Cal.App.4th 379, 387.)
Equitable subrogation may be used “‘to enforce restitution in
order to prevent unjust enrichment. . . . [Citation.]’” (Estate
of Kemmerrer (1952) 114 Cal.App.2d 810, 814; see also
Lawyers Title Ins. Corp. v. Feldsher, supra, 42 Cal.App.4th
at p. 53.)
Citibank West’s alleged nondisclosure of its own
refinancing of the first line of credit and the circumstances
surrounding its failure to close the second line of credit are
issues relevant to the equities of the case. It is doubtful,
however, that they state a separate cause of action for
constructive fraud because constructive fraud is “‘a unique
species of fraud applicable only to a fiduciary or confidential
relationship.’ [Citation.]” (Mark Tanner Construction, Inc. v.
HUB Internat. Insurance Services, Inc. (2014) 224
Cal.App.4th 574, 588.) No such relationship has been
30
alleged in this case, nor does it generally arise in arm’s
length dealings between business entities. (See, e.g., City of
Hope Nattional Medical Center v. Genentech, Inc. (2008) 43
Cal.4th 375, 386–392; Recorded Picture Co. v. Nelson
Entertainment, Inc. (1997) 53 Cal.App.4th 350, 370;
Worldvision Enterprises, Inc. v. American Broadcasting Cos.
(1983) 142 Cal.App.3d 589, 595.)
Besides, were the allegations against Citibank West to
give rise to a separate claim of constructive fraud (or
negligent misrepresentation), such a claim would be barred
by the statute of limitations in section 338, subdivision (d).
(Thomson v. Canyon (2011) 198 Cal.App.4th 594, 607
[applying three-year statute of limitations to claim of
constructive fraud]; Broberg v. The Guardian Life Ins. Co. of
America (2009) 171 Cal.App.4th 912, 920 [applying three-
year statute of limitations to claims of fraud and negligent
misrepresentation]; but see Ventura County Nat. Bank v.
Macker (1996) 49 Cal.App.4th 1528, 1530–1531 [applying
two-year statute of limitations to claim of negligent
misrepresentation].)
Appellant’s argument that a claim subject to the
statute of limitations in section 338 would not have accrued
until 2011, when respondent asserted its priority, is based
on the assumption that Citibank West’s lien terminated
upon payoff; hence, according to appellant, respondent did
not have priority as a matter of law, and it injured
appellant’s interest only by its misguided claim of priority.
As we have explained, that assumption is incorrect.
31
Respondent has legal priority under the “first in time, first
in right” system of lien priorities unless equity requires a
different result. (JP Morgan Chase Bank, N.A. v. Banc of
America Practice Solutions, Inc., supra, 209 Cal.App.4th at
p. 860.)
Nor does the delayed discovery rule aid appellant with
any claim for fraud subject to section 338. Delayed
discovery, unlike equitable subrogation, is defeated by
presumed or constructive notice. (Nguyen v. Western Digital
Corp. (2014) 229 Cal.App.4th 1522, 1551; see generally 3
Witkin, Cal. Procedure (5th ed. 2008) Actions, § 659, p. 870.)
Appellant relies on Federal Deposit Ins. Corp. v. Dintino
(2008) 167 Cal.App.4th 333, to argue that Countrywide had
no duty to inspect the public records for a reconveyance of
Citibank West’s deed of trust because it had no reason to
suspect Citibank West retained lien priority. The court in
Dintino reasoned that a claim based on the mistaken
recordation of a reconveyance by a bank may not be defeated
solely by the record of reconveyance, where the bank has no
other reason to suspect its mistake. (Id. at p. 352.)
In contrast, here, appellant’s allegations show that, in
March 2006, Countrywide’s escrow agent learned several
things that would have placed Countrywide on inquiry notice
as to its lien priority: that the Limas had simultaneously
refinanced the same line of credit with two banks, that
Countrywide’s payoff of the first line of credit had been
rejected, and that Citibank West conditioned the closing of
the second line of credit on receiving a signed termination
32
letter with the payoff. Because the escrow agent’s
knowledge of these facts is imputed to Countrywide for
purposes of accrual of any independent claim for fraud
against Citibank West, such a claim would be barred under
section 338, subdivision (d).
