author: BENJAMIN F. GIBSON, District Judge.

text:
    AMERICAN EXCAVATORS, INC., Plaintiff, v. Johanna PARSHALL, Defendant.
    No. G83-485 CA.
    United States District Court, W.D. Michigan, S.D.
    Oct. 22, 1984.

      Robert J. Robinson, Bean, Robinson & Bean, Grand Ledge, Mich., for plaintiff.
    Neil A. McLean, Glassen, Rhead, McLean & Campbell, Grand Ledge, Mich., Michael H. Feiler, Farmington Hills, Mich., for defendant.
   OPINION

BENJAMIN F. GIBSON, District Judge.

This is a civil rights action under 42 U.S.C. § 1983 in which American Excavators, Inc. (American), a Michigan corporation, seeks damages claiming that it was deprived of property without due process of law. Defendant Johanna Parshall is the treasurer of Oneida Township and is charged with collection of property taxes under state law. Plaintiff alleges that on February 24, 1983, defendant seized property belonging to plaintiff and others which was valued at more than $1 million to pay allegedly delinquent personal property taxes totalling approximately $13,000. Defendant has filed a motion for summary judgment arguing that plaintiff has failed to state a cause of action under federal law since plaintiff has failed to allege that defendant’s actions violated the United States Constitution. American has also filed a motion to add Robert Cole, Eaton County Treasurer, and Eaton County as parties defendant.

DISCUSSION

The motion for summary judgment is brought pursuant to Ped.R.Civ.P. 56 which provides in part:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

In order to warrant the grant of summary judgment, the moving party bears the burden of establishing the non-existence of any genuine issue of fact that is material to a judgment in his favor. Adickes v. S.H. Kress & Co., 398 U.S. 144, 147, 90 S.Ct. 1598, 1603, 26 L.Ed.2d 142 (1970); United States v. Articles of Device ... Diapulse, 527 F.2d 1008, 1011 (6th Cir.1976).

In determining whether or not there are issues of fact requiring a trial, “the inferences to be drawn from the underlying facts contained in the affidavits, attached exhibits, and depositions must be viewed in the light most favorable to the party opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Bohn Aluminum & Brass Corp. v. Storm King Corp., 303 F.2d 425 (6th Cir.1962). Even if the basic facts are not disputed summary judgment may be inappropriate when contradictory inferences may be drawn from them. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); E.E.O.C. v. United Association of Journeymen & Apprentices of the Plumbing & Pipefitting Industry, Local 189, 427 F.2d 1091, 1093 (6th Cir.1970).

Defendant claims that plaintiff has failed to allege a violation of the United States Constitution and, therefore, has failed to state a claim under § 1983. Although plaintiff’s complaint does not disclose the specific portion of the constitution which was violated by defendant’s conduct, plaintiff does claim that defendant violated plaintiff’s “right not to be deprived of its property without due process of law as guaranteed by said Constitution ...” Complaint ¶ 13. Giving these allegations a fair reading, the Court concludes that plaintiff has attempted to allege a violation of the due process clause of the 14th Amendment.

In Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), the Supreme Court recognized that not every taking of property by the state without a predeprivation hearing gives rise to a cause of action under § 1983 and concluded the state tort remedies could satisfy the requirements of due process. In Vicory v. Walton, 721 F.2d 1062 (6th Cir.1983), the Sixth Circuit interpreted Parratt to require plaintiffs claiming deprivation of property without due process of law to plead and prove the absence of an adequate state law remedy in order to state a claim under § 1983. The plaintiff in Vicory had brought a § 1983 action to recover damages for the seizure of his house trailer by local authorities investigating a murder. After reviewing the applicable state law, the Sixth Circuit concluded that the procedures under Ohio’s forcible entry and detainer statute permitted plaintiff to recover damages for the seizure of his property and, therefore, due process could be provided in a post-seizure judicial proceeding.

In Michigan, a civil action to recover possession of property seized to pay taxes or a fine pursuant to state law is specifically prohibited by M.C.L. § 600.2920 which provides in part:

Section 2920. (1) A civil action may be brought to recover possession of any goods or chattels which have been unlawfully taken or unlawfully detained and to recover damages sustained by the unlawful taking or unlawful detention, subject to the following conditions:
(a) An action may not be maintained under this section to recover possession of or damages for goods or chattels taken by virtue of a warrant for the collection of a tax, assessment, or fine in pursuance of a statute of this state.

Nonetheless, defendant contends that state procedures permitting taxpayers to pay taxes under protest and seek a refund afforded plaintiff in this case an adequate remedy for any alleged constitutional violation. Plaintiff, however, claims that that procedure was ineffective because the constitutional violation only occurred when defendant actually seized the property.

“The fundamental requirement of due process is the opportunity to be heard and it is an ‘opportunity which must be granted at a meaningful time and in a meaningful manner.’ ” Parratt v. Taylor, supra, 451 U.S. at 540, 101 S.Ct. at 1915 (quoting Armstrong v. Manzo, 380 U.S. 545, 552, 85 S.Ct. 1187, 1191, 14 L.Ed.2d 62 (1965)). The Court concludes that procedures which permit a taxpayer to challenge the amount of tax assessed after paying the taxes do not provide an adequate opportunity to challenge the seizure of property which only occurs if the taxes are not in fact paid. However, in spite of this conclusion, the Court finds that plaintiff has an adequate state law remedy against defendant.

In Campbell v. Shearer, 732 F.2d 531 (6th Cir.1984), plaintiff filed a § 1983 action claiming that seizure of his property by the Michigan Department of Treasury under a jeopardy tax assessment violated the due process clause of the 14th Amendment. The district court granted summary judgment to defendants based on its conclusion that they were entitled to immunity for their conduct. Although the Sixth Circuit affirmed the district court, it did so on the basis that statutory appeal procedures and a judicially created remedy were adequate to satisfy due process requirements. That decision relied in part on Craig v. Detroit Police Department, 397 Mich. 185, 243 N.W.2d 236 (1976), a case in which the Michigan Supreme Court held that the Michigan circuit courts could exercise equity jurisdiction to order the return of property seized to satisfy a jeopardy assessment under the Michigan Use Tax and Income Tax because the statutes did not otherwise provide for a prompt post-seizure hearing into the factual basis for the assessment. Although the Craig case was concerned with providing the taxpayer with a prompt post-seizure hearing in which to challenge the factual basis for the jeopardy assessment, the Court is persuaded that plaintiff in this case could have challenged defendant’s seizure of its property in a similar state court proceeding. See also Fidlin v. Collison, 9 Mich.App. 157, 167, 156 N.W.2d 53 (1967) (holding that the seizure of personal property valued at $10,500 to pay a jeopardy assessment of $629.32 was unlawful for defendant’s failure to follow the statutory procedure for collection of taxes and for excessive destraint of property).

Plaintiff claims that its remedy under state law is inadequate because Michigan’s governmental immunity statute prevents American from bringing a tort action against defendant. The governmental immunity statute, M.C.L. § 691.1407, states:

Except as otherwise provided, all governmental agencies shall be immune from tort liability in all cases wherein the government agency is engaged in the exercise or discharge of a governmental function. Except as otherwise provided herein, this act shall not be construed as modifying or restricting the immunity of the state from tort liability as it existed heretofore, which immunity is affirmed.

By its terms, the statute does not confer immunity on government officials or employees. Fisher v. Michigan Department of Mental Health, 128 Mich.App. 72, 81, 339 N.W.2d 692 (1983). Though government officials and employees may enjoy a limited immunity under common law, they do not enjoy immunity for tortious acts committed in the performance of ministerial duties. Antkiewicz v. Motorists Mutual Insurance Company, 91 Mich.App. 389, 397, 283 N.W.2d 749, lv. den. and vacated on other grounds 407 Mich. 936, 285 N.W.2d 659 (1979); accord Fisher v. Michigan Department of Mental Health, supra. Under Michigan law, seizure of property to pay taxes is a ministerial duty. See M.C.L. § 211.47; Raynsford v. Phelps, 43 Mich. 342, 5 N.W. 403 (1880).

Based on the foregoing discussion, defendant’s motion for summary judgment is granted and this case is dismissed. Plaintiff’s motion to add parties is denied as moot.

      . For a more recent discussion of the application of Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), to cases brought under 42 U.S.C. § 1983 see Wilson v. Beebe, 743 F.2d 342 (6th Cir.1984). In Wilson the Sixth Circuit reiterated its conclusion that Parratt requires § 1983 plaintiffs claiming deprivation of property without due process of law to plead and prove the inadequacy of state damage remedies. However, the Court held that Parratt did not apply to those § 1983 cases in which the plaintiff alleges deprivation of life or liberty.


source: Caselaw Access Project

author: MURRAY M. SCHWARTZ, District Judge.

license: Public Domain

text:
    George M. WHITESIDE, III, and Donna A. Whiteside, his wife, Plaintiffs, v. NEW CASTLE MUTUAL INSURANCE COMPANY, a Delaware corporation, and Downs & Company, a Delaware corporation, Defendants.
    Civ. A. No. 83-59 MMS.
    United States District Court, D. Delaware.
    Oct. 22, 1984.

      Clark W. Furlow, Katzenstein & Furlow, Wilmington, Del., for plaintiffs.
    John C. Phillips, Jr., Wilmington, Del., for defendant New Castle Mut. Ins. Co. Allen M. Terrell) Jr-> and Thomas A. Beck> Richards, Layton & Finger, Wilmington> DeL) for defendant Downs & Co.
   OPINION

MURRAY M. SCHWARTZ, District Judge.

