author: MIHM, District Judge.

text:
    YEOMANS DISTRIBUTING COMPANY, Plaintiff, v. UNITED STATES of America, Defendant.
    No. 83-1235.
    United States District Court, C.D. Illinois, Peoria Division.
    Jan. 9, 1985.

      David L. Higgs, Sutkowski & Washkuhn, Peoria, Ill., for plaintiff.
    Ellen Carpenter, Trial Atty., Tax Div., Dept, of Justice, Washington, D.C., Janet L. Jannusch, Asst. U.S. Atty., Peoria, Ill., for defendant.
   ORDER

MIHM, District Judge.

The Plaintiff, Yeomans Distributing Company, has brought this action seeking to recover an alleged overpayment of tax and interest assessed by the Internal Revenue Service following disallowance of deductions claimed for deferred compensation payments made to A.M. Yeomans. The assessment complained of was made for the corporation’s fiscal years ending April 30,1978 and April 30,1979, and the amount sought to be recovered is $27,804.98 plus statutory interest.

FINDINGS OF FACT

In 1947, A.M. Yeomans founded and solely operated Yeomans Distributing Company as an exclusive distributor of Motorola audio products and parts. He was 47 years old at that time and he abandoned the relative security of the Motorola factory, where he had been employed for 16 years. He put everything that he had, his material assets as well as his time and energy, into the growth and development of the business. In 1953 he incorporated and served as the corporation’s president, chief executive officer, and chairman of the board of directors from 1953 until his retirement at age 70 in 1971. Over the years he added new lines of products for distribution and he superintended the corporation’s expansion from total assets of $619,000 to somewhat more than $2,000,000. He expended tremendous time and effort, doing business in classic fashion. In that 18 year time period, the corporation declared no dividends and Mr. Yeomans reduced his salary on two occasions, with the intention of maintaining the corporation’s capital at a level which he considered to be reasonable for a business of that kind.

A.M. Yeomans owned approximately 90% of the corporate stock in June of 1966, and his wife and two children, Murray and Fay, owned the remaining shares. At no time during its existence has anyone outside of his immediate family owned stock in the corporation. In 1969, Mr. Yeomans began transferring his shares to his son, Murray. Approximately 21.3% of the stock was transferred between 1969 and 1970 and 38.3% was transferred during 1971. By 1978, Murray Yeomans owned 74.2% of the corporation’s stock. Testimony during the trial indicated that A.M. Yeomans currently owns approximately 10% of the corporate stock.

On June 17, 1966, Mr. Yeomans entered into an agreement with the corporation in which he promised to remain as president and board chairman at least until he reached age 68 and to retire no later than age 71. He further agreed to perform consultation services after his retirement for which he was to be compensated separately. There was also a non-competition clause as part of this agreement. In exchange for these promises, the corporation agreed to continue paying him a salary in an amount not less than what he was currently earning until his retirement, $20,000 per year for life after his retirement, and that same amount to his surviving widow.

Pursuant to this agreement, A.M. Yeo-mans retired in 1971 and was succeeded as president of the corporation by his son, Murray. He has performed the agreed upon consulting services and been compensated for them. He has also received the $20,000 annual payment from the corporation, which claimed that payment as a business deduction under § 162 of the Internal Revenue Code of 1954.

The Court is called upon in 1984 to determine the real purpose of that agreement reached in 1966. Although the agreement itself is silent as to that purpose, the board resolution of the same date speaks in terms of deferred compensation. The Court feels comfortable at this time ruling for the Plaintiff that the payments were, in fact, deferred compensation. Such a basis for the agreement is completely consistent with the conservative business approach adopted by A.M. Yeomans over the years. He put all he had into the company and wanted it to go to the next generation to benefit his children and his grandchildren. Moreover, the expert testimony established that the amount in the agreement is com--pletely in line with prevailing deferred compensation rates at the time the agreement was made. It must, in fairness, be noted that the Court’s intuition suggests that the motivation for the $20,000 payments was not unmixed and that they may, in part, reflect remuneration for the transfer of stock. However, the Court finds no way to evaluate what portion of the motive was payment for the transferred stock and refuses to speculate.

The Court, therefore, finds that the facts as presented support Plaintiff’s ¡position that these payments were deferred com-, pensation.

FINDINGS OF LAW

The Internal Revenue Code, Chapter 26, U.S.C.A. § 404, makes payments of deferred compensation deductible for purposes of federal income taxes if that compensation would otherwise be deductible as an ordinary and necessary expense in carrying on of business under Code § 162. Section 404(a) of the Code provides that:

“If compensation is paid or accrued on account of any employee under a plan deferring the receipt of such compensation, such contributions or compensation shall not be deductible under § 162 (relating to trade or business expenses) or § 212 (relating to expenses for the production of income); but, if they satisfy the conditions of either of such sections, they shall be deductible under this section, subject, however, to the following limitations as to the amounts deductible in any year; ...”

The explanatory treasury regulation, § 1.404(a)-l(b) denies a deduction to a payment under a plan “which is primarily for the benefit of shareholders of the employer,” finding that such payment may “constitute a dividend within the meaning of § 316.”

Section 162(a)(1), sets out the relevant criteria for deductibility in this case. The requirements are two: the payment must be reasonable in amount and it must be compensatory in nature.

The determination of reasonableness is a factual one made by a consideration of the circumstances existing on the date that the agreement was entered into. The Court believes, after considering the testimony and documentation provided by both parties, that the $20,000 annual payment to Mr. Yeomans was reasonable. In making this determination, the Court accepts as correct the Government’s contention that the agreement was entered into at a time when Mr. Yeomans still controlled the company and that it was prospective only, thus requiring the Court’s close scrutiny. However, even viewed with the required skeptical eye, Mr. Yeomans’ total dedication to the company and his consistent application of conservative business policies, the fact that he drew modest amounts of salary from the company over the years, the placing of his deferred compensation payment amount in the middle of the normal range at the time the agreement was made, and the fact that the company is in sound financial condition and is able to make such payments without financial detriment all combine to convince the Court that the amounts agreed upon are reasonable.

The determination that the payments are in the nature of compensation requires the Court to consider the stock transfers that were made by Mr. Yeomans to his son, Murray, and assess the motivation and intent underlying the execution of the agreement. As indicated above, the Court finds that there may have been some element of payment for the transferred stock, but further finds that the overriding intent, the dominant motive, was actual remuneration for services rendered to the corporation but inadequately compensated at the time of their performance because of Mr. Yeomans’ insistence on maintaining adequate capital.

Therefore, the Court finds that the dual criteria for deductibility under § 162 of the Internal Revenue Code have been met and that Mr. Yeomans’ annual $20,000 payment is the type of deferred compensation which may be deducted under § 404(a) of the Code.

It is hereby ordered that the additional tax and penalty in the amount of $27,804.98 were improperly assessed and should be returned to the Plaintiff with the statutory interest.


source: Caselaw Access Project

author: TOM S. LEE, District Judge.

license: Public Domain

text:
    MURRAY, EAST & JENNINGS, a partnership; John R. Murray; Jean Smith East; Douglas A. Jennings, Plaintiffs, v. J & S CONSTRUCTION COMPANY, INC., Defendant.
    Civ. A. No. J84-0276(L).
    United States District Court, S.D. Mississippi, Jackson Division.
    Jan. 14, 1985.

      William R. Purdy, Ott & Purdy, Jackson, Miss., for plaintiffs.
    Michael B. Wallace, Jones Mockbee & Bass, Jackson, Miss., for defendant.
   MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

This cause is before the court on the motion of the plaintiffs, Murray, East & Jennings (ME & J), a partnership, John P. Murray, Gene Smith East and Douglas A. Jennings, for a preliminary injunction staying the arbitration proceedings initiated by the defendant, J & S Construction Company, Inc. (J & S). After consideration of the evidence presented by the parties at a hearing, the argument of counsel and their memoranda of authorities, the court is of the opinion that the plaintiffs’ motion should be denied.

Plaintiffs, John P. Murray, Gene Smith East and Douglas A. Jennings, are partners in ME & J, a general partnership organized and existing under the laws of the State of Mississippi. ME & J was formed for the purpose of developing a medical office complex in Rankin County, Mississippi. In February 1982, Jennings, on behalf of the partnership, entered into a construction management contract for the Rankin County project with J & S in J & S’ office in Cookeville, Tennessee. J & S is a Tennessee corporation and, prior to the execution of this contract, had never been involved in a project in Mississippi. Under the contract, disputes were to be settled by arbitration following the filing, within a reasonable time, of a written notice of demand for arbitration with the other party to the contract, the American Architectural Association and the architect.

The contract work was divided into two phases, preconstruction, Article 1.1, and construction, Article 1.2. In performing the preconstruction phase, J & S reviewed and evaluated designs, schedules, and assignment of responsibilities, coordinated contracting procedures and developed bid analyses. J & S also solicited bids through the United States Postal Service for construction work from contractors in several states. By letter dated August 10, 1983, ME & J terminated the contract, stating that J & S had “failed substantially to perform its obligations in accordance with Article 1.1” of the contract. In addition, the letter stated that J & S had not qualified to do business in Mississippi, a step viewed as necessary by ME & J. Prior to receipt of this letter, J & S had completed 1390 hours of work in the preconstruction phase, 100 of which were in Mississippi, and had not begun work in the construction phase. On March 1,1984, six months after receipt of the letter of termination, J & S informed attorneys for ME & J of its intent to invoke the arbitration clause of the contract.