We conclude that appellant may proceed on its cause of
action for declaratory relief based on equitable subrogation.
We consider all other theories in the first and second
amended complaint to be variations of that cause of action,
rather than independent causes of action, as they assert no
independent right for which relief may be granted under
California law. (Davies v. Krasna, supra, 14 Cal.3d at
p. 515.) While on the facts of this case the statute of
limitations in section 338 would bar a cause of action subject
to its terms, the claim for equitable subrogation is not
subject to section 338 and is not time-barred.
33
DISPOSITION
The judgment is reversed and the matter is remanded
for further proceedings on appellant’s request for declaratory
relief based on equitable subrogation. The parties are to
bear their own costs on appeal.
CERTIFIED FOR PUBLICATION
EPSTEIN, P. J.
We concur:
WILLHITE, J.
COLLINS, J.
34 | 01-03-2023 | 02-16-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4126848/ | FILED
NOT FOR PUBLICATION
FEB 16 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHRIS LANGER, No. 15-55587
Plaintiff-Appellant, D.C. No.
3:14-cv-02281-MMA-JLB
v.
ENCANTADO II, LLC, a California MEMORANDUM*
Limited Liability Company; CONTENTO
INCORPORATED, DBA Busy Bee’s
Bagel Bakery, a California Corporation;
DOES, 1-10,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of California
Michael M. Anello, District Judge, Presiding
Submitted February 6, 2017**
Pasadena, California
Before: GRABER, BYBEE, and CHRISTEN, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Chris Langer appeals the district court’s dismissal, on summary judgment, of
his claims under the Americans with Disabilities Act (ADA) and various state
laws. We review for abuse of discretion the district court’s decision declining to
continue the motion under Federal Rule of Civil Procedure 56(d), see U.S. Cellular
Inv. Co. of L.A. v. GTE Mobilnet, Inc., 281 F.3d 929, 934 (9th Cir. 2002), and now
affirm.
1. Langer claims that the district court abused its discretion in refusing to
continue the summary judgment motion until after some period of formal
discovery. We disagree. Rule 56(d) “provides a device for litigants to avoid
summary judgment when they have not had sufficient time to develop affirmative
evidence.” United States v. Kitsap Physicians Serv., 314 F.3d 995, 1000 (9th Cir.
2002). “To prevail under this Rule, parties opposing a motion for summary
judgment must make ‘(a) a timely application which (b) specifically identifies (c)
relevant information, (d) where there is some basis for believing that the
information sought actually exists.’” Emp’rs Teamsters Local Nos. 175 & 505
Pension Trust Fund v. Clorox Co., 353 F.3d 1125, 1129 (9th Cir. 2004) (quoting
VISA Int’l Serv. Ass’n v. Bankcard Holders of Am., 784 F.2d 1472, 1475 (9th Cir.
1986)). The defendants submitted evidence demonstrating that they immediately
remedied all alleged ADA violations at the Busy Bee Bakery. Although Langer
2
argues on appeal that he needed expert discovery to measure the slope of the
handicap-accessible parking space, he did not raise this argument before the district
court. Langer failed to meet his burden under Rule 56(d) to specifically identify
relevant information that he sought through discovery.
2. Langer also asserts that the district court’s ruling deprived him of his
“right” to determine whether some other portions of defendants’ facility—those he
had not yet inspected—violated the ADA. We remain unpersuaded. Langer did
not offer any evidence nor allege any facts to suggest that there are additional ADA
violations at the Busy Bee Bakery. Our decision in Doran v. 7-Eleven, Inc., 524
F.3d 1034 (9th Cir. 2008), does not stand for the proposition that Langer was
entitled to discovery on the facts of this case.
AFFIRMED.
3 | 01-03-2023 | 02-16-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4142580/ | ,.,( .