Plaintiffs George and Donna Whiteside (“the Whitesides”) brought this diversity action against defendants New Castle Mutual Insurance Company (“New Castle Mutual”) and Downs & Company (“Downs”) to recover money owed them under a homeowners’ insurance policy issued by defendants. Presently before the Court is defendant Downs’ motion for summary judgment, or, in the alternative, to dismiss the plaintiffs’ claim for attorney’s fees. For the reasons stated below, defendant’s motion will be denied.

I. Facts

For purposes of this motion, the facts are undisputed. The Whitesides first obtained a New Castle Mutual homeowners’ insurance policy on their Pennsylvania home through Downs in April, 1972. The policy gave them unlimited protection against the theft of silver items. For the next four years, this policy was renewed annually when Downs mailed the White-sides a premium invoice and the Whitesides mailed Downs a payment. In 1977, Downs renewed the Whitesides’ coverage by sending the Whitesides an invoice and a new policy that reflected a change in New Castle Mutual’s policy form. This coverage was renewed by invoice in 1978. In April, 1979, Downs sent plaintiffs a new policy and a cover letter stating only that the enclosed policy “renew[ed] the coverage” for another year.

This new policy, however, differed from the previous policy in that it limited the insurer’s liability for the theft of silver items to $1000. This change in policy terms was not called to the Whitesides’ attention by separate notice, although that was Downs’ usual practice. The only notice plaintiffs had of this reduction in coverage was in the change of terms of the policy itself, but plaintiffs never read the new policy.

The Whitesides’ coverage was renewed by premium invoice in April, 1980 and 1981. In early 1982, their home was burglarized and silver items worth over $26,000 were stolen. When they called New Castle Mutual to report the theft, plaintiffs learned for the first time that the policy imposed a $1000 limit for theft of silver items. Plaintiffs then instituted this action to recover on the policy for the value of the stolen silver. Upon completion of discovery, Downs filed the instant motion for summary judgment, alleging that the plaintiffs’ claim on the policy must be denied because of the $1000 limitation on liability, of which plaintiffs had adequate notice. Downs has also moved, in the alternative, to dismiss plaintiffs’ claim for attorney’s fees because the statute creating a right to fees does not apply to plaintiffs.

II. Summary Judgment on the Policy

A threshold issue is which forum’s law to apply to the insurance contract. A federal court in a diversity case must apply the conflict of laws rules of the state in which it is sitting in order to determine the relevant law. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). This Court has recently stated that the Delaware courts in contract actions are moving toward the flexible “most significant relationship to the transaction” test set forth in section 188 of the Restatement (Second) of Conflict of Laws. Hill v. Equitable Trust Co., 562 F.Supp. 1324, 1334 (D.Del.1983); Phoenix Canada Oil Co. v. Texaco, Inc., 560 F.Supp. 1372, 1379 (D.Del.1983); see Oliver B. Cannon and 0Inc. v. Dorr-Oliver, Inc., 394 A.2d 1160, 1166 (Del.1978). The factors that the Court must consider in order to determine the state with the most significant relationship to the transaction include “(a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties.” Restatement (Second) of Conflict of Laws § 188(2). Although the information presented concerning factors (a), (b), (c), and (e) is equivocal, the crucial factor in a property insurance dispute is the location of the insured property — in this case, the plaintiffs’ house in Pennsylvania. See Restatement (Second) of Conflicts of Laws § 188, comment e, at 581; see also id. § 193. Moreover, the policy contains, in an endorsement, certain terms required by Pennsylvania law. It would be anomalous to apply Delaware law to a contract dictated in part by Pennsylvania law. Accordingly, Pennsylvania law will be applied to the contract issue.

Both parties recognize that the crucial issue is whether the Whitesides received adequate notice of the change in policy terms effected as part of the 1979 renewal. The rule in Pennsylvania and other jurisdictions is that “[t]he delivery of the policy as a renewal, in the absence of notice or explanation that the terms of the policy had been altered, contemplate[s] the same terms and conditions as the existing insurance.” Schock v. Pennsylvania Township Mutual Fire Ins. Ass’n, 148 Pa. Super. 77, 24 A.2d 741, 743 (1942); see Overholt v. Reliance Ins. Co. of Philadelphia, 319 Pa. 340, 179 A. 554, 557 (1935); see also Annot., 91 A.L.R.2d 546, 549 (1961); 18 Couch on Insurance 2d § 68:64 (rev. ed. 1983); 13A Appleman, Insurance Law and Practice § 7648, at 452-54 (1976). In ordinary circumstances, the insured has no duty to read a renewal policy sent to him or her, and may assume that the renewed policy contains the same terms and conditions as the previous policy. Schock, 24 A.2d at 743; see Annot., 91 A.L.R.2d at 558; Government Employees Ins. Co. v. United States, 400 F.2d 172, 175 (10th Cir. 1968).

Defendant Downs does not dispute the validity of this rule, but contends that the Whitesides received adequate notice of the change in policy terms when they received their policy in the mail, because the manner of renewing the policy changed. According to Downs’ argument, the usual manner of renewing the policy before 1979 was the mere mailing of a premium notice, whereas the 1979 renewal notice contained the new and different policy. The inclusion of the policy, Downs reasons, should have alerted the Whitesides to the fact that their policy was being changed, and the Whitesides therefore should have read this new policy. In support of its argument, Downs cites two cases from other jurisdictions, Thomson v. Southern Mutual Ins. Co., 90 Ga. 78, 15 S.E. 652 (1892) (per curiam), and Epstein v. Northwestern National Ins. Co., 267 Mass. 571, 166 N.E. 749 (1929).

Downs’ argument is not supported by the facts or by the weight of authority. First, this case is factually distinct from Thomson and Epstein, because the White-sides received, along with the new policy, a cover letter from Downs stating that the enclosed policy “renew[ed] the coverage for a further period of one year.” Hammond Deposition, Plaintiffs’ Exhibit 8. The Whitesides relied on this letter and, for that reason, failed to read the renewal policy. Even assuming that a change in the manner of renewal should lead insureds to infer that the policy has changed, the statement in the cover letter assuring the Whitesides that this policy renewed their coverage negates that inference. See 18 Couch on Insurance 2d § 68:64, at 67 (rev. ed. 1983).

Moreover, the weight of authority does not support Downs’ contention that a change in the manner of renewal is adequate notice of a change in policy terms. The Pennsylvania cases call for direct, specific notice of policy changes, see Schock, 24 A.2d at 743; Overholt, 179 A. at 557, and Downs’ inferential approach would not satisfy that standard. The Pennsylvania rule comports with the modern cases decided since Thomson and Epstein. Those cases require the mailing of a separate explanatory notice of policy changes, and not just the mailing of the new policy itself, in order to effectuate a change in policy terms, because “it is inequitable to require an insured to search the fine print of each renewal policy.” Government Employees Ins. Co. v. United States, 400 F.2d at 175. See also Aetna Ins. Co. v. Lythgoe, 618 P.2d 1057, 1059 (Wyo.1980); Gaston-Lincoln Transit, Inc. v. Maryland Casualty Co., 285 N.C. 541, 206 S.E.2d 155, 161 (1974); Canadian Universal Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 574-75 (Minn.1977); Bauman v. Royal Indemnity Co., 36 N.J. 12, 174 A.2d 585 (1961). As the Pennsylvania Supreme Court stated: “If the company intended in the new policy to alter the terms of this old one, it should have made its intentions evident.” Overholt, 179 A. at 557. The mailing of the policy was not enough to make Downs’ intentions evident. If that was the only notice the Whitesides received, they were entitled to assume that the policy terms remained unchanged and that they had unlimited coverage against the theft of silver. Accordingly, Downs’ motion for summary judgment will be denied.

III. Attorney’s Fees Claim

In their complaint, plaintiffs have claimed, based on 18 Del.C. § 4102, that they will be entitled to an award of attorney’s fees if they prevail in this action. Defendant Downs has moved to dismiss this claim on two grounds: (1) 18 Del.C. § 4102 is inapplicable because the law of Pennsylvania, not Delaware, applies to this action; (2) 18 Del. C. § 4102 only applies to plaintiffs who are Delaware residents, and the Whitesides are Pennsylvania residents.

The basis for Downs’ first argument is that 18 Del.C. § 4102 is “procedural” and inapplicable because federal courts apply their own procedural rules. If this provision is substantive, Downs claims, it is inapplicable because Pennsylvania substantive law applies to this case. Downs’ argument ignores that the terms “substantive” and “procedural” have different meanings dependent upon the context in which they are used. Professor Moore has clarified the distinction:

Under general conflict of laws principles, matters of procedure are usually governed by the internal law of the forum state even if the conflict of laws rules of the forum require that the law of another state apply to the substantive issued [sic] in the case. This principle should not be confused with the substantive-procedural distinction under the Erie rule. For example, ... questions of the burden of proof are substantive within Erie, and thus the federal court must follow the law of the forum state regarding such questions. But under the forum state’s conflict of laws rules, the burden of proof may be considered procedural, in which case, the internal law of the forum state would ultimately be applied by the federal court, even if, under the forum's conflict of laws rules, the law of another state would be applied to other issues in the case.