The criteria for the issuance of a preliminary injunction are well settled in the Fifth Circuit. The moving party must demonstrate:

1. A substantial likelihood that the mov-ant will prevail on the merits;

2. A substantial threat that the movant will suffer irreparable injury if the injunction is not granted;

3. That the threatened injury to the movant outweighs the threatened harm the injunction may do to the nonmoving party; and

4. That granting the preliminary injunction will not disserve the public interest. Canal Authority v. Callaway, 489 F.2d 567, 572 (5th Cir.1974). A preliminary injunction is extraordinary relief and should only be granted upon a clear showing by the plaintiff. Id.

The moving party must first establish a substantial likelihood of success on the merits of its claims. ME & J contends that the arbitration provision is not enforceable under the Mississippi Construction Arbitration Act because J & S has failed to qualify to do business in Mississippi. Section 11-15-101 of the Mississippi Code Annotated provides:

(2) Sections 11-15-101 through 11-15-143 shall apply to any agreement for the planning, design, engineering, construction, erection, repair or alteration of any building, structure, fixture, road, highway, utility or any part thereof, and to any purchase by, or supply to, any contractor or subcontractor qualified to do business in this state of any materials to be used in the planning, design, engineering, construction, erection, repair or alteration of any building, structure, fixture, road, highway, utility or any part thereof; provided, however, that nothing contained in sections 11-14-101 through 11-15-143 shall be construed as amending or otherwise affecting the provisions of sections 65-2-1 through 65-2-17, section 65-1-89, section 65-1-91, and section 77-9-387, Mississippi Code of 1972.
(3)Sections 11-15-101 through 11-15-143 shall also apply to any agreement for architectural, engineering, surveying, planning and related professional services performed in connection with any of the agreements enumerated in subsection (2) of this section.

According to the statute, qualification to do business is a prerequisite for application of the Act only for contractors or subcontractors purchasing or supplying materials for use in the project. Because the work performed by J & S was not of this nature, the company was not required to qualify to do business in order to enforce the arbitration provision.

The plaintiffs further argue that, should arbitration be allowed to proceed and an award granted to J & S, the defendant could not enforce the award because of Mississippi’s door closing statute. In Mississippi, “no foreign corporation transacting business in this state without a certificate of authority shall be permitted to maintain any action, suit or proceeding in any court of this state.” Miss.Code Ann. § 79-3-247 (Supp.1984). A foreign corporation “[transacting any business in interstate commerce” is not considered to be doing business in the state for purposes of this statute. See Miss.Code Ann. § 79-3-211 (Supp.1984). This legislation is penal in nature and must be strictly construed. See Diversacon Industries, Inc. v. National Bank of Commerce, 629 F.2d 1030, 1032 (5th Cir.1980); Val-U-King Homes, Inc. v. Taylor, 301 So.2d 857, 859 (Miss.1974).

In Diversacon Industries, Inc. v. National Bank of Commerce, 629 F.2d 1030 (5th Cir.1980), Diversacon, a Florida corporation, was awarded a contract for construction of a portion .of an interstate highway. Diversacon utilized the Jackson, Mississippi offices of Con-Plex, another subdivision of Diversacon’s parent corporation, United States Industries, Inc. (USI). USI personnel in Jackson inspected the proposed site and provided administrative services for the project, including the negotiation of a subcontract with the Mississippi contractor. Diversacon also secured a surety agreement with The Mississippi Bank. The plaintiff contended .that the Mississippi door closing statute did not bar the suit because it was involved in interstate commerce and, therefore, exempted by Miss.Code Ann. § 79-3-211.

The Fifth Circuit reversed the district court’s order dismissing the suit but agreed with its construction of the statute. Diversacon, 629 F.2d at 1032. The district court utilized the test established in Newell Contracting Company v. State Highway Commission, 195 Miss. 395, 15 So.2d 700, 703 (1943), wherein the Mississippi Supreme Court stated:

The usual test of whether or not a foreign corporation is doing business within the meaning of our statutes is whether or not it is doing such acts as are within the function of its corporate powers, and where the business performed is substantial in scope such corporation is held to be doing business.

In Newell, the plaintiff, Newell Contracting Company, was an Alabama corporation which had not qualified to do business in Mississippi. Newell established a temporary office in Mississippi, inspected job sites and plans and successfully bid on a state highway project. In performing the highway contract, Newell made purchases, entered into subcontracts with local workers, and furnished equipment, labor and materials in Mississippi. The Mississippi Supreme Court held that Newell’s activity constituted doing business within the state under Mississippi’s door closing statute. It is clear that J & S’s activities in the precon-struction phase of the contract were substantially more limited than those of New-ell.

In Diversacon, the court determined that the issue presented was “whether Diversa-con’s activities were intrastate or substantially interstate,” that is, whether Diversa-con had “localized” its business or had “entered the state ‘to contribute to or to conclude a unitary state transaction.’ ” Diversacon, 629 F.2d at 1033 (quoting Allenberg Cotton Company v. Pittman, 419 U.S. 20, 32-33, 95 S.Ct. 260, 267, 42 L.Ed.2d 195 (1974)). The court concluded that Div-ersacon’s business in Mississippi constituted interstate activity and the suit, therefore, was not barred by the door closing statute.

J & S’ work on the contract before termination was conducted primarily outside Mississippi and included interstate activity, such as the solicitation of bids from contractors. The contract, executed in Tennessee, represented J & S’ only project in Mississippi, and its activities which were conducted within the state were for the sole purpose of contributing to “a unitary state transaction.” Therefore, the court is of the opinion that Mississippi’s door closing statute would not bar the defendant’s action to enforce an arbitration award.

The plaintiffs finally contend that they are entitled to a preliminary injunction because the defendant did not file its notice of demand for arbitration in accordance with the terms of the contract. Section 11-15-105 of the Mississippi Code Annotated provides that any party to an agreement for arbitration may petition the court for an order to proceed with arbitration. “If the court finds that no substantial issue exists as to the making of the agreement or provision, it shall grant the application.” Miss.Code Ann. § 11-15-105(1) (Supp.1984). The statute further states: “An order for arbitration shall not be refused on the ground that the claim in issue lacks merit or bona fides or because any fault or grounds for the claim sought to be arbitrated have not been shown”. Miss.Code Ann. § 11-15-105(4) (Supp.1984). Although the motion before this court is one in which, a party seeks to enjoin rather than to proceed with arbitration, the court is of the opinion that the statute is applicable by analogy. Since the parties did not question the making of the arbitration agreement, arbitration should be allowed to proceed. Questions regarding the timeliness of the demand are to be decided by the arbitrator. Accordingly, the plaintiff has not satisfied the first prong of the Canal Authority test.

The plaintiff has not demonstrated a substantial threat that it will suffer irreparable injury absent the issuance of this preliminary injunction because the construction of the Rankin County facility is now completed. Consequently, arbitration will not interfere with ongoing work on the project. The harm to J & S, in not being able to arbitrate its claims pursuant to the contract, clearly outweighs any harm that would be suffered by ME & J. ME & J has also failed to satisfy the fourth prong of the Canal Authority test, for this court finds that the public interest will be best served by allowing arbitration to proceed according to the terms of the contract.

Accordingly, it is ordered that plaintiffs’ Motion for Preliminary Injunction is denied.

      . The plaintiff contends that J & S has failed to comply with the arbitration demand requirements of the contract, which include filing the demand with ME & J within a reasonable time.

      . It is clear that procedural issues are to be resolved by the arbitrator under the Federal Arbitration Act. See Belke v. Merrill, Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1027 (11th Cir.1982); O’Neel v. National Association of Securities Dealers, 667 F.2d 804, 807 (9th Cir.1982); Conticommodity Services, Inc. v. Phillip & Lion, 613 F.2d 1222, 1226 (2nd Cir.1980); Trade Arbed, Inc. v. S/S Ellispontos, 482 F.Supp. 991, 998 (S.D.Tex.1980).

      . The defendant further contends that it is entitled to enforce the arbitration clause pursuant to the Federal Arbitration Act. The plaintiff has not established a substantial likelihood of prevailing against this claim as it appears to the court, on the basis of the evidence adduced, that the contract is one "involving commerce.” See Moses H. Cone Memorial Hospital v. Mercury Construction, 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).


author: DUPREE, District Judge.

text:
    COASTAL NEURO-PSYCHIATRIC ASSOCIATES, P.A., Ellis F. Muther, M.D., Clarence E. Ballenger, III, M.D., and Mack D. Jones, M.D., Plaintiffs, v. ONSLOW COUNTY HOSPITAL AUTHORITY, Defendant.
    No. 84-51-Civ-4.
    United States District Court, E.D. North Carolina, New Bern Division.
    Jan. 21, 1985.

      John M. Martin, White, Allen, Hooten & Hodges, Kinston, N.C., Noel L. Allen, Bar-ringer, Allen & Pinnix, Raleigh, N.C., for plaintiffs.
    Thaddeus B. Hodgdon, Hollowell & Sil-verstein, Raleigh, N.C., Alex Warlick, Jr., Warlick, Milsted, Dotson & Carter, Jacksonville, N.C., for defendant.
   ORDER

DUPREE, District Judge.

Plaintiffs brought this antitrust action pursuant to Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. They assert that defendant has improperly restricted use of its computerized axial tomography (hereafter “CAT Scan”) equipment to certain radiologists to the exclusion of all others. Before the court at this time is defendant’s motion to dismiss on grounds of insufficiency of process, insufficiency of service of process and failure to state a claim upon which relief can be granted. F.R.Civ.P., Rule 12(b)(4), (5) and (6). Plaintiff has responded, and the motion is ripe for disposition.

INSUFFICIENCY OF PROCESS AND OF SERVICE OF PROCESS

In support of this motion, defendant raises two grounds. First, it asserts that it has been misnamed, in that the caption reads that plaintiffs have sued the Onslow Memorial Hospital, Incorporated, while defendant’s actual name is the Onslow County Hospital Authority. Second, defendant contends that the complaint was served on the Hospital Administrator, who is not authorized to accept service for the hospital. F.R.Civ.P., Rule 4(d)(6); N.C.R.C.P., Rule 4(j)(5)(c).