OFFICE OF TNE A’ITORNEYGENERAL OF TEXAS
y:
i. AUSTIN
5
,,T
g-c.Mmn ‘-”
mweasmv--
/..
nottoP8blo
li.A. zwvl8,PDge a
She iwuutoe of ee~MflbdoopLe8of birth'or.
d.ath
8Mt 6 oePtiii8d oooJ.ofthe P8ooPdOf @ty
..~.~OPd88thP8@8tiPOdWt&l'
. *hiohhe DhDllb8 OatHledto 8 See of fifty
UO&8 (50#),t0 bo wd w tb, 8pPlbUtt;.
Altduly8ueho~~ofthePeeoPdor8blPth
,, op dwth, whetl pPqoPl7 ooP8iiied b7 aa st8to
8t~8~, dmll be W.BO h8le evld8noo in
8OUPt: ~$t$ POOD Of 8hO i8Ob8 tyP8in
8tat.d. .,
&.denoe in 8 oourtof mooti.m
Y. i, ~vtb, Page 4
Roxto~8ble
;:
.‘~. .:...
. .
.
: ‘.’”
. | 01-03-2023 | 02-18-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4143471/ | OFFICE OF THE AITORNEY GENERAL OF TEXAS
AUSTIN
-c.yIla
--
Bonorabl~Bwl Ilrittaln
County Auditor
San ratriolo u6wstr
glnton,Temr " /---!A
I
“‘l’&ayf& tlona appear
to h6~e been obthaed in
an Mml k wmwt, th8t ls , tbof were not taken
~: ,\aa a igdlrldual petltlon, but in 8ereral oopfw,
to the varlou8 wrte of the oamty, aab when filed
the ecweqziloqplss were attaohed together.
*A further lrrsgularlty,emldent on the faoe ot
tiheln6txuwat, lo the faot that mmy of th8 sig-
natures. such a8 hut3tmndana wife, 8on or dawhtec,
bar the handwritingof only one xmnber of the
fklUllP. The numberof signer8 on the pstitlone l#
lneuffiolentto oonstltute10 per oent of the quali-
rlsa property taxpaying toter8 unlaeo the irrsgu-
rarity in algnaturerrjust,mentlonedis oonuldsred
468
5,Bmorable Burl Brlttaln,page #a
I as valid. It appears that there we8 a design
or scheme used In order to get the ausrlolent
number O? slgner8,for Iu IIU& In~tanaes the
pereon olroulatlngthe p8tltlon reque8tsd the
slmer to alignthe name8 of other member8 or
thm rtidms.~
The followingque8tlonahare arisen out ot the above
rtnte of raatirr,
and upon which OUT opinion is requeatedr
I 1. “Whether petitions oiroulated ln reyeral
parts, rather than as a uult, is a valid petition,
oven though It was attached together at the time
i
i 2. “(6) Whether a petition showing dealgn, rraud
or a sohems on it8 faOe, bearfng forged au6 uaauthor-
f ized elg?laturee
Is void?”
I *(b) Whether the signersmm and the unauthor-
ized n-8 ebould be ellmlnated In counting the num-
F- ber neoesnarpfor 10 per oent, or whether the un-
& authorizednemes only should be ell&Inated?”
3. Whether algneremay wIthdraw their nauwu
after the l;rsltitlon
has been rllea, aither by strlk-
I ine off their rumis or riling a supplementarypeti-
tIoa asking t&t their name8 be w5.thdrawnfrom the
i. DetitIon?”
In anewer to your flrstqusotlon, we advlre that in
r opinion petitIons olroulated In several parts other than
F:!f~a unit, will oonstltute the baels of e valid patltlon In
B event that eaoh or the several pirta are headed 4th sub-
antially the same matter,allho? whIoh petition for 6n elso-
on on tha .sameor ldentloal aueatlon.DrOYided they am
mw l-0.Rudd, es 24 63, the Court of Clvll Apyeala
mild,with rerarence to d queetlon 8Imller to that submitted
ia the instant g&tie,thet a petition ‘biroulatedin sight
Darts aud attaohed at the tine of filing oonstltuted,but one
DWtion. The same aubjeot matter appearing in the heading
’eFiohof the eight parts being the same nnd aubaequently
riled at the same time wee h6ld euiilolent to authorize the
Qourtto make the neoesearp orders pursuant thereto.