1A, Pt. 2 Moore’s Federal Practice, ¶ 0.311[1], at 3165-66 (2d ed. 1983) (footnotes omitted). Under Erie principles, attorney’s fees are considered substantive and controlled by state law in diversity cases. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 259 n. 31, 95 S.Ct. 1612, 1622 n. 31, 44 L.Ed.2d 141 (1975); Montgomery Ward & Co. v. Pacific Indemnity Co., 557 F.2d 51, 56 (3d Cir. 1977). To determine which state’s law on attorney’s fees governs in this case, Delaware conflict of laws rules must be consulted. Klaxon Co. v. Stentor Electric Manufacturing Co., supra. Under Delaware conflicts rules, attorney’s fees are considered “procedural” (in the conflicts sense), and Delaware courts apply Delaware attorney’s fees provisions. Chester v. Assiniboia Corp., 355 A.2d 880, 882 (Del.1976). It follows that the law of Delaware on attorney’s fees — 18 Del.C. § 4102 —does apply to this action.

Downs’ second contention is more troubling. Downs contends only Delaware residents can recover attorney’s fees under 18 Del.C. § 4102. The statute, on its face, contains no such limitation. It provides:

The court upon rendering judgment against any insurer upon any policy of property insurance, as “property” insurance is defined in § 904 of this title, shall allow the plaintiff a reasonable sum as attorney’s fees to be taxed as part of the costs.

18 Del. C. § 4102. However, the Delaware Supreme Court, in Chester v. Assiniboia Corp., supra, stated: “The Trial Court concluded that the intent of the statute is that reasonable attorney fees should be awarded as part of costs when plaintiff is a Delaware corporation (or resident) and a contract dispute is litigated here. We agree.” 355 A.2d at 882.

Although this language seems controlling, there are several reasons why Downs’ reading of it should not be followed. First, neither the trial court nor the Supreme Court was directly confronted with the issue at hand, because the plaintiff in Chester was a Delaware resident. Indeed, no Delaware court has denied fees to non-resident plaintiffs in any reported case. Second, the quoted statement only implies, but does not state clearly, that non-resident plaintiffs cannot recover. Finally, the statute on its face does not limit recovery to Delaware residents, and prior versions of the statute do not indicate that only Delaware resident plaintiffs may recover attorney’s fees. See 18 Del.C. § 1105 (1953); 45 Del.Laws ch. 81 (1945); Del.C. § 511 (1935); 37 Del.Laws ch. 52, § 50 (1931); 18 Del.Laws ch. 695, § 3 (1889). Aside from the dictum in Chester, there is no support for barring non-resident plaintiffs from recovering Delaware statutory attorney’s fees. These reasons compel the conclusion that the Delaware Supreme Court, when confronted with the issue, would not bar non-resident plaintiffs from recovering attorney’s fees and would not follow the implications of the Chester dictum. Defendant Downs’ motion to dismiss plaintiffs’ claim for attorney’s fees will be denied.

      . Defendant Downs barely contests this conclusion. See Defendant Downs & Company’s Reply Brief In Support Of Its Motion To Dismiss Or, In The Alternative, For Summary Judgment, at 2. Moreover, the choice of Pennsylvania law, rather than Delaware law, appears to have little practical impact. Although no Delaware court has addressed this issue, Delaware courts would be likely to follow the Pennsylvania standard, which is accepted in virtually all jurisdictions. See Annot., 91 A.L.R.2d 546 (1963); 43 Am. Jur.2d Insurance § 448 (1982).

      . Downs has also argued, without citation of authority, that this action is barred by plaintiffs’ laches in failing to read their policy from 1979 to 1982. The doctrine of laches, however, does not bar the recovery of a plaintiff who fails to read a renewal policy for a long period of time after receiving it. Overholt, 179 A. at 557.


author: CURTIN, Chief Judge.

text:
    The STATE OF NEW YORK, on behalf of itself and the City of Niagara Falls, a municipal corporation, Plaintiff, v. Donald O’HARA; Cecos International, Inc., formerly Newco Chemical Waste Systems, Inc.; Heavy Equipment Leasing Services Co., Inc.; and James H. Williams, Defendants.
    No. CIV-83-1440C.
    United States District Court, W.D. New York.
    Oct. 22, 1984.
    Robert Abrams, Atty. Gen., of the State of N.Y., White Plains, N.Y. (Susan Belgard, Asst. Atty. Gen., White Plains, N.Y., of counsel), for plaintiff.
    Borins, Halpern, Setel, Snitzer, Levy, Yellen & Brownstein, Buffalo, N.Y. (Harold H. Halpern, Buffalo, N.Y., of counsel), for defendant Donald O’Hara.
    Wilmer, Cutler & Pickering, Washington, D.C. (Andrew B. Weissman, Washington D.C., of counsel), for defendants Cecos International, Inc., and Heavy Equipment Leasing Services Co., Inc.
    Duke, Holzman, Yaeger & Radlin, Buffalo, N.Y. (Emanuel Duke, and Gregory P. Photiadis, Buffalo, N.Y., of counsel), for defendant James H. Williams.
   CURTIN, Chief Judge.

This action concerns allegedly fraudulent conduct on the part of the defendants in connection with contracts for remedial work at Love Canal. The plaintiff has filed a seven-count complaint, which includes two claims for relief under the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 [RICO], one claim under the Federal Disaster Relief Act, 42 U.S.C. §§ 5121 et seq. [FDRA], and four pendent claims. Defendants now move to dismiss. This motion is granted for the reasons stated below.

Counts one and two are civil RICO claims. These counts must be dismissed in light of two cases recently decided by the United States Court of Appeals for the Second Circuit. See, Sedima, S.P.R.L. v. Imrex Company, 741 F.2d 482 (2d Cir. 1984); Bankers Trust Company v. Rhoades, 741 F.2d 511 (2d Cir.1984). The complaint herein does not allege any convictions for predicate offenses, nor is any specific RICO injury indicated. Counts one and two are therefore dismissed.

Count three, which is based upon FDRA, is also dismissed, because this statute does not confer a right of action upon the plaintiff.

Plaintiff first argues that the State is primarily responsible for all monies funded under FDRA and that for this reason, a right of action under FDRA is implied. The conclusion does not follow from the premise, even if the premise is taken as true.

What is implied in that premise is the right of the federal government to be reimbursed and a duty of the State to reimburse the federal government. The court is not persuaded that a right of action on behalf of the State against private entities is implicit in a duty which may fall upon the State’s shoulders, especially when the rights and obligations as between the State and the defendants herein are basically contractual and, accordingly, clearly defined in State common law.

The foregoing also answers the plaintiff’s argument that a right of action is implicit in the federal regulations. Specifically, plaintiff invokes 44 CFR § 205.39, dealing with agreements between states and the Federal Emergency Management Agency [FEMA], This regulation sets forth some of the matters which must be contained in all FEMA-state agreements.

Primary reliance is placed upon 44 CFR § 205.39(f)(3), which relates to amendments to the agreements. When the regional director of FEMA deems it necessary, a FEMA-state agreement shall be amended to address, inter alia, “the need for the State to pursue recoveries against responsible parties.” 44 CFR § 205.39(f)(3). This language merely alludes to the fact that states may need to proceed against “responsible parties,” and that the federal-state agreement may have to be adjusted to accommodate that possibility. This language does nothing, by implication, to confer a right of action.

Nor do I find that a right of action is implicit in the statute itself. No right of action is expressly stated in FDRA. There are “certain limited circumstances” in which a right of action is implied, even though Congress has not taken “the far better course” of specifically providing for it in the statute. Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 374, 102 S.Ct. 1825, 1837, 72 L.Ed.2d 182 (1982), quoting Cannon v. University of Chicago, 441 U.S. 677, 717, 99 S.Ct. 1946, 1968, 60 L.Ed.2d 560 (1979).

Determining the existence of a right of action requires an analysis of the four factors stated in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). These are: 1) whether the plaintiff is a member of a “ ‘class for whose especial benefit the statute was enacted.’ ” Id. at 78, 95 S.Ct. at 2088, quoting Texas & Pacific R. Co. v. Rigsby, 241 U.S. 33, 39, 36 S.Ct. 482, 484, 60 L.Ed. 874 (1916) (emphasis in original); 2) whether there is any indication of legislative intent to create or deny a private remedy; 3) whether a private remedy is consistent with the underlying purpose of the statutory scheme; and 4) whether the cause of action is one traditionally relegated to state law.

The second, third, and fourth Cort factors can be disposed of quickly. There is little evidence of any intent by Congress to create a right of action. There is, if anything, some indication that Congress meant not to provide a right of action. The FDRA has provisions for civil and criminal penalties for persons who misstate facts in connection with requests for assistance, violate regulations under FDRA, or misapply loan proceeds. 42 U.S.C. § 5157(a), (b), (c). The maximum penalties under subsections (a) and (b) are $10,000 and $5,000, respectively. Under subsection (c), the maximum penalty is one and one-half times the principal amount of the loan.

The claims against the defendants are for substantially greater sums than the limits provided in the statute, and there is no argument that 42 U.S.C. § 5157 is the source to which plaintiff looks for a right of action. Indeed, the basis of the claim is fraud, which is a traditional state common law claim. The common law nature of the plaintiffs claim, plus the existence of enforcement proceedings completely different from those invoked by the plaintiff, suggest that this sort of claim is not implicit in FDRA.

The first factor stated in Cort v. Ash also does not help the plaintiff. It is true that FDRA was enacted for the benefit of states in need of emergency relief. However, this is not a case where the State is being denied emergency relief. The federal government is not withholding funds. Thus, this is not a case where the defendant is accused of not according a federal right to a member of a protected class.

