BARRON CHIROPRACTIC & REHABILITATION, P.C. vs. ENTERPRISE RENT-A-CAR COMPANY OF BOSTON, INC.
Present: Driscoll, P.J., Miller, & Poole, JJ.
Insurance, "Personal injury protection" benefits; G.L. c. 90, §34M. Consumer Protection, G.L. c. 93A. Practice, Civil, Summary judgment.
Opinion vacating summary judgment for defendant, affirming denial of summary judgment for plaintiff and ordering remand for further action. Summary judgment motions heard by Baylor, J.
DRISCOLL, P.J. Plaintiff, Barron Chiropractic & Rehabilitation, P.C. ("Barron") , appealed the trial judge's allowance of a motion for summary judgment pursuant to Mass.R.Civ.P., Rule 56 filed by Enterprise Rent A Car Company of Boston, Inc. ("Enterprise") , Defendant. Barton also appeals the trial judge's denial of Plaintiffs cross-motion for summary judgment pursuant to Mass.R.Civ.P., Rule 56. The primary issue on appeal is whether the trial judge erred in granting Enterprise's motion for summary judgment and denying Barron's motion for the assessment of attorney fees. For the reasons stated below, we reverse the trial judge's allowance of Enterprise's motion for summary judgment and affirm his denial of Barron's cross- motion for summary judgment.
Barron filed suit against Enterprise to collect outstanding Personal Injury Protection ("PIP") benefits pursuant to M.G.L. c. 90, §34M. It also alleged that the denial of such benefits was a violation of M.G.L.c. 93A, §11. The action stemmed from chiropractic treatment rendered to one Clairemont Lockhart ("Lockhart"). Lockhart was injured in an automobile accident while a passenger in a rental car owned by Enterprise. The accident occurred on December 3, 2005 in Brooklyn, New York.
having placed the case in suit.
After tendering payment, Enterprise moved for summary judgment on all counts of Barron's complaint. Barron opposed Enterprise's motion for summary judgment and filed a cross-motion for summary judgment. Enterprise opposed Barron's cross-motion. The trial judge allowed Enterprise's motion for summary judgment and denied Barron's cross-motion for summary judgment. Barron filed a timely notice of appeal.
We find that the court erred in allowing defendant's motion for summary judgment on plaintiff's M.G.L. c. 90, §34M and c. 93A, §11 claim. Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, and responses to requests for admission, together with affidavits, show that there are no genuine issues as to any material fact and that, as a consequence, the moving party is entitled to judgment as a matter of law. Mass. R. Civ. P., Rule 56(c) .
When the court evaluates the materials accompanying a motion for summary judgment, all inferences to be drawn from the underlying facts must be must be viewed in the light most favorable to the party opposing the motion. Hub Associates v. Goode, 357 Mass. 449 , 451 (1970). When ruling on a summary judgment the court should only "determine whether a genuine issue of material fact exist[s]." Attorney General v. Bailey; 386 Mass. 367 , 370-71 (1982) , quoting H & M Cake Box, Inc. v. Bakery & Confectionery Workers Int'l Union, Local 45, 454 F.2d 716, 719 (lst Cir. 1972).
It is well established that in Massachusetts, automobile rental companies are required by statute to provide personal injury protection (PIP) benefits to guest occupants of its motor vehicles. M.G.L. c. 90, §32E; Enterprise Rent A Car v. Ararella Mut., 451 Mass. 264 ,267 (2008).
M.G.L.c. 93A, §11 prohibits "unfair method[s] of competition or ...unfair or deceptive act[s] or practice[s]." Whether conduct by an insurer constitutes what is unreasonable, or what is unfair or deceptive in the circumstances of a particular case, is a question of fact for a trial court. Spence v. Boston Edison Co., 390 Mass. 604 , 616 (1983); Provenzano v. Plymouth Rock Assurance Corp., 2008 Mass. App. Div. 68 , 70 (2008). It is not a defense to a c. 93A, §11 claim that the Defendant's conduct was negligent (essentially due to inexperienced and unsupervised employees) rather than intentional. Linthicum v. Archambault, 379 Mass. 381 , 388 (1979).
It is not unreasonable when an insurer seeks and relies upon an opinion from outside counsel regarding its liability under the policy. Boston Symphony Orchestra, Inc. v. Commercial Union Ins Co., 406 Mass. 7 , 14 (1989). M.G.L.c. 93A, §11 has been interpreted to provide a remedy of multiple damages where an insurer forces plaintiff to litigate clearly valid claims. R. W. Granger & Sons, Inc. v. J & S Insulation, Inc, 435 Mass. 66 , 78 (2001).
