AGAPE FAMILY WORSHIP CENTER, INC., Plaintiff, v. DONALD RICHARD GRIDIRON, JR., and WESTERN STATES GOLF ASSOCIATION, Defendants.
Pending before the Court is Defendant Western States Golf Association's ("WSGA") Motion to Dismiss and Motion to Strike Portions of the First Amended Complaint ("FAC"). (ECF Nos. 12, 13.) For the reasons discussed below, the Court GRANTS IN PART and DENIES IN PART the Motion to Dismiss and GRANTS the Motion to Strike, upon converting it into a motion to dismiss.
After carefully considering the papers filed in support of and in opposition to the Motions, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15.
WSGA moved to dismiss and to strike portions of the FAC on October 9, 2015. (ECF Nos. 12, 13.) Timely oppositions and replies were filed. (ECF Nos. 20, 21, 24, 25.) The motions are now before the Court for decision.
WSGA requests that the Court take judicial notice of the complaint in the adversary bankruptcy proceeding, Case No. 2:14-ap-01709-NB; Agape Family Worship Center, Inc. v. Donald Richard Gridiron, Jr., et al., filed in the United States Bankruptcy Court for the Central District of California. (ECF No. 14.) The Court takes judicial notice of the complaint. Fed. R. Evid. 201; United States ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (a court "may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue.").
Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint for lack of a cognizable legal theory or insufficient facts pleaded to support an otherwise cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To survive a dismissal motion, a complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2). Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual allegations "must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Essentially, the complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
The determination as to whether a complaint satisfies the plausibility standard is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. A court is generally limited to the pleadings and must construe all "factual allegations set forth in the complaint . . . as true and . . . in the light most favorable" to the plaintiff. Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). However, a court need not blindly accept conclusory allegations, unwarranted deductions of fact, or unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).
Generally, a court should freely give leave to amend a complaint after granting a dismissal. Fed. R. Civ. P. 15(a). However, a court may deny leave to amend when "the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see also Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).
WSGA moves to dismiss all of Agape's claims against it, namely (1) vicarious liability, (2) negligence, (3) conversion, (4) money had and received, (5) unjust enrichment, and (6) receipt of stolen property. WSGA also moves to strike the portions in the FAC that reference punitive damages against WSGA.
WSGA argues that it cannot be held vicariously liable for Gridiron's wrongdoings. (Motion ["Mot."] 16-20.) Under the doctrine of respondeat superior, an employer is liable for the torts of its employees committed within the scope of the employment. Lisa M. v. Henry Mayo Newhall Mem'l Hosp., 12 Cal. 4th 291, 296 (1995). "[A]n employee's willful, malicious and even criminal torts may fall within the scope of his or her employment for purposes of respondeat superior, even though the employer has not authorized the employee to commit crimes or intentional torts." Id. at 296-97. To be within the scope of employment, the employee's tort must have a "causal nexus" to the employee's work. Id. at 297. For a "causal nexus" to exist, the tort must be "engendered by or arise from the work." Id. at 298. To constitute such an "outgrowth" of employment, "the risk of tortious injury must be inherent in the working environment or typical of or broadly incidental to the enterprise [the employer] has undertaken." Id. (internal citations and quotation marks omitted).
The scope of employment is limited, however, by an element of foreseeability: an employer is liable only when, considering the enterprise's operations, the risk of injury is generally foreseeable. Id. at 299. Foreseeability "merely means that in the context of the particular enterprise, an employee's conduct is not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employer's business." Id. (citing Rodgers v. Kemper Constr. Co., 50 Cal. App. 3d 608, 618-19, (1975)). In other words, an employer will not be held vicariously liable for an employee's malicious or tortious conduct "if the employee substantially deviates from the employment duties for personal purposes." Farmers Ins. Grp. v. Cnty. of Santa Clara, 11 Cal. 4th 992, 1004-05 (1995) (emphasis in original).
The Court finds that Agape has sufficiently pleaded WSGA's vicarious liability for the claims against Gridiron. Agape alleges that Gridiron, as WSGA's treasurer and accountant, conducted all banking activities on behalf of WSGA, deposited unauthorized checks from Agape to WSGA's bank account, and used those funds to pay for WSGA's routine operating expenses. (FAC ¶¶ 18, 20, 23, 24.) It is "typical of or broadly incidental" to the duties of a treasurer and accountant to engage in banking activities on behalf of his employer and to pay for its routine operating expenses. See PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, 150 Cal. App. 4th 384, 393-94 (2007) (law firm can be held vicariously liable for partner's participation in removing cash from client's residence to help client post bail and cover legal fees, because those activities are "typical of or broadly incidental" to the practice of a white-collar defense lawyer). Moreover, an accountant and treasurer's theft of a third party to cover the employer's routine operating expenses, is foreseeable in that the conduct is "not so unusual or startling" and does not deviate substantially from his duties. Id. at 393 (triable issues of fact remain as to whether lawyer's removal of cash from client's residence was a foreseeable consequence of the legal fees generated by the law firm); see also Inter Mountain Mortg., Inc. v. Sulimen, 78 Cal. App. 4th 1434, 1442 (2000) (loan representative's submission of fraudulent loan application to lender was foreseeable). Thus, the Court DENIES the motion to dismiss as it pertains to WSGA's vicarious liability.
WSGA additionally contends that the "adverse interest exception" applies to cut off its vicarious liability. (Mot. 17.) The Court will not consider this argument given that the applicability of this exception is a question of fact that is inappropriate for resolution at the pleading stage. See Cement & Concrete Workers Dist. Council Pension Fund v. Hewlett Packard Co., 964 F. Supp. 2d 1128, 1144 (N.D. Cal. 2013).
Agape alleges that it was injured by WSGA's "negligence in supervising, prohibiting, controlling and regulating the conduct of Gridiron . . . ." (FAC ¶ 38.) WSGA seeks to dismiss what is essentially a negligent supervision claim on the basis that it is barred by the economic loss rule. (Mot. 25-27.) According to WSGA, the economic loss rule prohibits a plaintiff who alleges negligence from recovering for purely economic loss. (Mot. 26.) However, WSGA's reliance on the economic loss rule is misplaced. The rule more accurately stands for the proposition that there is no tort liability for economic loss caused by the negligent performance of a contract. JMP Securities LLP v. Erlich v. Altair Nanotechnologies Inc., 880 F. Supp. 2d 1029, 1042-43 (N.D. Cal. 2012); see also Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 988 (2004) ("The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise."). Given that there is no contract at issue here, the economic loss rule is inapplicable.
Nevertheless, Agape fails to allege sufficient facts to state a cause of action for negligent supervision because liability for negligent supervision requires "knowledge by the principal that the agent or servant was a person who could not be trusted to act properly without being supervised." Burnett v. Nw. Trustee Servs., Inc., 2015 WL 566702, at *1 (C.D. Cal. Feb. 9, 2015) (citing Noble v. Sears, Roebuck & Co., 33 Cal. App. 3d 654, 664 (1973)). The FAC contains no factual allegations from which WSGA's knowledge could be inferred. See Farias v. Nat'l R.R. Passenger Corp., 2015 WL 4749002, at *7-8 (C.D. Cal. Aug. 11, 2015) (dismissing negligent supervision claim because plaintiff alleged no facts from which the court could reasonably infer that employer knew or should have known of employee's harassing conduct). Given the allegation that WSGA entrusted Gridiron with its own bank accounts, the more plausible inference would be that WSGA had no knowledge of Gridiron's untrustworthiness. Therefore, the Court GRANTS the motion to dismiss Agape's negligence claim with leave to amend.
