ANALYSIS OF SEPTEMBER 12, 2013 SUPREME COURT OPINIONS[Posted September 12, 2013] As I mentioned in my programming note earlier this week, I was in Richmond this morning – a wonderful place to visit, especially at Ninth and Franklin, but not exactly where I want to be on opinion day. The Supreme Court hands down ten published opinions today in cases argued in the June session.
I was in the court yesterday, too, and got to see a nice ceremony that I’d never seen before – recognition of staff members of the court for length of service. One of the recipients was the Clerk, Trish Harrington, who was recognized for having worked with the court for 25 years.
I also heard the chief justice’s request yesterday for a moment of silence to honor the victims of the 2001 terrorist attacks. In a very nice touch, she also asked those present to remember in their thoughts the many American servicemembers who have lost their lives in protecting our nation’s security while far from home.
Finally, I got to mark September 11 in a happier way – after the day’s arguments were done, I slipped away for a quick trip to Harrisonburg to visit my daughter, who’s attending college there. For us, September 11 will always be a special day, and it was wonderful to have a chance, however fleeting, to see her on the occasion of her 19th birthday. Happy belated birthday, my princess.
In a case of enormous interest down here in Tidewater, PKO Ventures v. Norfolk Redevelopment and Housing Authority, the justices take up an issue of statutory construction affecting the power of a housing authority to take real property.
Six years ago, in the wake of Kelo v. New London, the General Assembly restricted the ability of condemnors to acquire blighted property. Previously, a non-blighted parcel could be taken for blight removal as long as it was located within an area that was found to be blighted. The 2007 statute changed that, specifying that only properties that are themselves blighted can be taken for blight remediation.
The new statute contained an exception for housing authorities. Since many of them carry out long-range blight eradication plans, the legislature didn’t want to cut them off from those projects by stopping ongoing condemnations. The exception states that the new law wouldn’t affect the ability of such authorities to acquire properties until July 1, 2010, a three-year window within which those long-term projects could be completed.
In conjunction with Old Dominion University’s desire to acquire property across Hampton Boulevard from the campus, the Norfolk Redevelopment and Housing Authority filed a condemnation petition in April 2010, roughly six weeks before the deadline, to acquire an apartment building owned by PKO Ventures, LLC. The authority used the slow-take procedures in the eminent-domain statutes, because it didn’t have the power to use quick-take. As a result, July 1, 2010 came and went with the case still in the early stages of litigation; it wasn’t completed until August 2012, two years after the deadline.
The landowner argued in the trial court that the authority’s ability to take the property expired with the deadline, but a judge disagreed, holding that the law to be applied was that law in effect as of the date suit was filed. The landowner got a writ to review this jurisdictional holding.
Today, the justices unanimously reverse and enter final judgment for the landowner. The court holds that even under the trial court’s reasoning, the applicable law (containing the deadline) had been in effect since 2007. The law immediately went into effect; the exception gave authorities the right to finish acquiring properties for another three years. The justices specifically reject the interpretation that it gave authorities another three years to file suit.
The court also finds that the new law didn’t affect any of the authority’s vested rights. That’s because when you’re taking land in such a suit, you don’t have a vested right until final judgment. This statute accordingly didn’t deprive NRHA of a property right to acquire the land.
The court decides today an appeal involving one of the infrequently cited components of jurisdiction, namely, territorial jurisdiction, in Commonwealth v. Leone. Leone had been convicted of a felony in the 1990s, but evidently did a good job of turning his life around, to the point that the Governor restored his civil rights. But that restoration wasn’t universal; it didn’t include the right to possess or transport firearms. For that, by statute, an applicant has to go to his local circuit court.
Leone did that, asking the nearest learned judge to give him what the Governor could not. That judge was located here in Virginia Beach; the court considered the petition and granted it. There’s only one problem: Leone had to cross a state line to get to the courthouse. He lived just across the Crucial Divide, in northeastern North Carolina, probably within a mile of sweet Virginia air.
The Commonwealth asked the Supreme Court to invalidate the trial court’s order, and today, the justices do just that. The relevant language in the statutes permits an applicant to “petition the circuit court of the jurisdiction in which he resides for a permit to possess or carry a firearm . . .”