In response, plaintiffs do not refute these contentions, but assert that dismissal is not justified where it appears that service can be properly made. Bailey v. Boilermakers Local 667, 480 F.Supp. 274, 278 (N.D.W.Va.1979); Securities and Exchange Commission v. Gilbert, 82 F.R.D. 723, 727 (S.D.N.Y.1979). The court agrees. Accordingly, plaintiffs will be given ten days to file an amended complaint properly naming the defendant and to effect proper service upon it. Defendant’s motion to dismiss for insufficiency of process and insufficiency of service of process is denied without prejudice to file a renewed motion if plaintiffs do not properly serve defendant within ten days of the filing of this order.

FAILURE TO STATE A CLAIM

In support of this motion defendant asserts (1) that it is immune from antitrust liability under the state action exemption first set out in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), and (2) that plaintiffs have failed to allege an illegal tying arrangement or other restraint of trade. These arguments will be addressed seriatim.

1. State Action Exemption

In Parker v. Brown, supra, the Supreme Court first held that a state’s exercise of its sovereign powers to impose anticompeti-tive restraints on trade could not be challenged under the antitrust laws. “[Nothing in the language of the Sherman Act or its history ... suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.” Id. at 350-51, 63 S.Ct. at 313-14. Although initially protecting all state in-strumentalities and subdivisions, this exemption subsequently was narrowed by the Court. In Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), the Court ruled that in order to be protected from antitrust liability, a state agency’s “anticompetitive activities must be compelled by direction of the State acting as a sovereign.” Id. at 791, 95 S.Ct. at 2015. Thus, the Virginia State Bar was held not to be exempt from liability where its adoption of a minimum fee schedule was neither mandated nor even suggested by the applicable state laws and regulations.

The Supreme Court’s next major holding in this area came in City of Lafayette v. Louisiana Power & Light Company, 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). There, the Court rejected the City of Lafayette, Louisiana’s assertion that its city-operated utility was exempt from antitrust laws simply because it was a municipality. Rather, the city was required to show that the state had directed or authorized the anticompetitive practice. “To permit municipalities to be [totally] shielded from the antitrust laws ... would impair the goals Congress sought to achieve by those laws, ... without furthering the policy underlying the Parker ‘exemption.’ ” (Citation omitted.) Id. at 415, 98 S.Ct. at 1138.

A plurality of the court developed a two-pronged test which must be satisfied in order to invoke the state action exemption. First, the state must have authorized the challenged activity, and second, it must have done so with an intent to restrict competition.

[A]n adequate state mandate for anti-competitive activities of cities and other subordinate governmental units exists when it is found “from the authority given a governmental entity to operate in a particular area, that the legislature contemplated the kind of action complained of.” (Citation omitted.)

Id. at 415, 98 S.Ct. at 1138; see also, Gold Cross Ambulance and Transfer v. City of Kansas City, 705 F.2d 1005, 1011 (8th Cir.1983).

This test was further refined in Community Communications Company, Inc. v. City of Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982). In that case, the City of Boulder, Colorado enacted an “emergency” ordinance prohibiting the plaintiff from expanding its cable television service for three months. Plaintiff sued, alleging that this activity violated the Sherman Act. The city responded by arguing that it was immune from antitrust liability under the state action doctrine because it was a “home-rule” municipality which had been granted extensive powers of self-government by the Colorado Constitution. The Supreme Court, in a 5-3 majority opinion, rejected this argument and held that the ordinance could not be exempt from antitrust scrutiny unless it constituted either the action of the state in its sovereign capacity or a municipal action in furtherance of a clearly articulated and affirmatively expressed state policy. Id. at 48-51, 102 S.Ct. at 839-841. The court further held that

the requirement of “clear articulation and affirmative expression” is not satisfied when the State’s position is one of mere neutrality respecting the municipal actions challenged. . .■. A State that allows its municipalities to do as they please can hardly be said to have “contemplated” the specific anticompetitive actions for which municipal liability is sought (emphasis in original).

Id. at 55, 102 S.Ct. at 842.

Thus, the question for this court is whether the North Carolina legislature has authorized defendant to grant exclusive privileges to certain physicians to use its facilities and whether it has done so with the intent to restrict competition.

From the statutes cited by the parties, it appears that the first requirement has been met. Chapter 131E of the North Carolina General Statutes, entitled “Health Care Facilities and Services,” permits municipalities and counties to own and operate hospital facilities. Part of the purpose of this Act was to insure that adequate hospital facilities would be provided in areas of the state that are not as financially lucrative as the major cities. N.C.G.S. § 131E-15; see also, N.C.G.S. § 131-91, repealed by Session Laws 1983, c. 775, s. 1. The Act further provides, in pertinent part:

§ 131E-23. Powers of the authority.
(16) To establish procedures for health care providers to secure the privilege of practicing within any hospital operated by the authority pursuant to Part B of Article 5 of this Chapter;
(17) To establish reasonable rules governing the conduct of health care providers while on duty in any hospital operated by the facility pursuant to Part B of Article 5 of this Chapter;
§ 131E-85 Hospital privileges and procedures.
(a) The granting or denial of privileges to practice in hospitals to physicians licensed under Chapter 90 of the General Statutes, Article 1, dentists and podiatrists and the scope and delineation of such privileges shall be determined by the governing body of the hospital. Such determinations shall be based upon the applicant’s education, training, experience, demonstrated competence and ability, and judgment and character of the applicant, and the reasonable objectives and regulations of the hospital, including, but not limited to appropriate utilization of. the hospital facilities, in which privileges are sought. Nothing in this Part shall be deemed to mandate hospitals to grant or deny to any such individuals or others privileges to practice in hospitals.

Thus, the state has granted defendant the authority to grant or deny physicians the privilege to practice in its hospital, including the right to determine who may use its CAT Scan equipment. However, that right is not unfettered. Specific anticom-petitive activity is only permissible when it is clear that it has been sanctioned by the legislature. N.C.G.S. § 131E-85(a) does not specifically permit hospitals to deny privileges in order to limit competition. The closest it comes is to permit such determinations to be based on “the reasonable objectives and regulations of the hospital, including, but not limited to appropriate utilization of the hospital facilities.”

Therefore, the court must determine whether limitation of privileges to use defendant’s CAT Scan equipment furthers any reasonable hospital objectives. However, such a determination cannot be made at this time. Defendant’s only justification for its actions is that it must “have the latitude necessary to impose restrictions on competition within the hospital in order to meet the needs of indigent patients not being provided for in the private sector.” Defendant’s Brief, p. 16. However, defendant never explains how this particular restriction meets those patients’ needs. Instead, it argues that the general intent of Chapter 131E is to permit municipal hospital authorities to limit competition in any way they see fit. The court is unable to agree. Community Communications Company, Inc. v. City of Boulder, supra, clearly states that the state must have contemplated the specific anticompetitive action challenged. 455 U.S. at 55, 102 S.Ct. at 842; accord, Pinehurst Airlines, Inc. v. Resort Air Service, Inc., 476 F.Supp. 543, 552 (M.D.N.C.1975). While Chapter 131E does contemplate anticompetitive activity with respect to the number of hospitals permitted in a given area, see N.C.G.S. § 131E-175, defendant points to nothing in that chapter which gives it unbridled authority to restrict the use of its facilities in contravention of the Sherman Act. See State of North Carolina ex rel. Edmisten v. P.I.A. Asheville, Inc., 740 F.2d 274 (4th Cir.1984).

Furthermore, when ruling on a motion to dismiss, the court must take the allegations raised in the complaint as true. United States v. Mississippi, 380 U.S. 128, 85 S.Ct. 808, 13 L.Ed.2d 717 (1965). Plaintiffs have alleged that defendant’s actions do not further any reasonable hospital or state objectives. Therefore, the court cannot say, at this time, that defendant’s actions fall under the state action exemption.

2. Illegal Tie-In

Defendant’s next contention is that plaintiffs have failed to allege an illegal tying arrangement or other restraint of trade which would invoke the protection of the Sherman Act. The Supreme Court has recently dealt with the subject of illegal tie-ins in Jefferson Parish Hospital District No. 2 v. Hyde, — U.S. -, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984). In that case the plaintiff, an anesthesiologist, challenged the defendant hospital’s exclusive contract providing that all anesthesiological services required by the hospital’s patients would be performed by a specific professional medi: cal corporation. Plaintiff contended that this contract violated the Sherman Act. After trial, the district court concluded that the contract in question had minimal anti-competitive consequences which were outweighed by the benefits in the form of improved patient care. Hyde v. Jefferson Parish Hospital District No. 2, 513 F.Supp. 532 (E.D.La.1981). The Court of Appeals reversed, holding that the contract was illegal “per se.” Hyde v. Jefferson Parish Hospital District No. 2, 686 F.2d 286 (5th Cir.1982). On review, the Supreme Court found that there was a tying arrangement in that the hospital used its control over a tying product (the operating room facilities) to require patients to purchase the tied product (the contracted for anesthesiology services). However, it reversed the Court of. Appeals’ holding because it found that plaintiff had failed to show that this arrangement unreasonably restrained competition, since there was nothing in the record to indicate that patients could not seek anesthesiological services elsewhere in the relevant market.

Tying arrangements need only be condemned if they restrain competition on the merits by forcing purchases that would not otherwise be made. ... The evidence indicates that some surgeons and patients preferred respondent’s services to those of Roux, but there is no evidence that any patient who was sophisticated enough to know the difference between two anesthesiologists was not also able to,go to a hospital that would provide him with the anesthesiologist of his choice.