This distinguishes the present case from others in which an implied right of action was found to exist. Cannon v. University of Chicago, 441 U.S. 677, 99 S.Ct. 1946, is a typical case. Cannon involved a sex discrimination provision in Title IX of the Education Amendments of 1972, which provided that “No person ... shall, on the basis of sex, be ... subjected to discrimination under any education program or activity receiving Federal financial assistance.” The Supreme Court held that there was an implied right of action for a female who alleged that she was a victim of discrimination.

Statutory language such as that in Cannon and other civil rights cases is the type of “right-creating” language which is normally found in statutes carrying an implied right of action. Davis v. United Air Lines, Inc., 662 F.2d 120, 122-23 (2d Cir. 1981). No such language appears in FDRA.

It should also be noted that this case does not involve a statute which deals with an area of law in which a private right of action has been traditionally recognized by courts. In cases of that sort, legislative silence is often viewed as legislative acquiescence with existing case law. See, e.g., Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 102 S.Ct. 1825. In the area of disaster relief, something considerably more than silence is necessary to find an implied right of action. For all of the foregoing reasons, I conclude that the plaintiff has no private right of action under FDRA.

Finally, plaintiff argues that even if there is no basis for the federal claims, the pendent claims still ought to proceed in this forum. I disagree.

The only parts of this lawsuit that are still viable are claims which involve difficult questions of state law. The question of whether a federal court should hear pendent claims when non-frivolous federal claims have been dismissed is a matter for the court’s sound discretion. Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). Delicacy of the state law issues involved, and the principle that federal courts should avoid needless decisions on such issues are factors which favor abstention. Falls Riverway, Inc. v. City of Niagara Falls, 732 F.2d 38, 42 (2d Cir.1984).

The present case is still in an undeveloped posture. It would be imprudent to decide such delicate state law issues when there is no need to do so. The pendent claims are therefore dismissed.

To summarize and repeat: 1) Counts one and two are dismissed pursuant to the decisions in the Sedima and Bankers Trust eases; 2) Count three is dismissed, because the FDRA does not confer a right of action upon the plaintiff; 3) The pendent claims are also dismissed. Defendants’ motion is granted, and the complaint is dismissed. Judgment shall enter for defendants.

So ordered.

      . The court declines plaintiffs invitation to stay its judgment herein, pending possible proceedings before the Supreme Court in Sedima and Bankers Trust. The Second Circuit has spoken clearly and decisively in those cases, and the plaintiffs rights in this case can be protected through the usual appellate process.


author: McLAUGHLIN, District Judge.

text:
    Rosaria FRESCA, Plaintiff, v. Edward E. ARNOLD and Diane Arnold, Defendants.
    No. 84 CV 0344.
    United States District Court, E.D. New York.
    Oct. 22, 1984.
    Dominic J. Cornelia, P.C., New York City, for plaintiff.
    Pizzitola & Di Blasi, P.C., Brooklyn, N.Y. (Vincent A. Di Blasi, Brooklyn, N.Y., of counsel), for defendants.
   MEMORANDUM AND ORDER

McLAUGHLIN, District Judge.

Plaintiff in this diversity action seeks three million dollars ($3,000,000) for injuries allegedly suffered when the ear in which she was a passenger was hit by defendants’ car, driven by co-defendant Diane Arnold. Defendants have moved to dismiss for ineffective service of process. Fed.R.Civ.P. 4(f). Plaintiff has cross-moved to transfer the action to the District of New Jersey. 28 U.S.C. § 1406(a). For the reasons developed below, plaintiff’s motion is granted.

Facts

The accident occurred in New Jersey on June 11, 1982. Plaintiff, a New York resident, commenced this action on January 25, 1984. Defendants, both New Jersey residents, were served at their home in New Jersey.

Plaintiff concedes that this Court has no personal jurisdiction over defendants, but contends that the action should be transferred, rather than dismissed, because plaintiff would be barred from commencing a new action by New Jersey’s two-year statute of limitations. N.J.Stat.Ann. 2A:14-2 (West 1952).

Discussion

Plaintiff relies upon 28 U.S.C. § 1406(a) as the'basis for her cross-motion to transfer. That section provides that when an action is filed in a district where venue is improper, the district court shall either dismiss the action or, if it is in the interest of justice, transfer it to the district where it could have been brought. Although on its face that section refers only to actions improperly venued, it has been extended to cases like this where venue is proper, 28 U.S.C. § 1391(a), but no personal jurisdiction exists. Corke v. Sameiet M.S. Song of Norway, 572 F.2d 77 (2d Cir.1978).

It is of no consequence, however, whether plaintiff’s reliance on § 1406(a), as opposed to the general transfer statute, 28 U.S.C. § 1404(a), is proper. A district court need not elect between the two sections, id. at 80; it “has power to transfer the case even if there is no personal jurisdiction over the defendants, and whether or not venue is proper in [the] district, if a transfer would be in the interest of justice.” Volk Corp. v. Art-Pak Clip Art Service, 432 F.Supp. 1179, 1181 (S.D.N.Y. 1977) (footnotes omitted). Judge Weinfeld’s statement in that case has been adopted as the law of this Circuit. Corke v. Sameiet M.S. Song of Norway, supra, 572 F.2d at 80.

The question then becomes whether it is in the interest of justice to transfer this case. The accident at issue occurred in New Jersey, both defendants reside there, and so presumably do any witnesses. Defendants filed no papers in opposition to plaintiff’s cross-motion, and the Court cannot perceive any hardship to defendants if the action is transferred. Refusal to transfer, however, would work tremendous hardship on plaintiff, who admits that this Court has no personal jurisdiction over defendants. If this action were dismissed plaintiff would be barred from commencing a new action in New Jersey. See N.J.Stat. Ann. 2A:14-2 (West 1952). Transfer in this instance is clearly in the interest of justice. Corke v. Sameiet M.S. Song of Norway, supra, 572 F.2d at 80.

For the foregoing reasons, plaintiff’s cross-motion is granted; there is thus no need to consider defendants’ motion. It is hereby ORDERED that this action is transferred to the District of New Jersey.

SO ORDERED.


author: GENE CARTER, District Judge.

text:
    Daniel E. SMITH, Plaintiff, v. Margaret HECKLER, Secretary of Health & Human Services, Defendant.
    Civ. No. 83-0203-P.
    United States District Court, D. Maine.
    Oct. 22, 1984.

      Thomas P. Downing, Jr., Portland, Me., for plaintiff.
    Paula D. Silsby, Asst. U.S. Atty., Portland, Me., for defendant.
   OPINION AND ORDER DENYING PLAINTIFF’S APPEAL

GENE CARTER, District Judge.

In this case Plaintiff has appealed directly to this Court under 28 U.S.C. § 636(c)(4) from an order of the Magistrate. That order affirmed the decision of the Defendant Secretary denying Plaintiff’s application for a period of disability and for disability insurance benefits.

Plaintiff’s appeal was dismissed initially by this Court on March 31, 1984, for failure to file a timely brief. On May 29, Plaintiff filed a Motion for Relief from Judgment, which was granted by the Court for want of objection on June 12, 1984. After Plaintiff filed a statement of the cause and brief on June 22, 1984, the Defendant Secretary filed a motion for extension of time in which to file her brief, from August 13, 1984, to August 20, 1984. Since no objection was filed, that motion, too, was granted. The Secretary did not, however, file her brief until August 22, two days after the appointed date.

On far too many occasions the Court has dealt at length with the Secretary’s failure to take seriously the procedural rules and orders of this Court. See, e.g., Ouelette v. Heckler, Civ. No. 84-0129-P (D.Me. Aug. 2, 1984), Montrose v. Heckler, 579 F.Supp. 240 (D.Me.1984).

As a sanction for this most recent dereliction, the Court will consider Plaintiff’s appeal without considering the arguments presented by Defendant in her brief. Since those arguments were not timely made, the Court deems them waived.

Proceeding to the merits of the appeal, the Court first states that the appropriate standard of review of final orders of the Magistrate in social security cases is the same standard used by appellate courts in reviewing decisions of the district courts in social security matters. Therefore, the standard of review to be applied by this Court is whether the determination made by the ALJ is supported by substantial evidence. 42 U.S.C. § 405(g); Lizotte v. Secretary of Health and Human Services, 654 F.2d 127, 128 (1st Cir.1981). The determination must be supported by such relevant evidence as a reasonable mind might accept as adequate to support the conclusions drawn. Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971). The Court has thoroughly reviewed the transcript of the administrative proceedings, the exhibits presented and the brief of Plaintiffs counsel.

Plaintiff contends that the findings of the ALJ were not supported by the evidence in several respects. The Court cannot agree. Although Plaintiff claims that the AU ignored salient portions of various medical records, it is clear that the AU carefully considered all of the reports in his evaluation of the evidence. The portions which Plaintiff claims were ignored are largely the conclusions of the physicians on the issue of disability. Plaintiff concedes, however, and the law of this circuit is explicit, that the AU is not compelled to accept a physician’s conclusion on the ultimate question of disability. Rodriquez v. Secretary of Health and Human Services, 647 F.2d 218, 222 (1st Cir.1981).

Plaintiff also contends that the AU’s findings concerning his alcoholism and depression are not supported by substantial evidence and that the AU ignored important aspects of the evidence. In fact, as the Magistrate pointed out, each of the findings is supported on the record. Specifically, the AU’s finding that Plaintiff’s nonexertional impairments have not caused restrictions in daily activity, construction of interests, or difficulty in relating to other people, and thus do not meet the requirements of 20 C.F.R. Part 404, App. 1 § 12.04, are supported in the record by his testimony concerning his daily activities and the social network that he has developed around Alcoholics Anonymous meetings.