"Conversion is the wrongful exercise of dominion over the property of another." Oakdale Village Group v. Fong, 43 Cal. App. 4th 539, 543 (1996). The elements of conversion are: "(1) the plaintiff's ownership or right to possession of the property at the time of the conversion; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages." Mindys Cosmetics, Inc. v. Dakar, 611 F.3d 590, 601 (9th Cir. 2010) (citing Oakdale Village Group, 43 Cal. App. 4th at 543-44).
WSGA argues that Agape's conversion claim must be dismissed because (1) the FAC fails to allege a specific, identifiable sum at issue and (2) WSGA was a "mere conduit" that inadvertently held Agape's funds. (Mot. 27-30.) The Court, however, declines to dismiss Agape's claim on these bases.
First, at the pleading stage, it is sufficient to allege that "approximately" $1.9 million of Agape's funds were converted. Orangi v. JP Morgan Chase Bank, 2011 WL 1807174, at *2 (N.D. Cal. May 11, 2011) ("While [the plaintiff] may have to establish the specific amount allegedly taken in order to prove her case, she need not do so merely to state a claim [for conversion]."); Natomas Gardens Inv. Grp., LLC v. Sinadinos, 710 F. Supp. 2d 1008, 1019 (E.D. Cal. 2010) ("Considering the liberal pleading requirements in federal court, . . . at the pleading stage it is only necessary for plaintiffs to allege an amount of money that is 'capable of identification.'" (citing PCO, Inc., 150 Cal. App. 4th at 397)).
Second, WSGA's lack of knowledge of Gridiron's theft does not preclude a conversion claim against it.
[T]he foundation for the action of conversion rests neither in the knowledge nor the intent of the defendant. It rests upon the unwarranted interference by defendant with the dominion over the property of the plaintiff from which injury to the latter results. Therefore, neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance, are the gist of the action.
Burlesci v. Petersen, 68 Cal. App. 4th 1062, 1066 (1998) (citing Poggi v. Scott, 167 Cal. 372, 375 (1914)) (reversing dismissal of conversion claim because it was irrelevant that defendant believed he had a security interest in the collateral he allegedly converted). Agape alleges that money stolen from it was deposited into WSGA's bank account and that WSGA spent a portion of the stolen funds to pay for its routine operating expenses. (FAC ¶ 24.) Such allegations are sufficient to state a claim for conversion. Therefore, the Court DENIES the motion to dismiss Agape's conversion claim.
To state a claim for money had and received, a plaintiff must allege that (1) the defendant received money that was intended to be used for the benefit of the plaintiff, (2) the money was not used for the benefit of the plaintiff, and (3) the defendant has not given the money to the plaintiff. Chase Inv. Servs. Corp. v. Law Offices of Jon Divens & Assocs., LLC, 748 F. Supp. 2d 1145, 1175 (C.D. Cal. 2010); Schultz v. Harney, 27 Cal. App. 4th 1611, 1623 (1994) (plaintiff must allege that the defendant is indebted to the plaintiff for a certain sum "for money had and received by the defendant for the use of the plaintiff."). This claim "lies wherever one person has received money which belongs to another, and which in equity and good conscience should be paid over to the latter." Gutierrez v. Girardi, 194 Cal. App. 4th 925, 937 (2011) (citing Weiss v. Marcus, 51 Cal. App. 3d 590, 599 (1975)).
WSGA argues that this claim should be dismissed because (1) it did not benefit from or know about Gridiron's theft, and (2) the principle of equity bars Agape's claim where it failed to inspect its own bank account records, the same "misconduct" that Agape alleges against WSGA. (Mot. 30-33.) The Court disagrees. The FAC sufficiently alleges that WSGA benefitted from Gridiron's theft. (FAC ¶ 24 ("WSGA utilized a portion of the funds received from [Agape] to pay for its routine operating expenses . . . .").) That WSGA was unaware that money stolen from Agape was deposited into its account does not necessarily preclude a claim for money had and received. Twining v. Thompson, 68 Cal. App. 2d 104, 114 (1945) (where defendant "had no knowledge of his wrongful detention" of plaintiff's money, plaintiff states a claim for money had and received if a demand for its return was made). Finally, WSGA provides no case law support for the proposition that a claim for money had and received fails on equity grounds if the plaintiff is guilty of the same failings as the defendant or if the defendant was also a victim of the theft. Thus, the Court DENIES the motion to dismiss Agape's claim for money had and received.
The Court assumes for purposes of deciding the motion to dismiss that Agape made a demand to WSGA for the return of the money that allegedly belongs to Agape.
WSGA argues that there is no independent cause of action in California for unjust enrichment. (Mot. 33-34.) Agape contends that California courts are split on the issue and that its unjust enrichment claim should be dismissed only if another cause of action for restitutionary damages survives the motion to dismiss. (Opposition ["Opp."] 30.) The Ninth Circuit recognizes a claim for unjust enrichment. See Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1067 (9th Cir. 2014). However, Agape's claim for money had and received, an action for restitutionary damages, survives the motion to dismiss. See Gutierrez, 194 Cal. App. 4th at 937. Therefore, the Court GRANTS the motion to dismiss Agape's unjust enrichment claim without leave to amend.
WSGA contends that this claim should be dismissed because liability for receipt of stolen property is premised on actual knowledge of theft, which WSGA did not have. (Mot. 35.) California Penal Code section 496(a) states, "[e]very person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, . . . shall be punished by imprisonment . . . ." (emphasis added). Any person injured by a violation of section 496(a) may bring a civil action for three times the amount of actual damages. See Cal. Pen. Code § 496(c).
The Court finds that WSGA cannot be held directly liable for receipt of stolen property given its lack of knowledge, but that the FAC alleges sufficient facts to hold WSGA vicariously liable. See Lisa M., 12 Cal. 4th at 296-97 ("[A]n employee's willful, malicious and even criminal torts may fall within the scope of his or her employment for purposes of respondeat superior, even though the employer has not authorized the employee to commit crimes or intentional torts."). Therefore, the Court DENIES the motion to dismiss Agape's claim for receipt of stolen property.
The Court finds that Agape's allegations are insufficient to support the application of these doctrines. For these doctrines to apply, a plaintiff must plead facts to show that it failed to uncover the alleged wrongdoings despite reasonable diligence. Yumul v. Smart Balance, Inc., 733 F. Supp. 2d 1117, 1130 (C.D. Cal. 2010) ("In order to invoke the delayed discovery exception to the statute of limitations, the plaintiff must specifically plead facts which show . . . the inability to have made earlier discovery despite reasonable diligence.") (internal brackets omitted); Bernson v. Browning-Ferris Indus., 7 Cal. 4th 926, 933-34 (1994) (fraudulent concealment tolls the running of the statute until the wrongdoing is "discovered, or through the exercise of reasonable diligence[,] should have [been] discovered"); Bernson, 7 Cal. 4th at 936 (citing Sanchez v. S. Hoover Hosp., 18 Cal. 3d 93, 99 (1976)) ("The rule of equitable estoppel includes, of course, the requirement that the plaintiff exercise reasonable diligence."). Here, Agape fails to allege facts showing any diligence whatsoever over the course of seven years, during which Gridiron stole millions of dollars from the church.
