Wasserman's Appellate Summaries

August 8, 2000
By Lawrence Wasserman, Esq.

Netlaw Libraries welcomes attorney Lawrence Wasserman as a new website contributor. We are pleased to announce that his guest column, which synopsizes the recent decisions from the Ninth Circuit Court of Appeals, the California Supreme Court, the six California appellate districts, as well as some of the recent and interesting decisions from the U.S. Supreme Court, will be appearing as a regular feature for members and guests visiting the Netlaw Libraries website. We hope that you will find it to be a good way to start your legal research day and welcome your comments and criticisms regarding the column.

San Remo Hotel v. City And County Of San Francisco
Case No. A083530
California Court of Appeal, First District, Division Five
(Certified for publication with the exception of part II. B and part II. C.)

REAL PROPERTY-CONSTITUTIONAL-TAKING BY CITY THROUGH CONVERSION FEE FROM RESIDENTIAL TO TOURIST HOTEL
The San Remo Hotel is a small, 62-unit, three-story hotel in the North Beach or Fisherman’s Wharf area of San Francisco. Since the early 1970's it had had a permit from the City to operate as a hotel, and the City had always collected local taxes on the Hotel’s rentals to tourists. It had some 10 to 20 long-term residents and operated in part as a bed and breakfast. In 1990, a Hotel Conversion Ordinance was passed, which generally forbids the rental of rooms in residential hotels to tourists during the tourist season, absent permission from the City. The HCO also provided that the residential hotel may not rent such rooms to tourists except by special permission of the City. The trial court sustained the City’s demurrers to San Remo Hotel's claim that the City carried out an unconstitutional taking when it required the Hotel to pay the City the amount of $567,000, in the form of a conversion fee, to operate as a tourist hotel, under a Hotel Conversion Ordinance. The trial court ruled as a matter of law that the operation of the Hotel as a tourist hotel in 1987 was not a lawful prior nonconforming use.
HELD: The government is prohibited from taking private property for public use without just compensation. A heightened or intermediate level of scrutiny must be applied to an exaction by a governmental unit as a condition of the legal use of property. The Hotel’s pleadings state causes of action that the required payment was an unconstitutional taking. If actual use of the Hotel by tourists were demonstrated, such use, as a matter of law, could legally be a prior nonconforming use for purposes of the HCO, and the trial court’s ruling on this legal issue must be reversed. Reversed and remanded.

San Diego County Health And Human Services Agency v. Helen T.
Case No. D034773
California Court of Appeal, Fourth District, Division One

FAMILY LAW-JUVENILE DEPENDENCY-DENIAL OF REUNIFICATION SERVICES BASED ON PAST REUNIFICATION FAILURES-AMERICANS WITH DISABILITIES ACT IRRELEVANT TO JUVENILE CHILDREN DEPENDENCY PROCEEDINGS
Helen is developmentally disabled. Her history with child protective services, dates back to 1988. It includes problems with neglect, physical abuse, inadequate food in the home, failure to get proper medical attention for her children and domestic violence by her boyfriend. Her minor children, Christina, Larry and Ariel, became dependents of the juvenile court in 1997 after a finding Helen was unable to properly care for them. Helen T.'s minor daughter, Diamond, was made a dependent of the juvenile court and removed from her custody.
HELD: In determining whether the child is in present need of the juvenile court's protection, the court may consider past events. The evidence showed Helen's chronic mental disorder, even with education, therapy and medication, prevented her from being able to safely parent Diamond. The court properly denied Helen reunification services based on the prior removal of her other children and there was no showing reunification was in Diamond's best interest. The Americans With Disabilities Act does not directly apply to juvenile dependency proceedings and cannot be used as a defense in them. Affirmed.

In Re: Marriage of Dancy
Case No. E021923
California Court of Appeal, Fourth District, Division Two
(Certified for publication with the exception of parts II. and V.)