The Court cannot agree either with Plaintiff’s suggestion that his alcoholism and depression alone are disabling. The regulations state clearly that addiction to alcohol “will not, by itself, be a basis for determining whether you are, or are not, disabled. As with any other medical condition we will decide whether you are disabled based on symptoms, signs and laboratory findings.” 20 C.F.R. § 404.1515(e). As stated above, the determination that Plaintiff did not manifest the requisite symptoms, signs and laboratory findings is supported by substantial evidence.

The AU specifically found that claimant’s “nonexertional impairments, alone or in combination with his exertional impairments do not significantly affect his ability to perform a wide range of sedentary work.” Finding 18. (Emphasis added). Plaintiff’s argument that the AU failed to consider the cumulative effect of his impairment is, therefore, without merit.

Finally, Plaintiff asserts that the AU mechanically applied the medical vocational guidelines (the grid) in finding that Plaintiff is capable of sedentary work that is available in the national economy. Because of his nonexertional impairment, Plaintiff contends, too, that a vocational expert is required to establish his alternate vocational capacity.

The regulations make clear that the guidelines may not be conclusive when nonexertional impairments are involved. 20 C.F.R. Part 404, Appendix 2, § 200.00(e). See also, Gagnon v. Secretary of Health and Human Services, 666 F.2d 662, 665 (7th Cir.1981); Stewart v. Heckler, 594 F.Supp. 590 at 593-594 (1984) (per Carter, J.). The regulations also require a two-part procedure when both exertional and nonexertional impairments are present, as they are in this case.

[W]here an individual has an impairment or combination of impairments resulting in both strength limitations and nonexertional limitations, the rules in this sub-part are considered in determining first whether a finding of disabled may be possible based on the strength limitations alone and, if not, the rule(s) reflecting the individual’s maximum residual strength capabilities, age, education, and work experience provide a framework for consideration of how much the individual’s work capability is further diminished in terms of any types of jobs that would be contraindicated by the nonexertional limitations. Also, in these combinations of nonexertional and exertional limitations which cannot be wholly determined under the rules in this Appendix 2, full consideration must be given to all the relevant facts in the case in accordance with the definitions and discussions of each factor in the appropriate sections of the regulations, which will provide insight into the adjudicative weight to be accorded each factor.

20 C.F.R. Part 404, Appendix 2, § 200.-00(e)(2). Explicating this regulation, the First Circuit has stated that the guidelines should not be mechanically applied when nonexertional impairments “are so significant that the applicant does not possess the residual functional capacity on which the ‘Guidelines’ are predicated.” Torres v. Secretary of Health and Human Services, 668 F.2d 67, 69 (1st Cir.1981).

The ALJ’s opinion demonstrates that he was fully aware that the grid is not applicable in all situations and that he did not blindly apply it. At the outset he recited the above regulation limiting use of the grid. In the findings section of his opinion the AU determined first that no finding of disability was available on the strength impairments alone. Continuing to the second phase of the evaluation, he determined that the nonexertional impairments, alone or in combination with the exertional impairments, “did not significantly affect [Plaintiff’s] ability to perform a wide range of sedentary work.” The AU had twice previously articulated his finding that Plaintiff’s nonexertional impairments did not significantly affect his ability to perform work related functions. His final analysis that the nonexertional impairments did not significantly affect his ability to perform sedentary work follows from the previous finding. Since there was no significant effect on the residual functional capacity on which the grid is predicated, its use by the AU was entirely proper.

Accordingly, it is ORDERED that the appeal of the Plaintiff be, and is hereby, DENIED.

So ORDERED.

      . Plaintiff claims that the AU failed to discuss at all the October 12, 1982, report of Dr. Dowling which termed Plaintiff “totally disabled.” This report, including Dr. Dowling’s assessment of Plaintiffs physical limitations, was discussed by the ALJ at page 6 of his opinion. Tr. 22.
      Plaintiff, on page 5 of his brief, also alludes to other mistakes or omissions in the AU’s opinion. These were all pointed out to the Appeals Council before its review and that body found that they did not affect the outcome of the case. The Magistrate reviewed this finding and found no error in it. Likewise, this Court has reviewed the record and has found no error in that conclusion.


author: ORINDA D. EVANS, District Judge.

text:
    Gary AHRENS, b/n/f Leigh Ahrens and Leigh Ahrens and Fred Ahrens v. Fred KATZ, Rolo Hardin, Sheldon Baum, A.B. Caldwell, R.B. Holstein, A.R. Haight, Doctors Hospital of Tucker, Herbert L. Greenwald, and Bi-County Pediatrics, Inc. Gary AHRENS, b/n/f Leigh Ahrens and Leigh Ahrens and Fred Ahrens v. DOCTORS HOSPITAL OF TUCKER, INC.
    Civ. Nos. C81-1309, C84-858.
    United States District Court, N.D. Georgia, Atlanta Division.
    Oct. 22, 1984.

      William Q. Bird, Andrew M. Scherffius, Irwin M. Ellerin, Bird, Scherffius & Rumsey, Atlanta, Ga., for plaintiffs.
    Robert G. Tanner, James T. Perry, Atlanta, Ga., for Katz, Hardin and Caldwell.
    David A. Handley, James C. Huckaby, Alan Kyman, Gambrell & Russell, Atlanta, Ga., for Haight.
    W.E. Zachary, Sr., Zachary & Segraves, Decatur, Ga., for Doctors Hospital of Tucker.
    James S. Owens, Nall & Miller, Atlanta, Ga., for Greenwald and Bi-County Pediatrics.
   MEMORANDUM OPINION

ORINDA D. EVANS, District Judge.

By order entered September 14, 1984, the court denied Plaintiffs’ Petition in Equity as amended in Civil No. C84-858 above. The purpose of this memorandum opinion is to set forth the court’s reasons for denying the Petition in Equity as amended.

The Petition is brought under the court’s diversity jurisdiction. Plaintiffs are asking the court to set aside or deny res judicata effect to a 1982 judgment entered against them and in favor of Doctors Hospital of Tucker, Inc. by the Superior Court of DeKalb County, Georgia. The grounds asserted are fraud and mutual mistake. Plaintiffs seek to avoid the bar of the judgment in order to prosecute negligence claims against the Hospital in Civil No. C81-1309 above.

A federal district court may entertain a diversity-based suit in equity to set aside or deny res judicata effect to a state court judgment. See Vol. 7, Moore’s Federal Practice, ¶ 60.37[3] (2d Ed.). The principles of Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), require that the court apply the law of the state which rendered the judgment.

A number of Georgia statutes and decisions are relevant to determination of the proper standard of proof under Georgia law. O.C.G.A. § 23-2-21 provides in pertinent part:

(a) A mistake relievable in equity is some unintentional act, omission, or error arising from ignorance, surprise, imposition, or misplaced confidence.
* * * * * *
(c) The power to relieve mistakes — shall be exercised with caution, and to justify it the evidence shall be clear, unequivocal, and decisive as to the mistake. (Emphasis supplied).

O.C.G.A. § 23-2-57 provides:

Fraud may not be presumed but, being in itself subtle, slight circumstances may be sufficient to carry conviction of its existence.

The Georgia Supreme Court has held however that “slight circumstances” are insufficient to prove fraud in a suit to set aside a judgment. Leventhal v. Citizens & Southern National Bank, 249 Ga. 390, 291 S.E.2d 222 (1982). The Court did not state precisely what the applicable standard is in that case, but common sense dictates that evidence of fraud sufficient to reopen a judgment should be no less clear or unequivocal than that required to reopen based on mistake.

In Carroll v. Craig, 214 Ga. 257, 104 S.E.2d 215 (1958), the Georgia Supreme Court held that where a party sought by petition in equity to reform a deed, it was error to merely instruct the jury that petitioner could prevail based on a preponderance of the evidence. However, in Fidelity v. State Highway Dept., 174 Ga. 443, 163 S.E. 174 (1932), a similar case, the court held that a charge defining the burden of proof as that of a preponderance of the evidence but referring to the requirement of “clear, unequivocal and decisive” evidence was not erroneous.

Interpreting the foregoing Georgia statutes and holdings, this court finds that Georgia law requires that Plaintiffs prove their equitable claims by something more than a mere preponderance of evidence. The evidence must preponderate in Plaintiffs’ favor, but it must also be of “clear, unequivocal and decisive” quality. This standard applies to Plaintiffs’ claims to reopen based on alleged fraud and also on alleged mistake.

Having established the relevant standard of proof, the court now turns to a review of the evidence, and findings of fact.

Plaintiffs are seeking denial of res judicata effect to the state judgment on alternative grounds. First, they contend that the Hospital’s alleged suppression of a part of Gary Ahrens’ hospital chart, and a nurse’s obliteration and subsequent alteration of a part of the chart, worked a fraud on the Superior Court of DeKalb County, which granted the Hospital’s motion for summary judgment in the allegedly erroneous belief that the chart was true and correct, whereas it in fact had been fraudulently altered. Alternatively, Plaintiffs contend that both they and the Hospital proceeded in the DeKalb County action in the mistaken belief that Gary’s hospital chart was complete and correct, when in fact it was not.