Moreover, to establish entitlement to tolling based on a defendant's alleged fraudulent concealment, a plaintiff must point to "some active conduct by the defendant, above and beyond the wrongdoing upon which the plaintiff's claim is filed, to prevent the plaintiff from suing in time." Lukovsky v. City & Cnty. of San Francisco, 535 F.3d 1044, 1052 (9th Cir. 2008). In other words, the alleged basis for tolling must not simply overlap the plaintiff's cause of action. Id. Agape argues that the FAC affirmatively pleaded fraudulent concealment in that it alleges that "Gridiron instructed [Agape's] book keeper not to open the bank statements and hold them for him" and that he "took blank checks from [Agape] with him when he left the church campus and returned to California." (Opp. 22; FAC ¶ 15, 16.) However, such conduct does not rise "above and beyond" Gridiron's theft and his efforts to hide it. Given that the Court grants leave to amend the FAC, however, Agape has another chance at alleging sufficient facts to support the application of the doctrines that may save its facially time-barred claims.
As a preliminary matter, WSGA's Rule 12(f) motion to strike punitive damages from the FAC is procedurally improper. The Ninth Circuit construes Rule 12(f) narrowly, finding it improper to strike portions of the pleading if those portions are not: (1) an insufficient defense; (2) redundant; (3) immaterial; (4) impertinent; or (5) scandalous. Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973-74 (9th Cir. 2010). Under Whittlestone, it is procedurally improper to bring a motion to strike punitive damages because punitive damages do not fall under any of the Rule's five enumerated categories. See e.g., Rittenberg v. Decision One Mortg. Co., 2012 WL 10423361, at *5 (C.D. Cal. Oct. 12, 2012) (denying motion to strike punitive damages under Whittlestone because it is procedurally improper). Therefore, the Court shall convert WSGA's motion to strike into a Rule 12(b)(6) motion to dismiss. See Redlands Country Club, Inc. v. Cont'l Cas. Co., 2011 U.S. Dist. LEXIS 155911, at *16-17 (C.D. Cal. Jan. 28, 2011) (converting motion to strike punitive damages into Rule 12(b)(6) motion to dismiss).
The Court dismisses the request for punitive damages against WSGA as to the claim for money had and received. See Steiner v. Rowley, 35 Cal. 2d 713, 720 (1950) (punitive damages cannot be recovered for money had and received). Because the unjust enrichment claim has been dismissed, a motion to dismiss punitive damages as to this claim is moot. The Court does not decide whether punitive damages shall be dismissed against Gridiron as it is WSGA, not Gridiron, that brings this motion.
As to the conversion claim against WSGA, the Court dismisses the request for punitive damages. Under a theory of direct liability, punitive damages are awardable for conversion if a plaintiff can make the "required showing of malice, fraud, or oppression." Haigler v. Donnelly, 18 Cal. 2d 674, 681 (1941). Agape fails to allege facts showing any malice, fraud, or oppression on the part of WSGA. Under a theory of vicarious liability, an employer cannot be held vicariously liable for punitive damages unless the employer had advance knowledge of the unfitness of the employee and was reckless in employing him, authorized or ratified the employee's wrongful conduct, or the employee was hired in a managerial capacity and was acting in the scope of employment. Weeks v. Baker & McKenzie, 63 Cal. App. 4th 1128, 1148-49 (1998); see also Cal. Civ. Code § 3294(b). The FAC fails to plead facts showing that any of these conditions are met here. Accordingly, the Court GRANTS the motion to dismiss claims for punitive damages with leave to amend.
For the above reasons, the Court GRANTS IN PART and DENIES IN PART WSGA's Motion to Dismiss. (ECF Nos. 12, 13.) The Court denies the Motion as to all claims except for the claims for negligence, unjust enrichment, and punitive damages. The negligence and punitive damages claims are dismissed with leave to amend. Plaintiff shall have fifteen (15) days to file an amended complaint.


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In this case, Hoffman Plastic Compounds, Inc. v. NLRB, the U.S. Supreme Court decided that federal immigration law prohibited awarding undocumented immigrant workers back pay under the National Labor Relations Act.
This case arose when Hoffman Plastic Compounds fired José Castro and others for union activities in 1989. During a series of administrative proceedings before the National Labor Relations Board (NLRB), it was determined that Castro was an undocumented immigrant who had used fake papers to gain employment. Castro was awarded some back pay (for the period beginning on date of his illegal termination until Hoffman discovered he was unauthorized to work). See Hoffman Plastic Compounds, Inc., 306 N.L.R.B. 100, 1992 WL 14561 (1992); Hoffman Plastic Compounds, Inc., 314 N.L.R.B. 683, 685, 1994 WL 397901 (1994); Hoffman Plastic Compounds, Inc. 326 N.L.R.B. No. 86, 1998 WL 663933 (Sept. 23, 1998).
Hoffman appealed to the Court of Appeals for the District of Columbia, arguing that the Immigration Reform and Control Act of 1986 ("IRCA") and the case Sure-Tan, Inc. v. NLRB, 467 U.S. 883, 104 S.Ct. 2803, 81 L.Ed.2d 732 (1984), barred awards of any backpay to undocumented workers. A panel of the D.C. Circuit Court of Appeals affirmed, Hoffman Plastic Compounds, Inc. v. N.L.R.B., 208 F.3d 229 (D.C.Cir. 2000), but rehearing en banc was granted and the judgment vacated. Hoffman Plastic Compound, Inc. v. N.L.R.B., 2000 WL 985015 (D.C.Cir. 2000). On rehearing en banc, the Court held that a worker's undocumented status did not render him ineligible to obtain backpay as a remedy for an employer's violation of the NLRA. Hoffman Plastic Compounds, Inc. v. N.L.R.B., 237 F.3d 639 (D.C.Cir. 2001). The Supreme Court granted certiorari, Hoffman Plastic Compound, Inc. v. N.L.R.B., 533 U.S. 976, 122 S.Ct. 23, 150 L.Ed.2d 804 (2001) and reversed. Hoffman Plastic Compounds, Inc. v. N.L.R.B., 535 U.S. 137, 122 S.Ct. 1275, 152 L.Ed.2d 271 (2002). The Supreme Court (Chief Justice Rehnquist) held that the Immigration Reform and Control Act of 1986 (IRCA) foreclosed an award of backpay under the NLRA to undocumented alien works who had never been legally authorized to work in the U.S.
On remand, the District Court entered judgment in favor of the employer Hoffman. See Hoffman Plastic Compound, Inc. v. N.L.R.B., 2002 WL 1974040 (D.C.Cir. Aug 27, 2002) and Hoffman Plastic Compound, Inc. v. N.L.R.B., 2002 WL 1974028 (D.C.Cir. Aug 27, 2002).
Plaintiff Description Hoffman Plastic Compounds, Inc.
The Oyez Project, Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137 (2002).

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Appeal from the Circuit Court, Pasco County, W. Lowell Bray, Jr., J.
Nancy A. Lauten and George A. Vaka of Vaka, Larson Johnson, P.L., Tampa; and Jonathan Hall, Joshua E. Burnett, and Marshall Thomas Burnett, Tampa, for Appellant.
Alicia Lopez and Karl Forrest of Groelle Salmon, P.A., Tampa, for Appellee.
Michael Warfel appeals a final judgment entered in favor of Universal Insurance Company of North America in a sinkhole insurance coverage case. Mr. Warfel is entitled to a new trial because the trial court should not have instructed the jury on an evidentiary presumption that impermissibly shifted the burden of proof to him. Accordingly, we reverse.
In March 2005, Universal issued an all-risks homeowners' insurance policy to Mr. Warfel. The policy covered sinkhole claims. Effective June 1, 2005, the legislature amended sections 627.706 to 627.707, Florida Statutes (2005), and enacted sections 627.7065, 627.7072, and 627.7073 relating to database information, testing standards, and reporting requirements for sinkhole claims.
