author: PATRICK F. KELLY, District Judge.

text:
    BANK OF OKLAHOMA, N.A., a National Banking Association, Plaintiff, v. FIDELITY STATE BANK AND TRUST COMPANY, DODGE CITY, KANSAS, Defendant.
    No. 83-1747-K.
    United States District Court, D. Kansas.
    Dec. 9, 1985.

      E. Edward Brown, Garden City, Kan., Gregory A. Guerrero, Tulsa, Okl., for plaintiff.
    Max E. Estes, Dodge City, Kan., for defendant.
   MEMORANDUM AND ORDER

PATRICK F. KELLY, District Judge.

This is a tort action between two secured creditors with competing claims in the 1981 crops of their mutual debtors, Louis, Connie and Gail Beery (Beerys). The Bank of Oklahoma (BOK) is seeking recovery from Fidelity State Bank (FSB) for the latter’s alleged conversion of the proceeds of the 1981 Beery crops, claiming a superior right to those monies by virtue of a prior perfected security interest in the crops. FSB claims a superior right in the proceeds based on a subordination agreement in which, it argues, BOK subordinated its security interest in the 1981 crops in exchange for FSB’s loan to the Beerys to help finance their 1980 and 1981 farm operations.

Defendant FSB has filed a motion to dismiss on grounds BOK may not now maintain this action, having already secured a judgment against the Beerys on their contract and foreclosing against the real estate securing that note. That judgment, however, was obtained in a contract action brought by the Small Business Administration, in which BOK appeared as a defendant. By contrast, this is a tort action against a different party, arising out of different facts, and it does not appear plaintiff is barred from maintaining this action by the principles of res judicata and collateral estoppel. Defendant’s motion to dismiss is denied.

Plaintiff’s motion for partial summary judgment raises the question whether or not BOK subordinated its security interest in the Beerys’ 1981 crop, as claimed by FSB. The documentary evidence shows on its face that regardless of what FSB’s interpretations and assumptions may have been, BOK at no time subordinated that particular security interest and is therefore entitled to recover on its conversion claim. Plaintiff’s motion for partial summary judgment is granted.

Facts

The easiest way to summarize the critical facts and documentary evidence in this case is by means of the following timetable:

2/16/78 BOK loaned the Beerys $1,685,000, secured by mortgages on the Beerys’ real estate in Gray County, Kansas, and security interests in machinery and equipment, feed, grain and harvested crops owned or thereafter acquired, and in “all annual and perennial crops of whatever kind and description grown or growing or to be planted or produced on land owned, rented, leased, or hereafter acquired ____” (Emphasis added.)

3/17/78 & j/7/78 BOK’s financing statements covering the Beerys’ feed, crops, and machinery and equipment were filed with the Kansas Secretary of State and the Gray County Register of Deeds, respectively; both statements recite that “proceeds and products of collateral are also covered.”

12/31/79 The Bancoklahoma Agri-Service Corp. (BOASC) loaned the Beerys an unspecified amount of money and took back a “farm operating note.”

7/28/80 Meetings were held between BOK, BOASC, the Beerys, and their guarantors concerning the Beerys’ financial difficulties and their failure to make payments on a current basis on the Oklahoma Banks’ loans. These parties entered into a written agreement dated July 1, 1980, in which BOK and BOASC agreed to refrain from foreclosing on their collateral in exchange for the Beerys’ agreement to secure additional financing from a third party lender. The critical language of that agreement is in 114:

“Beery agrees that on or before September 30, 1980, he will present to the Bank and Guarantors a plan acceptable to [them] for obtaining new funds from other sources and financial institutions in amounts sufficient to finance the remainder of the Beery 1980 and 1981 farming operations, including all existing accounts payable and overdrafts outstanding at the date hereof. Bank [BOK and BOASC, collectively] agrees to subordinate its existing security interest in the 1980 com, milo and soybean crop and all 1981 crops including com, milo, soybean, wheat and alfalfa, to such interim lender upon its commitment to fund the farming operations and accounts payable, etc. Should the proceeds of the 1980 corn, milo and soybean crop be sufficient to repay the interim lender, Beery agrees to pay to the Bank in escrow an amount necessary to assure the payment of the February 1, 1981, principal and interest payment due on the Term Equipment Note.” (Emphasis added.)

8/21/80 BOK, BOASC, the Beerys, and Fidelity State Bank entered into a written subordination agreement, the pertinent portions of which read:

“1. Fidelity represents and warrants that it has made loans to the Borrower in the principal amount of Four Hundred Thousand Dollars ($400,000) evidenced by a promissory note dated August 21, 1980, payable with interest as provided therein on or before December 19, 1980. To secure the Fidelity loan, the Borrower has granted a security interest in the Borrower’s 1980 growing crops of corn, milo and soybeans growing on certain lands in Gray County, Kansas____
“2. The Bank hereby subordinates its first and prior security interest in the Borrower’s 1980 growing crops of corn, milo, and soybeans growing on the lands listed on Exhibit ‘A’ hereto to the security interest of Fidelity in such crops up to the amount of $400,000 plus accrued interest and reasonable costs of collection incurred in connection therewith.” (Emphasis added.)

8/21/80 BOK, BOASC, Fidelity and the Beerys’ guarantors sign and enter into a letter agreement prepared by the attorney for BOK, which recites:

“The Beerys have requested, and each of the guarantors have consented to the BOK’s and BOASC’s subordination of their lien interest in the Beerys’ 1980 growing crops of corn, milo and soybeans pursuant to the terms of [the] Subordination Agreement____ The Agreement contemplates the Beerys obtaining a plan acceptable to the bank and the guarantors for obtaining new funds in an amount sufficient to finance the remainder of the Beery 1980 and 1981 farming operations. It is understood that the $400,000 loan from Fidelity State Bank may not be sufficient to fund all of the operations contemplated in Paragraph 4 of the [July 1, 1980] Agreement. However, each of you approve the subordination and agree that our subordination of security interest in the 1980 corn, milo and soybean crop to Fidelity State does not effect [sic] your obligations to BOK and BOASC and is approved by each of you.” (Emphasis added.)

This letter agreement was signed by Timothy Jackson, a commercial officer on behalf of BOK and BOASC; Thomas Martin, acting president of FSB; and the three guarantors; but was not signed by the Beerys. 8/21/80 FSB and the Beerys entered into a promissory note for $400,000, secured by a security agreement of the same date covering the “1980 Growing Crops of Corn, Milo, and Soybeans____” (Emphasis added.)

8/25/80 FSB’s financing statement covering the Beerys’ 1980 growing crops of corn, milo and soybeans was filed with the Gray; County Register of Deeds.

11/25/80 Beerys’ BOASC operating note fell due, which they were required to pay under the terms of paragraph 1 of the July 1, 1980 agreement. Beery persuaded the Oklahoma banks to release their security interest in his 1980 alfalfa crop to FSB in exchange for the latter’s loan of an additional $271,734.15 to pay off the BOASC operating note. The Beerys then entered into a new security agreement with FSB granting it a security interest in stored corn, milo, soybeans and alfalfa, which secured a new consolidated note in the amount of $697,850, also dated November 25, 1980. According to plaintiff’s computations, the value of the combined collateral, the 1980 corn, milo, soybean and alfalfa crops, exceeded the amount of FSB’s consolidated loan by a margin of at least approximately $727,000.

11/28/80 Timothy Jackson, a commercial lending officer acting on behalf of BOASC and BOK wrote a letter to FSB regarding the formers’ release of their security interest in the Beerys’ alfalfa crop. In pertinent part, the letter read:

“The purpose of this letter is to inform your office of the release of our Security Interest in the above-named subject 1980 Corn, Milo, Soybean and Alfalfa Harvested Farm Products, while all other Security Interests shall remain in full force and effect, as evidenced by the attached UCC-3 Financing Statement____’ (Emphasis added.)

12/1/80 FSB filed a new financing statement with the Gray County Register of Deeds covering the Beerys’ corn, milo, soybeans and alfalfa in storage.

Spring 1981 Without notice to BOK or BOASC, FSB permitted the Beerys to use some of the proceeds of the 1980 stored corn, milo, soybeans and alfalfa to finish paying the 1980 operating expenses and additional expenses in preparation for the 1981 farming year, rather than applying those proceeds to reduce the Beerys’ debt to FSB as originally anticipated. This permission was given to the Beerys by an FSB officer who believed paragraph 4 of the July 1, 1980 agreement authorized FSB to enter such an arrangement, and that as a result FSB would thereby obtain a security interest in the Beerys’ 1981 crops superior to that of BOK.

1981 Beery ultimately paid off the FSB debt with funds which included all of the proceeds from the 1981 crops. After-wards, no money from the 1981 crops remained to apply toward or satisfy the Beerys’ debt to BOK.

8/2/83 BOK filed the present suit seeking recovery from FSB for its alleged conversion of the proceeds of the 1981 crops, contrary to BOK’s prior perfected security interest therein.

8/20/84 In United States v. Beery, No. 82-1651 (D.Kan.1984), BOK obtained a judgment in rem against Louis Beery and in personam against Connie and Gail Beery, for $992,854.87, with interest at 18% until paid. Judge Theis ordered that BOK’s mortgage on real estate in Gray County securing the Beerys’ note be foreclosed and that property be sold in partial satisfaction of those judgments. Slip op. at 9.