As the justices have noted in recent cases, there are four components of jurisdiction, a word that “has many, too many, meanings.” The first and foremost is subject-matter jurisdiction, the power of a given court to adjudicate a particular kind of case. This is why you can’t go into JDR Court to sue for medical malpractice; that case belongs in circuit. Here, by statute, the circuit court expressly has subject-matter jurisdiction.
The next component is notice jurisdiction, which is achieved by serving a defendant with process. This is what brings a given party before the court; a court can’t adjudicate a defendant’s case if the defendant isn’t part of the lawsuit yet.
There’s a catch-all provision called “other conditions of fact” that must exist in order for the court to have the power to act in a given case. But the red-headed stepchild of the foursome – at least, gauged by how often it’s the dispositive factor – is territorial jurisdiction. We lawyers commonly know this as venue.
Here, there’s a specific territorial requirement set out in the statute: a petition can only be filed where the defendant resides. This applicant didn’t reside in Virginia, so he filed his petition in the closest available Virginia jurisdiction. The court therefore rules today that the Virginia Beach court didn’t have the ability to adjudicate this case.
In fairness to the aforementioned learned judge, I can see exactly how he would have concluded that he could grant the petition, since otherwise there would be no locality within Virginia where the applicant could file his petition. In fact, the justices today reach that very conclusion. What’s left for Leone? Well, if he wants that restoration of rights, I only know of one avenue that’s available to him: There are plenty of homes for sale here in beautiful Virginia Beach . . .
In the Supreme Court, 4-3 decisions are usually the most interesting to read (unless you’re the litigant on the “3” end; but we’ll leave that aside for now). We get an intriguing discussion in Jordan v. Commonwealth in, of all things, a sufficiency-of-the-evidence appeal.
Jordan was convicted of several offenses related to a carjacking. One of those (the only one taken up in this appeal) was possession of a firearm by a convicted felon. Jordan certainly had the latter status; the issue is whether the Commonwealth proved that he possessed a firearm.
I’ll set the table here by letting you know that there are two different burdens for two distinct, though similar, offenses. In order to convict for use of a firearm in the commission of a felony, it’s enough to show that the implement looked like a gun. That’s because the “target” of the statute is the fear that even a fake gun can put in the mind of someone who’s being confronted with what looks like a gun.
In contrast, in order to get a conviction for possession of a firearm by a convicted felon – the charge that’s at issue in this case – the prosecution must show that it was a real gun. The statute doesn’t forbid a convicted felon to possess a cap pistol, no matter how realistic it looks.
Jordan’s victim first testified that Jordan robbed him by pointing “a gun” at him. He described it by color and appearance, and added on direct examination, “It was a – like a Raven pistol.” (A Raven, we learn today, is a form of Saturday Night Special.) On redirect, after the defense evidently raised on cross the possibility of a toy gun, the 13-year-old victim was asked if it could have been a toy pistol. “A really detailed toy gun if it was.”
On these statements, this decision turns. A majority of the court finds that the victim’s identification of the object as a pistol, combined with his specific description and Jordan’s brandishing of it, was sufficient to enable the jury to convict. The dissent (Justice Powell, writing for Justices Goodwyn and Millette) thinks that just wasn’t enough to get to a jury. Remember, the prosecutor has to prove beyond a reasonable doubt that this was actually a gun; not merely that it looked like one.
The dissent argues that it’s impossible for anyone to really know, upon looking at an object for perhaps five seconds (as this victim did) to know that what he’s seeing is a functioning firearm. Without careful inspection, any victim could be fooled. The dissent turns aside implicit criticism by noting that this wouldn’t effectively foreclose all convictions of this offense, as long as someone can testify that he or she saw the gun being fired, for example.
This is a close call, but I find my sentiments with the majority here. This really is a question of fact, and the jury had the right, if it so chose, to believe the boy’s statement. He had indicated that he was familiar with firearms because his father was in the military. I tend to agree that this is a question of the weight, not the sufficiency, of the evidence in this case.
Schuiling v. Harris arises from an employment contract, whereby a homeowner hired a full-time, live-in housekeeper. Evidently the homeowner was a savvy businessman, because he had the housekeeper sign an employment agreement that contained a mandatory arbitration provision, directing that all disputes arising out of the agreement would be arbitrated by a firm called National Arbitration Forum.