104 S.Ct. at 1566-68.

Therefore, this court must decide first, whether plaintiffs have alleged a tying arrangement and second, whether they have alleged a sufficiently anticompetitive effect on the relevant market. Plaintiffs appear to have met the first test. They allege that the defendant has engaged in two tying arrangements in that: (1) patients who use the hospital’s services (the tying product) are forced to use the hospital’s own CAT Scan (the tied product) when such a procedure is needed by the patient; and (2) patients who use the hospital’s CAT Scan (the tying product) are forced to use the hospital’s chosen radiologists (the tied product) rather than one of their own choosing.

The latter arrangement asserted by plaintiff is virtually identical to the one in Hyde and clearly constitutes a tying arrangement. However, the first arrangement does not. All patients who use the hospital’s services are not required to use its CAT Scan equipment. Only those who need a CAT Scan are required to use that equipment. Thus, there is no tying product. This situation is no different from a restaurant which requires its customers to purchase the restaurant’s wine if they wish to have wine with their meal. If the restaurant required customers to purchase wine whenever they purchased a meal, it would be engaged in a tying arrangement. But the restaurant does not violate the antitrust laws simply because it does not let its customers pick and choose among its products. Similarly, plaintiffs’ second situation would constitute a tying arrangement only if all patients who sought the hospital’s services were required to undergo a CAT Scan. Since they are not so required, only the first situation alleged by plaintiffs constitutes a tying arrangement.

The second requirement, that plaintiffs allege a sufficiently anticompetitive effect on the relevant market, has also been met. Defendant asserts that the relevant market is all of eastern North Carolina, since plaintiffs admit in their complaint that they service that area. However, the relevant market area is not the total area serviced by plaintiffs, but the market in which plaintiffs and defendant compete. See Hyde, supra, 104 S.Ct. at 1561. By statute, that market area includes “the area within 10 miles from the territorial boundaries” of Onslow County. N.C.G.S. § 131E-20(a). There is no dispute that defendant operates the only hospital in this area, thus preventing plaintiffs from using another hospital to treat patients needing CAT Scans. It is of no moment that plaintiffs have their own CAT Scan equipment, for they have alleged that hospital patients must use only the hospital’s CAT Scan equipment when they are in the hospital. Thus, plaintiffs have successfully alleged that defendant’s policy of giving certain radiologists the exclusive right to perform and interpret all CAT Scans has an anticompetitive effect over the relevant market area. Therefore, defendant’s motion to dismiss must be denied, as plaintiffs have met the two-pronged test set out in Hyde.

In summary, it is hereby

ORDERED that

(1) Defendant’s motion to dismiss for insufficiency of process and insufficiency of service of process be denied without prejudice to file a renewed motion if plaintiffs do not properly name and serve defendant within ten days of the filing of this order; and

(2) Defendant’s motion to dismiss for failure to state a claim upon which relief can be granted be denied.

      . Although Sections 1 and 2 of the Sherman Act speak only to criminal antitrust violations, the court will assume, for purposes of this motion, that plaintiffs also have alleged jurisdiction under the Clayton Act, 15 U.S.C. § 15, which provides this court with jurisdiction over civil actions alleging injury as a result of violations of the antitrust laws.


author: VanARTSDALEN, District Judge.

text:
    William KING v. Warden Edward L. JENKINS.
    Civ. A. No. 84-1221.
    United States District Court, E.D. Pennsylvania.
    Jan. 23, 1985.

      Frederick C. Hanselmann, German, Gallagher & Murtagh, Philadelphia, Pa., for plaintiff.
    Felix P. Gonzalez, Asst. City Solicitor, Philadelphia, Pa., for defendant.
   MEMORANDUM AND ORDER

VanARTSDALEN, District Judge.

In this action William King, a prisoner at Holmesburg Prison, has filed a pro se complaint under 42 U.S.C. § 1983 alleging that his constitutional rights were violated in connection with his protective segregation from the general prison population for a period of one week. Defendant’s motion to dismiss' was denied because it contained a number of unsupported factual allegations. Defendant has now filed a motion for summary judgment supported by two depositions and an affidavit. Plaintiff, through his court appointed counsel, has responded to that motion.

In deciding a motion for summary judgment the court must determine whether the moving party has carried its burden of showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. See Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir.1981). All reasonable inferences from the evidentiary material of record must be drawn in favor of the non-moving party. Small v. Seldows Stationery, 617 F.2d 992, 994 (3d Cir.1980). A response to a properly supported summary judgment motion may not rest upon the allegations of the pleading but must present, by affidavit or otherwise, specific facts sufficient to create a genuine issue of material fact. Fed.R.Civ.P. 56(e); Sunshine Books, Ltd. v. Temple University, 697 F.2d 90, 96 (3d Cir.1982). In the present case there is some uncertainty in the memories of the various actors as to the specific days and times at which certain events took place. There is, however, no dispute as to any material fact precluding judgment as a matter of law.

Plaintiffs complaint states:

I had been locked in a cell for over 100 hours, no bath, nor have I been able to walk around for any exercise, I was told that I was placed in this cell for my own protection, because I was told by another resident that my life was endanger [sic], but had found out that it was only a lie, in fact I wrote the warden of the prison and informed him that it was not true at all, but still he has not allowed me to talk with him nor to come out of this cell.

On Monday, March 5, 1984, the defendant, Warden Edward L. Jenkins, received a telephone call from an attorney, Donald Bronstein. Mr. Bronstein told Warden Jenkins that he had information from an inmate in the special custody unit that inmates in that unit had been making homemade knives. Mr. Bronstein did not tell Warden Jenkins who the informant was.

The Warden immediately had the cells in that unit searched, but no weapons were found. Warden Jenkins, in his deposition, described what such a search is like: “They lock up the entire cell block, each inmate in his own cell. Each cell is searched individually. The individual in the cell is searched, his person is searched. He’s asked to strip and all of his personal effects, his bed and everything is searched.” Jenkins Deposition at 11. The inmates were very upset and wanted to know what had precipitated the shakedown.

At that point King stated before a prison official, Sergeant Mercer, and before all the inmates in the unit, that he had precipitated the search by getting a lawyer to call the Warden. The Warden directed that King be placed in a cell separated from the rest of the special custody unit for his own protection, fearing reprisal for his instigating the search.

On either Thursday March 8, 1984 {see Velitskovich Deposition at 31) or on Friday, March 9, 1984 {see Jenkins Deposition at 24) King was given a hearing before the administrative segregation review board. King testified at that hearing and was questioned by members of the board. The board’s recommendation was that King not be released from protective segregation.

On Friday, March 9, 1984 King communicated to Warden Jenkins orally that he no longer feared for his life. Jenkins asked King to put that representation in writing. King submitted' a written request to be released from segregation because he no longer feared for his life, but the request did not reach Jenkins on Friday, March 9 because he had gone home for the weekend. Either on Friday, March 9, or on Monday, March 12, Jenkins and Superintendent Owens interviewed three prisoners in the special custody unit to find out whether it was safe for King to return to that unit. Finally on Monday, March 12, King was released from segregation and placed back in his usual cell in the special custody unit.

The special custody unit, in which King is normally housed, is itself a protective segregation unit. King has, in the past, had troubles with a “radical organization of black Muslims, Fruit of Islam.” Velitsko-vich Deposition at 28. When King was placed in protective segregation the week of March 5, 1984, therefore, he was separated from the other inmates who were also in protective segregation.

Defendant contends that the only conceivable constitutional rights presented in this case are the eighth amendment guaranty against cruel and unusual punishment and the fourteenth amendment protection against deprivation of liberty without due process of law. He further contends that he is entitled to judgment as a matter of law on any such claims.

Plaintiff contends that the deposition testimony of Jenkins and Yelitskovieh establishes that the procedures mandated by the Pennsylvania Administrative Code with respect to review of segregation status of prisoners were not followed. Plaintiff further contends that there is an issue of fact whether King’s exercise and telephone privileges were curtailed during his protective segregation the week of March 5,1984.

On the facts before the court, there is no valid eighth amendment cruel and unusual punishment claim. There is no “static 'test’ ... by which courts can determine whether conditions of confinement are cruel and unusual, for the Eighth Amendment ‘must draw its meaning from the evolving standards of decency that mark the progress of a maturing society.’ ” Rhodes v. Chapman, 452 U.S. 337, 346, 101 S.Ct. 2392, 2399, 69 L.Ed.2d 59 (1981) (quoting Trop v. Dulles, 356 U.S. 86, 101, 78 S.Ct. 590, 2 L.Ed.2d 630 (1958) (plurality opinion)). The Supreme Court has opined, however, that prison “[cjonditions must not involve the wanton and unnecessary infliction of pain, nor may they be grossly disproportionate to the severity of the crime warranting imprisonment.” Rhodes v. Chapman, 452 U.S. at 347, 101 S.Ct. at 2399. Deliberate indifference to an inmate’s medical needs constitutes cruel and unusual punishment, Estelle v. Gamble, 429 U.S. 97, 103, 97 S.Ct. 285, 290, 50 L.Ed.2d 251 (1976), as does deprivation of basic human needs, Hutto v. Finney, 437 U.S. 678, 98 S.Ct. 2565, 57 L.Ed.2d 522 (1978).

Confinement in protective segregation necessarily entails some restriction as to an inmate’s activities because he or she cannot mix with the prison’s general population. Transfer to a more restrictive environment for nonpunitive reasons does not violate any constitutional rights of an inmate. See Hewitt v. Helms, 459 U.S. 460, 468, 103 S.Ct. 864, 870, 74 L.Ed.2d 675 (1983) (“It is plain that the transfer of an inmate to less amenable and more restrictive quarters for nonpunitive reasons is well within the terms of confinement ordinarily contemplated by a prison sentence.”).