12/20/84 BOK filed its Order Confirming Marshal’s Sale in Case No. 82-1651. BOK itself bought the real estate at that sale for $274,750, and reduced the judgment rendered in its favor by the same amount.

Defendant’s Motion to Dismiss

The issue presented by FSB’s motion to dismiss is whether, by virtue of the judgments obtained by BOK in Case No. 82-1651 and the subsequent foreclosure on the Beerys’ real estate, plaintiff is now barred under the principles of res judicata from maintaining this action to recover for defendant’s alleged conversion of the proceeds of the 1981 crops in which plaintiff held a prior perfected security interest. Specifically, defendant FSB argues that the Beery notes and indebtedness merged into the judgment rendered in BOK’s favor in the prior case and were accordingly extinguished, and that BOK cannot maintain a second action such as this to foreclose the underlying mortgage or security interests because those causes of action were not raised in the earlier case. In short, FSB contends the security interest underlying BOK’s claim of conversion in this case has already merged into the prior judgment and cannot now be relied on in this action.

The primary support for defendant’s position is Judge Theis’ opinion in In re Wilson, 390 F.Supp. 1121 (D.Kan.1975). That case held that a secured lender’s failure to enforce an Article 9 security interest at the time the lender obtained a personal judgment against the debtor constituted an impermissible splitting of a cause of action under Kansas law; as a result, the lender was not allowed to file a secured claim when the debtor later filed bankruptcy. Judge Theis reached this decision relying on a number of earlier Kansas cases indicating

that under the principles of res judicata, when a creditor brings either an action on a note or an action to foreclose a real estate mortgage securing that note, he has spent his one opportunity to judicially enforce the obligation. If the creditor first forecloses on the mortgage, he is precluded from bringing a subsequent action to obtain an in personam judgment on the note, and if he first obtains an in personam judgment, he is precluded from bringing a subsequent action to foreclose the mortgage. If the creditor wishs to both foreclose the mortgage and obtain an in -personam judgment, he must assert both claims in a single action.

Wilson, 390 F.Supp. at 1124, citing Matter of Downey, No. 8726-B-2 (D.Kan.1964); Kearny v. Nunn, 156 Kan. 563, 134 P.2d 635 (1943); and Rossiter v. Merriman, 80 Kan. 739, 104 P. 858 (1909). The secured creditor in Wilson argued it was entitled to proceed in separate actions under the following provisions of the Kansas UCC, K.S.A. 84-9-501:

(1) When a debtor is in default under a security agreement, a secured party has the rights and remedies provided in this part____ He may reduce his claim to judgment, foreclose or otherwise enforce the security interest by any available judicial procedure____ The rights and remedies referred to in this subsection are cumulative.
* * * * * *
(5) When a secured party has reduced his claim to judgment the lien of any levy which may be made upon his collateral by virtue of any execution based upon the judgment shall relate back to the date of the perfection of the security interest in such collateral____

Judge Theis stated that these provisions supported, rather than nullified, application of the principles of res judicata; “[sjince the rights and remedies are cumulative, the creditor is not forced to elect between the remedies and thus is free to assert them simultaneously” in his one action. Wilson, id. at 1125.

Defendant FSB’s contentions that Wilson applies to this case and bars any recovery by plaintiff BOK are rejected for two reasons. First, the unique facts of this ease remove it from the framework in which Wilson was decided, and it is therefore distinguishable. In Wilson, the secured creditor acted affirmatively to institute an action on the debt and obtain an in personam judgment for the full amount of the loan, without attempting to replevin or foreclose on the collateral. By contrast, in this case plaintiff BOK has not acted in an affirmative manner exhibiting any election of remedies on its part, to which it should now be bound. Rather, BOK’s interests in the Beerys’ note and the real estate securing that indebtedness were asserted in the prior case, No. 82-1651, purely in a defensive position in the contract action brought by the United States on behalf of the Small Business Administration. Especially when one considers that BOK’s claim in the present case is brought against a different party, not the Beerys but FSB, and BOK’s claim sounds not in contract but in tort, it would be inequitable and unreasonable to now say BOK, in its earlier position as one of a number of defendants in the United States’ contract action, should nevertheless have interposed all claims potentially arising out of its security interests in the Beerys’ personal property.

The second, and perhaps more important, reason to reject defendant’s argument is that Wilson has been substantially discredited by both the Tenth Circuit Court of Appeals and UCC commentators. In Hill v. Bank of Colorado, 648 F.2d 1282 (10th Cir.1981), the court affirmed Chief Judge O’Connor’s holding that under Colorado UCC law the bar against cumulative actions on an obligation does not preclude a bank, which had taken an in personam judgment prior to the debtor’s bankruptcy but had failed to foreclose or execute on the judgment, from enforcing its security agreement against the bankruptcy trustee. That conclusion was reached in large part on the Colorado Court of Appeals decision in Bilar, Inc. v. Sherman, 40 Colo.App. 38, 572 P.2d 489 (1977), holding that under § 4-9-501 of the Colorado UCC a secured creditor may pursue those methods of collection afforded under the code or through judicial processes otherwise available, and when the latter course is chosen the creditor does not relinquish any rights obtained by virtue of his security interest.

Defendant FSB in this case argues Hill v. Bank of Colorado does not apply because that decision involved Colorado law rather than that of Kansas. However, UCC § 4-9-501 is identical in both states, and Hill has been interpreted as the-Tenth Circuit’s rejection of the Wilson analysis. Commenting on the two cases, Professor Barkley Clark said about Wilson:

Even when limited to its facts, however, the Wilson case seems dead wrong. If the election of remedies doctrine is to be resurrected, it should be done by the legislature and not the courts.

Clark, The Law of Secured Transactions Under the UCC, ¶ 4.3[2] (1980). Regarding the Tenth Circuit’s later decision in Hill, he states:

The Tenth Circuit has rejected the approach taken to cumulative remedies by In re Wilson____ In re Hill, like Wilson, involved a situation where a bank with a security interest in the bankrupt’s personal property had taken an in personam judgment prior to bankruptcy and had failed to execute or foreclose on the judgment. The Tenth Circuit held that such abstinence did not change the bank’s status to that of a general unsecured creditor in the bankruptcy proceeding. The doctrine of res judicata did not apply because that doctrine only provides that the same parties may not litigate the same controversy twice; it does not preclude parties from asserting different consistent remedies. Under § 9-501(1), the bank’s remedies were cumulative. Thus, it was consistent for the bank, even though it failed to pursue the collateral after obtaining the in personam judgment against the debtor, to retain its status as a perfected secured creditor in the bankruptcy proceeding. Although the Tenth Circuit held that Colorado law rather than Kansas law controlled and thus did not expressly overrule the Wilson case, the prior decision was clearly rejected by the higher court, particularly since the Colorado and Kansas versions of Article 9 are exactly the same. Thus, the Wilson deéision, which badly misconstrued Article 9, is effectively scotched.

Clark, The Law of Secured Transactions, tf 4.3[2] (1985 Cum.Supp. No. 2) (emphasis added).

In conclusion, the Kansas appellate courts have at no time reaffirmed their adherence to the waiver of remedy doctrine after the enactment of K.S.A. 84-9-501, nor have they adopted the Wilson decision and rationale. For that reason, and because of the Tenth Circuit’s implied rejection of Wilson in the Hill case, the Court does not feel bound by that case. The UCC clearly preserves for a secured creditor a variety of recourses after default, in addition to those otherwise available through judicial process, and plaintiff BOK is certainly free to now seek recovery for defendant’s conversion, notwithstanding BOK’s prior judgment in rem and foreclosure of the real estate mortgage. Defendant’s motion to dismiss is denied.

Plaintiffs Motion for Partial ' Summary Judgment

Plaintiff’s motion for partial summary judgment seeks to establish as a matter of law its superior right to the proceeds of the Beerys’ 1981 crops by virtue of BOK’s pri- or perfected security interest. The precise issue involved in the motion is whether FSB is correct in its assertion BOK subordinated its security interest in the 1981 crops at the same time it subordinated "the security interest in the 1980 crops to FSB in exchange for FSB’s loan to the Beerys. Repetitive and voluminous briefs have been filed by both parties, but the question involves only interpretation of the written documents previously summarized.

Those written instruments are clear on their face that although BOK made a general commitment to the Beerys in the July 1, 1980 agreement that it would subordinate its security interest in both the 1980 and 1981 crops to an interim lender who advanced sufficient money to fund the Beerys’ farming operations for those years, FSB did not provide the Beerys enough money to satisfy that condition and was accordingly only given a prior security interest in the debtors’ 1980 crops, with BOK retaining its superior status as to the 1981 crops. Defendant attempts to answer plaintiff’s motion for partial summary judgment by claiming that regardless of the particular language used in the parties’ subordination agreements and correspondence, FSB was at all times acting in reliance on paragraph 4 of the July 1, 1980 agreement between BOK and the Beerys, promising plaintiff’s subordination of its security interest in the crops for both years. Under the law governing the construction of contracts, and the actual language contained in the agreements entered into between plaintiff and defendant, those instruments are free from ambiguity and require no extrinsic evidence to aid in their interpretation. The evidence FSB relies on to create “material questions of fact” about the intent of the parties when entering these agreements is therefore inadmissible.