After four years on the job, the housekeeper eventually found reason to file a ten-count complaint against the homeowner, alleging torts and breach of contract. The homeowner sought to enforce the arbitration provision, noting that National Arbitration Forum was no longer available, and asking the court to appoint a substitute arbitrator.
“Not so fast,” the housekeeper answered. “In the agreement, we specified a particular arbitrator, and that arbitrator can’t do the job; that means the agreement is unenforceable and I get to take my claims to a jury.” The trial court agreed and denied the motion to compel arbitration. Taking advantage of the specific grant of authority for interlocutory appeals where arbitration is refused, the homeowner got a writ.
Today, the justices unanimously reverse and send the case back for arbitration. The dispositive provision in the agreement is a plain-vanilla severability clause. The Supreme Court rules today that the naming of a specific arbitrator is in a severable provision of the agreement, so the unavailability of that arbitrator doesn’t wipe out the entire agreement. That’s especially true where a statute (Code §8.01-581.03) expressly authorizes a trial court to appoint a substitute arbitrator where the original one can’t serve.
The next contract case is Assurance Data, Inc. v. Malyevac. It involves yet another employment agreement, though for services far removed from housekeeping. The employee signed on with a company to sell its computer products and services. He executed a noncompete agreement that barred him from soliciting any of the company’s “past, present or prospective customers” in the event of his separation.
The employee in the previous case lasted upward of four years; this one only hung on for a few months before fleeing for greener pastures. His erstwhile employer sued, seeking damages and injunctive relief.
The employee filed a demurrer, asserting that the employment agreement was overbroad and unenforceable as a matter of law. The trial court agreed and sustained the demurrer [red flag warning ahead] without leave to amend.
I’m no court insider; I was never a judicial law clerk and emphatically am not in on the justices’ private deliberations. But in my view, slightly educated as it may be, sustaining a demurrer without granting leave to amend even once is one of the surest ways for a trial judge to ensure particularly careful appellate scrutiny of his or her rulings. (For other time-honored means, try setting aside a jury verdict.) Sure enough, the justices agreed to hear the company’s appeal, and today, the court reverses.
This is a case that will have some application beyond the realm of covenants not to compete. But its effect on cases of that particular type will be massive; in my view, the court’s reasoning may mean that almost all such cases will have to be tried. Here’s the key to the ruling, in a line penned by the chief justice:
The premise running through Simmons, Modern Environments, Home Paramount, and our other decisions is that restraints on competition are neither enforceable nor unenforceable in a factual vacuum. Based on evidence presented, a trial court must ascertain whether a restraint “‘is narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy.'” An employer may prove a seemingly overbroad restraint to be reasonable under the particular circumstances of the case.
(Internal citations omitted) This elegant paragraph means that judges who consider such covenants should check their hole cards before concluding that even facially overbroad language dooms a given covenant. It means that a person or entity seeking to enforce a covenant will almost always get to a jury (if one has been demanded), because while language may appear to be prima facie overbroad, its proponent is permitted to adduce evidence of the context in which the agreement was reached, and in which it’s sought to be enforced.
This, then, is primarily a case about the function of a demurrer, which is “to determine whether a complaint states a cause of action upon which the requested relief may be granted.” The court concludes that a trial court can’t use a demurrer to “evaluate and decide the merits of the claim,” so this case goes back for trial.
There may be an aspect of Small v. FNMA that I’m just not getting. It’s not the opinion; that’s quite clear enough, thanks to the chief justice’s analysis. It’s why the parties were in court in the first place. Small is the Clerk of the Fredericksburg Circuit Court, and sued in US District Court seeking to collect unpaid recordation and state-grantor’s taxes for deeds recorded by Fannie Mae. The issue, of course, is whether FNMA is, in effect, the federal government and thus immune from the payment of state-levied taxes.
FNMA responded to the suit by asserting that the Clerk didn’t have standing to sue to collect the taxes. The district judge scoured every crevasse of Virginia jurisprudence but was unable to find helpful guidance; a certification order ensued, and the Supreme Court agreed to answer the certified questions. Here’s the primary one:
Under Virginia law, does a clerk of court possess statutory standing to initiate a lawsuit, in his official capacity, to enforce the real estate transfer tax on the recording of instruments?