In the present case King was already housed in the special custody unit. He was transferred to a cell separated from the other inmates in that unit for his own protection. In his complaint, King asserts that he “had been locked in a cell for over 100 hours, no bath, nor have I been able to walk around for any exercise.” The cell he was transferred to had a toilet in it. Jenkins Deposition at 36. Jenkins’ uncontro-verted testimony was that when he ordered King placed in protective segregation he instructed the prison officers to “make sure that he [King] gets his two hours exercise every day.” Jenkins Deposition at 20. There is no evidence, beyond the unsupported allegation in plaintiff’s complaint, that he did not get his daily exercise period. Even if he did not get his exercise period there is no evidence that Jenkins, the only defendant, was informed or had any knowledge of that fact.

There is insufficient evidence to find that Warden Jenkins denied King any basic human needs. Indeed, there is no evidence that Jenkins played any part in denying King any inmate privileges whatsoever or that he was aware of such, if in fact King was denied any privileges. The doctrine of respondeat superior does not apply in section 1983 actions, and, therefore, Jenkins could not be held liable even if there were an eighth amendment violation. Hampton v. Holmesburg Prison Officials, 546 F.2d 1077, 1082 (3d Cir.1976); see also Hodgin v. Roth, 536 F.Supp. 454, 460 (E.D.Pa.1982) (“prison supervisory personnel cannot be held liable under § 1983 unless there has been some showing that they were either directly involved in, or had knowledge of and acquiesced in, the constitutional violations”). Mere negligence on the part of Jenkins, had there been any, would not be sufficient to state a section 1983 cause of action against him. See Davidson v. O’Lone, 752 F.2d 817 (3d Cir.1984) (in banc). There is no basis for a section 1983 claim against Jenkins for a violation of the eighth amendment.

As the Supreme Court has held, the Pennsylvania Administrative Code establishes that prison inmates have a protected liberty interest in continuing to reside in the general prison population. Hewitt v. Helms, 459 U.S. 460, 103 S.Ct. 864, 74 L.Ed.2d 675 (1983). For purposes of the present case the Pennsylvania Code established King’s interest in remaining in his usual cell in the special custody unit. Although courts may look to state law, among other sources, for a basis establishing a liberty or property interest protected by the due process clause, see id. at 470-72, 103 S.Ct. at 870-72, courts must determine, as a matter of federal constitutional law, what process is required by the due process clause. Grandison v. Cuyler, 600 F.Supp. 967 (E.D.Pa.1984); see Hewitt v. Helms, 459 U.S. at 472-74, 103 S.Ct. at 872-73; Wolff v. McDonnell, 418 U.S. 539, 559-72, 94 S.Ct. 2963, 2976-82, 41 L.Ed.2d 935 (1974); Mims v. Shapp, 744 F.2d 946, 950 (3d Cir.1984).

Plaintiff raises the contention that defendant’s conduct arguably did not comply with the specifics of the procedures mandated by the Pennsylvania Code and that, therefore, summary judgment on plaintiff’s section 1983 claim is inappropriate. State law, however, does not define what process is due.

In determining what process is due, courts should consider three distinct factors:

First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976). In the present case the private interest is relatively minor: transfer from one protective segregation unit to protective segregation isolated from the other residents of the special custody unit. Cf. Hewitt v. Helms, 459 U.S. at 473, 103 S.Ct. at 872.

Plaintiff was only detained in special segregation for a period of one week until the warden was reasonably assured that it was safe for him to return to his usual cell. Plaintiff does not even complain about his initial segregation or the decision of the review board that he should remain in special protective segregation. His complaint is that he was not released immediately upon orally informing the authorities that he no longer feared for his life.

Warden Jenkins refused to release him until he received notice in writing that King no longer feared for his life and until Jenkins had satisfied himself that there was no danger. The federal courts have granted prison officials a wide degree of discretion in deciding what action is necessary to ensure the safety of inmates and guards. See Hewitt v. Helms, 459 U.S. at 472-74, 103 S.Ct. at 872-73; Bell v. Wolfish, 441 U.S. 520, 547, 99 S.Ct. 1861, 1878, 60 L.Ed.2d 447 (1979). The Supreme Court in Hewitt noted that prison officials’ decisions in this context “turn[] largely on ‘purely subjective evaluations’ and on predictions of future behavior.” 459 U.S. at 474, 103 S.Ct. at 873 (quoting Connecticut Board of Pardons v. Dumschat, 452 U.S. 458, 464, 101 S.Ct. 2460, 2464, 69 L.Ed.2d 158 (1981)).

King was afforded a hearing within four or five days of his segregated confinement and was assured of at least weekly review by the review board. When he believed he was no longer in danger and made that representation to prison officials, he was returned to his usual cell within three days upon a decision by officials that it was safe for him to return. His total period of confinement in special protective segregation was approximately one week. To require any more stringent procedure than that granted by prison officials in this case would unduly interfere with the discretion that must be exercised by prison officials in ensuring the safety of inmates and guards. Cf. Hewitt, 459 U.S. at 472-76, 103 S.Ct. at 871-74.

The government interest in ensuring the safety of those entrusted to its care is a very significant one. That interest cannot be adequately served unless prison officials are permitted to exercise their discretion in making subjective evaluations and predictions of future behavior. Mr. Velitskovich, a social worker at the house of corrections and a member of the review board, noted in his deposition:

I had spoken to a few of the other inmates who felt that Mr. King was acting out a little bit too much, he was excessively paranoid where he didn’t have to be paranoid, and nobody was going to hurt him. But, you know, you can hear one thing from somebody, but you can never be completely sure. You don’t know. They will tell you — residents will tell you one thing and as soon as he [King] gets out, it could be something else.

Velitskovich Deposition at 16-17. Such testimony confirms that discretion of prison officials is necessary in contexts such as this one.

Warden Jenkins was required to walk the line between denying King due process by not granting him adequate protection in the face of a known danger, cf. Davidson v. O’Lone, 752 F.2d 817 (3d Cir.1984) (in banc), and denying King due process by subjecting him to unwarranted restrictive confinement. This is at best a difficult and complex choice that wardens of penal institutions are daily required to make. Courts must be vigilant to protect the rights of prison inmates, but at the same time must afford prison custodians necessary latitude to operate the institutions in a way that will provide safety to the inmates and prison personnel, without fear of being liable in damages. In the present case Warden Jenkins’ actions were entirely consistent with protecting plaintiff’s constitutional rights.

ORDER

Upon consideration of defendant’s motion for summary judgment and supporting and opposing memoranda of law and depositions and affidavit; it is

Ordered that defendant’s motion for summary judgment is granted and judgment is entered in favor of defendant, Warden Edward L. Jenkins and against the plaintiff, William King.

      . There is some evidence that some broken pieces of a bed frame were found at some point, and that such objects could be made into knives. See Velitskovich Deposition at 21-22. Whether or not weapons were found does not alter the situation at the prison regarding the plaintiff and thus the discrepancy is not a dispute as to a material fact.

      . One time King had a caustic solution thrown in his face by a member of Fruit of Islam. He now regularly resides in the special custody unit for fear of a repeat of such an incident at the hands of any of the Fruit of Islam members in the general prison population.

      . The eighth amendment guaranty against cruel and unusual punishment is applicable to the states through the fourteenth amendment. Robinson v. California, 370 U.S. 660, 82 S.Ct. 1417, 8 L.Ed.2d 758 (1962).

      . 37 Pa.Code § 95.104(b)(3), cited by plaintiff, provides:
      An inmate may be temporarily confined to Close or Maximum Administrative Custody in an investigative status upon approval of the officer in charge of the institution where it has been determined that there is a threat of a serious disturbance or a serious threat to the individual or others. The inmate shall be notified in writing as soon as possible that he is under investigation and that he will receive a hearing if any disciplinary action is being considered after the investigation is completed. An investigation shall begin immediately to determine whether or not a behavior violation has occurred. If no behavior violation has occurred, the inmate must be released as soon as the reason for the security concern has abated but in all cases within ten days.


author: MOTLEY, Chief Judge.

text:
    John RUZAS, Petitioner, v. James SULLIVAN, Superintendent of Sing Sing Correctional Facility, Respondent.
    No. 84 Civ. 3933 (CBM).
    United States District Court, S.D. New York.
    Feb. 8, 1985.
    Lawrence A. Vogelman and Barry C. Scheck by Lawrence A. Vogelman, New York City, Steiman & Steinberg by David Steinberg, Poughkeepsie, N.Y., for petitioner.
    Robert Abrams, Atty. Gen. of N.Y. by Douglas D. Aronin, New York City, for respondent.
   MEMORANDUM OPINION AND ORDER

MOTLEY, Chief Judge.

Petitioner John Ruzas seeks a writ of habeas corpus pursuant to 28 U.S.C. section 2254 claiming, inter alia, that he was denied effective assistance of counsel in the appeal of his state court conviction. Because it appears that petitioner has failed to exhaust his state remedies with respect to the ineffective assistance claim, the instant petition must be dismissed without prejudice.

FACTS:

Petitioner was convicted of murder, robbery, and weapons offenses in Madison County court on July 4, 1975 and sentenced to a prison term of 25 years to life for the murder to run consecutively with concurrent sentences of 12 and a half to 25 years and seven and a half to 15 years on the other charges. The judgment of conviction was affirmed by the Appellate Division, Third Department on February 9, 1979. The Court of Appeals denied leave to appeal on April 10, 1979. In the appeal prepared by his attorney, who had replaced trial counsel, and in a supplemental pro se brief, petitioner raised most of the claims that form the basis of this petition, and these claims therefore seem to have been properly exhausted.