Barron does not dispute that Enterprise tendered payment before trial began, but it claims that Enterprise, by unfairly and/or deceptively withholding payments, forced it into litigation to collect their PIP payments. Enterprise's position for withholding the PIP benefits was that, at the time of the accident, Lockhart was not a resident of Massachusetts. Enterprise, without consulting with legal counsel, concluded that only Massachusetts residents were entitled to PIP benefits.
benefits, it is uncontroverted that Lockhart was a resident of Dorchester, MA. His residency was established by documents submitted to Enterprise giving an address in Dorchester for Lockhart. Enterprise believed that Lockhart's medical records created a discrepancy in his residence at the time of the accident. These records refer to Lockhart as a "St. Vincent male." [Note 1] No other address except the one in Dorchester, MA is provided. As such, for the purposes of a motion for summary judgment, it is not now in dispute that Lockhart was a Massachusetts resident.
Enterprise claims that its position regarding their interpretation of the statute is analogous to that of the defendant in Boston Symphony Orchestra, supra. We find Enterprise's position distinguishable. In Boston Symphony, the insurer sought and relied upon the legal opinion of outside counsel. The court ruled that its counsel's interpretation of the law was not unreasonable. In the present case, Enterprise did not seek the opinion of outside counsel until after Barron filed its suit. Furthermore Enterprise's misinterpretation was not that of a particularly complex area of law, but rather one very pertinent in the business in which Enterprise engages in on a day- to-day basis.
Enterprise also claims that the court should adopt the same rationale as the recent decision in Provenzano, supra, where the court found the tendering of payment to avoid litigation constituted a business decision and therefore could not be construed as a violation of M.G.L.c. 93A, §11. We find the decision in Provenzano to be distinguishable from the case at hand. In Provenzano, the insurer withheld payment in order to conduct an independent medical examination (IME) and review the medical history records of the patient. Enterprise's only reason for withholding payment in this case was its own unreasonable belief that Lockhart was not a resident of Massachusetts. That misunderstanding arguably forced Barron into litigation in order to recover the PIP payments to which they believed they were entitled.
We are hindered on this appeal because the trial judge did not make written findings in support of his allowance of Enterprise's motion for summary judgment. Nevertheless, after considering the briefs for both parties and the appendix from the trial court, we find that Barron's appeal merits a remand to the trial court for further proceedings. Accordingly, we vacate the order allowing the defendant's motion for summary judgment, but we affirm the order denying the plaintiff's cross-motion for summary judgment and remand this matter for further action consistent with this decision.
[Note 1] Lockhart is apparently a native of St. Vincent in the Virgin Islands.


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The global integration processes affect all human activity, including higher education. A single global educational space is currently in the formation and entails an increase in student mobility and cooperation between universities in different countries. Cross-border education developed in the decade past as a direct consequence of increase in the number of people participating in higher education in many countries, expansion in the use of new information and communication technologies, the emergence and acceptance of the idea of an economy based on knowledge, increased internationalization in the labour market and the need for highly qualified labour, and the growing number of private companies that started to provide educational services.
Higher education is developing fairly rapidly in the Ukraine, but mainly on an extensive basis. One of the economic factors that hinder development in innovation in higher education is the shortage of investment. This is due to several factors: the general economic crisis, demographic trends, insufficient competitive educational products, weak mechanisms of interaction between educational institutions and employers, foreign partners and international organizations etc. In the Ukraine higher education has suffered a substantial devaluation of scientific, technological and innovative potential in the majority of higher educational institutions, manifest in particular in the low efficiency of their research and innovation activities. Higher education institutions are also expected to implement and use modern educational technologies in order to be able to provide highquality educational services.
The actual problem is the selection and justification of advanced financial and economic models of investment into the higher educational system, with a view to the appropriate challenges posed by the particular social and economic situation and long-term predictions on technological development.
The purpose of the article is to present the results of research on financial support to investment institutions of higher education, to make evidence-based suggestions regarding the improvement of financing higher education, and the way to meet the challenges of our days.
In recent years, there have been adverse trends in investment in Ukrainian higher education, due to problems in financial and intellectual support.
The process of investment in higher education is regulated by statutes and regulations, including the Ukraine’s “Act on Investment Activity”, “Act on Innovation Activity”, “Act on Education”, “Act on Foreign Investments”, “Act on the Main Directions in Innovation”, “Act on the Main Directions in Science and Technology in the Ukraine” and others.
Investment in higher education has several features associated with specific educational activities and the functioning of higher education institutions.
First, its aim is not merely to accumulate capital and to achieve business results in the future, but also to increase human and intellectual resources, which requires the use of different technologies in analysis and prediction.