Plaintiffs’ claims of fraud and mistake received their impetus from an interview by Plaintiffs’ counsel of Dr. Terry Gerard in the spring of 1984. At that interview Dr. Gerard, who had been an intern at Doctors Hospital at the time of Gary’s birth, signed an affidavit stating that he had placed certain progress notes in the child’s hospital chart which are no longer there. He said these entries were critical of Dr. Greenwald, a Defendant in Civil No. C81-1309. Primarily, he said the notes documented his unsuccessful efforts to get Dr. Greenwald to come to the hospital to treat Gary.

Following the interview with Dr. Gerard, Plaintiffs’ counsel discovered “whiteouts” in Gary Ahrens’ hospital chart which also are alleged to have been part of a fraudulent scheme.

The court will first deal with the alleged missing progress notes and then will deal with the whiteouts.

A. The Missing Progress Notes

Fundamental to Plaintiffs’ claims for relief under both fraud and mistake theories is their assertion that Dr. Gerard created progress notes which he placed in Gary Ahrens’ file. There is no documentary evidence to support this assertion. The only testimonial evidence which directly addresses the contention is that of Dr. Gerard. The Hospital’s witnesses neither confirm nor deny that the progress notes ever existed.

Dr. Gerard testified that during the afternoon of Gary’s birth (July 12, 1979), he was the intern on duty. Three infants were in the nursery under his care — Gary Ahrens, Jeffrey Ahrens, and Misty George. He said he made notes during the afternoon on a pad and that that evening, he transferred these notes onto “Progress Record” forms in Gary Ahrens’ and Misty George’s hospital charts. The charts do not contain any such notes however. Dr. Gerard testified that he made no progress notes with respect to Gary Ahrens’ twin brother, Jeffrey. Jeffrey Ahrens’ post-delivery course was uneventful, but Misty George had hyaline membrane disease, and Gary Ahrens developed hypoglycemia.

Pursuant to a request made by the pediatrician for the George and Ahrens infants, Misty George and Gary Ahrens were picked up by a transport team on the evening of July 12 and taken to special high-risk nurseries at Grady and Egleston Hospitals respectively. Standard procedure in such cases is to send a copy of the transported infant’s chart with him to the new hospital, but no copy was sent with Gary Ahrens to Egleston Hospital. Gary Ahrens’ hospital chart does not contain a parental authorization for a copy of his chart to be sent. Misty George’s chart, however, reflects a signed consent for a copy of her chart to be sent to Grady Hospital on July 12, 1979. No evidence was presented addressing whether Grady has a copy of Misty George’s file, and if so, whether it contains any progress notes by Dr. Gerard.

A few days after Gary Ahrens’ transfer to Egleston Hospital, he developed necrotizing enterocolitis which required removal of his colon. The reason necrotizing enterocolitis developed is a major issue in Civil No. C81-1309. Plaintiffs have alleged a number of contributing causes. For one thing, they allege that Gary’s premature delivery by elective cesarean section was a causal factor in his developing hypoglycemia. The hypoglycemia in turn allegedly caused or contributed to the necrotizing enterocolitis. In addition, Plaintiffs allege that the pediatricians responsible for Gary’s care — Dr. Greenwald and Dr. Nickelsen — negligently failed to be present in the nursery on the afternoon following his birth. This failure is alleged to have caused a delay in treating his hypoglycemia, thus contributing to the later development of necrotizing enterocolitis.

Finally, there is evidence that when Dr. Gerard inserted an umbilical vein catheter in Gary while caring for him, that the catheter was misplaced and became curled up inside the child’s liver. Dr. Greenwald, a defendant in Civil No. C81-1309, contends that he instructed Dr. Gerard to give oral feedings of glucose only. Dr. Greenwald’s contention is that Gary’s hypoglycemia was not severe enough to require intravenous glucose, and that Dr. Gerard acted improperly when he allegedly decided on his own to administer intravenous glucose.

Since there is an absence of documentary evidence and no testimonial evidence except Dr. Gerard’s affirming his creation of progress notes on July 12, 1979, the fate of the petition in equity depends entirely on Dr. Gerard’s credibility.

Dr. Gerard is not a disinterested witness. Rather, he participated in Gary Ahrens’ care during a critical time following the child’s birth. He admits that as the intern on duty, he had the obligation to place appropriate progress notes in the hospital charts of his patients. Yet, there is no tangible evidence that he put any progress notes in the charts of any of the three patients he treated.

Dr. Gerard’s stated perspective on the events of July 12 is that until he inserted the umbilical vein catheter in Gary Ahrens (at about 6:00 p.m.), the child was in a great deal of distress. He explicitly testified that Gary was lethargic and that he had to be fed through a nasogastric tube. This particular part of his testimony was very unconvincing. Indeed, Dr. Gerard admitted uncertainty as to whether he had reported any lethargy or physical symptoms to the attending pediatrician during their phone conversations. After some equivocation, he testified he probably had told the pediatrician that the child was a “little bit listless.” Tr. 69. At another point in his testimony he testified that he was uncertain that he was capable of identifying lethargy in a newborn. Tr. 44. The testimony about the nasogastric tube came in response to leading questions and was unconvincing.

Other evidence contradicted Dr. Gerard’s testimony about the lethargy and the nasogastric tube. The nurses’ notes in Gary Ahrens’ chart do not reflect that he was lethargic or in distress. The notes reflect that Gary was fed orally, not through a nasogastric tube. Further, Sue Peterson— the only nurse who had an independent recollection of the events of July 12 — testifled credibly that Gary Ahrens had not been lethargic and that he had been fed orally, not through a nasogastric tube. Dr. Gerard’s contrary testimony, therefore, is not credited.

The fact that Dr. Gerard’s testimony was impeached in certain respects lessens the court’s confidence in his testimony that he placed progress notes in the file which are not now there. Also, the fact that his testimony is uncorroborated, and the fact that he is not disinterested weigh negatively. Thus, the court is unable to find that the evidence is of “clear, unequivocal, and decisive” quality. This failure is fatal to both the fraud and mistake theories.

In addition, the record provides no clear explanation of exactly what Dr. Gerard’s alleged progress notes said which would have enabled Plaintiffs to defeat the Hospital’s motion for summary judgment in the Superior Court of DeKalb County. The court credits Dr. Gerard’s testimony that he was extremely agitated at Dr. Greenwald on the afternoon of July 12, 1979, and further credits his testimony that he told Dr. Greenwald that he should come into the hospital to treat Gary Ahrens. These allegations, however, are not seriously disputed by Dr. Greenwald. Dr. Greenwald’s position is that he disagreed with Dr. Gerard about the presence of an emergency. Therefore, even if Dr. Gerard did create progress notes it is unclear exactly how the suppression of these notes altered Plaintiffs’ position with respect to their claims, especially their claims against the Hospital. For this additional reason, Plaintiffs’ claims of fraud and mistake pertaining to the progress notes are rejected.

B. The Whiteouts

As is stated in the September 7 order, once Dr. Gerard’s testimony came to light, Plaintiffs’ counsel reviewed Gary Ahrens’ original hospital chart and found “whiteouts” on certain portions of the nursing notes. The Petition in Equity alleges that these whiteouts were part of a fraudulent scheme to hide relevant facts concerning Gary Ahrens’ treatment, or alternatively the cause of a mutual mistake concerning Gary Ahrens’ course of treatment.

Analysis of these contentions is simplified by the fact that the parties have determined with x-ray equipment what the original notes said prior to the “whiteouts.” The line in the nursing notes which originally said “1628 results of RBS — 1628—Dr. Gerard notified — ” was changed to delete the intermediate reference to “1628” and to substitute “21%,” so that the line as altered now reads: “1628 Results of RBS — 21%— Dr. Gerard notified.”

Another line in the nursing notes originally read: “1745 Scalp vein I.V. started per Dr. Funk c # needle.” This entry was whited out and over that the following entry was made: “1750 glucagon t mg IM given RAT as ordered. Took and retained 10 cc D5W Has fair suck reflex.”

Beth Tiller, the nurse who made the original entries, the “whiteouts,” and the “writeovers,” testified at the September 13-14 hearing. Her testimony was credible. She stated that the whiteout/write-over procedure was not in accordance with correct nursing standards, and that the proper procedure would have been for her to line through the erroneous material, mark it “error,” and then make a correct entry beneath it. She said she could not remember why she had used the whiteout fluid instead. It was clear that she lacked an independent recollection of the events of July 12, 1979, but the nature of the material “whited over,” taken in conjunction with other material in the chart, fails to suggest a fraudulent or guilty motive. First, the substitution of the figure of 21% for 1628 was an obvious correction of an inadvertent repetition of the time of day. Secondly, it seems likely that Nurse Tiller made the entry concerning the scalp vein I.V. as Dr. Funk tried to start the I.V. When he failed because the patient’s veins were too small, Nurse Tiller decided to change the entry. The whiteout procedure was improper, but the court again is unable to infer a fraudulent or guilty motive.

Finally, Plaintiffs contend that the whiteouts on the nursing charts resulted in a mutual mistake as to the real content of Gary Ahrens’ hospital chart. It is true that counsel for neither side realized until recently that the chart contained “whiteouts” or what was under the “whiteouts.” This does not provide a basis for equitable relief from the DeKalb judgment, however, unless the chart misrepresented or omitted a material fact regarding Gary Ahrens’ course of treatment. The court finds that it did not. The chart made it clear that there was difficulty in starting an I.V. Specifically, the “Physicians Orders” section of the chart shows an entry by Dr. Gerard as follows: “1730 Dr. Funk to participate in helping get I.V. in child.” Immediately under that is the entry “1800 George Page to participate in helping get I.V. in child.” Thus, it is readily inferable that Dr. Funk did not start an I.V. Therefore, the whiteout made by Nurse Tiller was not significant to meaningful review of the chart.