By motion dated August 10, 1983, petitioner, by his current attorneys, moved for leave to reargue his appeal in the Appellate Division, alleging a new claim that petitioner had been deprived of the effective assistance of appellate counsel. The Madison County District Attorney opposed the motion both on the ground that it was untimely under the court’s rules and on the merits. The Appellate Division denied the motion without opinion on October 12, 1983.

Petitioner now seeks a writ of habeas corpus, including as one of his grounds for relief the ineffectiveness of his original appellate counsel. Petitioner maintains that his August 1983 motion to reargue exhausted this claim. Respondent argues that this motion must be deemed to have been decided on procedural grounds, and that petitioner’s claim has therefore never been heard on the merits in the state court. Respondent suggests, but petitioner disputes, that other routes remain open to petitioner to have this claim heard in state courts, which would require this court to dismiss the petition at bar.

DISCUSSION:

A state prisoner seeking federal habeas corpus review of his state conviction must first exhaust available state remedies. 28 U.S.C. section 2254(b), (c) (1976). See Picard v. Connor, 404 U.S. 270, 275, 92 S.Ct. 509, 512, 30 L.Ed.2d 438 (1971). This requirement is rooted in considerations of federal-state comity, and seeks to allow states the opportunity to correct constitutional errors prior to federal intervention. In order for a federal court to entertain a petition for the writ, all claims contained in the petition must be exhausted; “mixed” petitions of exhausted and unex-hausted claims must be dismissed in their entirety. Rose v. Lundy, 455 U.S. 509, 102 S.Ct. 1198, 71 L.Ed.2d 379 (1982).

A petitioner’s choice of an appeal route that is procedurally barred to him does not satisfy the initial requirement that state courts be given the opportunity to review a petitioner’s constitutional claims. United States ex rel. Johnson v. Vincent, 507 F.2d 1309, 1313 (2d Cir.1974), cert. denied, 420 U.S. 994, 95 S.Ct. 1435, 43 L.Ed.2d 678 (1975). If petitioner’s claim is procedurally barred in all possible state forums, the federal court may still entertain a habeas corpus petition under the “cause and prejudice” test of Wainwright v. Sykes, 433 U.S. 72, 97 S.Ct. 2497, 53 L.Ed.2d 594 (1977). Nevertheless, if another avenue of appeal is still available, the petitioner must exhaust it prior to federal habeas review. Petitioner need not exhaust every conceivable procedural device, but he must demonstrate that the highest state court from which a decision can be had was given a fair opportunity to rule on the merits of petitioner’s constitutional claims. Daye v. Attorney General, 696 F.2d 186, 190-91 & n. 3 (2d Cir.1982) (en banc).

In approaching the fact pattern at bar, this court does not write on a clean slate. A recent decision in this district is squarely oh point and provides significant guidance in addressing this motion. Landskroner v. Ternullow, 586 F.Supp. 402 (S.D.N.Y.1984) (Stewart, J.). In accordance with that decision and the standards enunciated above, the court finds that petitioner’s claim was never fairly presented to the state court, and that petitioner still has state avenues of appeal open to him.

Petitioner concedes that the dismissal of his August 1983 motion to reargue his appeal before the Appellate Division must be presumed under the law of this circuit to have been based on procedural grounds, since both procedural and substantive grounds were presented to the court. Johnson v. Harris, 682 F.2d 49 (2d Cir.), cert. denied, 459 U.S. 1041, 103 S.Ct. 457, 74 L.Ed.2d 609 (1982). Petitioner maintains, however, that the Appellate Division has discretion to waive the requirement of section 800.14(f) of its own court rules that motions to reargue an appeal “must be made within 60 days” of notice of the court’s order. Petitioner argues that the state court therefore had the opportunity to hear the claim of ineffective appellate counsel, and that the claim should be deemed exhausted.

Petitioner’s argument is without merit. Section 470.50(1) of the N.Y.Crim.Proc.Law does provide that an appellate court may at any time entertain a motion to reargue “in the interest of justice and for good cause shown.” However, that discretion is removed under the rules of the Appellate Division, Third Department, promulgated pursuant to the same section. “[T]he interest of justice/good cause criteria do not describe the circumstances under which time limits promulgated under section 470.-50(2) (e.g., App.Div. Third Dep’t Rule section 800.14(f)) may be relaxed, but rather the circumstances under which an otherwise timely motion to reargue should be granted.” Landskroner, 586 F.Supp. at 404.

The plain language of section 800.14(f) precludes discretion. Moreover, petitioner’s nearly four and a half year delay in filing a motion for reargument so grossly exceeds the 60 day limit as to dispel any question that the Appellate Division’s denial of the motion was discretionary.

Petitioner suggests in the alternative that if his motion to reargue is deemed to have been procedurally barred, the court should apply the “cause and prejudice” test of Wainwright v. Sykes to permit federal review of the unexhausted claim. The court finds it premature to reach this issue, however, since various unexhausted state collateral appeal procedures remain for petitioner’s claim. Although petitioner argues that these routes are untried and for practical purposes unavailable, this court is persuaded by the decision of Judge Stewart on nearly identical procedural facts in Landskroner that at least two state court devices appear to be available to a petitioner seeking to raise a claim of ineffective assistance of appellate counsel. 586 F.Supp. at 405.

The first method suggested is “a coram nobis proceeding either at the trial level under N.Y.Crim.Proc.Law section 440.10, or at the Appellate Division level under common law principles.” Id. See also People ex rel. Douglas v. Vincent, 50 N.Y.2d 901, 903, 409 N.E.2d 990, 990, 431 N.Y.S.2d 518, 518 (1980) (Meyer, J., dissenting, joined Jones and Fuchsberg, JJ.); N.Y. Crim.Proc.Law’ section 440.10 practice commentary (McKinney 1983).

Another method of review that is likely available to petitioner is a motion to rear-gue to the New York Court of Appeals, brought pursuant to the Court of Appeals Rule section 500.11(g)(3). That section, unlike section 800.14(f) of the Rules of the Appellate Division, Third Department, grants the court discretion to hear a rear-gument motion after the 30-day time limit set in the Rule. See Landskroner, 586 F.Supp. at 405. The New York Court of Appeals has apparently exercised this discretion to reach the merits of a claim of ineffective assistance of appellate counsel raised nearly two years after the court originally denied leave to appeal. See Barnes v. Jones, 665 F.2d 427, 432 (2d Cir.1981), rev’d on other grounds, 463 U.S. 745, 103 S.Ct. 3308, 77 L.Ed.2d 987 (1983).

While the availability of these methods of collateral review in the state courts is not certain, see Landskroner, 586 F.Supp. at 404, it would be inappropriate for this court to conclude that petitioner’s claim is procedurally barred when such routes are even arguably open. “Whether New York entertains collateral relief at this point is a matter of New York law to be decided by New York courts and not by federal court predictions of what stances those courts will take.” Wilson v. Fogg, 571 F.2d 91, 95 (2d Cir.1978). Cf. Brown v. Wilmot, 572 F.2d 404, 406 (2d Cir.1978) (per curiam) (inappropriate for federal court “to guess what constitutional issues New York courts will or will not entertain in a habeas proceeding”).

Since the court concludes that New York’s courts have not been given the requisite fair opportunity to hear petitioner’s claim of ineffective assistance of appellate counsel, and that procedural devices to obtain such review are arguably open, it is not necessary to reach the issue of the “cause and prejudice” test of Wainwright v. Sykes, 433 U.S. 72, 97 S.Ct. 2497, 53 L.Ed.2d 594 (1977). The court notes, however, that the availability of alternate channels of review would seem to militate against a finding of cause and prejudice. See Landskroner, 596 F.Supp. at 406. The court expresses no view as to whether petitioner will be able to demonstrate cause and prejudice if he ultimately is unable to obtain review of his unexhausted claim in the New York courts.

For the foregoing reasons, respondent’s motion to dismiss the petition for failure to exhaust state remedies is granted. The petition is dismissed without prejudice to petitioner’s right to file a new petition when all claims are exhausted or to refile this petition without the unexhausted claim.

SO ORDERED.


text:
    Jim CLARK, Plaintiff, v. AETNA CASUALTY & SURETY COMPANY, Defendant.
    Civ. A. No. E82-0073(L).
    United States District Court, S.D. Mississippi, E.D.
    Feb. 11, 1985.

      Laurel Weir, Weir & Booker, Philadelphia, Miss., Orma R. Smith, Smith, Ross & Trapp, Corinth, Miss., for plaintiff.
    Richard T. Lawrence, Watkins & Eager, Jackson, Miss., for defendant.
   MEMORANDUM OPINION

TOM S. LEE, District Judge.

Plaintiff, Jim Clark, initiated this suit when the defendant, Aetna Casualty and Surety Company (Aetna), refused to pay his claim under a policy of insurance issued by the defendant and covering certain farm equipment belonging to the plaintiff. The defendant argues that the policy was voided because of material misrepresentations made by the plaintiff. The parties have submitted evidence and testimony at a trial of this case before this court.

On June 22, 1981, defendant issued a policy of insurance to plaintiff. The declaration page of the policy lists seventeen pieces of farm equipment and an amount of insurance for each item, totaling $38,-470.00. The premium charged was $.80 per hundred dollars, or $308.00.

On August 22, 1981, a fire completely ■destroyed a shed owned by plaintiffs stepfather which contained all of the insured equipment. The plaintiff reported the loss to his insurance agent the next day, and on August 25, Roger Riddick, Senior Claims Representative for the defendant, arrived to inspect the scene. Plaintiff did not give a statement at that time because his child was visiting him and because he did not have his records together.