I’m going to cut right to the short answer to this query: No. Our taxation statutes authorize the Clerk to collect the taxes, but they don’t confer the authority to sue for unpaid taxes, which is a separate process. With local taxes, the locality is empowered to sue; with state taxes, the Department of Taxation has that power. Since a Clerk has no specific grant of authority, there’s no standing to sue here.
Now for the source of my puzzlement. Why’d the Clerk feel the need to sue in the first place? He had a simple remedy (one that’s mentioned obliquely in today’s opinion) that seems foolproof. When you or I walk into the Clerk’s Office and hand a deed to the Clerk for recordation, but we don’t pay the tax, the Clerk hands the deed right back without recording it. Paying the tax is a prerequisite to recordation; if you don’t pay the fare, you don’t get to ride the train.
So why didn’t the Clerk simply refuse to record the document, and make FNMA sue him? That would bring the ultimate issue – whether FNMA is exempt from the taxes – squarely on a judge’s desk for resolution without this procedural problem, which thwarts review of the case. Maybe there’s a reason that I just don’t see; if someone enlightens me, I’ll pass the word along to you.
Justice McClanahan offers an interesting partial dissent in which she points out that the Clerk also requested declaratory relief, not just monetary damages. She believes that the court should have entertained and resolved that issue. And she has substantial ammunition for the argument that unlike a suit for damages, a Clerk is empowered to seek judicial resolution of this question. Here’s the relevant text of the statute she relies upon: “The clerk may ascertain . . . the qualification of the deed or instrument for any exemption.” Justice McClanahan thinks that gives the Clerk discretion to do what’s necessary to resolve claims of exemptions, including going to court for declaratory relief if necessary.
The justices answer this standing issue today, but leave to another day the ultimate question of whether FNMA deeds are taxable.
I’m an appellate lawyer, not a dirt lawyer, but even so, I was surprised that I had never heard the term tenancy in severalty before stumbling across it in Nejati v. Stageberg. This case has a lot of fascinating angles that were not pursued, or that related only tangentially to the main issue, making it the functional equivalent of the dog that did not bark in the night.
This appeal centers on a parcel of land – or is it two parcels? – in what looks like a fairly nice section of Fredericksburg. According to the local commissioner of the revenue, it was only one parcel. But the commissioner’s records showed that in 1942 it had been listed as two separate “tax parcels.”
A purchaser acquired the entire tract and decided to sell it as two separate lots. One of those lots contained a duplex, and the other one was vacant. The owner got a survey showing the boundary between the lots as depicted on the old tax records. He recorded the survey, and then sold the two lots to Buyer A (the duplex) and Buyer B (the empty lot).
The seller also contracted with Buyer B to build a house on the empty lot. But when he went to get a zoning variance, he was told that he couldn’t build anything, because as far as the City was concerned, it was all one lot, and it already had a duplex on it.
Uh-oh. Buyer B tried to get administrative relief, and when he failed, filed suit against Buyer A, seeking to quiet title – not just in the part he had bought, but in the entire tract. Buyer B sought, and eventually got from the trial court, a ruling that the two Buyers now owned the whole parcel as tenants in common. The judge helpfully divided the respective interests according to they uneven purchase prices they had paid, but as of final judgment, the two had become unwilling partners.
Today the Supreme Court, led by Justice Mims, rides in to resolve the title morass. The court rules that the parties aren’t tenants in common but that term I saw for the first time, tenants in severalty. If you aren’t sure what that means, here’s the difference: Tenants in common jointly own the entire property, while tenants in severalty each own a defined portion of a unitary lot. If a deed conveys less than the entire lot, but it’s impossible to determine the exact boundary thus conveyed, then the parties are tenants in common. Here, we have a survey that shows exactly who owns what.
Of greater importance, the court confirms that even though the seller didn’t comply with the subdivision ordinance, the transfer of title is unaffected. That is, while you can’t achieve what’s called “subdivision by deed” by merely conveying part of an unsubdivided lot, the underlying conveyance is still valid.