For the foregoing reasons, the court finds no fraud or mistake relievable in equity under applicable Georgia law, and the judgment in favor of the Hospital in the Superior Court of DeKalb County is entitled to res judicata effect. Accordingly, the court has by order entered on September 14, 1984, (1) denied the Petition in Equity as amended in Civil No. C84-858, and (2) granted the Hospital’s motion for summary judgment in Civil No. C81-1309.

      . Both the Federal Rules of Civil Procedure and the Official Code of Georgia Annotated provide for an independent suit in equity to obtain relief from judgments procured by fraud or mistake. Although the Georgia statute is more specific in stating that an independent action to set aside a judgment may be based on allegations of fraud or mistake, it is clear that the federal and Georgia statutes provide parallel remedies. Cf. O.C.G.A. § 9-11-60(e); Rule 60(b), F.R.Civ.P.

      . There is a Progress Record form in Jeffrey Ahrens’ chart which contains two entries dated July 13 and 16, 1979 signed by Dr. Nickelsen, the attending pediatrician. Dr. Gerard testified it was unnecessary for him to make progress notes on Jeffrey Ahrens, because he was not having any problems. There is no Progress Record form at all in the charts of either Gary Ahrens or Misty George. Witnesses for both sides stated this was not unusual in a case where the patient was at the hospital for less than a day.

      . The request was by Dr. Neil Nickelsen, partner of Dr. Greenwald.

      . The transport team was called to pick up Misty George. However, when they arrived mid-evening at the Hospital, Dr. Nickelsen asked them to transfer Gary Ahrens also.

      . The nurses’ notes on the George infant, on the other hand, do reflect a distressed infant.

      . She testified that Misty George had had a nasogastric tube, however.

      . This lack of clarity is discussed in the court’s order of September 7, 1984. The amendment to Plaintiffs’ Petition filed in response to this order does little to improve the situation.


author: THOMAS F. HOGAN, District Judge.

text:
    Stephanie LEE, A Minor, et al., Plaintiffs, v. FORD MOTOR COMPANY, Defendant.
    Civ. A. No. 84-0987.
    United States District Court, District of Columbia.
    Oct. 22, 1984.
    Harry L. Ryan, Jr., Arlington, Va., for plaintiffs.
    E. Milton Farley, III, Christopher A. Myers, Hunton & Williams, Washington, D.C., for defendant.
   MEMORANDUM OPINION AND ORDER

THOMAS F. HOGAN, District Judge.

Plaintiffs brought this action to recover damages for personal injuries sustained by Stephanie Lee on June 24, 1981, when she was struck by a vehicle owned by Defendant Ford and driven by Ronald Fullwood. Fullwood was operating the vehicle within the scope of his employment with the Farm Credit Administration, a federal agency that maintained the vehicle in question under a long term lease agreement with Ford.

Plaintiffs assert that Ford, as the owner of the vehicle, is liable for any negligence of Fullwood which may have resulted in injury to Stephanie Lee. The basis of plaintiffs’ legal theory is the District of Columbia’s Motor Vehicle Safety Responsibility Act (the Act), which provides that:

Whenever any motor vehicle ... shall be operated upon the public highways of the District of Columbia by any person other than the owner, with the consent of the owner, express or implied, the operator thereof shall in case of accident, be deemed to be the agent of the owner of such motor vehicle, and the proof of the ownership of said motor vehicle shall be prima facie evidence that such person operated said motor vehicle with the consent of the owner.

D.C.Code § 40-408. The presumption created by the Act works a substantial change in the common law doctrine. See, e.g., Forrester v. Jerman, 90 F.2d 412 (D.C.Cir. 1937) (owner of automobile not liable for damages caused by another in use of automobile). By creating a fictitious agency relationship between the driver and owner, the law operates to sustain the owner’s responsibility for the automobile’s operation even when it is out of the physical control of the owner. The purpose of the act is obvious; it was intended to make automobile owners more conscientious in the loaning of their vehicles by allowing injured plaintiffs to shift the negligent driver’s liability to the owner who consented to the tortfeasor’s use of the car.

Defendant Ford has moved for summary judgment on the grounds that it should not be considered the “owner” of the vehicle under the Act as a matter of law. It is to this issue that the Court now turns.

As originally enacted in 1929, the predecessor of the Motor Vehicle Safety Responsibility Act did not contain a definition of the term “owner.” Thus, it was left to the courts to give meaning to the statutory language. The leading case under the 1929 statute is Mason v. Automobile Finance Co., 121 F.2d 32 (D.C.Cir.1941).

The issue presented in Mason was whether a chattel mortgagee, who held title to an automobile, could be held liable as an “owner” under the presumption created by the statute. The court, noting that the issue was one of first impression, looked to the structure and purpose of the act in order to aid in understanding the statutory language. The court per Justice Rutledge held:

In the absence of some definite statutory criterion of ownership, we think the purpose of the statute was to place the liability upon the person in a position immediately to allow or prevent the use of the vehicle and to do so by giving a lawful and effective consent or prohibition to its operation by others. The object was to control the giving of consent to irresponsible drivers by the one having that power rather than to impose liability upon one having a naked legal title with no immediate right of control.

121 F.2d at 35. Thus, the Court concluded that statutory ownership for purpose of title registration was not conclusive of ownership status under the 1929 Act.

The language and result in Mason was repeatedly followed by the courts of the District of Columbia. For example, in Gasque v. Saidman, 44 A.2d 537 (D.C.1945), the court considered whether the person who retained title to a vehicle but relinquished “possession, use, and control” should be considered an “owner” under the Act. Noting that “[t]he matter has been decided in this jurisdiction by Mason ...,” the court held that the title holder had “proved that he was not ... the owner” within the meaning of the Act. Id. at 538. See also Burt v. Cordover, 117 A.2d 116 (D.C.1955). The judicially developed law under the 1929 Act had substituted a practical test of ability to control a vehicle’s use for the more rigid legal definition of “owner.”

In 1956, Congress enacted the present Motor Vehicle Safety Responsibility Act, currently codified at 40 D.C.Code 40-401, et seq. The 1956 Act modified the earlier legislation by, inter alia, adding a definition of the term owner:

[a] person who holds the legal title of a vehicle, or in the event a vehicle is the subject of an agreement for the conditional sale or lease thereof with the right of purchase upon performance of the conditions stated in the agreement and with an immediate right of possession vested in the conditional vendee or lessee, or in the event a mortgagor of a vehicle is entitled to possession, then such conditional vendee or lessee or mortgagor shall be deemed the owner for the purpose of this chapter.

D.C.Code § 40-402(7). However, decisions handed down after the effective date of the 1954 legislation continued to rely on the 1929 Act precedents in the application of the statutory language.

For example, in Johnson v. Keyes, 201 A.2d 24 (D.C.1964), the court considered whether the defendant would be liable under the Act for an accident involving a car driven by her estranged husband. Although defendant admitted that she held the legal title of the vehicle, she also testified that the car was in the effective control of her husband who took the car with him following their marital separation. Id. at 25. Citing Mason v. Automobile Finance Co., the court held that the defendant “was not the owner of the automobile within the meaning of the Act.” Id.

This approach to the application of liability under the Act was followed in McClellan v. Allstate Insurance Co., 247 A.2d 58 (D.C.1968), which held that the legal owner of a vehicle would not be liable for damages caused by a driver who obtained control of the car by impersonating a parking lot attendant. The court, citing various cases discussed above, held that the owner in such a case would not be liable under the Act because of the absence of effective ability on the part of the owner to control the vehicle and render meaningful consent to its operation. Id. at 61-62.

The Court of Appeals for the District of Columbia Circuit has also maintained a consistent view of the purposes of the Act. In Herman v. Anacostia Chrysler-Plymouth, 350 F.2d 781 (D.C.Cir.1965), the court affirmed a grant of summary judgment for defendant car dealer, holding that defendant was not an “owner” of the vehicle which struck plaintiff despite the fact that defendant retained title to the vehicle under the sales contract. Id. at 783.

Thus, there is overwhelming precedent for the proposition that the person that holds legal title to a vehicle will not always be deemed to be the “owner” under the Motor Vehicle Safety Responsibility Act. Instead, looking to the purpose of the Act, the courts “place the liability upon the person in a position ... to allow or prevent the use of the vehicle____” Mason, 121 F.2d at 35.

In the present case, it is undisputed that Ford lacked “dominion and control” over the vehicle in question. The car had been provided to FCA by Ford while one of the vehicles under a long term lease between the parties was being repaired. See Affidavit of J. Barry Coughlin, Legislative Manager, Ford Motor Company, at 2. Under the lease, title remained in Ford but authority to control and operate the vehicles was given to the lessee, FCA. Ford had no immediate right to control the use of the vehicle at the time of the accident. While Ford did indeed “consent” to the operation of its cars by FCA employees, such blanket consent, which is the essence of a contract to lease, does not put Ford in the “position ... to allow or prevent the use of the vehicle ...” in any given case. Cf. Johnson v. Keyes, 201 A.2d at 26. It is this immediate right of control, as an incident of ownership, that is the focus of the Act in question. Given Ford’s position as the lessor of a fleet of automobiles to the FCA, Ford cannot be held liable as an “owner” under the Motor Vehicle Safety Responsibility Act.

Accordingly, it is this 18th day of October, 1984, hereby

ORDERED that the defendant’s motion for summary judgment be, and is, granted, and that judgment be entered for defendant.