HonorableBurl Brlttaln,paae #S
With roierenoe to'your question (a) under 2, we
thinkthat to stata the qua8tlOa la to anmar it, tar the
meson that the law oontemplate8 that a4 petltlonto r0nn
the baa18 of a legal eleotlon rhall be genuine in every
raepeot,and that ii the authority to whom said petition
la dlraotad datsnnlnsrrit to be a rcheme or a fraud,or
that It beam rorged and unauthorlsedsignaturer, 8uoh de-
termluatlonla not subjaot to oollateralattaok. Thlr
presents more a question or faot than or law, but it 8ecma
elanantarythat if the petition shone deei-, fraud or
eohemeand bears fortpd and unauthorlaedslgnaturse, it ia
void ipso faoto.
In reply to question (b) of 2, wa advise that we know
of no &thorlty exlating in the Conmla8lonere~Court to ellml-
nate irom a patition genuineslgwatureacxfqualiiledproperty
taxpayingvoter8 ror any purpose, and ow think that the CommIa-
rlonars'Court rrouldba aotIng olaerlp wlthln its dI8oretlon in
ellxlnatlngunauthorizednam88 and elgnatureeirom any petition
presentedto it tar eotlon thereon. Where the oftioar with
whom It has been filed ha8 authority to hear and datermIne it8
luiflola~y and validity, his deoif~lon thereon la rlnal unlearn
8uohdkolslon bae been fraudulent Or corruptly nmde or pmoured,
Or tinleas ho has been ullty of an abuse ot dlacretlon. 906
20 Corpus ilurla,91; a180 State vs. Orave8, 107 lf.E. 1018.
fIt mat be~‘assumad that tha authority to whom apetition~lr
~~diraoted'will not abuse their discretion nor reaoha deolalon
%predloatedupon fraud, or k&at auoh authority ha8 any desire
$0 eliminatefrom a petition elgnatureeof quatied electors
k%ltlmatsly plaued thereon*
We are or the oplnlon that the algners of a ~patItlOn
8ay withdraw their uamea after the petition has been flled at
Uw time before offioial aotlon thereon has been taloan,and
that the ?mnner,oi aoaotilpllshIng such withdrawal raqulras no
Prtloular foncallty. In the aase of Stats vs. F&apart,I.22
1. E. 99, it was stated that -
WUuleas provided othcrwlse by statute, olao-
tors v&o hav& xkgned a petition my withdraw
their nemee berore offlola aation has bean taken
thereon."
IonorableBurl Brittain, pee k
lJI0
to staller effect is the case of Tmtten vs. Banovor,
L2 Ghia C3tetc, 215; 20 Corpus Twi8, 95, wherein it wu8
mid :
*If as a result of tho withdrawal the petl-
tion fails to aontaln e mquiSlte number of
nen188It should be di8cis8'30."
Trusting that the foragoiag sattsfeatorilpanswWs
you! 1nqulry, we are _
CECLS
.
APPROVEDDEC 18, 1940
A, | 01-03-2023 | 02-18-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/4127800/ | TO BE PUBLISHED IN THE OFFICIAL REPORTS
OFFICE OF THE ATTORNEY GENERAL
State of California
DANIEL E. LUNGREN
Attorney General
______________________________________
OPINION :
: No. 94-207
of :
: May 13, 1994
DANIEL E. LUNGREN :
Attorney General :
:
CLAYTON P. ROCHE :
Deputy Attorney General :
:
______________________________________________________________________________
THE HONORABLE LOUISE RENNE, CITY ATTORNEY, CITY AND COUNTY
OF SAN FRANCISCO, has requested an opinion on the following question:
May the San Francisco Art Commission consider and approve the architectural design
for a terminal at the San Francisco International Airport as required by the city charter if (1) the
contract for the design was awarded to an architectural firm chosen by the San Francisco Airports
Commission and (2) the architectural firm has as a partner an architect who is also a member of the
San Francisco Art Commission?