Up to a point, that is. The party who’s out of luck here is Buyer B. He now owns what looks like a lovely corner lot (I’m looking at it right now on Bing Maps) that he cannot develop. That’s the limitation on the effective-conveyance angle: what you acquire may not be fully usable.
Now for the juicy non-issues. First, the opinion notes that after exhausting his administrative remedies and before filing suit, Buyer B reached a settlement with his title insurance company. (Good for him for buying owner’s coverage.) I assume that Buyer B is listed as a nominal party, with the title insurer carrying the real burden of this litigation; if Buyer B got satisfied by his insurer, I can’t imagine that he’d get to sue and keep any proceeds, too.
Next, the court points out in a footnote that the defendants in the lawsuit included the seller and “his corporate alter egos,” but Buyer B nonsuited them and they didn’t appear in the Supreme Court. That leaves open the possibility that Buyer B (or his title company) could obtain a judgment against those entities. We don’t have any indication of their solvency, however. The use of the phrase alter egos leads me to wonder whether a corporate veil or two may get punctured, but we may never know that.
Third, I’m wondering about the current tax angle. Buyer B definitely owns his defined tract. Does the commissioner of revenue send separate tax bills for one unitary lot? If Buyer B refuses to pay, could Buyer A face a tax lien? And at what value is Buyer B’s portion being assessed? It ought to be substantially deflated, since it’s probably only good for a picnic table and a tree fort.
Rather than waxing philosophical about other similarly arcane issues, I suppose it’s time to move on to the next case.
For me, Clifton v. Wilkinson was worth reading just for footnote 1. That’s because in addition to being a civil-procedure geek, I love reading history. That’s especially true when the history is that of the Commonwealth. But I digress.
This appeal is about the seemingly dry subject of easements by necessity. Those are created implicitly when a grantor severs an estate and conveys part of it to a grantee, but the grantee needs to use part of the retained property in order to beneficially use what he’s receiving. In that instance, the law implies an easement in favor of the grantee.
This property is in Washington County, a beautiful area in southwestern Virginia. A farmer bought an 18-acre tract there, fronting on State Route 704, in 1957. Four years later, the Commonwealth condemned a portion of it, bisecting the farm into a five-acre parcel and a ten-acre parcel, separated by what would become Interstate 81. The five-acre portion still fronted Route 704, but the ten-acre portion became landlocked by virtue of the condemnation.
The farmer solved his problem by renting an adjoining parcel from a neighbor, who had access to Route 704. Life went on as usual for 45 years, until the farmer retired and ceased renting the adjacent land. The farmer died the next year, and title to the two tracts passed to his widow.
Over the course of the next year, the neighbor and the widow engaged in some discussions about renewing the rental, but those never came to fruition. In 2008, the neighbor cut off access to his land, leaving the ten-acre parcel again stranded. The widow sued, seeking a declaration that she was entitled to an easement by necessity. The trial court gave her that right, and enjoined interference with the easement.
The justices aren’t so sympathetic. If you go back to the definition I gave you above, you’ll see why: The neighbor didn’t create this problem. VDOT did. The neighbor can’t be held to have implicitly dedicated a portion of his land to the farmer, because he didn’t bring about the landlocked situation. In the condemnation proceeding, the farmer got $1,450 for the land and $2,450 for damages to the residue, so presumably he thereby received full just compensation for the situation created by the taking.
When you think about it, this is the fair result. The neighbor was a stranger to VDOT’s taking, and he shouldn’t suffer the loss of a property right simply because the guy next door had the misfortune to be in the way of a limited-access highway. And while the amount of compensation paid to the farmer seems pitifully small, keep in mind that this was during the Kennedy Administration, when a Milky Way bar probably cost a nickel and you were rich if you earned $20,000 a year, and stinking rich if you made $75K.
I should at least mention why footnote 1 intrigued me. It’s the story of the creation of the Fairfax Line, which fixed the western limit of an enormous grant of land to Lord Fairfax in the Seventeenth Century by connecting the sources of two rivers that are well-known to us. Imagine all the land between the Rappahannock and the Potomac, starting at the Chesapeake Bay and going all the way into what’s now West Virginia. That’s five million acres (Senior Justice Russell has done the math for me, so I can’t take credit), and all of it belonged to one very wealthy man. The story is included to illustrate that once upon a time, easements of necessity were quite common.