In August 2005, Mr. Warfel noticed damaged walls and floors in his home. He filed a sinkhole claim with Universal. After an investigation by a geotechnical, geological and engineering firm, SD II Global, Universal denied the claim, concluding that the damage was not caused by a sinkhole. The SD II Global report found that the damage was caused by shrinkage, thermal stress, and differential settlement, all of which are excluded from coverage under the policy.
(1) The insurer must make an inspection of the insured's premises to determine if there has been physical damage to the structure which may be the result of sinkhole activity.
Mr. Warfel sued Universal. Before trial, Universal filed a motion asking the trial court to apply the above-referenced statutory provisions to the case. Universal contended that the 2005 amendments and enactments did not impair existing contract rights or obligations. Alternatively, Universal argued that any impairment was overridden by the State's interest in resolving a sinkhole insurance claim crisis. Universal also asked the trial court to determine that section 90.304, Florida Statutes (2007), allowed a jury instruction based on section 627.7073(1)(c) as a rebuttable presumption affecting the burden of proof. Over Mr. Warfel's objection, the trial court granted Universal's motion as it related to the jury instruction; that ruling is the crux of this appeal.
The trial court denied Universal's motion as to sections 627.706 to 627.707, finding that these amendments were substantive and not applicable retroactively. The trial court granted Universal's motion as to the three new enactments, sections 627.7065, 627.7072, and 627.7073, relating to sinkhole database, testing, and reporting requirements, reasoning that the statutes were procedural and did not involve an issue of retroactivity. Although Mr. Warfel takes issue with the latter ruling, we find no error and discuss the matter no further.
At trial several experts testified about the cause of damage to Mr. Warfel's home. Mr. Warfel presented the testimony of a geologist, an engineer, and a structural engineer, all of whom had reviewed the SD II Global report. They concluded that a sinkhole, at least in part, caused the damage. Universal presented testimony of a structural engineer, a geotechnical engineer, and a geologist, all affiliated with SD II Global. They concluded that sinkhole activity did not damage the home.
The respective findings, opinions, and recommendations of the engineer and professional geologist as to the verification or elimination of a sinkhole loss and the findings, opinions, and recommendations of the engineer as to land and building stabilization and foundation repair shall be presumed correct.
The legislature made minor changes to section 627.7073(1)(c) in 2006, none of which are relevant here.
Universal retained its experts under section 627.707(2) to conduct the testing required by section 627.7072 and to issue a report in accordance with section 627.7073. This report bears the presumption of correctness.
90.304 Presumption affecting the burden of proof defined. — In civil actions, all rebuttable presumptions which are not defined in s. 90.303 are presumptions affecting the burden of proof.
You must presume that the opinions, findings, and conclusion in the SD II report as to the cause of damage and whether or not a sinkhole loss has occurred are correct. This presumption is rebuttable. The Plaintiff has the burden of proving by a preponderance of the evidence that the findings, opinions, and conclusions of the report are not correct.
must presume that the opinions, findings, and conclusions in the SD II report as to the cause of damage and whether or not a sinkhole loss has occurred are correct. You must presume that report is correct. That report is the only report in evidence.
You can take it back in the room. Read it. You will presume — the Judge will instruct you you must presume that's correct.
Throughout the trial court proceedings, Mr. Warfel argued that the section 627.7073(1)(c) presumption was a "vanishing" or "bursting bubble" presumption, a presumption affecting the burden of producing evidence but not one shifting the burden of proof to him. See §§ 90.302(1), 90.303. Additionally, Mr. Warfel explained that the statutory scheme reflected no legislative intent to apply a public or social policy presumption so as to shift the burden of proof to the homeowner. He is correct.
90.303 Presumption affecting the burden of producing evidence defined. — In a civil action or proceeding, unless otherwise provided by statute, a presumption established primarily to facilitate the determination of the particular action in which the presumption is applied, rather than to implement public policy, is a presumption affecting the burden of producing evidence.
We see no clear legislative expression that public policy compels a homeowner to shoulder the burden to disprove the findings and recommendations of the insurer's engineers and geologists. We are also mindful that, historically, an all-risks policy encumbers the insurer with the burden to prove that a claimed loss is not covered. See Wallach v. Rosenberg, 527 So.2d 1386, 1388-89 (Fla. 3d DCA 1988). We must assume that the legislature was aware of this fact when it enacted section 627.7073(1)(c). Moreover, the legislature knows how to create burden-shifting presumptions under section 90.304. See C. Ehrhardt, Florida Evidence § 304.1 (2009 ed.) (explaining presumptions that affect the burden of proof and providing examples of conclusive presumptions). For example, the legislature included a burden-shifting presumption in a statutory amendment governing burdens of proof in will contests. There, the legislature announced that a presumption of undue influence implements public policy and shifts the burden of proof after the presumption of undue influence arises in a will contest. See § 733.107(2), Fla. Stat. (2002); Hack v. Janes, 878 So.2d 440, 443-4 (Fla. 5th DCA 2004) (explaining the section 733.107(2) provision and the difference between vanishing presumptions, which merely affect the burden of production of evidence, and public policy-related presumptions that provide for shifting of the burden of proof). Other legislatively man-dated public policy-related presumptions abound. See, e.g., Mallardi v. Jenne, 721 So.2d 380, 383 (Fla. 4th DCA 1998) (discussing amendment to section 61.14, Florida Statutes (1992), which adopted a presumption relating to contempt for failure to pay alimony or child support under section 90.302(2) of the evidence code "to implement the public policy of this state"); Ferguson v. Williams, 566 So.2d 9, 11 (Fla. 3d DCA 1990) (explaining that the statutory presumption of paternity under section 742.12(1), Florida Statutes (1989), is a rebuttable presumption and the legislature specifically provided that it was governed by section 90.304 of the evidence code).
We recognize the legislature's desire to stem the tide of sinkhole-related insurance claims. Unquestionably, certain provisions of the statutes described earlier in this opinion reflect a concern with identifying and advising homeowners and others of potential sinkhole-prone areas. See §§ 627.7065, 627.7072, 627.7073. For example, the reporting and recording provisions of sections 627.7065 and 627.7073 promote public awareness. But we are hesitant to conclude that this concern with enhancing public information, absent clear legislative direction, extends to the micromanagement of trial proceedings between private parties.
[W]hen credible evidence comes into the case contradicting the basic fact or facts giving rise to the presumption, the presumption vanishes and the issue is determined on the evidence just as though no presumption has ever existed. Conversely, if the basic facts are sufficiently proven so as to give rise to the presumption and not thereafter contradicted by credible evidence, the party in whose favor the presumption exists becomes entitled to a directed verdict. Thus, in either event, the presumption is productive of these procedural consequences but is not a matter for the jury to consider.
The jury is not told of this presumption. See Pub. Health Trust of Dade County v. Valcin, 507 So.2d 596, 600 (Fla. 1987); Murray v. Schreiner, 825 So.2d 527, 528 (Fla. 2d DCA 2002) ("`When the defendant produces evidence which fairly and reasonably tends to show that the real fact is not as presumed, the impact of "the presumption is dissipated." Whether the ultimate fact has been established must then be decided by the jury from all of the evidence before it without the aid of the presumption.'" (quoting Guile v. Boggs, 174 So.2d 26, 28-29 (Fla. 1965))); Aetna Cas. Sur. Co. v. Pappagallo Rest., Inc., 547 So.2d 243, 244 (Fla. 3d DCA 1989) (explaining that when adverse party introduces credible evidence to disprove a presumed fact, the presumption vanishes and the jury is never told of it); Nationwide Mut. Ins. Co. v. Griffin, 222 So.2d 754, 756 (Fla. 4th DCA 1969) ("A presumption is a rule of law which attaches to certain evidentiary facts and is productive of certain procedural consequences. The presumption is not itself evidence and has no probative value.").