Where the provisions of a written contract are clear and unambiguous, there is no occasion for applying the rules of construction, and the contract must be enforced according to its terms so as to give effect to the intention of the parties; that must be determined from the “four corners” of the instrument itself. Steel v. Eagle, 207 Kan. 146, 483 P.2d 1063 (1971). The intention of the parties and the meaning’of a contract are to be deduced from the instrument where its terms are plain and unambiguous; the facts and circumstances surrounding its execution become competent only in the event the instrument is ambiguous on its face and requires aid to clarify its intent. Martin v. Edwards, 219 Kan. 466, 548 P.2d 779 (1976). A contract is “ambiguous” only when the words used to express the meaning and intention of the parties are insufficient in the sense the contract may be understood to reach two or more possible meanings. Ambiguity does not arise, however, from a total omission. Duffin v. Patrick, 212 Kan. 772, 512 P.2d 442 (1973). Yet even where a contract is ambiguous, evidence of the facts and circumstances existing prior to and contemporaneous with its execution are competent only to clarify the intent and purpose of the contract, not to vary or nullify the clear and positive provisions of the contract. First National Bank of Olathe v. Clark, 226 Kan. 619, 602 P.2d 1299 (1979). It is a judicial function to interpret a written contract which is free from ambiguity and does not require oral testimony to determine its meaning. Pace v. First National Bank of Osawatomie, Kansas, 271 F.Supp. 230 (D.Kan.1967).

Defendant FSB places great reliance on the provisions of paragraph 4 of the July 1, 1980 agreement between BOK and the Beerys, in which BOK promised to subordinate its security interests in both the 1980 and 1981 crops to an interim lender who would fund the farming operations for those years. For two reasons, however, evidence of FSB’s alleged reliance on that provision is not admissible to vary the express terms of the subsequent instruments in which BOK released only its security interest in the 1980 crops. First, there is evidence within those subsequent writings themselves that FSB did not loan the Beerys sufficient funds for both the 1980 and 1981 operating years, and therefore would not qualify for priority even under the terms of the July 1, 1980 agreement. Secondly, and more importantly, because BOK and FSB themselves later entered into written agreements expressly defining their rights, it does not appear FSB can now admit into evidence and rely on the provisions of the earlier agreement, particularly in an effort to materially vary the clear provisions of the parties’ own later contracts. As a general rule, when a contract is complete and free from uncertainty, parol evidence of prior or contemporaneous agreements or understandings tending to vary the terms of the contract evidenced by writing is inadmissible. Hird v. Williams, 224 Kan. 14, 577 P.2d 1173 (1978). The Kansas UCC itself provides that a writing intended by the parties as a final expression of their agreement may not be contradicted by evidence of any pri- or agreement or of a contemporaneous oral agreement. K.S.A. 84-2-202. Under this rule, FSB is limited to defining its rights within the series of written agreements entered into with BOK beginning August 21, 1980.

Those documents, however, maybe construed together. Where two or more instruments are executed by the same parties at or near the same time in the course of the same transaction and concerning the same subject matter, they will be read and construed together to determine the intent of the parties. Burge v. Frey, 545 F.Supp. 1160 (D.Kan.1982); Hall v. Mullen, 234 Kan. 1031, 678 P.2d 169 (1984). This rule also applies where the parties involved comply with the provisions of interrelated documents, although one of the documents was not executed by a party to the transaction. Atlas Industries, Inc. v. National Cash Register, 216 Kan. 213, 531 P.2d 41 (1975). These principles require the Court to view the series of written agreements beginning August 21, 1980 as a whole. So viewed, they show that in consideration for FSB’s initial loan of $400,000 to the Beerys, BOK subordinated its security interest in the 1980 corn, milo and soybean crops, and that the parties jointly recognized that amount was likely insufficient to fund the Beerys’ farming operations for both 1980 and 1981. Next, in consideration of an additional loan of $271,734.15 from FSB to the Beerys, BOK subordinated its security interest in the 1980 alfalfa crop, expressly stating to FSB that BOK’s other security interests shall remain in full force and effect. Now FSB argues to the Court that in the spring of 1981, when it allowed Beery to use the proceeds of his 1980 crops to partially finance this 1981 operations rather than reduce his debt to FSB, that action was taken in reliance on the July 1, 1980 agreement and FSB’s belief it would, as a result, receive BOK’s subordination of its security interest in the 1981 crops. The only conclusion is that that action was undertaken without justification, and certainly BOK should not now be bound by the subsequent, unilateral suppositions of FSB and its officers. Courts must be extremely careful in referring to the actions of parties after a contract is executed as an aid to interpreting intention, particularly the actions of one party not concurred in by the other. Jennings v. General Medical Corp., 604 F.2d 1300 (10th Cir.1979).

Absent fraud or mutual mistake, a clear and unambiguous contract must be enforced according to its terms. Duffin v. Patrick, 212 Kan. 772, 512 P.2d 442 (1973). There is in this case no mutual mistake, only the unilateral mistake of FSB and its officers in relying on the general provisions of the July 1, 1980 agreement when those terms had been specifically modified by the particular subsequent agreements to which both BOK and FSB were parties. In those written instruments BOK subordinated only its security interest in Beerys’ 1980 crops, not the 1981 crops. FSB, as a result, acquired the proceeds of the 1981 crops in violation of BOK’s retained rights, and should now be held liable therefor.

FSB has also raised the defenses of laches, waiver, and equitable estoppel. Each are equitable limitations addressed to the discretion of the Court. No unreasonable delay is present in the record, and those defenses are denied.

IT IS THEREFORE ORDERED this 9 day of December, 1985, that defendant’s motion to dismiss is denied, and plaintiff’s motion for partial summary judgment is granted.


source: Caselaw Access Project

author: BUA, District Judge.

license: Public Domain

text:
    Amelia KING and Levolia Ellens, Plaintiffs, v. Rosemarie ARMSTRONG, George Marsh, James McGrady, Frank Mikrut, and Joe Bialek, Defendants.
    No. 84 C 9439.
    United States District Court, N.D. Illinois, E.D.
    Dec. 9, 1985.

      Chanon Williams, Chicago, 111., for plaintiffs.
    Donald L. Mrozek, Peter D. Sullivan, Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago, 111., for defendants.
   ORDER

BUA, District Judge.

Before the Court is defendants’ motion, pursuant to Federal Rule of Civil Proce- • dure 56, for partial summary judgment on a single count of plaintiffs’ complaint. For the reasons stated herein, defendants’ motion is granted.

I. FACTS

This is an action alleging violations of the Federal Credit Union Act and state laws of contract and defamation. The action was brought by Amelia King and Levolia Ellens against Rosemarie Armstrong, George Marsh, James McGrady, Frank Mikrut, and Joe Bialek. Jurisdiction is conferred on this Court pursuant to 28 U.S.C. § 1331. The instant motion for summary judgment concerns only Count III of plaintiffs’ complaint, which alleges that the defendants committed libel against Amelia King.

Plaintiff’s libel claim arises out of the defendants’ publication of a meeting notice. The plaintiff is employed by the Social Security Administration and is a member of the Chicago Area Office Federal Credit Union (Credit Union). The defendants are members of the Board of Directors of the credit union. In April 1983, the Board of Directors appointed plaintiff to the Supervisory Committee of the credit union. On or about March 22, 1984, plaintiff attempted to deposit and withdraw some funds from her account at the credit union, but because a hold was placed on her deposit her withdrawal was denied. On March 23, 1984, plaintiff presented her withdrawal request to the treasurer of the credit union who issued King a check.

On April 17, 1984, the Board of Directors held its monthly meeting at which it discussed the check issuance. The Board determined that the check was issued improperly, and voted to suspend King from the Supervisory Committee. In accordance with credit union by-laws, the Board was required to convene a special meeting of the credit union membership and submit the suspension to the members for approval. On May 1,1984, the Board of Directors posted and distributed to credit union members the following notice:

To: All Members of Chicago Area Office Federal Credit Union
From: Board of Directors Chicago Area Office Federal Credit Union
Subject: Suspension of Supervisory Committee Member
At the Board of Director’s monthly meeting held on April 17, 1984, the following order of business was addressed:
That on March 23, 1984, Amelia King willingly and knowingly did accept a check for illegal funds (in an undetermined amount) issued by a director unauthorized to issue checks.
Based on information obtained from National Credit Union Administration, Illinois Credit Union League, and CUNA Mutual Insurance Group, the Board of Directors found it imperitive [sic] and expedient that proper action be taken in order to protect and safeguard the bond ability, and future of your Credit Union. YOU, THE MEMBERSHIP, MAKE THE DIFFERENCE. ATTEND TODAY’S SPECIAL MEETING AND VOTE FOR THE FUTURE OF YOUR CREDIT UNION.
THE SPECIAL MEETING WILL BE HELD AT 5:00 P.M. IN THE EAST SIDE AUDITORIUM.

The plaintiff King alleges that this notice is libelous. The defendants submitted this motion for partial summary judgment on the libel count.

II. DISCUSSION

The above facts are not disputed. The remaining legal issues include: (1) whether the notice constitutes libel per se; (2) whether the notice was substantially true; (3) whether the notice was an expression of opinion; and (4) whether King suffered special damages necessary to support libel per quod. Since it holds for the defendants on the first and fourth issues, the Court need not address the second and third issues.