FAMILY LAW-NO STATUTE OF LIMITATIONS ON CHILD SUPPORT-LACHES DEFENSE NOT PRECLUDED
John and Kay married in 1967. They had one son, John Edward Dancy, Jr., born on November 13, 1967, before they separated on September 23, 1968. On March 7, 1969, an interlocutory judgment of divorce was entered, awarding custody of John Jr. to Kay, subject to reasonable visitation by John. Commencing April 1, 1969, John was to pay Kay $75 per month in child support, until John Jr. reached the age of majority, became self-supporting or until further order of the court. A final judgment of dissolution of marriage was entered on July 30, 1970. On November 20, 1995, Kay filed an order to show cause to establish child support arrearages, including principal and interest. At trial, Kay sought support arrearages for 160 months. The trial court awarded her substantial arrearages.
HELD: There was not estoppel or laches baring judgment. Although accrued arrearages are treated like money judgments that may not be retroactively modified, the trial court nevertheless retains equitable discretion in determining whether and the extent to which original support provisions should be enforced. There is no evidence of legislative intent to specifically exclude laches as a defense to prevent the collection of child support arrearages despite the lack of any statute of limitations or the elimination of the due diligence defense. Delay alone is insufficient to establish laches. There must be both (1) unreasonable delay and, (2) prejudice to the party asserting laches. By statute, (1) a judgment for child or spousal support was exempt from any requirement that judgments be renewed and, (2) such judgment, including lawful interest and penalties, is enforceable until paid in full. Attorney fees were also properly awarded. Affirmed.

City Of Santa Cruz v. Pacific Gas And Electric
Case No. H019427
California Court of Appeal, Sixth District

OTHER-CONSTITUTIONAL FRANCHISE FOR SUPPLYING WATER AND LIGHT
The City of Santa Cruz and 71 other parties joined in a class action challenging whether PG&E holds a constitutional franchise to supply light in the plaintiff cities. A franchise in this context is the right to use city streets to distribute electricity, gas or water to the city and its inhabitants. Normally the utility is charged a franchise fee as consideration for that privilege. The trial court found that PG&E had a constitutional franchise and except as to two plaintiffs, the court granted a motion for summary judgment in favor of PG&E.
HELD: No payment is required, for the exercise of a constitutional franchise. Constitutional franchises are derived from the California Constitution of 1879. This states that: "In any city where there are no public works owned and controlled by the municipality for supplying the same with water or artificial light, any individual, or any company duly incorporated for such purpose under and by authority of the laws of this State, shall, under the direction of the Superintendent of Streets, or other officer in control thereof, and under such general regulations as the municipality may prescribe for damages and indemnity for damages, have the privilege of using the public streets and thoroughfares thereof, and of laying down pipes and conduits therein, and connections therewith, so far as may be necessary for introducing into and supplying such city and its inhabitants either with gaslight or other illuminating light, or with fresh water for domestic and all other purposes, upon the condition that the municipal government shall have the right to regulate the charges thereof." After extensive review of the record the Court concluded that the evidence supported a constitutional franchise as to some but not all the cities. Affirmed in part and reversed in part.

People v. Mitchell
Case No. B123823
California Court of Appeal, Second District, Division Seven

ORDER
Modification of opinion filed herein on July 10, 2000, not affecting the judgment.

Rosasco v. Commission On Judicial Performance
Case No. A086366
California Court of Appeal, First District, Division Three

ORDER
Modification of opinion filed herein on July 18, 2000, not affecting the judgment.

People v. Cain
Case No. E025274
California Court of Appeal, Fourth District, Division Two

ORDER
Modification of opinion filed herein on July 11, 2000, not affecting the judgment.

In Re: Kadjevich, Debtor/Nicholas Kadjevich v. Robert Kadjevich
Case No. 99-15367
U.S. Court of Appeals for the Ninth Circuit