VILLANTI, J., Dissents with opinion.
I respectfully dissent because I do not agree that the trial court erred in its jury instruction regarding section 627.7073.
The standard of review applicable to a trial court's decision to give or withhold a jury instruction is abuse of discretion. Barbour v. Brinker Fla., Inc., 801 So.2d 953, 959 (Fla. 5th DCA 2001). "Trial courts are generally accorded broad discretion in formulating jury instructions." Id.; see also Barkett v. Gomez, 908 So.2d 1084, 1086 (Fla. 3d DCA 2005) (noting that decisions regarding jury instructions rest within the trial court's discretion and will not be reversed absent a showing of prejudicial error). In this case, the statute stated that the findings, opinions, and recommendations of the experts were presumed correct. See § 627.7073(1)(c). I fail to see how a trial court can abuse its discretion by giving an instruction that merely tracks the governing law. In fact, it would have been an abuse of discretion for the trial court to deny giving the requested instruction, since it was undisputed that Universal met its obligations under the new legislation and that Mr. Warfel's claim both arose and was filed after the statute's effective date. See, e.g., Barkett, 908 So.2d at 1086-87 (holding that failure to give jury instruction which tracked statutory language and which was warranted by the evidence or arguments required a new trial).
Furthermore, the parties do not dispute that social policy concerns drove the legislative changes at play in this case. They only disagree as to whether the presumption that accompanied these changes was one shifting the burden of proof or one that merely vanished once countervailing evidence was adduced. I contend that because the statutory sections at issue in the case were enacted to advance social or public policy, a burden-shifting presumption applies.
Presumption affecting the burden of producing evidence defined. — In a civil action or proceeding, unless otherwise provided by statute, a presumption established primarily to facilitate the determination of the particular action in which the presumption is applied, rather than to implement public policy, is a presumption affecting the burden of producing evidence.
Presumption affecting the burden of proof defined. — In civil actions, all rebuttable presumptions which are not denned in s. 90.303 are presumptions affecting the burden of proof.
(Emphasis added.) Section 90.304 applies to presumptions implementing public policy and, therefore, applies in this case.
Caldwell v. Division of Retirement, Florida Department of Administration, 372 So.2d 438, 439 (Fla. 1979), provides a useful analytic framework. In Caldwell the supreme court analyzed presumptions where the relevant statute did not expressly create a burden-shifting presumption. The case involved section 112.18(1), Florida Statutes (1975), which provided that a fireman's disability or death caused by heart disease was presumed to have been suffered in the line of duty unless the contrary was shown by competent evidence. Id. In Caldwell, there was conflicting expert testimony as to the cause of the fireman's injury. Id. The supreme court concluded that the presumption created by the statute "embodie[d] the social policy of the state" which recognized that firemen are subjected to certain hazards which could cause heart disease. Id. at 440. Therefore, the statutory presumption was intended to shift the burden of proof/persuasion, even though the statute did not expressly so state. The court reasoned that the presumption would be meaningless and would negate the statutory language if it simply vanished following testimony from the employer's expert regarding causation. Id. at 440-41.
Similar public policy considerations are evident in this case. In 2004, in response to the increase in sinkhole claims and policy cancellations, the Florida Legislature commissioned a study by Florida State University on matters related to the affordability and availability of sinkhole insurance. See Fla. S. Banking Ins. Comm., CS for SB 1488 (2005) Staff Analysis 18 (Apr. 7, 2005) (on file with comm.) [hereinafter SB 1488 Staff Analysis]. The study found that sinkhole claims had dramatically increased in a five-year period, from 348 in 1999 to 1108 in 2003, and that payments for sinkhole claims had almost tripled, from $22.4 million in 1999 to $65 million in 2003. Id. As a result of the increase in sinkhole claims and the high costs associated with investigating those claims, many private insurers withdrew from Florida, forcing residents to obtain property insurance through Citizens Property Insurance Company, Florida's insurer of last resort. Cassandra R. Cole, Ph. D., et al., Potential Solutions to the Sinkhole Problem in Florida, CPCU eJOURNAL (CPCU Society, Malvern, PA), Dec. 2005, at 2. This situation resulted in substantial rate increases for Citizens' policy-holders in sinkhole-prone counties. Id. at 2. The 2005 study made several recommendations to address the "sinkhole problem." Id. at 1. These recommendations included creating uniform procedures for adjusting sinkhole claims utilizing experts and establishing a database with sinkhole claims information. Id. The study recognized the high cost of sinkhole testing and the fact that accurate testing requires a certain level of "geotechnical expertise." Id. at 3. One of the problems with sinkhole testing was the lack of standardized methods for identifying sinkholes, which caused a large number of disputed claims. Id. The 2005 report recommended the creation of a uniform approach to identify sinkholes, in an effort to "provide consistency in claims handling" and a reduction in the number of disputed sinkhole claims. Id. at 4. It was obvious, based upon the study, that a collapse of the sinkhole insurance market was imminent without legislative reform. Against this critical economic background, the legislature revised the statutes at issue in this case "in response to a continuing crisis regarding the availability and affordability of sinkhole coverage." Fla. S. Banking Ins. Comm., CS for SB 286 (2006) Staff Analysis 3 (Apr. 11, 2006) (on file with comm.).
In 2005, the cost of testing for sinkhole losses ranged from $4000 to $8000 and higher. Cassandra R. Cole, Ph.D., et. al., supra at 3.
(Emphasis added.) As in Caldwell, it is clear that these statutory sections were enacted with a common social policy: to address the critical sinkhole insurance problem in Florida. Presumptions based on social policy are not "vanishing" presumptions; they do not automatically disappear. See Caldwell, 372 So.2d at 440. Rather, they are presumptions shifting the burden of proof. Id. (holding that presumption could be overcome only by clear and convincing evidence and that, in the absence of such cogent proof, public policy must be given effect). The majority points out that the legislature knows how to expressly create burden-shifting presumptions under section 90.304. While this may be true, as illustrated by Caldwell, the fact that the statute does not expressly state that it contains a burden-shifting presumption is not always dispositive of the issue.
In fact, this case illustrates why section 627.7073's presumption ought to be a burden-shifting presumption. Upon receiving Mr. Warfel's claim, Universal hired experts whose qualifications met the requirements of the relevant statute and had those experts conduct the type of testing required by the statute. The experts then prepared a report as required by section 627.7073. This was all done at Universal's expense. At trial Mr. Warfel offered his own experts, who simply reviewed Universal's report and visited the property; they did not conduct independent testing consistent with the standards set forth in section 627.7072. Mr. Warfel's experts then simply disagreed with the report's conclusions and opined that a sinkhole contributed to the damage to Mr. Warfel's property. To apply a "vanishing" presumption under these facts effectively negates the presumption of correctness conferred upon the report by section 627.7073(1)(c). It is inconceivable that the legislature would enact a statute containing extensive detail regarding sinkhole testing and expert reports and that it would express its intent that the report "be presumed correct," only to have this presumption "vanish" when an expert hired by the insured simply testifies that he disagrees with the conclusions contained in the report. Allowing Mr. Warfel's experts to "vanish" the presumption created by the statute by simply testifying that they disagree with the report negates the statute's efforts to provide consistency in claims handling and reduce the number of disputed sinkhole claims. This type of ipse dixit logic from the insured's experts is not consistent with the history and intent of the statute.