The story related in this footnote is almost completely superfluous to today’s holding; if the court had omitted it, our understanding of the parties’ dispute and the court’s resolution of it would not be diminished in the slightest. And yet I’m profoundly grateful for the digression. It brings to mind the labors, and the skill, and especially the courage, of a group of surveyors who undertook to survey that line in 1746, using the Eighteenth Century tools of that trade. As Justice Russell notes, their determination “was verified in 1999 by surveyors using modern methods.” If you will permit me an old line that might seem sexist in this age, these were men.
In Raley v. Haider, the court analyzes a res judicata defense to a follow-up suit by a former employee against his employer. The employee is a physician who worked for a medical practice (a professional LLC). When he felt he hadn’t been paid what he was owed, he filed a three-count complaint. Count I of that complaint alleged breach of contract and Count II alleged breach of an implied contract, both brought against the PLLC. Sandwiched between these was Count II, pleaded against the PLLC and its principal, claiming that the principal had siphoned off money that should have been used to pay the employee. This claim was brought under the corporation code.
The trial court decided that the employee couldn’t maintain the corporation-code count, because he wasn’t a member; it accordingly dismissed that count with prejudice. After trial on the remaining counts, the employee got a judgment for almost $400K.
Collecting the judgment proved to be a problem, as the PLLC didn’t appear to have that much available. The employee thereupon filed a second suit, this one against the principal and two related LLCs (though not the original employer), contending that the employer had made improper transfers of funds to the related LLCs. Interestingly, he also garnished the principal, but that didn’t yield anything fruitful. The trial court consolidated the garnishment and the second action, and eventually sustained a demurrer based on the previous judgment.
In the Supreme Court, the employee argued that the res judicata provision in Rule 1:6 didn’t bar his subsequent action because the dismissal of Count II in the first suit was not “on the merits” as required by that rule. Alas; he hadn’t made that argument below, so the justices find the argument foreclosed by Rule 5:25.
The employee had a backup plan. He contended that the parties in the actions were different. As for the garnishment, he was stepping into the shoes of the judgment debtor (the employer) to collect money from a third party (the principal). The justices today rule that that’s barred by res judicata because such an action is effectively by the same party against the same party, measured against the original suit.
The employee fares better against the related LLCs; the court rules today that they aren’t the same entities as the original employer. Res judicata requires identity of parties, and where the parties are different, there’s no preclusive effect in Rule 1:6. The case thus heads back to the trial court, where the employee will get another chance to track down those claimed transfers.
Attorneys in fact
The use of a demurrer takes another pummeling in Ayers v. Shaffer. This appeal is an intrafamily fight between siblings who differed over their great-grandmother’s estate. There’s no issue here about Grandma’s will; today’s squabble is over inter vivos transfers, and whether one sibling exercised undue influence to secure those.
Since this case came to the appellate court on a sustained demurrer, the only facts at issue are those stated in the complaint. The plaintiffs asserted that the defendants used a power of attorney, granted by Grandma, to secure several five-figure conveyances while Grandma was still alive. The complaint alleged that Grandma was in poor physical and mental health, but specifically noted that she was able to decide how she wanted her estate distributed.
The trial court sustained the demurrer because it noted that none of the inter vivos transfers had been achieved by use of the power of attorney; they were done by Grandma herself. The only thing the attorney in fact had done was drive Grandma to the bank.
This analysis was too narrow, the Supreme Court rules today. In order to make out a claim like this, a plaintiff may take either of two approaches:
[T]he presumption of undue influence arises and the burden of going forward with the evidence shifts [to the defendant] when weakness of mind and grossly inadequate consideration or suspicious circumstances are shown or when a confidential relationship is established.[Emphasis original in today’s opinion] Note the use of or in that sentence; a plaintiff can get the benefit of a presumption when a fiduciary (such as an attorney in fact) gets a favorable transfer and either of the above two circumstances exist. The allegations in the complaint clearly spelled out a claim that the attorney-in-fact had a confidential relationship with Grandma, and as long as that person received some benefit, the plaintiff gets the benefit of the presumption, so the case can go forward.