CONCLUSION
The San Francisco Art Commission may not consider and approve the architectural
design for a terminal at the San Francisco International Airport as required by the city charter if (1)
the contract for the design was awarded to an architectural firm chosen by the San Francisco
Airports Commission and (2) the architectural firm has as a partner an architect who is also a
member of the San Francisco Art Commission.
ANALYSIS
Section 1090 of the Government Code1 provides in part:
"Members of the Legislature, state, county, district, judicial district, and city
officers or employees shall not be financially interested in any contract made by
them in their official capacity, or by any body or board of which they are members."
1
All references hereafter to the Government Code are by section number only.
1. 94-207
We are asked to determine whether a violation of section 1090 would occur in a situation where the
public official with the financial interest is not responsible for awarding the contract. The San
Francisco Airports Commission has awarded a contract to an architectural firm to design a new
terminal at the San Francisco International Airport. The firm employs 700 architects and has
approximately 20 partners. Under section 3.601 of the San Francisco City Charter, the design must
be approved by the San Francisco Art Commission. If the latter fails to approve the original design,
a new design must be submitted at no further cost to the city until one satisfactory to the commission
is tendered. One of the members of the art commission is an architect who is a partner in the firm.
He is responsible for all of the firm's work in the area of urban design and planning. The issue
to be resolved is whether the architect, as a member of the art commission, would violate section
1090 by having to approve the design submitted by his firm. We conclude that he must resign from
the commission before it considers the design of the airport terminal.
In 76 Ops.Cal.Atty.Gen. 118 (1993), we summarized the general requirements of
section 1090 as follows:
". . . Section 1090 is concerned with financial interests, other than remote or
minimal interests, which would prevent officials from exercising absolute loyalty and
undivided allegiance in furthering the best interests of their public agencies. (See
Stigall v. City of Taft (1962) 58 Cal. 2d 565, 569.) Moreover, when section 1090 is
applicable to one member of the governing body of a public entity, the proscription
cannot be avoided by having the interested member abstain; the entire governing
body is precluded from entering into the contract. (Thomson v. Call (1985) 38
Cal. 3d 633, 647-649; Stigall v. City of Taft, supra, 58 Cal.2d at p. 569; City of
Imperial Beach v. Bailey (1980) 103 Cal. App. 3d 191, 197; 70 Ops.Cal.Atty.Gen. 45,
48 (1987); 69 Ops.Cal.Atty.Gen. 102, 104 (1986).) A contract which violates
section 1090 is void. (Thomson v. Call, supra, 38 Cal.3d at p. 646.)" (Id., at p. 119;
fn. omitted.)
In a recent informal opinion (Cal.Atty.Gen., Indexed Letter, No. IL 92-1212 (Jan. 26,
1993)), we concluded that a former member of a city planning commission would violate section
1090 if he were to enter into a contract with the city to be a consultant with respect to the city's
general plan revision. While he was still a commission member, the planning commission had
adopted a policy to use consultants instead of staff members for the plan revision. This policy was
adopted in a somewhat segmented fashion through approval of budget allocations during prior fiscal
years and various discussions held by members of the planning commission and its subcommittees.
In determining that the consulting contract would be "made" by the former commissioner in his
official capacity for purposes of section 1090, we stated:
"The critical test for determining whether section 1090 has been violated is
whether an officer or employee has participated in the making of a contract in his or
her official capacity. (Millbrae Assn. for Residential Survival v. City of Millbrae
(1968) 262 Cal. App. 2d 222, 237; 66 Ops.Cal.Atty.Gen. at 160-161.) `[T]he statute
not only strikes at situations that do involve actual fraud and dishonesty but also at
those in which such is absent but in which the possibility exists nonetheless for
personal influence of an interested [officer] to be brought to bear, either directly or
indirectly, on an official decision. [Citations.]' (66 Ops.Cal.Atty.Gen. at 160, fn. 3.)