A. Libel Per Quod

From Count III, it is unclear whether the legal theory under which King proceeds is one of libel per quod or libel per se. Nevertheless, the Court is bound to construe the pleadings liberally and in the light most favorable to the plaintiff. Accordingly, the Court will assume that the plaintiff alleges defamation under both per quod and per se theories.

Words may be actionable as libel per quod if they are actually defamatory and if specific damage is alleged. American Pet Motels, Inc. v. Chicago Veterinary Medical Association, 106 Ill.App.3d 626, 62 Ill.Dec. 325, 435 N.E.2d 1297 (1st Dist.1982). Under Fed.R.Civ.P. 9(g), the pleading of special damages in an action for libel per quod “shall be specifically stated.” Action Repair, Inc. v. ABC, 776 F.2d 143, 149 (7th Cir.1985). The damage allegation found in Count III states that King has been injured in her reputation, sustaining damages of $100,000. This allegation does not constitute a sufficient statement of special damages for purposes of Rule 9(g).

While there is no hard and fast formula for determining whether an item of special damages has been stated with sufficient specificity, it is clear that the complainant must do more than allege that the injury suffered was the natural result of the alleged libel. Spelson v. CBS, Inc., 581 F.Supp. 1195, 1201 (N.D.Ill.1984). At the very least, an allegation of special damage must be “explicit.” Id. Thus in Paul v. Premier Elec. Const. Co., 581 F.Supp. 721 (N.D.Ill.1984), the plaintiffs special damage allegation was insufficient where it claimed injury to the plaintiffs good name, reputation and business in the amount of $12,500,000. The complaint alleged no basis for the figure, no connection between the defamatory statement and the damage, and did not specify the nature of the damage. Id. at 274. The instant damage allegation suffers from the same deficiency.

Not only is the plaintiffs’ pleading of specific damages insufficient, but plaintiffs raise no genuine issue as to the existence of special damages. In their submissions to the Court the defendants asserted that the plaintiff King suffered no special damages, and supported their assertion with a copy of King’s deposition testimony. Plaintiffs rested entirely on their pleadings with respect to the special damage issue. Since it finds that the plaintiffs failed to establish a genuine issue of fact regarding the absence of special damages, the Court grants defendants’ motion for summary judgment on the claim of libel per quod.

B. Libel Per Se

Words are libelous per se if they are “so obviously and naturally hurtful to the person aggrieved that proof of their injurious character can be, and is, dispensed with.” Reed v. Albanese, 78 Ill.App.2d 53, 58, 223 N.E.2d 419, 422 (1st Dist.1966). In Illinois, there are four categories of words which may be actionable as libel per se. These categories consist of words which impute: (1) the commission of a criminal offense; (2) infection with a communicable disease; (3) unfitness or want of integrity in the performance of the duties of an office or employment; and (4) the lack of ability to perform in his or her business, trade or profession. Fried v. Jacobson, 107 Ill. App.3d 780, 63 Ill.Dec. 564, 438 N.E.2d 495 (1st Dist.1982).

The current Illinois standard employed in examining statements alleged to be defamatory is set forth in Chapski v. Copley, 92 Ill.2d 344, 65 Ill.Dec. 884, 442 N.E.2d 195 (1982):

We therefore hold that a written or oral statement is to be considered in context, with the words and the implications therefrom given their natural and obvious meaning; if, as so construed, the statement may reasonably be innocently interpreted or reasonably be interpreted as referring to someone other than the plaintiff it cannot be actionable per se. This preliminary determination is properly a question of law to be resolved by the court in the first instance; whether the publication was in fact understood to be defamatory or to refer to the plaintiff is a question for the jury should the initial determination be resolved in favor of the plaintiff. Id. at 199. [Emphasis supplied.]

This current rule is known as the “reasonable innocent construction rule.” This rule requires “a statement be analyzed with the words and implications given their natural and obvious meaning in as much of a current day context as possible.” Action Repair, at 145. In the context of a summary judgment motion, the reasonable innocent construction rule requires that the court determine as a matter of law, whether an alleged defamatory statement can reasonably be interpreted as falling outside of one of the four aforementioned categories of libel per se. Only if the statement is not reasonably capable of such innocent construction will an issue of fact remain for the fact-finder, and thereby survive summary judgment.

In the instant case the plaintiffs contend that the notice to the credit union members imputes King’s commission of a criminal offense and her want of integrity in the performance of the duties of an office or employment. These contentions must be measured under the “reasonable innocent construction rule.”

1. Commission of a Criminal Offense

The context in which the allegedly defamatory statement appeared was a notice dated May 1,1984, to credit union members of an upcoming special meeting of the membership. The notice was posted on various bulletin boards and delivered to credit union members. The May 1 notice was the second notice of a special meeting to consider King’s suspension. The first notice, dated April 23, 1984, stated simply that a special meeting would be held regarding the suspension of a supervisory committee member, but neither identified King nor described the circumstances which gave rise to the meeting. The more explicit May 1 notice was apparently necessary to comply with credit union by-laws which require that a special meeting notice state with particularity the purpose for which it is held.

Defendants contend that, because the allegedly libelous statement was made in a meeting notice, it could reasonably be interpreted to merely describe the issue which the Board of Directors addressed and which the meeting would address, and not to actually accuse King of a crime. However, the notice does more than merely announce the purpose of the special meeting. The natural and obvious meaning of the notice, and its most reasonable interpretation, is that the Board of Directors suspended King because they determined that King in fact “willingly and knowingly did accept a check for illegal funds.” The notice further asks credit union members to respond to the Board’s determination by attending a special meeting and voting on King’s permanent suspension. The message amounts to an accusation by the Board of Directors that King committed some wrong. The remaining question is whether the imputed act falls within the definition of crime which would entitle plaintiff to recovery under libel per se.

To be actionable as libel per se, for imputing a criminal offense, the defection charged must be an indictable one, involving moral turpitude and punishable by death or by imprisonment otherwise than in lieu of fine. Mitchell v. Peoria Journal-Star, Inc., 76 Ill.App.2d 154, 160, 221 N.E.2d 516, 520 (3d Dist.1966). The charge need not reflect the specificity of an indictment, but must directly or indirectly impute the commission of a crime which is so serious that damage to the accused must be presumed from the words alone. See American Pet Motels, 106 Ill.App.3d at 627, 62 Ill.Dec. at 328, 435 N.E.2d at 1300. Again, the reasonable innocent construction rule governs the interpretation of the statement.

Although the notice in this case clearly suggests that King committed some wrong, the notice is unclear regarding the gravity of the wrong. Knowingly accepting a cheek for illegal funds could suggest a crime of theft or receipt of stolen property, or it could amount to no crime at all. Moreover, the context of the statement is not helpful in measuring the seriousness of the alleged crime. The fact that the Board of Directors suspended King and the suggestion in the notice that the bond ability and future of the credit union were threatened add seriousness to King’s act. However, the mention that the check for the illegal funds was issued by a director unauthorized to issue checks shifts some guilt to the director and tempers King’s- wrong. Considering the context of statement, and its natural and obvious meaning, the Court finds that a reasonable person could interpret the statement as imputing conduct falling short of a serious crime. The words are simply not so obviously and naturally hurtful that damage to King must be presumed. Accordingly, the statement is not actionable per se as imputing the commission of a crime.

2. Want of Integrity

Plaintiff alleges that the notice imputed her want of integrity and unfitness in the office of Supervisory Committee Member. As previously discussed, the notice reasonably and naturally conveys that the Board of Directors found plaintiff to have accepted a check for illegal funds. The message implies that plaintiff lacks integrity as a supervisory committee member, and it cannot reasonably be innocently interpreted otherwise. The remaining question is whether Supervisory Committee membership is an “office” as contemplated by the Illinois libel law.

Illinois courts have found statements libelous per se which have imputed a person’s lack of integrity in the office of judge (Cooper v. Illinois Publishing & Printing Co., 218 Ill.App. 95 (1st Dist.1920), mayor (Lundstrom v. Winnebago Newspapers, Inc., 58 Ill.App.2d S3, 206 N.E.2d 525 (2d Dist.1965)), canvassing board member (Hotz v. Alton Telegraph Printing Co., 324 Ill.App. 1, 57 N.E.2d 137 (4th Dist.1944)), state’s attorney (McDonald v. Chicago Daily News Pub. Co., 252 Ill.App. 61 (1st Dist.1929)), city board chairman (Costello v. Capitol Cities Media Inc., Ill 111. App.3d 1009, 67 Ill.Dec. 721, 445 N.E.2d 13 (5th Dist.1982)), and alderman (Catalano v. Pechous, 83 Ill.2d 146, 50 Ill.Dec. 242, 419 N.E.2d 350 (1980)). Statements tending to injure persons in their trade or business are also clearly actionable per se. See, e.g., Crinkley v. Dow Jones & Co., Inc., 119 Ill.App.3d 147, 74 Ill.Dec. 636, 456 N.E.2d 138 (1st Dist.1983). But persons defamed in a nonpublic office, which is not an office of employment, seem to have no cause of action for libel per se. This Court reached the same conclusion in another recent case where it stated, “this category of libel per se speech is limited to those cases where the individual allegedly defamed is the holder of a public office.” Spelson v. CBS, Inc., 581 F.Supp. 1195, 1205 (N.D.Ill.1984). This conclusion is not only consistent with Illinois precedent, but is consistent with the rationale of libel per ' se. Statements are libelous per se only if they are so obviously injurious to a person that damages may be presumed. The amount of injury suffered by one who is defamed in public office or in a profession or livelihood is naturally great, and therefore the existence of injury is presumed. In contrast, the harm accruing to a person who is defamed in a private endeavor, outside of the person’s trade or business, is not obvious. The latter situation requires proof of damages.