      . The accident giving rise to this action occurred in the District of Columbia, and the parties agree that the substantive law of the District of Columbia is applicable.

        . The defendant in Keyes, like Ford, was not a “conditional vendee or lessee” or a “mortgagor ... entitled to possession.” Despite the fact that her legal status placed her squarely within the definition of owner under the statute, the court nevertheless looked to the purpose of the statute and defendant’s actual ability to control the use of the vehicle.

      . Plaintiff suggests that Ford, through the lease agreement, retained some control over the vehicle’s use and operation. The agreement does restrict operation of the cars to "the continental limits of the United States” and contain precatory language requiring use of the automobile "only in a careful manner." However, the Court does not believe that such broad contractual limits constitute the "dominion and control” over the vehicle contemplated under the statute.


author: MIHM, District Judge.

text:
    The UNITED STATES of America for the Use of OWENS-CORNING FIBERGLAS CORPORATION, a corporation, Plaintiff, v. BRANDT CONSTRUCTION COMPANY, a partnership, et al., Defendants. Charles BRANDT, et al., Plaintiffs, v. UPTOWN NATIONAL BANK OF MOLINE, a national banking corporation, Defendant.
    Nos. 83-4066, 84-4073.
    United States District Court, C.D. Illinois, Peoria Division.
    Oct. 28, 1984.
    Robert J. Noe, Bozeman, Neighbour, Patton & Noe, Moline, 111., for plaintiff.
    Thomas A. Skorepa, Marquis, Bonnett & Skorepa, Rock Island, 111., for defendants.
   ORDER

MIHM, District Judge.

This case was previously consolidated with an action brought by the United States for the use of Owens-Corning Fiberglas Corp. against Brandt Construction Company (“Brandt”). In that consolidated action, the Court granted Plaintiff’s motion for summary judgment and entered judgment in favor of Owens-Corning. Plaintiff Brandt Construction Company now seeks to obtain from Defendant Uptown National Bank (“Uptown” or “the Bank”) the amount it paid Owens-Corning in satisfaction of the prior judgment.

In Count I of the complaint, brought pursuant to the Miller Act, 40 U.S.C. § 270a et seq., Brandt alleges that the Defendant has violated the duty of a creditor to apply funds from a government bonded job to obligations incurred in generating those funds. Count II alleges misrepresentation and breach óf fiduciary relationship. After oral argument,. Defendant’s motion for summary judgment as to Count II was denied based on the Court’s finding that genuine issues of material fact exist. Both parties seek summary judgment with respect to Count I.

FACTUAL BACKGROUND

In October of 1981, Brandt, as general contractor, entered into two subcontracts with DeVolder Brothers Roofing Contractors, Inc. (“DeVolder”) pertaining to the repair of two buildings at the Rock Island Arsenal. Pursuant to these contracts and in compliance with the Miller Act, Brandt executed payment and performance bonds on which it was the principal. DeVolder did not have sufficient funds to pay its suppliers and others and needed to obtain capital from a third party. DeVolder went to Uptown National Bank, to which it was already indebted on other obligations. The Bank and DeVolder worked out an agreement whereby the Bank would finance De-Volder on the Arsenal project and DeVolder would thereafter apply the profit from that job on its previously existing indebtedness to the Bank. DeVolder represented to the Bank that the profit would be approximately $60,000 and that it would come in the form of a retainage fee paid at the time the job was finished.

In April of 1982, representatives of the Bank, Brandt and DeVolder met. Brandt at that time was made aware of the Uptown-DeVolder agreement. The parties discussed how Uptown was to be repaid its monthly advances to DeVolder and worked out an agreement whereby Brandt made checks payable jointly to DeVolder and Uptown.

On October 28, 1982 Brandt made its final payment to DeVolder by a check in the amount of $64,734.56, payable jointly to DeVolder and Uptown. At the time that payment was made, Brandt was unaware that certain firms which had supplied material for the Arsenal project had not been paid, including Owens-Corning. The final payment was in an amount sufficient to pay the balance due all firms supplying material. DeVolder advised Uptown that it was necessary to use the final payment from Brandt to satisfy its obligation to the suppliers and requested that the Bank not take the check as previously agreed. Uptown refused to comply with DeVolder’s request and applied the sums to DeVolder’s pre-existing indebtedness. DeVolder was thus unable to pay Owens-Corning. De-Volder subsequently filed bankruptcy. Owens-Corning filed a claim against Brandt and the surety on its bond, pursuant to the terms of the Miller Act, and this Court subsequently entered judgment against Brandt. Brandt paid Owens-Corning $59,853.62 in satisfaction of the judgment.

CROSS-MOTIONS FOR SUMMARY JUDGMENT

Although this is not a Miller Act proceeding, Brandt suggests it is a case seeking recovery of the amount paid to a successful Miller Act claimant and it arises because of Uptown’s deliberate misappropriation of funds. Brandt argues that despite the Bank’s knowledge that the funds in question were derived from a bonded government project and that certain suppliers were unpaid, Uptown appropriated the funds and applied the payment on the note of DeVolder, an indebtedness totally unrelated to the government project. Brandt contends that the Bank thus violated the rule that a creditor who knows that funds are derived from a government bonded job is obligated to apply the funds to obligations incurred in generating those funds as opposed to an unrelated transaction. See United States for the Use of C.H. Benton, Inc. v. Roelof Construction Co., 418 F.2d 1328 (9th Cir.1969); United States for the Use of Hyland Electrical Supply Co. v. Franchi Brothers Construction Corp., 378 F.2d 134 (2nd Cir.1967).

Uptown argues that the traditional remedies available to a surety or general contractor who has been exposed to liability under its payment bond are subrogation and indemnification. Under either of these theories of recovery, Defendant contends that Brandt has a cause of action against the subcontractor DeVolder but that there is no basis in law for Brandt to in effect waive any rights it has against DeVolder and instead plead a cause of action against the Defendant.

The rule has been established that “once it has been determined that a supplier has knowingly misapplied funds, the misapplied funds must be reallocated to the proper accounts (citations omitted).” United States for the Use of General Electric Supply Co. v. Wiring, Inc., 646 F.2d 1037, 1040 (5th Cir.1981).

“The rationale for this rule is that it would be unfair to the principal and surety on the Miller Act bond to permit a supplier to collect old debts out of monies paid on a current government project, secure in the knowledge that he will be able to collect for the material furnished on the government project by filing a claim against the bond.” 646 F.2d at 1040.

This rule and the rationale behind it do not provide support for the argument advanced by Brandt in this case.

A bank or financial institution which advances money for a government project has no Miller Act protection. The injection of capital into a government project does not constitute the furnishing of labor or materials, and therefore such a creditor has no cause of action against the general contractor’s bond. See First National of Dothan v. American Surety Co. of New York, 53 F.2d 746 (5th Cir.1931); U.S. for the Use of First Continental National Bank & Trust Co. v. Western Contracting Corp., 341 F.2d 383 (8th Cir.1965).

Roelof supra, and Franchi Brothers, supra, involve factual situations in which a materialman or supplier applied money from a government job to a prior delinquent account and then attempted to assert a Miller Act proceeding on the general contractor’s bond. These cases do not establish that any creditor who knows that funds are derived from a bonded job is obligated to apply the amount to that account as opposed to an unrelated obligation. See American Fidelity Co. v. National City Bank of Evansville, 266 F.2d 910 (D.C.Cir.1959) (where contractor borrowed money from bank and as security therefor legally assigned proceeds of government construction to the bank, in the absence of fraud, sureties on the contractor’s performance and payment bonds could not recover progress payments from bank to reimburse them for sums paid by them because of contractor’s default after bank had collected progress payments), Coconut Grove Exchange Bank v. New Amsterdam Casualty Co., 149 F.2d 73 (5th Cir.1945).

Contrary to Brandt’s suggestion, the status of the recipient of the funds is an important consideration. The restrictions in the Miller Act exist not only to protect a general contractor from making double payments, but also to ensure that obligations owing to suppliers and material-men arising from government projects are satisfied. Further, policy considerations militate against acceptance of Brandt’s position. Uptown entered into a contract with the subcontractor DeVolder and obtained assignment of the monies due to DeVolder from Brandt. Under Brandt’s logic, once Brandt found out about the diversion of funds by its subcontractor, it could recoup these funds from Uptown and use the money to pay suppliers. If financial institutions do not receive the benefit of their contractual agreements when financing public works, however, they may be dissuaded from becoming involved in public works projects.

Brandt is not entitled to recover against Uptown under the remedies of subrogation or indemnification. Under the principles of subrogation, once Brandt pays the claim of the supplier, Brandt stands in the shoes of that supplier and can gain no better position than the supplier had. There is no allegation that any material-man had an action against Uptown as well as against DeVolder. If it is assumed that Uptown breached some portion of its contract with DeVolder concerning the application of the retainage, Brandt has no right to assert a breach on behalf of DeVolder. There is neither privity of contract nor is there any specific subrogation right contained in the Brandt-DeVolder subcontract which would allow Brandt to assert against Uptown any defenses which DeVolder may have against the Bank. Additionally, there exists in section 8 of the Brandt-DeVolder subcontracts an indemnity agreement by which DeVolder promises to pay for all material furnished under the subcontract and to indemnify Brandt and hold him harmless from any and all claims by those other than the subcontractor. There is no such indemnity agreement between Brandt and Uptown.

Accordingly, Plaintiffs Motion for Summary Judgment is DENIED. Defendant’s Motion for Summary Judgment is GRANTED as to Count I.