BANKRUPTCY-ADMINISTRATIVE EXPENSES OF BANKRUPTCY ESTATE MUST BE POST PETITION AND EXPENSES OF THE ESTATE
Angela Kadjevich died 20 years ago. Her sons Nicholas and Robert have been in litigation since then. Robert has been in Bankruptcy since 1987. A settlement was reached between Nicholas and Robert's bankruptcy estate. Nicholas was to receive the most valuable property that remained in Angela's probate estate. Because this property was worth more than Nicholas' share of Angela's estate, he was required to make an equalizing payment to Robert's bankruptcy estate, and Nicholas was allowed to offset the full amount of a previous judgment in a fraud action against Robert. Nicholas obtained financing for the equalizing payment. After the bankruptcy court refused to offset the financing costs against the amount due he requested that the amount charged for the financing and the attorney fees awarded in the fraud case be classified as an administrative expense. The bankruptcy court denied the request ant the district court agreed.
HELD: When the assets of a bankruptcy estate are distributed to the bankrupt's creditors, claims for administrative expenses are among the very first unsecured claims that are paid. Administrative expenses are the he actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case. Only post-petition debts can be treated as administrative expenses. The attorney fee award was a pre petition debt and the financing costs were not expenses of the estate. Affirmed.

In Re: Smith, Debtor/Smith v. Kennedy, Et Al.
Case No. 98-56795
U.S. Court of Appeals for the Ninth Circuit

BANKRUPTCY-THIRTY DAY PERIOD FROM CONCLUSION OF FIRST MEETING OF CREDITORS TO FILE OBJECTIONS TO DEBTOR'S CLAIMED EXEMPTIONS-RIGHT TO ADJOURN CREDITORS MEETING-EFFECT OF ADJOURNING CREDITORS MEETING UNTIL FURTHER NOTICE
Kennedy and others obtained a judgment against Smith. Smith filed for Chapter 11 bankruptcy in August 1995. Smith claimed an exemption for real property, which he asserted, was a retirement investment. The creditors' meeting in Smith's bankruptcy was initially held on September 8, 1995. The meeting was continued to September 22 and then to October 27, 1995. At this October 27 hearing, after questioning Smith about certain omissions, the trustee adjourned the meeting "until further notice." On June 19, 1996, Kennedy filed objections to Smith's exemption of the real property from the bankruptcy estate. Smith's motion to dismiss the objections as untimely was denied and the exemption disallowed.
HELD: The Bankruptcy rules provide that the trustee or any creditor may file objections to the list of property claimed as exempt by the debtor within 30 days after the conclusion of the meeting of the creditors unless, within such period, further time is granted by the court. If the meeting of creditors is adjourned, rather then concluded, the thirty-day period for objections does not begin to run. The meeting may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further notice. Adjournments "until further notice" are permissible, but the bankruptcy court should not allow them in all cases. In this case, an adjournment "until further notice" was appropriate, since Smith indicated he would amend his schedules to correct errors and omissions. Smith needed to offer more than merely his intentions and dictionary definitions to satisfy the courts that the property was acquired as part of his private retirement plan. Affirmed.

LabelGraphics v. Comissioner Of The Internal Revenue Service
Case No. 99-70164
U.S. Court of Appeals for the Ninth Circuit

TAXES-DISALLOWANCE OF CORPORATE PRESIDENT'S COMPENSATION AS EXCESSIVE-FACTORS IN DETERMINING REASONABLE COMPENSATION FOR CORPORATE EXECUTIVE OF WHOLLY OWNED CORPORATION
LabelGraphics produces pressure-sensitive identification materials such as product labels. Martin started the company and during the 1990 tax year, was the president and the 1989 and 1990 corporation's sole shareholder. LabelGraphics sustained a net loss after taxes in 1990. During this time the company developed a highly successful proprietary process for producing labels. Martin played a leading role in the substantial research and development that led to the creation of the process. In 1990 Martin's salary was $156,000 and he received a bonus of $722,913, substantially higher than all previous bonuses. The IRS denied the payment as a deduction on LabelGraphics tax return. The Tax Court found that $406,000 was reasonable compensation.
HELD: A corporation may deduct a reasonable allowance for compensation for personal services rendered. When payments are made to an individual who is both a corporate employee and a principal shareholder, a two-prong test is applied to determine whether the distribution is truly compensatory. First, the amount of compensation must be reasonable and, second, the payment must be purely for services, or have a purely compensatory purpose. The Tax Court considered the five factors for determining reasonable compensation. Its finding that $406,000 was reasonable is not clearly erroneous.