In the instant case, plaintiff King alleges injury to her office of Supervisory Committee Member. The credit union is a private, voluntary organization comprised of local federal employees. The credit union membership elects a Board of Directors, which in turn appoints several executive officers and committees, including the Supervisory Committee, to assist in operating the credit union. Within the committees are committee officers and members. Plaintiff King's position as a member of the Supervisory Committee was uncompensated, consumed only a few hours per month, and was entirely outside of her full-time employment with the Social Security Administration. Considering the private nature of King’s office, the Court finds that any defamation of plaintiff in that office is not so obviously harmful that it is actionable per se.

III. CONCLUSION

For the reasons stated above, defendants’ motion for partial summary judgment is granted. Accordingly, Count III of plaintiffs’ complaint is dismissed.

IT IS SO ORDERED.


author: DIANA E. MURPHY, District Judge.

text:
    Louis L. PHILLIPS, and L.L. Phillips Charities, Inc., Plaintiffs, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., and Ben M. Sirianni, Defendants.
    Civ. No. 4-81-394.
    United States District Court, D. Minnesota, Fourth Division.
    Dec. 9, 1985.
    Ted S. Meikle, Fredrikson & Byron, Terence M. Fruth, Fruth & Anthony, Minneapolis, for plaintiffs.
    James B. Vessey, Dorsey & Whitney, Minneapolis, for defendants.
   MEMORANDUM OPINION AND ORDER

DIANA E. MURPHY, District Judge.

Plaintiffs Louis L. Phillips and L.L. Phillips Charities brought this action against defendants Merrill Lynch, Pierce, Fenner & Smith and Ben Sirianni alleging violation of federal and state securities laws, breach of contract and fiduciary duty, and negligence. After this court granted defendants’ motion to compel arbitration of state law claims, a National Association of Securities Dealers, Inc. (NASD) arbitration panel found defendants liable to plaintiff Louis L. Phillips in the amount of $930,000 and to plaintiff L.L. Phillips Charities, Inc. in the amount of $196,700. By order dated September 19, 1985, the court confirmed the arbitration award. Plaintiffs had also sought prejudgment interest running from July 2, 1985, the date of the award, through the entry of this court’s judgment. The court found that the parties had not sufficiently developed the law applicable to the motion for prejudgment interest and permitted the parties to submit additional briefs. The parties have now submitted their memoranda, and the motion for prejudgment interest is before the court.

The parties agree that plaintiffs are entitled to some amount of prejudgment interest. The parties disagree, however, about the rate of interest to- be applied. Plaintiffs argue that, under federal law, they are entitled to prejudgment interest equal to their own interest costs. Defendants argue that the Erie doctrine requires the application of the law of Minnesota, Wisconsin, or New York, which provide rates of 6%, 5%, and 9% respectively. Plaintiffs argue that even if state law governs, the applicable Minnesota, Wisconsin, and New York statutes provide interest at rates of 9%, 9% and 12%, respectively.

Section 13 of the Federal Arbitration Act, 9 U.S.C. § 13, provides that a judgment entered by a federal court confirming an arbitration order

shall have the same force and effect, in all respects, as, and be subject to all provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered.

While federal law provides the arbitration mechanism, a federal court’s confirmation of an arbitration award setting state law claims is no different in effect from a federal court judgment based on diversity or pendent jurisdiction. Thus, state law governs the rate of prejudgment interest in this case. See, e.g., Parsons & Whittemore Alabama Machinery and Services Corp. v. Yeargin Construction Co., 744 F.2d 1482, 1484 (11th Cir.1984); Merit Insurance Co. v. Leatherby Insurance Co., 728 F.2d 943, 945 (7th Cir.1984). See also Weitz Co. v. Mo-Kan Carpet, Inc., 723 F.2d 1382, 1383, 1387 (8th Cir.1983), (state law determines award of prejudgment interest in diversity action).

Neither side urges that New York law be applied in this matter. Defendants advocate the application of Wisconsin law because some of the parties are Wisconsin residents and many of the relevant events took place there. Plaintiffs press for application of Minnesota law, emphasizing the actions taken in Minnesota and Minnesota’s strong regulatory interest in the claims at issue. Under Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408 (1973), the choice between Minnesota and Wisconsin law is a close one. On balance, the court finds it appropriate to apply Minnesota law.

Plaintiffs argue that the court should award 9% interest pursuant to Minn.Stat. § 549.09; defendants argue that Minn.Stat. § 334.01 mandates 6% interest. Neither side has provided any authority to support their positions on this difference. It appears that the Minnesota courts have never addressed this precise issue. In Pacific Indemnity Co. v. Thompson-Yaeger, Inc., 258 N.W.2d 762 (Minn.1977), however, the Minnesota Supreme Court held that § 549.09 provided for interest from the time a court-appointed referee issued a report until the court’s subsequent entry of judgment. For similar reasons, the court finds that Minn.Stat. § 549.09 governs the issue at bar. See also Unique Systems, Inc. v. Zotos International, Inc., 622 F.2d 373 (8th Cir.1980) (citing Pacific Indemnity) (Minn.Stat. § 549.09 governs whether a party is entitled to interest between time of Magistrate’s recommended order and entry of judgment).

Accordingly, based on the above and all the files, records, and proceedings herein,

IT IS HEREBY ORDERED that plaintiff’s motion for prejudgment interest is granted, and defendants are liable for interest in the amount of $18,115.89 to Louis L. Phillips and in the amount of $3,831.60 to L.L. Phillips Charities, Inc.

LET JUDGMENT BE ENTERED ACCORDINGLY.


author: LOVELL, District Judge.

text:
    Joette NYSTUL, Plaintiff, v. NORTHWESTERN TELEPHONE SYSTEMS, INC., and Pacific Telecom, Inc., Defendants.
    No. CV 84-220-M-CCL.
    United States District Court, D. Montana, Missoula Division.
    Dec. 10, 1985.

      Ann C. German, Keller & German, Libby, Mont., for plaintiff.
    C. Eugene Phillips, Murphy, Robinson, Heckathorn & Phillips, Kalispell, Mont., Pamela Jacklin, Stoel, Rives, Boley, Fraser & Wyse, Portland, Or., for defendants.
   OPINION AND ORDER

LOVELL, District Judge.

Plaintiff instituted this action against her former employers pursuant to Title VII of the Civil Rights Act of 1964. The complaint alleges unlawful employment practices which have discriminated against plaintiff on the basis of her sex. There are three counts alleged in the complaint. Count one is based on Title VII, 42 U.S.C. § 2000(e) et seq. Counts two and three are based on claims of state law, including violation of the covenant of good faith and fair dealing in employment relations and violation of public policy as embodied in the constitution and laws of the state of Montana. Under consideration are defendants’ two motions to dismiss. The first is a motion to dismiss the Title VII claim which is denied for failure to submit briefs as required by Rule 220-1 of the Local Rules for the District of Montana. The second is a motion to dismiss the second and third claims for lack of jurisdiction.

Jurisdiction is not based on diversity; rather, plaintiff asserts federal question jurisdiction over the Title VII claim, and pendent jurisdiction over the state claims. Defendants, on the other hand, maintain that this court does not have pendent jurisdiction, and in any event that it should not choose in its discretion to exercise such jurisdiction.

The leading case regarding pendent jurisdiction is United, Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). Gibbs set forth three requirements the court must find to exercise pendent jurisdiction: (1) the federal claims must be substantial and not frivolous; (2) the federal and state claims must arise out of a common nucleus of operative fact; (3) the claims must be such that the plaintiff would ordinarily be expected to try them together. The Ninth Circuit has restated these rules and relies on them to this date. Carreras v. City of Anaheim, 768 F.2d 1039, 1042 (9th Cir.1985). The doctrine of pendent jurisdiction has been held to be one of discretion, not of power, as long as the federal claims are substantial enough to confer subject matter jurisdiction on the federal court. Wren v. Sletten Construction Company, 654 F.2d 529 (9th Cir.1981). As such, the determination of whether to exercise jurisdiction over pendent state claims is within the discretion of the district court, and the court is not required to exercise such jurisdiction. Securities Investor Protection Corporation v. Vigman, 764 F.2d 1309, 1318 (9th Cir.1985).

The three requirements set forth in Gibbs are not the exclusive test for exercising pendent jurisdiction. Those three requirements comprise the elements of the first of two tests which the court must determine before exercising jurisdiction. Gibbs sets forth the issue of whether the court has power to hear the pendent state claims. Once having determined that it does have such power, the court must examine “the specific statute that confers jurisdiction over the federal claim, in order to determine whether ‘Congress in [that statute] has ... expressly or by implication negated the exercise of jurisdiction over the particular non-federal claim.’ ” Mongeon v. Shellcraft Industries, Inc., 590 F.Supp. 956, 957 (D.Vt.1984), citing Owen Equipment and Erection Company v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). Kroger focuses on the question of whether the court in its discretion should exercise pendent jurisdiction. In this case, the parties’ briefs concentrate on the status of Montana employment discrimination law. As discussed below, this is one important factor for consideration but is not the sole critical point of contention.