Riddick conducted a telephone interview with the plaintiff on August 27 at which time plaintiff again stated that he had to find his records but never asked Riddick to postpone the interview. Riddick questioned the plaintiff regarding his acquisition of the equipment, and plaintiff stated that he could not recall the names of the sellers of many of the items. Clark said that he purchased the single axle trailer from a man in Arkansas whose name he had forgotten and that he did not remember from whom he had bought the hay baling equipment in March 1981. Plaintiff further told Riddick that an appraisal by an employee of Mooney Tractor Company had been the basis for the figures in the policy. After the telephone interview, Clark submitted bills of sales that he represented to be legitimate. According to the bills of sale, he bought most of the property from local friends and family members. The bills of sale indicate that he bought the single axle trailer from his stepfather, although he had earlier stated that he had purchased it from a man in Arkansas. The bills of sale also show that he bought the hay baling equipment from Ovett Gipson for whom he was working at the time. This bill of sale was marked “duplicate” and was completed and signed by Gipson in black ink to show that the plaintiff paid $16,000.00 for several pieces of equipment. The “1” in $16,000.00, however, is in blue ink. At the trial, plaintiff explained that he paid Gipson $10,000.00 in cash and signed a note for $6,000.00. Billy Irons testified that he did not remember if the prices were entered on the bill of sale signed by him, and Okla Bozeman stated that no price was listed on the bill of sale that he signed.

Riddick talked with a representative of Mooney Tractor Company, who said that the plaintiff first requested an appraisal following the fire. Based on the policy description of the equipment, the representative estimated the replacement cost to be $15,607.00. Riddick also contacted Pedigo Equipment Company to obtain values of the equipment from the Official Guide to Tractor and Farm Equipment. Pedigo’s es-tímate was $17,137.00. Clark advised Rid-dick that he had an appraisal from Saxon Motor Supply in excess of $28,000.00 and offered to settle for that amount. Mark Saxon of Saxon Motor Supply told Riddick that the estimate of $28,000.00 was based on new and used replacement equipment depending on availability. Saxon’s estimate of maximum or near maximum cash value of the equipment which he gave to Riddick was $20,020.00. Riddick’s offer to settle the case for $20,020.00 was refused by the plaintiff, who then offered to settle for $26,000.00.

After Riddick had offered to settle the claim, a deputy state fire marshal informed him that the bill of sale submitted by Billy Irons was not an original and that Irons had not sold any equipment to the plaintiff. Riddick asked the plaintiff about the invoices and Clark again stated that they were legitimate. Further investigation revealed that the bill of sale signed by Okla Bozeman was also not legitimate, as the listed price exceeded the actual sale price by nearly $5,000.00.

On December 11, 1981, defendant wrote plaintiff of its intent to exercise its right under the policy to take the plaintiff’s statement under oath. In his statement given on December 29, 1981, plaintiff said that he had secured the bills of sale following the fire, which had destroyed all of his records except his insurance policy. Clark further stated that his income tax return for 1981 would show profits of $5000-$6000 from selling cattle, $3500-$3800 from hauling hay and $4000-$5000 from hauling pulpwood during the year. The plaintiff’s federal income tax return for that year, however, reflects no income from hauling hay and pulpwood and a substantial loss in his cattle farming operations.

The plaintiff contends that the policy issued to him by Aetna is a valued policy and, therefore, Aetna must pay the amount shown on the declaration page, $38,470.00. Furthermore, according to the plaintiff, under a valued policy, statements concerning the value of the property are not material and, consequently, the policy is not voided under the material misrepresentation clause. In American Insurance Company v. Gentile Brothers Companies, 109 F.2d 732, 735 (5th Cir.1940), the Fifth Circuit stated: “If there is anything in the policy which clearly indicates an intention on the part of the insurer to value the risk and loss, in whatever words expressed, the policy is valued.” According to the plaintiff, the assignment of values to the insured items and the calculation of premiums as a percentage of the claimed value indicates a valued policy. The defendant argues that its liability is limited to the actual cash value of the equipment at the time of the loss pursuant to the policy which states in part:

“The Company shall not be liable beyond the cash value of the property at the time any loss or damage occurs and the loss or damage shall be ascertained or estimated according to such actual cash value with proper deduction for depreciation, however caused, and shall in no event exceed what it would then cost to repair or replace the same with material of like kind and quality.

In Springfield Crusher, Inc. v. Transcontinental Insurance Company, 372 F.2d 125 (3rd Cir.1967), the court found that a policy with an identical limitation of liability clause was a conventional open policy and not a valued policy, since it required proof of the actual cash value of the insured property at the time of the loss. Id. at 127. The Springfield court, however, made no mention of whether premiums were based on a percentage of the amount of insurance obtained. In Ball v. Aetna Casualty and Surety Company, 58 F.R.D. 362 (E.D.Ky.1973), the plaintiff moved for summary judgment on the basis that the policy was a valued policy. The court determined that several aspects of the contract indicated a valued policy, but

“[t]hese factors, however, are not conclusive in the absence of unambiguous policy terms reflecting a ‘valued’ policy. The appraisal and incorporation of a schedule does not necessarily indicate a ‘valued’ policy, since there are a number of other reasons why the insurer would want such information. There has been no allegation in the case at bar that the premiums were based directly upon the appraised values, as was the case in American Insurance Company [109 F.2d 732 (5th Cir.1940) ].

Id. at 364.

Although the court apparently found the fact that premiums were not based on the appraised values to be influential, that fact alone was not determinative.

In Huth v. General Accident and Life Assurance Corporation, 536 S.W.2d 177 (Mo.1976), the court held that a policy with premiums based on the appraised value was a valued policy. The policy in issue contained a limitation of liability clause identical to the one in the policy issued by Aetna to Clark. The Huth policy also, however, included an attachment which read: “This Company shall be liable for the full repair or replacement cost of the property insured without deduction for depreciation but in no event to exceed the amount pf insurance applying thereto.” The court tetated: “The provision of the attachment deletes any reference to actual cash value referred to in the basic policy and indicates to us that the company has agreed to pay the full amount of the insured value of the guns or the replacement cost whichever is less.” Accordingly, the Huth case, because of the differing policy language, is not conclusive.

This court finds that the policy issued, by Aetna to Clark was a conventional open policy with Aetna’s liability being limited to the actual cash value of the insured equipment. The calculation of premiums as a percentage of the amount of insurance on each item is a factor to be considered but is not determinative, particularly when the policy expressly limits the insurer’s liability to the actual cash value of the property at the time of loss. Therefore, plaintiff’s claims that Aetna was required to pay the total amount of insurance, $38,470.00, and that statements regarding the actual cash value of the equipment are not material are not well taken.

In Southern Guaranty Insurance Company v. Dean, 172 So.2d 553 (Miss.1965), Southern Guaranty sought to establish that an insurance policy was voided by the insured’s failure to cooperate in the company’s investigation of a fire loss. The court stated:

“It is well established that such clauses in fire insurance policies are reasonable and valid, and are to be given a reasonable interpretation. If breached, the insurer would be deprived of a valuable right for which it contracted. Moreover, in an examination of the insured, all of those matters are material which have a bearing on the insured and the loss. The insured is required to give the best information available.”

Id. at 556.

In Edmiston v. Schellenger, 343 So.2d 465 (Miss.1977), the Mississippi Supreme Court held that an insurance policy was voided when the insured wilfully made material false statements or refused to answer material questions. Id. at 466.

The Mississippi Supreme Court “takes a broad view of materiality” in this context. Edmiston, 343 So.2d at 466. In Taylor v. Firemans Fund Insurance Company, 306 So.2d 638 (Miss.1974), the insurer contended that the insured’s refusal to answer certain questions following a fire loss voided the policy under the misrepresentation clause. The Mississippi Supreme Court held that questions regarding the insured’s title to the property, the amount paid and the source of the purchase money were material. Id. at 644. In Southern Guaranty, 172 So.2d at 556, the Mississippi Supreme Court also held that questions pertaining to the financial condition of the insured business and its owners were material. It is clear, therefore, that the questions to which the insurer allegedly received false answers from Clark were material.

It is also apparent in this case that Clark made false statements in his taped telephone interview with Riddick and in his sworn statement in response to questions about material matters asked by the defendant. Clark told Riddick that he did not know the names of the people from whom he purchased several pieces of equipment and subsequently produced purportedly legitimate bills of sale signed by friends and family members. In his sworn statement, the plaintiff had continued to maintain that he had purchased two of the four pieces of equipment listed on the fraudulent bill of sale from Billy Irons, but, at trial, he finally admitted that he did not buy any of the items from Irons. Clark’s testimony at the trial attempting to explain his alleged lapses of memory as an inability to recall names is simply not credible. Furthermore, in his sworn statement given at the end of the year, Clark stated that he would realize substantial profit from several ventures, while his income tax returns reflect either losses or a failure to report the alleged income. In the two years preceding the fire loss, the tax returns show a net income of approximately $5,000 to $10,000 per year. It is during this time that Clark allegedly expended over $30,000 in the purchase and repair of equipment. Although it is arguable that purchase money was available from funds other than reported income, the plaintiff has not substantiated any other source. Therefore, if the false material statements were willfully made, the policy must be voided.

In Claxton v. Fidelity and Guaranty Fire Corporation, 179 Miss. 556, 175 So. 210 (1937), the insured claimed that fire had destroyed a five year old piano valued at $500. The court determined that the insured had owned the piano for twenty years and it was worth only $25 to $50. The court stated: “One cannot escape the conviction that the false statements here were knowingly and willfully made, and therefore the intent to deceive will be implied.” In Edmiston, 343 So.2d at 467, the court inferred the intent to deceive from the insured’s admission at the trial that he knew the statements he made were false. Clark admitted at trial that he knew that the bills of sale he produced and represented to be legitimate were not originals and in fact were not signed by the true sellers. Therefore, this court must also conclude that Clark acted with an intent to deceive when he made the false material statements. The defendant properly considered the policy voided under the misrepresentation clause.