Second, a large number of investment projects in the field of higher education have non-commercial purposes. Education is the basis of the personality, the nation and the state, it is a determining factor in the political, social, economic, cultural and scientific life of society. Education plays and builds the intellectual, spiritual, and economic potential in society.
Thirdly, investment in higher education should take global trends into account. Education is a strategic resource for improving human welfare, national interests, strengthening the credibility and competitiveness on the international scene. The policy of investment in higher education improvement should be developed with a view to the above.
Fourthly, investment in higher education also affects other areas in education (especially primarily school and vocational) as well as related fields.
Fifthly, in the structure of investment sources allocated to higher education, traditionally a significant part comes from the state budget (mainly in public higher education institutions maintained by the Ministry of Education and Science of the Ukraine) and from various departmental programs (mainly in public higher educational institutions that manage other departments).
Table 1 characterizes the current state of investment support to higher education development.
The data listed in the table shows that investment in higher education is unstable (in 2006, 2009 and 2010 decline, and in 2007 and 2008 increase is recorded).
The rapid decline in investment in 2009 is due, above all, to the overall investment crisis (a decrease was recorded in all sectors of economic activity in 2009). The share of investment used in higher education relative to the total investment is stable (0.3%).
Investment into higher education at the expense of the state budget is presented in Table 2.
The data shows that between 2006– 2009 a significant part of investment made in fixed assets (between 21.6 and 31.3%) in higher education was financed by the state budget (the average rate being 5.0%).
The analyzed statistical data suggest that there is inconsistency in the conduct of public investment policy in higher education, as it depends on the rapid changes in the macroeconomic situation and on the state budget revenues.
Under these conditions the public policy of investment in higher education must be optimised on the basis of a common conceptual approach to the priorities and projects; and new mechanisms must be applied in public–private partnerships to attract non-traditional sources of investment financing.
However, in a realistic assessment of the current situation it should be noted that it is rather unfeasible to develop a common policy for investment in higher education, because higher education institutions, the key elements in this system, fundamentally differ in terms of ownership and the legal forms of governance.
State universities must set up and implement their own investment policy in compliance with the relevant government regulations in the context of the overall state investment model. Public investment resources are limited (according to estimates, between 2009–2011 approximately 95% of the budget expenditures were allocated to finance the salaries of public sector employees, social benefits and purchasing energy), and thus the implementation of massive public investment projects was actually impossible.
State and local governments finance budget institutions (educational, cultural and research institutions, governments, courts and other judicial authorities etc.). Financing by budgetary institutions, companies and organizations is performed, as a rule, on the basis of the estimation and planning methodology.
In practice, the problem of determining the optimum number of budgetary institutions also arises (as it affects the maintenance costs of such institutions).
The efficiency of investment in higher education can be improved on the basis of a prudential reform, including, in particular, the optimization of universities. Today in the Ukraine more than 850 higher education institutions train specialists of all accreditation levels. They report to 26 ministries and departments, and 10 of them are subordinated to only one institution. Educational institutions are often hindered in development by their subordinate status, and the introduction of the idea of integration in educational activities, which requires a new paradigm of educational institutions in interaction with both ministries and employers, and the higher education system as a whole. A study of foreign examples shows that the countries with similar demographic indices have the following average student numbers at universities: Spain – 22,000; Italy – 23,000; Greece – 14,000; while there are only 3,000 students in the Ukraine.
The approaches and criteria used in making investment decisions relating to higher education development at the expense of the budget should be revised. The government must change the external criteria of assessing the quality of higher education. While the principle of “more students – more money” works, the quality of education suffers. It is reasonable to develop comprehensive quality assessment criteria of the educational process, including the evaluation of the learning content and the technologies used in training; the assessment of the knowledge gained by a student; the requirements of organizing and monitoring the learning process; modern requirements for the competence of teachers and students; a clear and transparent procedure of self-analysis by each higher education institution as the basis of the quality assurance system.
In consideration of the above, the objective of the public investment policy in higher education must include the encouragement of investment and improvement in the structure of investments in the context of creating the conditions for personal development and creative fulfilment for every Ukrainian citizen, educating generations of people able to work effectively and learn throughout life, preserve and increase the value of national culture and civil society to develop and strengthen a sovereign, independent, democratic, social and legal state as an integral part of the European and world community.
Organizing the economic activity of educational institutions on the basis of non-profit.
Upgrading the network of educational institutions.
However, in a realistic assessment of the current situation, it should be noted that the elaboration of a common investment policy for higher education is almost impossible because higher education institutions, as a key element of this system, are fundamentally different according to their ownership and legal status.