Kroger has been cited extensively on the question of pendent jurisdiction in the context of Title VII actions. There is a split of authority as to whether pendent jurisdiction should be exercised in Title VII cases. Of those cases involving state law claims appended either to Title VII actions or to similar actions brought under the Age Discrimination in Employment Act (ADEA), at least eleven district courts have held against exercising pendent jurisdiction and have dismissed the state law claims.

A representative case is Frye v. Pioneer Logging Machinery Inc., 555 F.Supp 730 (D.S.C.1983). This was an action against a former employer for failure to reinstate the plaintiff after she had taken a maternity leave of absence. The plaintiff sued under Title VII, and also asserted four state law claims, including tortious interference with contract, breach of oral contracts, and intentional infliction of emotional distress. The court found the Gibbs test to be satisfied—the federal claim was of sufficient substance to confer federal jurisdiction and the state and federal claims arose out of the same nucleus of operative fact, “if only in the sense that the claims derive from the failure or refusal to reemploy plaintiff after her maternity leave.” 555 F.Supp at 732.

The Frye court then cited Kroger for the rule that the federal courts must consider whether the statutory grant of federal jurisdiction, either expressly or by implication, excludes the state claim from federal jurisdiction. Citing Jong-Yul Lim v. International Institute of Metropolitan Detroit, 510 F.Supp 722 (E.D.Mich.1981), the court stated that the relief Congress has provided under Title VII is equitable in nature, including only reinstatement and back pay. Therefore, the statutory exclusion of legal remedies under Title VII reveals a congressional desire to restrict the type of relief awarded in discrimination claims brought under the statute. The court thus concluded that joinder of state law claims, under which a plaintiff might be entitled to compensatory and punitive damages, would directly conflict with congressional intent of limited relief.

Joinder of state claims also defeats the purpose of Title VII to expedite claims. The Frye court cited Gibbs for the principle that discretion to dismiss pendent claims should be exercised when (1) divergent state or federal theories of relief are likely to cause jury confusion; (2) the state issues are found to predominate in terms of proof, scope of issues raised, or comprehensiveness of remedies sought; (3) a surer-footed reading of the applicable law can be obtained in state court; or (4) considerations of judicial economy, convenience, and fairness to the litigants are not present. Id, at 735. The court thus held that the plaintiff’s pendent claims must be dismissed because the court is without power to hear them and, assuming the existence of such power, the court as a matter of discretion would decline to exercise such jurisdiction. All claims except the Title VII claims were dismissed without prejudice.

Other courts have applied a similar rationale. One district court noted that the Ninth Circuit Court of Appeals has not directly considered the issue. James v. KID Broadcasting Corp., 559 F.Supp. 1153 (D.Idaho 1983). The James court cited Cancellier v. Federated Department Stores, 672 F.2d 1312 (1982), where the Ninth Circuit “commented on the problem”. In Cancellier, the plaintiff prevailed at trial on ADEA and pendent state law claims. The Ninth Circuit upheld the award of punitive and emotional distress damages, stating that there was no double recovery. The court questioned the wisdom of allowing open-ended state law claims to coexist with limited ADEA claims, but said it was for Congress to decide. The court stated that dismissal of pendent claims is proper in some circumstances, such as where the trial judge finds that state issues predominate in terms of the comprehensiveness of the remedy sought, or that there is a sufficient likelihood of jury confusion in treating divergent legal theories of relief to justify separating state and federal claims.

In Wescott v. Wackenhut Corporation, 581 F.Supp 9 (S.D.Cal.1983) the court concluded “that the state law claims ... constitute the ‘tail’ which wags the federal ‘dog’, and that an assertion of pendent jurisdiction over them would be ill-advised.” The court noted that the Gibbs standard sets forth only the minimum requirements for exercise of pendent jurisdiction, and that it must also determine that Congress has not negated the exercise of pendent jurisdiction over a particular non-federal claim. The court stated that the lion’s share of relief sought by the plaintiff is available only under the state law claims. “It is dubious that Congress would consider an assertion of pendent jurisdiction over the state claims in this case to be proper, since Congress ruled out both compensatory and punitive damages in Title YII cases, as well as the availability of the jury trial which plaintiff has demanded on her state law claims.” Id, at 10. The court thus dismissed the pendent state claims.

Other factors which have been considered by courts applying a similar analysis include the injection of substantial new issues into the proceedings, Gerlach v. Michigan Bell Telephone Co., 448 F.Supp. 1168 (E.D.Mich, 1978), and the unsettled nature of state law in the area of employee discharge. Gleason v. Board of County Commissioners, 596 F.Supp. 1561 (D.Colo.1984). Overall, the courts stress that entertaining claims of state law contravenes federal policy as manifested in Title VII, and that exercise of pendent jurisdiction would conflict with and detract from the procedural and remedial scheme enacted by Congress. Bennett v. Southern Marine Management Co., 531 F.Supp. 115 (M.D. Fla. 1982); Hoferek v. University of Missouri, 604 F.Supp. 938 (W.D.Mo.1985); Ritter v. Colorado Interstate Gas Co., 593 F.Supp. 1279 (D.Colo.1984); Thibodeau v. Foremost Insurance Co., 605 F.Supp. 653 (N.D.Ind.1985).

Authority to the contrary is scant, although a few courts have held that pendent jurisdiction will be exercised in the interests of judicial economy and fairness to the litigants. Goodman v. Bd. of Trustees, Etc., 511 F.Supp. 602 (N.D.Ill.1981); see also, Lopez v. Bulova Watch Co., Inc., 582 F.Supp. 755 (D.R.I.1984). A better reasoned decision is Guyette v. Stauffer Chemical Co., 518 F.Supp. 521, 524 (D.N.J.1981), where the court held that as long as other considerations of fairness and convenience weigh in favor of pendent jurisdiction, there is no reason why a federal court should refuse pendent jurisdiction simply because state law provides remedies above and beyond those provided by Congress.

In this case, I find the weight of authority to be persuasive. Consideration of the federal and state issues together would lead to jury confusion and could only cause more delay in the case, contrary to the express policy of Title VII. Moreover, employment discrimination law in Montana is largely a creature of judicial evolution, and a surer-footed reading of the law can be obtained in state court. In view of these considerations, the court

HEREBY ORDERS that Counts Two and Three of plaintiff’s complaint are DISMISSED without prejudice to refile in state court.

IT IS FURTHER ORDERED that defendants’ motion to dismiss Count One of the complaint is DENIED.

      . The recent decision in DeHorney v. Bank of America, 777 F.2d 440 (9th Cir.1985), a race discrimination in employment action which involved state law claims of wrongful discharge and violation of the covenant of good faith and fair dealing, sheds no light on this issue, as pendent jurisdiction apparently was never raised as an issue in the case.


author: HADEN, Chief Judge.

text:
    Gregory F. ELSWICK, Petitioner, v. Manfred HOLLAND, Warden, et al, Respondents.
    Civ. A. No. 84-2376.
    United States District Court, S.D. West Virginia, Charleston Division.
    Dec. 10, 1985.

      Gregory F. Elswick, pro se.
    Mary Rich Maloy, Deputy Atty. Gen., Charleston, W.Va., for respondents.
   MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

Pending before the Court is the habeas corpus petition of Gregory F. Elswick. The Respondents, West Virginia State officials, have filed a motion to dismiss and an answer. The pro se Petitioner has filed a “Rebuttal.”

The Petitioner, Elswick, was indicted in 1983 by a Kanawha County, West Virginia, grand jury for three counts of sexual assault. The alleged incident of sexual assault occurred in Charleston, West Virginia, on January 23, 1983. Elswick was accused of forcing a young female to submit to oral, anal and vaginal intercourse. Each of these acts was assigned a count of the three-count indictment. After a two-week trial, which commenced on December 7, 1983, Elswick was found guilty of Count Three of the indictment. The trial judge thereupon sentenced Elswick to an indeterminate term of not less than five nor more than ten years in the West Virginia Penitentiary. He is currently incarcerated at that institution.

After the determination of guilt at the trial court, Elswick’s counsel filed a petition with the West Virginia Supreme Court of Appeals alleging error by the trial court and requesting a new trial. Elswick assigned the following seven grounds as error.

“I. The Circuit Court of Kanawha County committed reversible error by denying appellant’s motion to set aside judgment and motion for judgment of acquittal due to the insufficiency of the evidence to substantiate a conviction of second degree sexual assault.
II. The Circuit Court of Kanawha County committed prejudicial error in not performing [sic] the defense to inquire into or to cross-examine about the alleged victim’s prior sexual conduct.
III. The Circuit Court of Kanawha County committed reversible and prejudicial error when he restricted trial defense counsel’s cross examination of Dr. Bernard Luby as to his examination of [the victim],
IV. The Circuit Court of Kanawha County erred prejudicially to the interest of the appellant in failing to order that a presentence investigation be conducted into the background of the appellant.
V. The Circuit Court of Kanawha County erred when it revoked the appellant’s bond after the trial and committed the appellant to jail pending further proceedings.
VI. The trial courts conduct unduly influenced the outcome of the judgment of guilt and unduly influenced and prejudiced the jurors in the outcome of the case below.
VII. The court below committed error in failing to accord the appellant an opportunity to present evidence in extenuation and mitigation prior to sentencing.”