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ARLENE ROTH, Plaintiff, v. NATIONSTAR MORTGAGE, LLC, Defendant.
This matter comes before the Court on Defendant's Motion for Reconsideration (Doc. #68) filed on January 9, 2017. Plaintiff filed a Response in Opposition (Doc. #75) on February 6, 2017. For the reasons stated below, the Motion is denied.
Defendant Nationstar asks this Court to reconsider its December 29, 2016 Order (Doc. #65) denying Nationstar's opposed Motion to Strike Plaintiff's Jury Demand (Docs. # 48; 56). Nationstar sought to strike the jury demand because of jury waiver provisions contained in Plaintiff's mortgage agreement and a prior settlement agreement between Plaintiff and Nationstar. In denying Nationstar's Motion to Strike, the Court concluded, sua sponte, that Nationstar had waived the right to invoke the jury waiver provisions by selecting the jury trial option in the parties' signed joint Case Management Report (CMR) (Doc. #26), and further, by failing to expeditiously object to the Court's Case Management and Scheduling Order (Doc. #31) scheduling the case for a jury trial for the April 2017 term. (Doc. #65, p. 3.) Having so concluded, the Court did not address whether the waiver provisions were enforceable and encompassed Plaintiff's claims.
A non-final order may be revised at any time before the entry of a final judgment. Fed. R. Civ. P. 54(b). The decision to grant a motion for reconsideration is within the sound discretion of the trial court and may be granted to correct an abuse of discretion. Region 8 Forest Serv. Timber Purchasers Council v. Alcock, 993 F.2d 800, 806 (11th Cir. 1993). "The courts have delineated three major grounds justifying reconsideration of such a decision: (1) an intervening change in controlling law; (2) the availability of new evidence; (3) the need to correct clear error or prevent manifest injustice." Sussman v. Salem, Saxon & Nielsen, P.A., 153 F.R.D. 689, 694 (M.D. Fla. 1994). According to Nationstar, reconsideration is warranted to correct the Court's clear error in denying the Motion to Strike on waiver grounds.
Even if Nationstar's Answers had "explicitly denied" Plaintiff's right to a jury trial (which they did not), the Court would still find reconsideration unwarranted. Though true - as Nationstar points out - that "Rule 39(a)(2) contains no time limit for the filing of an objection to the demand for a jury trial" and thus a jury demand may be stricken even days before trial (Doc. #68, p. 6 (quoting FN Herstal SA v. Clyde Armory Inc., 838 F.3d 1071, 1090 (11th Cir. 2016))), whether to strike a jury demand still rests within the Court's sound discretion. Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 226 (3d Cir. 2007); Brown Jordan Int'l Inc. v. Carmicle, No. 0:14-CV-60629, 2015 WL 11197774, at *1 (S.D. Fla. Aug. 27, 2015); see also Fed. R. Civ. P 39(a).
Unlike in the Action Nissan, Inc. v. Hyundai Motor America Middle District of Florida case (No. 6:06-cv-01747) that Nationstar argues is "directly on point," Nationstar's Answers (Docs. #21, 37) contain no "objection to jury trial demand" section moving to strike Plaintiff's jury trial demand. Rather, Nationstar simply "denies the allegations of Paragraph 59" of the Complaint (Doc. #1) and Amended Complaint (Doc. #33), alleging that "Plaintiff is entitled to and hereby respectfully demands a trial by jury on all issues so triable." The majority of the responses in Nationstar's Answers are largely identical to this general denial.
The undersigned previously exercised his discretion in favor of denying Nationstar's Motion to Strike and finds no clear error in that decision. Unlike the defendant in the FN Herstal case, here, Nationstar has not asserted that Plaintiff lacks a Seventh Amendment right to proceed before a jury; rather Nationstar argues only that Plaintiff contractually waived the right to a jury trial. The distinction is important. The former scenario typically manifests later in the litigation process, when claims and remedies are narrowed, as was the case in FN Herstal. Id. at 1088-89. In contrast, the waiver argument has been available to Nationstar since the day the Complaint was filed. Nothing prevented Nationstar from moving to strike Plaintiff's jury demand sooner, and there certainly was no reason for Nationstar to agree to a jury trial in the CMR if Nationstar believed Plaintiff had waived that right.
Nationstar cites Matter of Garfinkle, 672 F.2d 1340, 1347 (11th Cir. 1982) for the proposition that "waiver does not arise from forbearance for a reasonable time." In that case, the Eleventh Circuit actually went on to hold that, while "[a]t an earlier point in time, appellants may have had the right to object to purchasing property based on a sale order that was being appealed and the right to refuse to accept court ordered cancellation of the leases," their failure to act sooner "warrant[ed] an inference of relinquishment of a known right." Id. at 1348. So too, here.
Nor has the Court relied on "inapposite law [that is] contrary to persuasive authority on the subject" in denying the Motion to Strike, as Nationstar contends. The law on which the Court principally relied was the undersigned's own recent Opinion and Order denying, in (pertinent) part, a defendant's motion to strike the plaintiff's jury demand: Gulf Bay Capital, Inc. v. Textron Fin. Corp., No. 2:14-CV-209-FTM-29CM, 2016 WL 4009942 (M.D. Fla. July 27, 2016). As relevant here, the Court concluded that even though neither party had demanded a jury trial, the parties' subsequent agreement to proceed before a jury - as indicated by the "jury trial" option selected in the signed joint case management report - was sufficient to establish mutual consent to a jury trial. Id. at *2. Before reaching that conclusion, the Court reviewed apposite decisions from other district court judges (having uncovered no Eleventh Circuit decision on the subject), some of which found that waiver had occurred, and others holding against waiver. Ultimately, the Court viewed better-reasoned those cases finding waiver. Nationstar has presented the Court with no binding authority compelling a different result under the facts presented here.
The undersigned also held that, despite having consented to a jury trial, defendant Textron could unilaterally withdraw that consent for purely equitable claims, for which there existed no Seventh Amendment right to a jury trial. Gulf Bay, 2016 WL 4009942, at *3 (citing Kramer v. Banc of Am. Sec., LLC, 355 F.3d 961, 968 (7th Cir. 2004)). Shortly thereafter, the Eleventh Circuit - in FN Herstal - "addressed the propriety of withdrawing consent to a jury trial when the matters to be tried are purely equitable" for the first time and ultimately "agree[d] with Kramer's reasoning." 838 F.3d at 1089.
Nationstar's Motion for Reconsideration of Court's Order Denying Motion to Strike Jury Trial (Doc. #68) is DENIED.
DONE and ORDERED at Fort Myers, Florida, this 26th day of March, 2017.

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JOHN M. CALLAN, executor & trustee, vs. JAMES G. WINTERS & others [Note 1].
CIVIL ACTION commenced in the Middlesex Division of the Probate and Family Court Department on July 23, 1986.
The case was heard by Arthur G. Coffey, J.
Edward F. Finnegan (Paul G. Sargent with him) for Diane Matte.
Dennis E. McHugh for William J. Mahoney & others.
petitions for instructions). A judge of probate held that the adopted children are so entitled. The natural child appealed. [Note 3] We transferred the case to this court on our own motion. We reverse.