In view of the above recommendations, a clear state strategy should be developed regarding investment in higher education. Its application should be aligned with the strategic documents that set the direction of social and economic development. In our view, it is advisable to adopt a legal act, and everything must be done to ensure genuine implementation.
We believe that increasing integration will pave the way to investment in higher education, as it means the establishment of mutually beneficial business relations between the participants of higher education and those of the national economy. The most promising way is to intensify the integration of higher education and business. Under the new economic conditions educational institutions and companies need to find possible “connection points” to set up efficient cooperation, including investment in education projects. It should also be considered that in post-industrial economies a new phenomenon will be widespread – a powerful system of corporate education. Since large companies usually act as agents of global investment and innovation, they must respond to the challenges posed by the competitive environment in terms of human resources and human capital. Consequently, market-leading companies face the problem of the need to accumulate investment resources and investment projects for the development of human capital.
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In his much anticipated opinion rendered today, Advocate General (“AG”) Bot considers that this mechanism for the settlement of investor-State disputes is compatible with the EU Treaties and the EU Charter of Fundamental Rights.
Although the CJEU usually follows the opinion of its AGs, the divergence of views between the Court and AG Wathelet in Achmea was a striking example that this pattern admits exceptions. In a dictum of Achmea, the CJEU held that the EU has competence to conclude agreements establishing an international court “provided that the autonomy of the EU and its legal order is respected”.
Since 2009, by virtue of the Lisbon Treaty, the external trade policy (including direct investment) has become an exclusive competence of the EU. As a result, Member States have been precluded from entering into new free trade agreements (“FTAs”), which have been concluded by the EU since then.
As it is well known, the use of Investor-State Dispute Settlement (“ISDS”) mechanisms has been seen by certain sections of the civil society, and by the EU itself (see its December 2017 submission to the Working Group III of UNCITRAL on the ISDS Reform), as inappropriate for disputes involving States because of their alleged lack of transparency, legitimacy, consistency as well as the absence of sufficient review of the arbitral tribunals’ decisions.
In order to address these criticisms, the EU’s approach has been to attempt to institutionalise the resolution of investment disputes in the FTAs it concludes, through the inclusion of an Investment Court System (“ICS”). Such a mechanism is now provided for by most of the EU FTAs, including with Canada (CETA), Singapore (the EUSFTA) and Vietnam (the EUVFTA).
In a nutshell, the ICS provides for a break from the ad hoc arbitration system to a permanent and institutionalised court, whose members (subject to strict independence and impartiality requirements) are appointed in advance by the States parties to the treaty instead of being appointed on a case-by-case basis by the investor and the responding State. The EU FTAs also contain appellate bodies, as opposed to traditional investment arbitration mechanisms which only provide for one instance on the merits. Subject to the mandatory provisions of the FTAs, investors’ claims may still be submitted according to the ICSID or UNICTRAL Arbitration Rules (or any other rules on agreement of the parties) whilst the ICSID Secretary General and Secretariat remain entrusted with administrative tasks.
This new approach has not overcome the general public’s mistrust for investment arbitration. The ICS provided for by CETA, in particular, gave rise to heated debates in the framework of the conclusion of the treaty. This point was one of the core reasons put forward by some of Belgium’s federated entities, led by the Walloon Region, for refusing to agree to the signature of the treaty by the Belgian federal Government. If the Walloon Region finally surrendered, after intense political pressure, it was subject to an agreement with the federal State and the other Belgian federated entities that Belgium would refer the validity of the CETA’s ICS to the CJEU.
This was done on 7 September 2017, when Belgium requested the CJEU to render an opinion on the compatibility of the CETA’s ICS with EU law – in particular with (i) the exclusive competence of the CJEU to provide the definitive interpretation of EU law, (ii) the general principle of equality, (iii) the requirement that EU law is effective, and (iv) the right to an independent and impartial judiciary – while specifying that Belgium “does not take any position itself regarding [those] questions”.
CETA entered into force provisionally on 21 September 2017, with the exclusion of the ICS (among other controversial provisions).
Towards a Multilateral Investment Court?
Shortly after Belgium’s request, on 13 September 2017, the European Commission introduced a recommendation for a Council decision authorising the opening of negotiations for a convention establishing a multilateral court for the settlement of investment disputes (the “Multilateral Investment Court” or “MIC”), with the aim of “having one, multilateral institution to rule on investment disputes covered by all the bilateral agreements in place” rather than one bilateral investment court for each FTA.
The EU Council formally gave its agreement on 20 March 2018, though the possibility of replacing the various ICSs by a single MIC had already been provided for by CETA, the EUSFTA and the EUVFTA.