"In People v. Sobel (1974) 40 Cal. App. 3d 1046, 1052, the court outlined the
broad reach of section 1090:
2. 94-207
`The decisional law, therefore, has not interpreted section
1090 in a hypertechnical manner but holds that an official (or a public
employee) may be convicted of violation no matter whether he
actually participated personally in the execution of the questioned
contract, if it is established that he had the opportunity to, and did,
influence execution directly or indirectly to promote his personal
interests.'
In Millbrae Association for Residential Survival v. City of Millbrae, supra, 262
Cal.App.2d at 237, the court defined the `making' of a contract to include the
preliminary discussions, negotiations, compromises, reasoning, planning, drawing
of plans and specifications, and solicitation for bids.
"Section 1090's prohibition applies regardless of whether the contract is
found to be fair and equitable (Thomson v. Call (1985) 38 Cal. 3d 633, 646-649) or
the official abstains from all participation in the decision to contract (Fraser-Yamor
Agency, Inc. v. County of Del Norte (1977) 68 Cal. App. 3d 201, 211-212). In
Thomson a city mayor was found to have violated section 1090 despite his selective
abstentions on votes concerning the acquisition of his property by the city, upon
advice he received from his city attorney. The court refused to segment the
`transaction' as urged by the mayor to preclude a violation of section 1090.
"Section 1090 applies to persons in advisory positions to contracting
agencies. (City Council v. McKinley (1978) 80 Cal. App. 3d 204, 212-213; Schaefer
v. Berinstein (1956) 140 Cal. App. 2d 278, 291-292.)
"In Stigall v. City of Taft (1962) 58 Cal. 2d 565, 569-571, the court concluded
that where a councilman had been involved in the preliminary stages of the planning
and negotiating process but had resigned from the council prior to its vote on the
contract, he nonetheless had been involved in the `making' of the contract. In City
Council v. McKinley, supra, 80 Cal.App.3d at 212, the court followed this reasoning,
stating:
`. . . The negotiations, discussions, reasoning, planning, and
give and take which go beforehand in the making of a decision to
commit oneself must all be deemed to be a part of the making of an
agreement in the broad sense [citation] . . . . If the date of final
execution were the only time at which a conflict might occur, a city
councilman could do all the work negotiating and effecting a final
contract which would be available only to himself and then present
the matter to the council, resigning his office immediately before the
contract was executed. He would reap the benefits of his work
without being on the council when the final act was completed. This
is not the spirit nor the intent of the law which precludes an officer
from involving himself in the making of a contract.'
"In 66 Ops.Cal.Atty.Gen. 156, we concluded that county employees who
proposed that their functions be accomplished through private consulting contracts
were barred from contracting with the county to perform such services. We stated:
`We are told that the persons involved, while employees of
the county and as employees of the county, have provided input in the
3. 94-207
formulation of the contract . . . . By that participation in the give and
take that went into such "embodiments" of the contract and drawing
of plans and specifications, the county employees had the opportunity
to, and did bring their influence to bear on the ultimate contract itself.
While no fraud or dishonesty may have been involved, we are
nonetheless satisfied that in so doing they participated, not in their
personal capacities but in their official ones as county employees, in
the `making of the contract' within the meaning of section 1090 . . .
.' (Id. at p. 160.)"
We have consistently determined that any modifications to a contract would also fall
within the proscription of section 1090. (See 65 Ops.Cal.Atty.Gen. 305, 308-309 (1982); 3
Ops.Cal.Atty.Gen. 333, 334 (1944); Cal.Atty.Gen., Indexed Letter, No. IL 87-601 (June 8, 1987).)
With these various conclusions, principles, and interpretations in mind, we turn to
the awarding of the San Francisco airport terminal contract. The art commissioner here would be
financially interested in the contract as a partner in the architectural firm even if the art commission
were to approve the first proposed design submitted. As a partner, he would share in any profits
from the contract. Should the art commission reject the first design, under the terms of the contract
the firm's profits would necessarily be reduced as each new design was submitted to the art
commission for approval.