We summarize the relevant facts. On February 24, 1958, Hattie L. Wilby (testatrix) executed a will in which she left certain property to her niece, Grace L. Stachowiak. The will also established a trust for the remainder of the estate, naming Stachowiak as the sole beneficiary for life. On Stachowiak's death, the will provided that the trust estate be divided in two shares and distributed equally to Charles A. Winters and James G. Winters, the grandnephews of the testatrix, should they survive the life beneficiary, free and clear of all trusts. In the event that one, or both, of her grandnephews predeceased the life beneficiary, the testatrix provided that his share "shall be apportioned for the benefit of the issue then and from time to time living."
Our task is to determine whether the four adopted children are to be considered "issue" under the will. We note, at the outset, that, since the four children were not adopted until November 12, 1976, they could have no interests which "vested" prior to that date. See Davis v. Hannam, 369 Mass. 26 , 31 (1975); Billings v. Fowler, supra at 239-242.
The statutory change was to apply only to instruments executed after August 26, 1958, the effective date of the act. Thus, on its face, this statute did not apply to the will of the testatrix, executed in February, 1958.
In 1969, the Legislature further amended the statute, adding more terms which were to be interpreted as including adopted children. St. 1969, c. 27. [Note 8] The 1969 statute made the adoption provision retroactive, regardless of the date of execution of the instrument, except that it excluded from its application any instrument "which was executed or effective prior to August [26, 1958,] with respect to any interests or right therein which had vested prior to the effective date of this act." St. 1969, c. 27, Section 2. The effective date of the act was September 1, 1969. St. 1969, c. 27, Section 3.
In 1975, the Legislature amended St. 1969, c. 27, Section 2, repealing its retroactive application and providing that the repeal "shall take effect as of September first, nineteen hundred and sixty-nine." St. 1975, c. 769, Sections 3 and 4. [Note 9] Additionally, the statute's provision that the word "issue" ordinarily shall include adopted children was limited in its application "to grants, trust settlements, entails, devises or bequests, executed after [September 1, 1969]." Thus, again, the will of the testatrix was excluded.
Ordinarily, in determining what was the law at the time of the testatrix's death, it would not be necessary to look to any legislative enactments which transpired after the testatrix's death. We generally apply the law at the time of death, with the understanding that testators have kept abreast of the changes in the law and would make appropriate revisions in their instruments if these changes contravened their original expectations. Here, it may be said, fairly, that the 1975 amendment restored the state of the law, as to the will in issue, in a manner consistent with the law at the time the will was executed. The Legislature, by repealing the retroactive provisions to the 1969 act, and by making this repeal effective as of September 1, 1969, essentially redefined what was the law in effect at the time of the testatrix's death in 1971.
challenges to the 1975 amendment, [Note 10] we hold that the 1975 amendment barred the retroactive application of G. L. c. 210, Section 8, to an instrument executed before August 26, 1958, and that, accordingly, the four adopted children are not entitled to share in the distribution of the trust.
[Note 1] Diane Matte, William J. Mahoney, Richard L. Mahoney, John P. Winters, and Mary L. Streeter, formerly known as Mary L. Winters.
[Note 2] William J. Mahoney, Richard L. Mahoney, John P. Winters, and Mary L. Streeter, adopted children of the late Charles Albert Winters.
[Note 3] Diane Matte, natural child of Charles Albert Winters.
[Note 4] James G. Winters, the testatrix's second natural grandnephew, survived the life beneficiary and received one-half of the trust distribution. The parties do not dispute the validity of this result.
[Note 5] A more extensive statement of the history of the statutes pertaining to the rights of adopted children under wills and trusts is found in Boston Safe Deposit & Trust Co. v. Fleming, supra at 175-178. Billings v. Fowler, supra at 234-237.
[Note 6] Statute 1876, c. 213, Section 9, provided: "The term `child,' or its equivalent, in any grant, trust-settlement, entail, devise or bequest, shall be held to include any child adopted by the settler, grantor, or testator, unless the contrary plainly appears by the terms thereof; but in no other case shall a child by adoption have, under such an instrument, the rights of a child born in lawful wedlock to the adopting parent, unless it plainly appears to have been the intention of the settler, grantor or testator to include an adopted child: provided, however, that nothing in this act shall be construed to restrict any right to the succession to property which may have vested in any person already adopted in accordance with the laws of this Commonwealth." Later modifications essentially continued this provision. See Pub. Sts. c. 148, Section 8 (1882), and R.L. c. 154, Section 8 (1902). Statute 1876, c. 213, Section 9, together with its modifications, became G. L. c. 210, Section 8.
[Note 7] Statute 1958, c. 121, Sections 1-3, provided: "SECTION 1. Chapter 210 of the General Laws is hereby amended by striking out section 8, as appearing in the Tercentenary Edition, and inserting in place thereof the following section: -- Section 8. The word `child', or its equivalent, in a grant, trust settlement, entail, devise or bequest shall include an adopted child to the same extent as if born to the adopting parent or parents in lawful wedlock unless the contrary plainly appears by the terms of the instrument.
"SECTION 2. The provisions of section eight of chapter two hundred and ten of the General Laws, as amended by section one of this act, shall be applicable only to grants, trust settlements, entails, devises or bequests executed after the effective date of this act.
"SECTION 3. This act shall take effect six months after its passage".
"Section 8. The words `child', `grandchild', `issue', `heir' or `heir-at-law', or their respective equivalents, in a grant, trust settlement, entail, devise or bequest, shall include one who is adopted to the same extent as if born to the adopting parent or parents in lawful wedlock, whether the adoption was decreed before or after the date of execution or the effective date of any such grant, trust settlement, entail, devise or bequest, unless the contrary plainly appears by the terms of the instrument.
"SECTION 2. The provisions of section eight of chapter two hundred and ten of the General Laws, as amended by section one of this act, shall be applicable to all grants, trust settlements, entails, devises or bequests whether the same were executed or effective before or after the effective date of this act provided that said provisions shall not apply to any such grant, trust settlement, entail, devise or bequest which was executed or effective prior to August twenty-six, nineteen hundred and fifty-eight with respect to any interests or right therein which had vested prior to the effective date of this act.
"SECTION 3. This act shall take effect on September one, nineteen hundred and sixty-nine."
"SECTION 4. Section three of this act shall take effect as of September first, nineteen hundred and sixty-nine. Approved December 16, 1975."
[Note 10] We note that, if vested interests were involved, the 1975 amendment might be subject to constitutional attack. See State St. Bank & Trust Co. v. D'Amario, 368 Mass. 542 , 552-553 (1975) (expressing doubts as to the validity of a statute which takes away vested interests); Billings v. Fowler, 361 Mass. 230 , 241 (1972). See also Nantucket Conservation Found. v. Russell Management, Inc., supra at 215-219. The adopted children have raised no such argument. We note, without deciding the issue, that, because the adoptees in this case were not adopted until 1976, they would not likely succeed in a claim that the 1975 amendment deprived them of a vested right.

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The results of experimental investigations of ways of passive sound insulation of a gyroscopic integrator are presented. A comparative analysis of the efficiency of screens under conditions of acoustic fields of a high level is carried out.
1. Mel'nick V. N., Mahmut D., Karachun V. V., Kunderevich E. K. Errors of measurements of longitudinal speeds of rocket carriers by gyroscopic integrator. Kosm. nauka tehnol., 8 (1) 81—88 (2002) [in Russian].
2. Karachun V. V., Lozovik V. G., Potapova E. R., Mel'nick V. N. Multidimensional problems of unsteady elastic suspension of a floating gyroscope, ed. by V. V. Karachun, 128 p. (Kornejchuk, Kiev, 2000) [in Russian].