International negotiations are taking place in the framework of Working Group III of UNCITRAL, which had identified the setting up of MIC as an “option for reform” of investor-State dispute settlements at the occasion of its 50th session last July. On 18 January 2019, the EU and its Member States submitted two papers to the working group. The first paper sets out in more detail the EU’s proposal of establishing a MIC whilst the second paper proposes a work plan for the process of the working group. It remains to be seen whether the European Union will gather sufficient support from its trading partners.
In its seminal Achmea ruling (Case C-284/16 of 5 March 2018), which has been extensively discussed on this blog, the CJEU ruled that: “[…] according to settled case-law of the Court, an international agreement providing for the establishment of a court responsible for the interpretation of its provisions and whose decisions are binding on the institutions, including the Court of Justice, is not in principle incompatible with EU law. The competence of the EU in the field of international relations and its capacity to conclude international agreements necessarily entail the power to submit to the decisions of a court which is created or designated by such agreements as regards the interpretation and application of their provisions, provided that the autonomy of the EU and its legal order is respected” (§57).
Against this background, AG Bot opines that CETA’s ICS does not jeopardise the principle of autonomy of EU law and the CJEU’s exclusive jurisdiction over its definitive interpretation. As it could have been expected, this aspect of Belgium’s request constitutes the crux of the AG’s opinion.
After having underlined that the preservation of the autonomy of the EU legal order is “not a synonym for autarchy” (§59), AG Bot stressed that the potential asymmetry between the substantive and procedural level of investment protection existing within the EU and within third State “necessitates the negotiation of a common standard of substantive and procedural protection” (§87), including a neutral dispute settlement mechanism. Even if EU law could, arguably, offer a sufficient level of protection to foreign investors who invest in the EU, such a reciprocal mechanism is necessary in order to ensure the protection of EU investors when they invest in third States. This conclusion would be supported by the absence of direct effect of CETA, which precludes domestic courts from applying the standards of protection set out in the treaty.
In the second step of his reasoning, AG Bot distinguishes CETA’s ICS with the CJEU’s ruling in Achmea. He argues that the premises guiding the line of reasoning would be different since, in this latter case, the court’s approach would have been “primarily guided by the idea that the judicial system of the European Union, in so far as it is based on mutual trust and sincere cooperation between Member States, is inherently incompatible with the possibility of Member States establishing, in their bilateral relations, a parallel dispute settlement mechanism which may concern the interpretation and application of EU law” (§105), whilst the relationship between the EU and Canada (or other third States) does not rest on the same principles.
AG Bot further considers that CETA provides sufficient guarantees in order to preserve the exclusive jurisdiction of the Court over the definitive interpretation of EU law since the applicable law before the CETA Tribunal consists exclusively of the relevant provisions of that agreement as interpreted in accordance with international law, excluding the domestic law of the Member States and EU law, which can only be taken into account by that Tribunal as a matter of fact (in particular to take account of legitimate objectives in the public interest). In addition, in the few instances where the CETA Tribunal would interpret EU law, it would be “bound by the interpretation of EU law given by the Court, which Article 8.31.2 of the CETA requires it to follow, whereas neither the Court, nor the institutions of the European Union, nor the national courts or authorities are bound by the interpretation of EU law made by the Tribunal” (§138). The decisions of the CETA Tribunal are also subject to an appellate body, which offers additional guarantees that the correct interpretation of EU law would be applied.
Finally, AG Bot underscores that CETA’s ICS does not affect the role of EU national courts of ensuring the effective application of EU law, nor the power (or obligation) of those courts to request a preliminary ruling from the CJEU since it “does not restrict the substantive rights enjoyed by foreign investors under internal EU law” nor “does it have the effect of limiting the jurisdiction of the Court or of the courts and tribunals of the Member States to hear and determine actions brought with a view to ensuring the observance of such rights as are afforded by internal EU law”.
A discrimination exists only where persons in relevantly similar situations are treated differently, without objective and reasonable justification. In this case, AG Bots is of the opinion that European investors who invest in Canada are merely in a similar situation with Canadian investors investing in the EU. Their situation cannot be equated to European investors investing within the EU. AG Bot added that “it would, in any event, be wrong to take the view that, given their ability to bring matters before the CETA Tribunal, Canadian undertakings investing in the EU are placed in a preferential situation as compared with EU undertakings investing in the EU. That possibility merely compensates for the fact that the CETA cannot be relied on directly before the domestic courts and tribunals of the Parties” (§205). Finally, the AG indicated that the purpose of encouraging foreign investments in the EU would, in any case, justify a difference of treatment.