While the commissioner would clearly have a financial interest, the question remains
whether the contract would be "made" by him as a member of the art commission for purposes of
section 1090. If the contract for the design were examined in isolation up to the time of its award,
we might conclude that the commissioner would not be in violation of the statute. The contract
would only be "made" by the airports commission, the awarding body. Such an approach, however,
is neither realistic nor in accord with the case law. The "making" of a contract within the meaning
of section 1090 is not to be given a hypertechnical meaning; all the facts and circumstances
surrounding the contract are to be examined. Essentially, if it is determined that an official
participated in the transaction, taken in its totality, and it would or potentially could affect his
personal financial interests, then the official would fall within the section 1090 proscription. (See
Thomson v. Call, supra, 38 Cal. 3d 633, 647-649.)
Here, the approval of the design services by the art commission is part of the original
contract. The transaction may not be segmented into two steps. Although the contract was awarded
by the airports commission, it was not merely for a design, but for a satisfactory design. The art
commission will in essence determine the ultimate terms and conditions of the contract, that is, what
constitutes a satisfactory design. As such, art commission members may be said to be participants
in the making of the contract.
The function of the art commission may be likened here to determining whether the
original contract should be affirmed or modified. If the original design is satisfactory, the
commission in effect will affirm the original contract, thus participating in its "making." If the
original design is not satisfactory, the contract will essentially be "modified" by a new design
approved by the art commission, thus again making the art commissioners participants in the
contract's execution. (See, e.g., 65 Op.Cal.Atty.Gen., supra, 308-309.)
In sum, the basic transaction here is the submission by the architectural firm of a
satisfactory design for a new airport terminal. The commissioner in question will participate in the
transaction through his commission's review and approval of the design. To conclude otherwise
4. 94-207
would give section 1090 a strict, hypertechnical construction which would be contrary to the
consistent and longstanding approach taken by the courts and this office.
Having concluded that section 1090 would otherwise be applicable herein, we must
consider whether one of the sanctioned "remote interests" contained in section 1091 would allow
the art commission to approve the contract without first requiring the resignation of one of its
members. Section 1091 states:
"(a) An officer shall not be deemed to be interested in a contract entered into
by a body or board of which the officer is member within the meaning of this article
if the officer has only a remote interest in the contract and if the fact of that interest
is disclosed to the body or the board of which the officer is a member and noted in
its official records, and thereafter the body or board authorizes, approves, or ratifies
the contract in good faith by a vote of its membership sufficient for the purpose
without counting the vote or votes of the officer or member with the remote interest.
"(b) As used in this article, `remote interest' means any of the following:
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"(11) That of an engineer, geologist, or architect employed by a consulting
engineering or architectural firm. This paragraph applies only to an employee of a
consulting firm who does not serve in a primary management capacity, and does not
apply to an officer or director of a consulting firm.
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . "
We believe that section 1091's remote interest exception for consultants is inapplicable in the present
circumstances. The art commissioner with the financial interest in the airport terminal contract may
be "employed" by the architectural firm; however, he is also a partner in the firm. Hence, he is not
only an employee, but an owner.2 Also, he serves in a primary management capacity as the design
quality partner responsible for all of the firm's work in the area of urban design and planning. The
interest of the art commissioner here thus does not meet the requirements for the remote interest
exception of subdivision (b)(11) of section 1091.3
In answer to the question presented, therefore, we conclude that the San Francisco
Art Commission may not consider and approve the architectural design for a terminal at the San
Francisco Airport as required by the city charter if (1) the contract for the design was awarded to an
architectural firm chosen by the San Francisco Airports Commission and (2) the architectural firm
has as a partner an architect who is presently a member of the San Francisco Art Commission.
*****
2
We are informed that his partnership interest is approximately five percent.
3
Whether the architectural firm in question may be considered a "consulting" architectural firm
in the circumstances presented for purposes of section 1091, subdivision (b)(11) is beyond the scope
of this opinion.
5. 94-207 | 01-03-2023 | 02-18-2017 |