3. Karachun V. V., Tryvailo M. S., Mel’nick V. M. Noise-protection screen. Pat. 39600 A Ukraine, MKI4 G 10 K 11/00; No. 2000116168; Zajavl. 01.11.2000; published 15.06.2001, Bull. No. 5 [in Ukrainian].

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G.R. No. 158941 - TIMESHARE REALTY CORP. v. CESAR LAO, ET AL.
TIMESHARE REALTY CORPORATION, Petitioner, v. CESAR LAO and CYNTHIA V. CORTEZ, Respondents.
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the October 30, 2002 Resolution1 of the Court of Appeals (CA), which denied due course to the appeal of Timeshare Realty Corporation (petitioner) from the March 25, 2002 Decision2 of the Securities and Exchange Commission (SEC) in SEC Case No. 01-99-6199; and the July 4, 2003 CA Resolution,3 which denied petitioner's Motion for Reconsideration.
On October 6, 1996, herein petitioner sold to Ceasar M. Lao and Cynthia V. Cortez (respondents), one timeshare of Laguna de Boracay for US$7,500.00 under Contract No. 135000998 payable in eight months and fully paid by the respondents.
Sometime in February 1998, the SEC issued a resolution to the effect that petitioner was without authority to sell securities, like timeshares, prior to February 11, 1998. It further stated in the resolution/order that the Registration Statement of petitioner became effective only on February 11, 1998. It also held that the 30 days within which a purchaser may exercise the option to unilaterally rescind the purchase agreement and receive the refund of money paid applies to all purchase agreements entered into by petitioner prior to the effectivity of the Registration Statement.
Petitioner sought a reconsideration of the aforesaid order but the SEC denied the same in a letter dated March 9, 1998.
Respondents directly filed with SEC En Banc6 a Complaint7 against petitioner and the Members of its Board of Directors - Julius S. Strachan, Angel G. Vivar, Jr. and Cecilia R. Palma - for violation of Section 4 of Batas Pambansa Bilang (B.P. Blg.) 178.8 Petitioner filed an Answer9 to the Complaint but the SEC En Banc, in an Order10 dated April 25, 2000, expunged the Answer from the records due to tardiness.
Petitioner filed a Motion for Reconsideration12 which the SEC En Banc denied in an Order13 dated June 24, 2002.
Under Section 4, Rule 43 of the 1997 Revised Rules of Civil Procedure, petitioners shall not be given an extension longer than fifteen (15) days from the expiration of the reglementary period, except for the most compelling reason.
Thus, on 24 July 2002, in the absence of a compelling reason that justifies the granting of a longer period of extension, this Court issued a resolution wherein petitioners were given an extension of ONLY fifteen days from 10 July 2002 or until 25 July 2002 within which to file the Petition for Review, otherwise, the above entitled case will be dismissed.
However, records show that petitioners filed their Petition for Review only on 19 August 2002, which is twenty-five (25) days beyond the allowed 15-day extended period granted by this Court.
WHEREFORE, the appeal from the decision of the Securities and Exchange Commission (SEC) Case No. 01-99-6199 is hereby DISMISSED for failure of the petitioners to file their Petition for Review under the 15-day period granted by this Court as provided by Rule 43, Section 4 of the 1997 Revised Rules of Civil Procedure.
Its motion for extension being inherently flawed, petitioner should not have presumed that the CA would fully grant the same.28 Instead, it should have exercised due diligence by filing the proper petition within the allowable period,29 or at the very least, ascertaining from the CA whether its motion for extension had been acted upon.30 As it were, petitioner's counsel left the country, unmindful of the possibility that his client's period to appeal was about to lapse - as it indeed lapsed on July 25, 1999, after the CA allowed them a 15-day extension only, in view of the restriction under Section 4, Rule 43. Thus, petitioner has only itself to blame that the Petition for Review it filed on August 19, 1999 was late by 25 days. The CA cannot be faulted for dismissing it.
The Court notes that the CA reckoned the 15-day extension it granted to petitioner from July 10, 1999, the date petitioner filed its Motion for Extension, rather than from July 19, 1999, the date of expiration of petitioner's original period to appeal. While such computation of the CA appears to be erroneous, petitioner did not question it in the present petition. But even if we do reckon the 15-day extension period from July 19, 1999, the same would have ended on August 3, 1999, making petitioner's appeal still inexcusably tardy by 16 days. Either way we reckon it, therefore, petitioner's appeal was not perfected within the period prescribed under Rule 43.
Nevertheless, the Court opts to resolve the substantive issues raised by petitioner in its appeal so as to determine the lawful rights of the parties and put an end to the litigation.
Petitioner claims that at the time it entered into a timeshare purchase agreement with respondents on October 6, 1996, it already possessed the requisite license and marketing agreement to engage in such transactions,31 as evidenced by its registration with the SEC as a corporation.32 Petitioner argues that when it was registered and authorized by the SEC as broker of securities33 - such as the Laguna de Boracay timeshares - this had the effect of ratifying its October 6, 1996 purchase agreement with respondents, and removing any cause for the latter to rescind it.
(a) A copy of its articles of incorporation with all amendments thereof and its existing by-laws or instruments corresponding thereto, whatever the name, if the issuer be a corporation.
1 Penned by Associate Justice Regalado E. Maambong and concurred in by Associate Justices Delilah Vidallon-Magtolis and Andres E. Reyes, Jr.; rollo, p. 17.
4 SEC Decision, rollo, pp. 42-43.
6 It is noted that the propriety of the filing of the complaint directly with the SEC En Banc was never raised as an issue.
8 The Revised Securities Act, approved February 23, 1982.
10 SEC Decision, supra note 4, at 42.
14 CA rollo, p. 2.
16 CA rollo, p. 6.
21 Petition, rollo, p. 11.
22 Far East Bank and Trust Company v. Commissioner of Internal Revenue, G.R. No. 149589, September 15, 2006, 502 SCRA 87, 91.
23 Ang v. Grageda, G.R. No. 166239, June 8, 2006, 490 SCRA 424, 438; Neypes v. Court of Appeals, G.R. No. 141524, September 14, 2005, 469 SCRA 633, 646; Petilla v. Court of Appeals, G.R. No. 150792, March 3, 2004, 424 SCRA 254, 262.
24 The Securities Regulation Code, approved July 19, 2000.
25 Hongkong and Shanghai Banking Corporation, Ltd. v. G.G. Sportswear Manufacturing Corporation, G.R. No. 146526, May 5, 2006, 489 SCRA 578, 585.
26 MuÃ±ez v. Jomo, G.R. No. 173253, October 30, 2006, 506 SCRA 300, 307.
27 Bernardo v. People of the Philippines G.R. No. 166980, April 4, 2007, 520 SCRA 332, 341-342. See also Philippine Amusement and Gaming Corporation v. Angara, G.R. No. 142937, November 15, 2005, 475 SCRA 41, 51; Marcial v. Hi-Cement Corporation/Union Cement Corporation, G.R. No. 144900, November 18, 2005, 475 SCRA 388, 396.
28 Bernardo v. People of the Philippines, supra note 27, at 341.
29 Gochan v. Gochan, 446 Phil. 433, 456 (2003); Sps. Galen v. Atty. Paguirigan, 428 Phil. 590, 596 (2002).
30 Ang v. Grageda, supra note 23, at 444.
31 Petition, rollo, p. 11.
36 Hongkong and Shanghai Banking Corporation, Ltd. v. G.G. Sportswear Manufacturing Corporation, supra note 25, at 585-586.

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