The AG considers that the effectiveness of EU competition law cannot be jeopardised by the CETA Tribunal’s decisions (e.g. by awarding damages equivalent to the amount of fines imposed by the European Commission or a national competition authority). CETA acknowledges that the Parties may take appropriate measures to proscribe anti-competitive behaviours and guarantees their right to regulate in order to achieve legitimate objectives in the public interest.
CETA’s ICS does not breach the right to an independent and impartial tribunal as it merely constitutes an alternative method of dispute settlement, which provides sufficient procedural guarantees (in particular as regards the tribunal members’ remuneration schemes, their appointment and removal, and the rules of ethics that they have to follow).
In Achmea, the CJEU rendered its decision roughly 6 months after the publication of the opinion of its AG. Needless to say that the Court’s final say will be impatiently awaited by the EU, its trading partners and the civil society. The CJEU’s opinion is likely to shape the future of extra-EU investment arbitration, as AG Bot highlighted that “what is at issue here is the definition of a model which is consistent with the structural principles of the EU legal order and which, at the same time, may be applied in all commercial agreements between the European Union and third States” (§86). In the meantime, AG Bot’s reasoning briefly set out hereabove is likely to cause much ink to flow.
The principle of autonomy of EU law appears to be the most likely potential stumbling block to the compatibility of the ICS or a future MIC with EU law, in line with the concerns raised by the Court in Achmea. Arguably, an easy way out could be to provide in the EU FTAs (or a potential international convention establishing a MIC) the possibility/obligation for investment courts/their appellate bodies (or a potential MIC) to refer the case to the CJEU, as long as it is deemed compatible with the CJEU’s competences under the EU Treaties. Obviously, such a clause would not merely depend on the willingness of the EU but also on the consent of the other contracting States, which may request a similar arrangement for the definitive interpretation of their domestic law by their supreme/constitutional court. As pointed out by AG Bot, “this would run counter to the purpose of the dispute settlement mechanism, namely to be neutral and independent from the domestic courts and tribunals of the other Party” (§182).
The views expressed herein are the author’s only.

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JOHANNE J. PEÃ‘A & ERLANA G. VDA. DE INOCENCIO, doing business under the name and style of LARGESTONE ENTERPRISES, Petitioners, v. THE HONORABLE COURT OF APPEALS and DURA-TIRE & RUBBER INDUSTRIES, INC., Respondents.
Before us is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 42383 affirming the Decision2 of the Regional Trial Court (RTC) of Manila, Branch 10, in Civil Case No. 92-61507 and its Resolution dated August 19, 1996 denying the motion for reconsideration of the said decision.
Respondent Dura-Tire & Rubber Industries, Incorporated (Dura-Tire for brevity) is a corporation engaged in the business of manufacturing and sale of vehicle tires and other rubber products. Among the customers of the respondent were petitioners Johanne J. PeÃ±a and Erlana G. Vda. de Inocencio who, by themselves, were also engaged in the business of buying rubber products from the respondent and of selling the same to their customers under the business name Largestone Enterprises (Largestone). Largestone was also the authorized sales agent of respondent Dura-Tire. The petitioners would purchase rubber products from the respondent on credit for delivery to their customers, after which the petitioners would pay the respondent for the said purchases.
On May 8, 1991, the respondent and petitioner Inocencio entered a surety agreement in which the latter bound and obliged herself, jointly and solidarily, with petitioner PeÃ±a to pay to the respondent, when due, all money indebtedness or obligation of any kind incurred by petitioner PeÃ±a in the past and/or thereafter, arising from or growing out of any sale, whether on credit and/or forwarding on consignment, for sale or return goods and deliveries, as well as customers' accounts guaranteed by petitioner PeÃ±a, and to pay on demand any said indebtedness upon his default.3 Petitioner PeÃ±a signed the agreement as a witness.
* Delivery Receipt of Massive Sales Inc. c/o Dura-Tire Rubber Industries, Inc.
In partial payment of the said purchases from the respondent, petitioner Inocencio issued the following Philbanking Checks: Check No. 847401 dated November 21, 1991; Check No. 847402 dated December 10,1991; Check No. 847404 dated December 29, 1991; and Check No. 847403 dated January 2, 1992. Petitioner PeÃ±a also drew and issued to the respondent Philippine National Bank Check No. 224391 dated November 25, 1991, in the amounts of P37,456.91, P29,771.10, P19,544.57, P46,431.67, and P14,063.58.33 However, these checks were returned by the drawee banks for either of the following reasons: "closed account," "payment stopped," or "drawn against insufficient funds." The petitioners, likewise, failed to pay for the balance of their account.