The West Virginia Supreme Court refused to hear the appeal. Consequently, Elswick has turned to this Court for relief. He incorporates by reference the brief his counsel submitted to the state court and the arguments contained therein.

In addition to an answer, the Respondents filed a motion to dismiss. Their argument is essentially in two parts. They argue first that Elswick has failed to state grounds suitable for habeas corpus relief. Second, they argue that Elswick has not exhausted his state remedies. The Court turns first to the exhaustion argument.

The Court finds the Respondents’ argument that Elswick has not exhausted his state remedies to be meritless. The Respondents contend that the “allegation of state theories is not sufficient to apprise the court of federal constitutional issues as a state prisoner is required ‘to present the State Courts with the same claim he urges upon the federal courts.’ ” Respondents’ motion, p. 2 (quoting, Picard, 404 U.S. 270, 275, 92 S.Ct. 509, 512, 30 L.Ed.2d 438 (1971)). The Respondents’ statement of the law is quite correct. To meet the state exhaustion requirement, a petitioner must present his federal constitutional claim to the state court as a federal constitutional claim. Nelson v. Solem, 714 F.2d 57, 59 (8th Cir.1983). “It is not enough that all the facts necessary to support the federal claim were before the state courts ... or that a somewhat similar state-law claim was made.” Anderson v. Harless, 459 U.S. 4, 6, 103 S.Ct. 276, 277, 74 L.Ed.2d 3 (1982) (per curiam). Nevertheless, the Respondents’ argument has no application here. Elswick is presenting verbatim to this Court the arguments he presented to the state court. Thus, he cannot be said to be presenting arguments in a light different from those brought before the state court.

If the Respondents’ motion has any worth, it is to be found in their contention that Elswick has not raised a federal question in his petition. The point is material because on this subject (habeas corpus) a federal court’s scope of review is narrow. It can entertain an application for a writ of habeas corpus, “only on the ground that [the petitioner] is in custody in violation of the Constitution or laws or treaties of the United States.” 28 U.S.C. 2254; see also Rose v. Hodges, 423 U.S. 19, 96 S.Ct. 175, 46 L.Ed.2d 162 (1975). It is well settled that matters of state law not involving federal constitutional issues are not appropriate grounds for federal habeas corpus relief. Chance v. Garrison, 537 F.2d 1212 (4th Cir.1976); Grundler v. North Carolina, 283 F.2d 798 (4th Cir.) cert. denied, 362 U.S. 917, 80 S.Ct. 670, 4 L.Ed.2d 738 (1960). A few of the grounds assigned by Elswick raise only state law claims; the Court will come to them in turn.

Elswick has requested that a hearing be scheduled so that he might air his grievances. The Court, however, does not find that a hearing is necessary. When “[t]here is no dispute over what happened at the trial, but merely over its legal consequences,” Grundler, 283 at 802, a hearing need not be held. See also Bradley v. Cowan, 500 F.2d 380, 381 (6th Cir.1974) (where a petition for habeas corpus raises a purely legal issue, no hearing is required). Moreover, none of the circumstances enumerated in 28 U.S.C. § 2254 exist which would mandate that an evidentiary hearing be held. Having addressed this point, the Court now turns to the grounds raised by Elswick.

Elswick assigns as his first ground the allegedly insufficient evidence at trial to support a conviction of second degree sexual assault. He contends specifically that there was no evidence that the victim resisted the efforts of her assailant. Elswick fashions this argument from the language of the controlling statute. W.Va. Code, § 61-8B-4(a) provides, in pertinent part, that: “[a] person is guilty of sexual assault in the second degree when: (1) such person engages in sexual intercourse or sexual intrusion with another person without the person’s consent and the lack of consent results from forcible compulsion.” Section 61-8B-1 defines “forcible compulsion” as

“(a) Physical force that overcomes such earnest resistance as might reasonably be expected under the circumstances; or
(b) threat or intimidation, expressed or implied, placing a person in fear of immediate death or bodily injury to himself or another person or in fear that he or another person will be kidnapped.”
For the purposes of this definition, ‘resistence’ ineludes physical resistance or any clear communication of the victim’s lack of consent.”

The Court believes that Elswick puts too much emphasis on the element of resistance. The import of the statute is that a victim does not have to endanger herself by fierce resistance when threats and intimidation have been employed against her. The Court finds ample evidence from which the jury could have concluded that the victim’s lack of consent was overcome by threats and intimidation.

In spite of the above examination of the merits, the Court notes that the sufficiency of the evidence is normally a matter of state law and procedure and does not involve federal constitutional issues. Grundler, 283 F.2d at 802. There is a Fourteenth Amendment violation only when the conviction is so totally devoid of evidentiary support as to raise a due process issue. Id. at 801. The situation here stops far short of assuming constitutional dimensions.

Elswick contends that West Virginia’s Rape Shield Law denied him the opportunity to effectively cross examine the victim and the treating physician. The Court need not tarry long on this point. The

West Virginia Supreme Court has itself held that the statute, W. Va. Code, § 61-8B-12, does not violate the right to confrontation guaranteed by the Sixth Amendment. State v. Persinger, 286 S.E.2d 261 (W.Va. 1982); State v. Green, 163 W.Va. 681, 260 5. E.2d 257 (1979). While this Court is not bound by the state court’s holdings, it finds them to be well reasoned and persuasive. Moreover, the Court does not find any merit in Elswick’s contention that the state placed the victim’s character in evidence.

Elswick raises two grounds which the Court finds to be unsuitable for review on a petition for habeas corpus. He contends that the trial court erred when it revoked his bond prior to appeal and that the trial court influenced and prejudiced the jurors when it instructed the jury on a count of the indictment during the opening of the trial as opposed to at the end of the trial. Both of these grounds are based upon state law. The Court fails to discern any allegation that rights protected by federal law were breached.

Elswick claims that he was prejudiced by the trial court’s refusal to have a presentence investigation report prepared. He cites a West Virginia statute, W.Va. Code, § 62-12-7, which, as read by this Court, grants a trial court the discretion of whether to order a presentence investigation. See State ex rel Simpkins v. Harvey, 305 S.E.2d 268 (W.Va.1983); see also West Virginia Rule of Criminal Procedure 32(c); cf. Hazelwood v. Arnold, 539 F.2d 1031 (4th Cir.1976) (under federal law, ordering of a presentence investigation and report is discretionary). In addition to the lack of an absolute right to a presentence report under the state statute, there is no federal constitutional right to a presentence investigation and report. Vines v. Muncy, 553 F.2d 342, 350, n. 26 (4th Cir.) cert. denied, 434 U.S. 851, 98 S.Ct. 163, 54 L.Ed.2d 120 (1977); Lawson v. Riddle, 401 F.Supp. 410, 412 (W.D.Va.1975); but see Rule 32(c)(1), Federal Rules of Criminal Procedure. Moreover, “[i]n the ordinary case the issue of whether petitioner is entitled to a pre-sentence report at all is a matter of state law and not cognizable under a petition for a writ of habeas corpus.” Stamper v. Baskerville, 531 F.Supp. 1122, 1127-28 (E.D.Va.1982).

If the attack on the sentencing was limited to the presentence investigation issue, the Court could confidently leave this area of inquiry and move on. Elswick, however, in complaining of the lack of a presentence report, incorporates an argument aimed at the method by which the trial judge sentenced him. For purposes of clarity, the Court deems it advisable to set out the remarks of the trial court, at sentencing:

“[DEFENSE COUNSEL]: Your Hon- or, has the Court ordered a presentence investigation to be done in this matter?
THE COURT: I feel that in this case, because of the information and evidence that the defendant has already furnished as well as the evidence of the other witnesses, that further inquiry into the defendant’s character and conduct and habits is not necessary in this case. I, therefore, believe that I ought to pronounce judgment according to law without further inquiry into the defendant’s background, his character, conduct, and habits.
There were various factors brought to my attention by counsel for the defense during the trial and pretrial motions as well as factors brought to the attention of this court by the prosecuting attorney in the presence of the defense of this case. It has even come to my attention—of course its hearsay—that other assaults have been made upon female persons by this defendant, and I have also been informed as late as during the trial of this case, while this very matter has been pending before this court, before the jury and the judgment of the court has been made, that the defendant while he was out on bond attempted other vicious assaults of the same type of character as to the other accusations that have been made against him in this indictment. I do not have the names of the alleged victim or victims of these assaults right at hand this minute, but I can obtain such information and more specifically recite the alleged happenings and occurrences of the nature I have generally described here just at this time.”

Record of trial pp. -, Counsel for Elswick objected to the sentencing and took his argument to the West Virginia Supreme Court in the following terms:

“As this honorable court can ascertain from the sentencing remarks of the court below, the trial court denied counsel the right to counter certain allegations made against appellant herein, and in so doing, appellant was denied due process of law. Counsel for appellant submits that a failure to order a presentence report denied the appellant herein his right to counter the allegations made against him by others who had apparently spoken to the trial judge about appellant herein. Record of trial pp.-.
Furthermore, as is apparent from the record of trial, the court below based his sentence upon certain matters which had apparently been brought to his attention by others inasmuch as these matters were not brought to the attention of the court below through a presentece [sic] investigation. The appellant was denied his right to present evidence contrary to these allegations.”

Petitioner’s brief at 26.