The plaintiff also seeks punitive damages, prejudgment interest and attorney’s fees. This relief must, of course, be denied, and the court notes that the defendant acted in good faith in its efforts to settle the plaintiff’s claim prior to learning of the misrepresentations made by Clark.

A separate judgment shall be submitted in accordance with the local rules.

      . The misrepresentation clause of the policy provides:
      "This entire policy shall be void if, whether before or after a loss, the Insured has concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the Insured therein, or in case of any fraud or false swearing by the Insured relating thereto.”

      . Riddick’s testimony with reference to his communications with Pedigo, Mooney Tractor Company and Mark Saxon was admissible only on the issue of defendant’s intent with regard to the question of punitive damages and was not admissible as to the value of the insured property.

      . At trial, Billy Irons, a neighbor and friend of Clark, after initially testifying on direct examination that he had not sold Clark any of the property described on the bill of sale signed by him, equivocated on this issue on cross examination by the plaintiff. The defendant then sought introduction of a prior statement made by Irons and the court reserved ruling on plaintiff’s objection. The court finds that the statement is admissible and overrules the objection of the plaintiff.


author: JOE J. FISHER, District Judge.

text:
    Mitchell M. YOUNG and Wife Donna Koch Young v. Sheila S. SIMPSON, Executrix of the Estate of Buck H. Simpson, Deceased.
    Civ. A. No. TX-81-61-CA.
    United States District Court, E.D. Texas, Texarkana Division.
    Feb. 11, 1985.

      E. Ben Franks, Lavender, Rochelle, Bar-nette, Franks & Arnold, Texarkana, Ark., for plaintiffs.
    Nicholas H. Patton, Young, Patton & Folsom, Texarkana, Ark., for defendant.
   MEMORANDUM OPINION

JOE J. FISHER, District Judge.

This is a diversity jurisdiction suit. Plaintiffs, Dr. Mitchell M. Young and his wife, Donna Koch Young, residents of Tex-arkana, Texas, filed suit for damages against the Estate of Buck Simpson, Texar-kana, Arkansas, claiming that Buck Simpson made an oral agreement to repurchase from them, on their demand, fifteen (15%) percent of the outstanding stock of Hush Puppy of Little Rock, Inc., and a one-third (Vs) undivided interest in real property on and adjacent to the Corporation’s place of business located in Little Rock, Arkansas. Trial of this cause was to the Court on October 16, 1984, in Texarkana, Texas, and after careful consideration of Plaintiffs’ claim, the evidence presented, the pleadings and the briefs, this Court finds that there was no enforceable repurchase agreement. Furthermore, Plaintiffs’ claim is barred by the Statute of Frauds and the Parol Evidence Rule.

FACTS

Dr. Young, a physician in Texarkana, Texas, over the years has invested in numerous enterprises. He met Simpson in 1973, and in 1976 through 1977 began discussing the possibility of his investing in certain businesses with Simpson. In May of 1978, Simpson approached Dr. Young about investing in a restaurant called the “Hush Puppy of Little Rock, Inc.,” which is located in Little Rock, Arkansas. Dr. Young decided to invest in the restaurant and paid $65,000 to Simpson for a stock certificate evidencing 15% of the outstanding stock in the “Hush Puppy” corporation, plus a warranty deed evidencing a one-third undivided interest in the real estate under and adjacent to the restaurant. Dr. Young alleges that he was induced to invest in the restaurant on the promise that he was to receive 15% of the corporation’s profits. Additionally, Dr. Young alleges that he entered into a contemporaneous oral agreement with Simpson. Under such agreement, Simpson was to repurchase Dr. Young’s interest in the corporation and real property for a stipulated price whenever Dr. Young decided to exercise such option. No documents, however, incident to the purchase agreement make any mention of a repurchase agreement. Furthermore, Dr. Young makes no allegation that Simpson was to provide any documentation to evidence the alleged repurchase agreement. Dr. Young, nevertheless, claims that he attempted to exercise the alleged repurchase agreement but that his efforts were unsuccessful. He, therefore, obtained counsel and brought this suit seeking damages. Simpson denied the existence of an agreement to repurchase in deposition testimony. Before trial, he was tragically killed in an automobile accident and thus the Court has been deprived of his live testimony. Nevertheless, since no written contract exists, the Statute of Frauds precludes recovery by Plaintiff, Dr. Young.

STATUTE OF FRAUDS

Section 8.319 of the Texas Business and Commerce Code sets forth certain requirements regarding the enforceability of contracts for the sale of securities. The Code reads, in pertinent part:

A contract for the sale of securities is not enforceable by way of action or defense unless:
1. there is some writing signed by the party against whom enforcement is sought or by his authorized agent or broker, sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price.

Tex.Bus. & Com.Code Ann. § 8.319 (Vernon Supp.1984). Stock of a closely held corporation comes within the term “securities” as set forth in 8.319 of the Code. Kenny v. Porter, 604 S.W.2d 297, 301 (Tex.Civ.App.—Corpus Christi 1980, writ ref’d n.r.e.). Therefore, the alleged oral agreement to repurchase the stock in Hush Puppy of Little Rock, Inc. is subject to the Code’s requirements. Since there is no writing signed by Simpson which evidences such alleged agreement, Dr. Young’s claim is unenforceable even if there had been such an agreement. See Consolidated Petroleum Industries, Inc. v. Jacobs, 648 S.W.2d 363, 866 (Tex.App.—Eastland, 1983, writ ref’d n.r.e.)

Section 26.01(b)(4) of the Texas Business and Commerce Code sets forth requirements regarding the enforceability of contracts for the sale of real estate. That section is governed by Section 26.01(a) which reads:

(a) A promise or agreement described in Subsection (b) of this section is not enforceable unless the promise or agreement, or a memorandum of it, is
(1) in writing; and
(2) signed by the person to be charged....

Tex.Bus. & Com.Code Ann. § 26.01(a) (Vernon 1968). The alleged oral agreement to repurchase the real estate interest under and adjacent to the “Hush Puppy of Little Rock, Inc.” falls within the purview of the above-quoted section of the Code. Although Dr. Young alleges that Simpson promised to repurchase the real property on Dr. Young’s demand, there is no writing signed by Simpson and Dr. Young which evidences such contention. Therefore, such alleged promise is also unenforceable. Kronenberger v. Beke, 517 S.W.2d 664 (Tex.Civ.App.—Houston [1st Dist.] 1974, writ ref'd n.r.e.).

The judicial doctrine of promissory estoppel, moreover, may not be invoked by Dr. Young in an attempt to avoid the statutory writing requirement imposed on the alleged oral agreement. Promissory estoppel may only be invoked if there was a promise to provide a writing at a later date to evidence the oral agreement. See, e.g., Nagle v. Nagle, 633 S.W.2d 796, 800 (Tex.1982). Looking to the record before this Court, there is no allegation or evidence which in any way suggests that there was such a promise. Young alleges that Simpson said he would repurchase his interest but Young never alleges that Simpson promised to state so in writing. Accordingly, the alleged oral agreement cannot be enforced under the doctrine of promissory estoppel.

PAROL EVIDENCE

Finally, Dr. Young’s claim arising from the alleged oral agreement is barred by the Parol Evidence Rule. Under such rule, “parol evidence is not admissible to vary the terms of a document which is clear and express in its terms.” Malone v. Federal Deposit Insurance Corp., 611 S.W.2d 855, 857 (Tex.Civ.App.—Houston [14th Dist.] 1980, writ ref'd n.r.e.). For many years, Texas courts have proclaimed the following:

The legal theory of written contracts includes the presumption that the writing itself merges into the instrument all the oral agreements then existing between the parties, the writing thus becoming itself an instrument embodying the parties’ whole and entire agreement. Lewis v. East Texas Finance Co., 1941, 136 Tex. 149, 146 S.W.2d 977. In the absence of fraud, accident, or mistake, par-ol evidence is inadmissible to vary, add to, or contradict the terms of a valid written instrument.

Patton v. Crews, 264 S.W.2d 467, 469 (Tex.Civ.App.—Fort Worth 1954, writ ref’d n.r.e.).

In the instant case, none of the documents evidencing the sale of the stock and real property contain any language which suggests that there was a prior or contemporaneous repurchase agreement. Furthermore, the documents appear not only complete, but also “clear and express in their terms.” The Court finds that the alleged repurchase agreement, by definition, contradicts the purchase agreement as evidenced by the various documents. The Court also finds that there was no fraud, accident, or mistake which induced Dr. Young to purchase the stock. Accordingly, Dr. Young’s claim is barred by the Parol Evidence Rule. Velasquez v. Cruz, 418 S.W.2d 377, 379 (Tex.Civ.App.—Beaumont 1967, no writ).

CONCLUSION

In summary, this Court finds that ..there was no agreement on the part of Simpson to repurchase on the demand of Dr. Young and at a stipulated price, the stock and real property which Dr. Young acquired pursuant to his investment in “The Hush Puppy of Little Rock.” Even if there had been such an agreement, it is barred by the Statute of Frauds and the Parol Evidence Rule.

It is therefore ORDERED, ADJUDGED AND DECREED that judgment will be entered in favor of the Defendant, Sheila S. Simpson, Executrix of the Estate of Buck H. Simpson, Deceased, and against the Plaintiffs, Dr. Mitchell M. Young and his wife, Donna Koch Young. Plaintiffs and Defendant shall bear their own costs.

      . At trial, Defendant argued that the oral agreement could not be proved because Simpson was killed before trial. Defendant claimed that evidence concerning the agreement was barred by the Dead Man’s Statute. Such contention was erroneous. See Lewis v. Foster, 621 S.W.2d 400, 404 (Tex.1981). In practical terms, however, it makes no difference to this case. Even if Simpson was still alive, the claim is barred on the grounds set forth above.