The respondent sent letters on January 22 and 28, 1992 to the petitioners demanding the payment of their account which, according to the respondent, had amounted to P455,742.97, exclusive of interest, as shown in the statement of account appended thereto.34 The petitioners promised to pay their account to the respondent, but reneged thereon.
The respondent appended to its complaint the surety agreement executed by it and petitioner Inocencio, the sales invoices issued to Aboitiz Transport, Alma Cuilleta, Golden Rays Taxi, ILT Transport Care Trading, Inland Con Carrier, Inland Trailways, Ipodca Cooperative, Largestone Enterprises, Pandacan Cooperative and Phil. World Charters and Travel Service Corporation, marked as Annexes "B" to "BB" thereof. It also appended to its complaint, as Annex "CC" thereof, the Delivery Receipt to Philtranco and the Sales Invoices to Project 4 Cooperative and Tire King Goodyear Service, as Annexes "DD" to "HH." It further appended to its complaint, as Annexes "II" to "LL" thereof, the five (5) checks drawn and issued by the petitioners in its favor; and, as Annexes "NN" to "OO" thereof, the respondent's letters of demand to the petitioners duly acknowledged by the latter.
6. Petitioner Inocencio admitted that she issued the checks, Annexes "II," "JJ," "KK," and "LL," but averred that she did so only in blank and delivered the same to petitioner PeÃ±a, and only to show the same to the respondent to prove that petitioner Inocencio had a checking account; that without the knowledge and consent of petitioner Inocencio, petitioner PeÃ±a delivered the checks to the respondent in payment of her purchases from the latter; and that petitioner Inocencio did not issue Check No. 224391, Annex "MM."
On August 3, 1992, the trial court issued an Order setting the pre-trial at 8:30 a.m. on September 11, 1992 and requiring the parties to submit their respective pre-trial brief at least three days before the pre-trial date. There is no showing in the records that the petitioners were served with copies of the said order; however, their counsel received a copy of the same on August 14, 1992 and failed to file any pre-trial brief. The respondent filed its pre-trial brief on September 1, 1992. By agreement of the parties, through counsel, pre-trial was reset by the court on October 16, 1992 at 8:30 a.m. Petitioner Inocencio received a copy of the trial court's Order dated September 11, 1992. The parties failed to appear for the pre-trial on October 16, 1992. Consequently, the court dismissed the complaint. The court granted the respondent's motion for reconsideration of the order of dismissal and issued an Order on January 4, 1993 setting the pre-trial at 8:30 a.m. on February 19, 1993. The copies of the order addressed to the petitioners were returned to the court for their failure to claim the same from the post office. As per the notation on the face of the envelope containing the order addressed to the petitioners, the latter had vacated the houses indicated therein.
When the case was called for pre-trial on February 19, 1993, the petitioners and their counsel failed to appear before the court. On motion of the counsel for the respondent, the petitioners were declared as in default for their failure to appear before the court for pre-trial, and for their failure to file their pre-trial brief. The motion of the respondent to adduce its evidence ex parte against the petitioners was granted. The respondent presented Lydia C. Lao whose testimony was completed, and formally offered in evidence as Exhibits "A," "B" to "B-32," "C" to "C-5," "D," and "E" to "E-1," all of which the trial court admitted. The court then issued an order declaring the case submitted for decision. The copy of the said order addressed to the counsel of the petitioners was returned to the court for the reason that the said counsel had apparently transferred his office without notifying the court of his new address. Furthermore, the copy of the order addressed to the petitioners was returned to the court for the reason that the latter had moved to another address.
c) costs of this suit.
'THE TRIAL COURT ERRED IN DECLARING THAT FROM THE UNDISPUTED EVIDENCE AT HAND, PLAINTIFF APPEARS TO HAVE INDUBITABLY ESTABLISHED THE ALLEGATION IN THE COMPLAINT, THUS, ENTITLING THE PLAINTIFF TO COLLECT FROM DEFENDANTS, JOINTLY AND SEVERALLY, THE AMOUNT OF P477,212.33.
On March 19, 1996, the CA promulgated a decision affirming the decision of the RTC. The petitioners filed a motion for reconsideration of the decision, but the CA denied the same.
1. THAT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE LOWER COURT DECLARING DEFENDANT-APPELLANT, ERLANA VDA. DE INOCENCIO, JOINTLY AND SEVERALLY, LIABLE TO DEFENDANT JOHANNED (SIC) PEÃ‘A, REFERRED TO AS "CUSTOMER" IN THE SURETY AGREEMENT, IN VIOLATION OF THE VERY ESSENCE OF A CONTRACT OF GUARANTY UNDER ART. 2058 OF THE NEW CIVIL CODE, AS WELL AS TO OTHER DELIVERIES AS EVIDENCED BY INVOICES (EXHIBITS B, B-1 TO B-32), WHICH WERE NOT PROVEN TO BE DELIVERIES OF WHICH JOHANNE PEÃ‘A HAD INCURRED IN DEBTEDNESS TO PLAINTIFF (SIC).