Choi v. Gaston, Chief of Police/City Of Anaheim
Case No. 98-56854
U.S. Court of Appeals for the Ninth Circuit

CIVIL RIGHTS-SUMMARY JUDGMENT-QUESTIONS OF FACT
Choi sued defendants for various violations of his constitutional and statutory rights arising from defendants' actions in detaining and arresting him during their search for a suspect in the shooting of an officer of the California Highway Patrol. Summary judgment was for the defendants.
HELD: The evidence was sufficient to give rise to a jury question regarding whether the officers had reasonable suspicion to stop Choi or probable cause to arrest him, or instead acted on the basis of racial profiling. The evidence was also sufficient to raise a jury question regarding when the conduct of the Anaheim officers evolved from a stop into an arrest. In other respects, the field investigation, his stop for investigation, the absence of evidence of racial stereotyping by the Anaheim police, summary judgment was properly granted. Affirmed in part and reversed in part.

First Pacific Bancorp v. Hefler, Chairman/Federal Deposit Insurance Corporation
Case No. 98-55634
U.S. Court of Appeals for the Ninth Circuit

OTHER-RIGHT OF PRIVATE ACTION FOR ACCOUNTING AGAINST FEDERAL DEPOSIT INSURANCE CORPORATION
In 1990, the California Department of Banking appointed the Federal Deposit Insurance Corporation as Receiver for First Pacific Bancorp. Nearly six years the FDIC terminated its receivership of the Bank. The FDIC gave Plaintiffs two pages of unaudited financial information covering the period from 1990 through December 31, 1995. Unable to get anything but cursory financial information for the six year period, plaintiffs filed suit for an accounting. Summary judgment was for the FDIC.
HELD: The FDIC, in its capacity as receiver, has been granted a broad range of powers and duties designed to ensure maintenance of the going concern value of failed banks and to avoid significant disruption in banking services. The statute granting the broad powers also imposes on the FDIC a duty to maintain a full accounting of each conservatorship and receivership or other disposition of institutions in default. Shareholders of an institution in receivership have a right to receive the reports prepared in accordance with the statute. In general, a violation of a federal statute, which results in harm to an individual, does not automatically give rise to a private cause of action in favor of that person. After an extensive statutory analysis the plaintiffs were found to be within the class of persons to be benefited by the statute, there is an indication of legislative intent to allow a remedy, which is consistent with the statutory intent, and is a remedy traditionally allowed in state courts. Reversed and remanded.

Association Of Western Pulp And Paper Workers Local v. Rexam Graphics
Case No. 99-35862
U.S. Court of Appeals for the Ninth Circuit

LABOR-ARBITRATION OF EMPLOYEE TERMINATION UNDER COLLECTIVE BARGAINING AGREEMENT-CONSIDERATION OF EMPLOYEE'S POST TERMINATION IN FASHIONING REMEDY-EXCEEDING SCOPE OF CBA
Greene was on reprimand status for excessive absenteeism at the time she left work, giving various excuses for leaving. She was terminated and the Union filed a grievance under the collective bargaining agreement. The arbitrator concluded that Rexam had acted without just cause in discharging Greene because Rexam had never notified the Union of its concerns about her and did not thoroughly investigate Greene's proffered reasons for leaving work on the date of her firing. The arbitrator also found that Greene was untruthful at the arbitration hearing, that she had lied on her application for unemployment benefits, and that her dishonesty had caused the employer-employee relationship to deteriorate to the point where she can no longer be trusted. Reinstatement was denied, but backpay and benefits were awarded to the date of the hearing. Rexam sued. The district court granted summary judgment to Rexam.
HELD: As long as an arbitrator's award draws its essence from the contract the interpretation of the scope of the issues submitted to him is entitled to deference. In the case before us, the parties directly asked the arbitrator to decide both whether Greene was terminated for just cause and, if not, what the appropriate remedy should be. The arbitrator considered Greene's post-termination conduct as a discrete issue relating only to the appropriate remedy, and not as an independent basis for termination. Industrial common law also supports consideration of post-termination conduct in deciding an appropriate remedy, even if the employee was initially fired without proper cause. The award drew its essence from the CBA. Affirmed.

Wasserman's Archived Appellate Summaries

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