The Supreme Court in Townsend v. Sain, 372 U.S. 293, 83 S.Ct. 745, 9 L.Ed.2d 770 (1963) found due process to be lacking when the sentencing judge plainly relied upon a false compilation of the criminal record of a defendant who was unrepresented by counsel. In U.S. v. Tucker, 404 U.S. 443, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972), the court held that a sentence could not be based upon misinformation of a constitutional magnitude. The Fourth Circuit in US. v. Powell, 487 F.2d 325 (4th Cir.1974) extended “the rule which requires the vacating of sentences based on false information to sentences based on assumptions not supported in the record.” U.S. v. Looney, 501 F.2d 1039, 1042 (4th Cir.1974).

The Court here finds that the sentencing courts comments in regard to assaults on other young females to be unsupported by the record. In this respect the facts of the instant case resemble those of Powell wherein the court found a sentencing to constitute a denial of due process. In Powell, the trial court based its sentence on two factors: That the defendant was the ringleader of a criminal group and that he was responsible for getting his brothers in trouble. Moreover, the court did not give the defendant a chance to refute or explain the allegations prior to sentencing. The Fourth Circuit concluded that these “two defects in the sentencing procedure—failure of the record to support material factors on which the severity of the punishment rested, and Powell’s lack of an opportunity to explain or refute the derogatory information on which the judge relied—denied Powell due process of law.” Powell at 329.

The record here does not reflect that Elswick was given the opportunity to explain or refute the information utilized by the trial court in imposing a sentence. While a defendant does not generally have a constitutional right to allocution absent a specific request, Ashe v. State of North Carolina, 586 F.2d 334 (4th Cir.1978), cert. denied, 441 U.S. 966, 99 S.Ct. 2416, 60 L.Ed.2d 1072 (1979); cf. Rule 32(a)(1)(C), Federal Rules of Criminal Procedure (court must address Defendant personally and ask him if he wishes to make statement) a defendant does have a right to refute any misinformation which the court may rely upon in passing sentence. Baker v. US., 388 F.2d 931 (4th Cir.1968).

The Court does not wish to be overly restrictive in imposing guidelines for the resentencing which it believes is constitutionally necessary. A trial court has wide discretion in the sources and types of evidence used in determining the kind and extent of punishment to be imposed. U.S. v. Zaza, 434 F.2d 66 (4th Cir.1970). And a sentencing court is not restricted by the federal constitution to the information received in open court. Williams v. New York, 337 U.S. 241, 69 S.Ct. 1079, 93 L.Ed. 1337 (1949); U.S. v. Bass, 535 F.2d 110, 120 (D.C.Cir.1976) (sentencing courts must be permitted to consider at least some hearsay information). At the resentencing of Elswiek, if the trial court chooses to rely upon the reports of Elswick’s misconduct toward young females, it should order a presentence investigation report on such or conduct an evidentiary hearing on the matter. In either event, Elswick and counsel should be given the opportunity in open court to explain or refute the allegations.

In remanding one case for resentencing on account of constitutional defects, the Fourth Circuit has “suggested” that the resentencing be done by another judge. U.S. v. Looney, 501 F.2d 1039 (4th Cir. 1974); see also U.S. v. Stein, 544 F.2d 96 (2d Cir.1976). These cases involved remands within the federal system, and they did not require absolutely that the resentencing be handled by another judge. This Court is reluctant to be so intrusive as to order a second state court judge to resentence Elswick. The Court discerns no prejudice—and none is alleged—on the part of the trial judge. The Court has confidence that the trial court will respect the constitutional values identified here and will conform thereto at the resentencing. Therefore, the Court sees no need to have the matter handled by a different trial court judge, unless the trial court so desires.

Accordingly, the Court grants the writ but suspends execution of the same for ninety days to give the state court the opportunity to resentence Elswick with credit for time served. In all other respects, the petition is denied.

The Clerk is directed to send a certified copy of this Memorandum Opinion and Order to counsel of record and to the Petitioner.

      . By an earlier order, the Court denied without elaboration Respondent’s motion to dismiss. Because the motion raises some relevant issues, the Court will offer a more complete treatment and explanation in this opinion.

      . There is no dispute that Elswick meets the "in custody" requirement of 28 U.S.C. § 2254.

      . By using the same arguments presented to the State Supreme Court, Elswick satisfies two requirements. First, by pressing his contentions in the State’s highest court, he has exhausted his state remedies. Preiser v. Rodriguez, 411 U.S. 475, 93 S.Ct. 1827, 36 L.Ed.2d 439 (1973); Strader v. Allsbrook, 656 F.2d 67 (4th Cir.1981). Second, he now presents to this Court the same grounds which the state court had opportunity to consider. Pitchess v. Davis, 421 U.S. 482, 95 S.Ct. 1748, 44 L.Ed.2d 317 (1975); Picard v. Connor, 404 U.S. 270, 92 S.Ct. 509, 30 L.Ed.2d 438 (1971).

      . See n. 1.

      . Elswick assigned different grounds of error for the "denial" of cross examination of the victim and the treating physician. Because they involve the same issue of law, the two grounds are combined here for consideration.

      . W.Va.Code, § 61-8B-12 has recently been amended. At the time of Elswick’s trial it provided as follows:
      "(a) In any prosecution under this article in which the victim’s lack of consent is based solely on his incapacity to consent because he was below a critical age, evidence of specific instances of the victim's sexual conduct, opinion evidence of the victim’s sexual conduct and reputation of the victim’s sexual conduct shall not be admissible. In any other prosecution under this article, evidence of specific instances of the victim’s prior sexual conduct with the defendant shall be admissible on the issue of consent: Provided, that such evidence heard first out of the presence of the jury is found by the judge to be relevant.
      (b) In any prosecution under this article, evidence of specific instances of the victim’s sexual conduct with persons other than the defendant, opinion evidence of the victim’s sexual conduct and repuation evidence of the victim’s sexual conduct shall not be admissible: Provided, that such evidence shall be admissible solely for the purpose of impeaching credibility, if the victim first makes his previous sexual conduct an issue in the trial by introducing evidence with respect thereto.”

      . For a collection of cases upholding State Rape Shield laws see Doe v. U.S., 666 F.2d 43, 48, n. 9 (4th Cir.1981).

      . W. Va.Code, § 62-12-7 provides as follows:
      "When directed by the court, the probation officer shall make a careful investigation of, and a written report with recommendations concerning, any prospective probationer. Insofar as practicable this report shall include information concerning the offender’s court and criminal record, occupation, family background, education, habits and associations, mental and physical condition, the names relationship, ages and condition of those dependent upon him for support, and such other facts as may aid the court in determining the propriety and conditions of his release on probation. No person convicted of a felony shall be released on probation until this report shall have been presented to and considered by the court. The court may in its discretion request such a report concerning any person convicted of a misdemeanor. A copy of all reports shall be filed with the Board of Probation and Parole.”

      . It is also well established that even if a presentence investigation report is formulated, there is no constitutional right to full disclosure of that report. Baker v. U.S., 388 F.2d 931 (4th Cir.1968); U.S. v. Knupp, 448 F.2d 412 (4th Cir.1971); see also U.S. v. DeVore, 423 F.2d 1069 (4th Cir.1970), cert. denied 402 U.S. 950, 91 S.Ct. 1604, 29 L.Ed.2d 119 (1971) (due process did not require disclosure of report because of trial judge’s assertion that he did not rely upon report); U.S. v. Zaza, 434 F.2d 66 (4th Cir.1970) (not required to exhibit presentence report where there was no report prepared for judge’s consideration); for additional cases see Annot. 40 A.L.R.3d, 681, 696 (1971).

      . The Court is mindful of the duty of a federal habeas court not to consider a constitutional argument by a petitioner which has not been presented to the state courts. The cases counseling against violating this principle of state-federal comity, however, are set in the context of a petitioner changing the tone, direction and authority of his argument in coming from the state to the federal system. In Picard v. Connor, 404 U.S. 270, 92 S.Ct. 509, 30 L.Ed.2d 438 (1971), the Supreme Court held that state courts must have had "the first opportunity to hear the claim sought to be vindicated in a federal habeas proceeding.” Id. at 276, 92 S.Ct. at 512. The Petitioner here presents nothing to this Court that he did not present to the state court. There is something paternalistic in the notion that this Court can discern issues on the face of a cold record, while a state appellate court, when faced with the same record, cannot. The Court prefers to see the West Virginia Supreme Court of Appeals as sub silentio rejecting the Petitioner’s constitutional argument. This Court disagrees with such an implied holding. Disagreement among courts is not uncommon. This Court, however, in its role as a forum for constitutionally aggrieved petitioners cannot defer to the state courts in interpreting the rights provided by the federal constitution. Townsend v. Sain, 372 U.S. 293, 312, 83 S.Ct. 745, 756, 9 L.Ed.2d 770.
      The pro se Petitioner’s disjointed "Rebuttal” cannot necessarily be read as trying to assert new constitutional grounds in this Court. In that the rebuttal was directed toward the text of the petition—a petition filed at both the state and federal levels—it can just as easily be read as the Petitioner’s attempt to argue that a federal question was presented to the state court.

      . Inexplicably, at this point in the proceedings, the pages of the trial transcript are unnumbered.

      . Elswick has assigned as an independent ground the failure of the trial court to grant him the right to speak in his own behalf at sentencing. The Court treats this ground as subsumed in the instant discussion of the sentencing procedure.