2. THAT THE HONORABLE COURT HAD ERRED IN DECLARING THAT EVEN IF IT WERE CONCEDED THAT THE DEFENDANTS DID NOT RECEIVED (SIC) THE NOTICE OF PRE-TRIAL CONFERENCE WHICH WAS RETURNED TO THE TRIAL COURT UNCLAIMED, THEIR FAILURE TO FILE A PRE-TRIAL BRIEF AT LEAST THREE DAYS BEFORE THE DATE OF PRE-TRIAL CONFERENCE AS REQUIRED IN CIRCULAR NO. 1-89 OF THE SUPREME COURT (JAN. 19, 1989) IN RELATION TO ADMINISTRATIVE CIRCULAR NO. 3-90 (JAN. 31, 1990) JUSTIFIED THE TRIAL COURT IN DECLARING THEM AS IN DEFAULT.
The respondent, for its part, contends that the petitioners have themselves to blame for their failure to claim their mail matter despite notice thereof to them. The respondent asserts that to substantiate the petitioners' pose would be to allow them to profit from their own negligence and that of their counsel. The petitioners faulted the CA for holding that they had waived their right to assail the trial court's order of default merely because they failed to file a motion for reconsideration of the decision of the trial court or for a new trial.
We agree with the petitioners that the trial court erred in declaring them as in default for their failure to file a pre-trial brief at least three days before the scheduled pre-trial set on February 19, 1993 and to appear before the trial court on said date and time.
Under Section 1, Rule 2080 of the Rules of Court,81 the parties and their counsel are mandated to appear before the court for pre-trial and if the defendants fail to do so despite due notice and without any justifiable reason therefor, they may be declared as in default, conformably to Section 2, Rule 20 of the said Rules.82 The parties are also mandated under Circular No. 1-89 dated January 19, 198983 to file their respective pre-trial briefs at least three days before the pre-trial conference and if the defendants fail to do so, they may be declared as in default. The parties and their counsel must be served with copies of the order of the court setting the case for pre-trial, either by personal delivery or by mail under Sections 3, 4, and 5, Rule 1384 of the Rules of Court, or by substituted service under Section 6, Rule 1385 of the Rules of Court.
As admitted by the petitioners, a copy of the January 4, 1993 Order of the trial court was sent to and received by their counsel on January 14, 1993. A copy of the same order was placed on a sealed brown envelope, addressed to the petitioners. The records also contain a registry notice addressed to the petitioners at "Pandacan, Manila." There is no showing that the notice was sent to or received by the petitioners. In fact, the respondent even failed to submit to the trial court a certificate from the postmaster stating that the clerk of court sent a notice of registered mail to the petitioners' counsel and that the latter received the same. And yet, the trial court declared the petitioners as in default for their counsel's failure to appear for pre-trial and to file their brief three days before February 19, 1993.
We are, thus, convinced that the trial court erred in declaring the petitioners as in default, in allowing the respondent to adduce its evidence ex parte, and in rendering judgment by default against the petitioners.
However, it must be stressed that the petitioners failed to file a motion for new trial under Section 1(a), Rule 37 of the Rules of Court despite receipt of notice of the trial court's decision. The petitioners had the right to appeal the judgment by default on the ground that the said judgment was contrary to law or the evidence. They were, however, proscribed from assailing the trial court's Order dated February 19, 1993 declaring them as in default.
On the substantial as well as the other procedural aspects, petitioner Inocencio avers that the respondent failed to adduce preponderant evidence to prove its claim for the principal amount of P477,212.33. She posits that she is not liable for the checks issued by petitioner PeÃ±a with respect to those purchases made by the latter's customers. She insists that she merely guaranteed the payment of the said purchases, and that the respondent had to first exhaust all the payments to be made by petitioner PeÃ±a before suing her. The petitioners assert that Lydia Lao, the lone witness of the respondent, failed to prove that they were privies to the sales invoices,87 or were involved in the transactions covered by the same. They contend that there is no preponderant evidence that the transactions involving the said sales invoices were covered by the surety agreement executed by and between petitioner Inocencio and the respondent.
The burden of proof is on the petitioners to establish their defenses by a preponderance of evidence while the burden of proof is on the respondent, as plaintiff, to prove by a preponderance of evidence the material allegations of its complaint.88 If the defendants admit the material allegations of the complaint, the plaintiff is then relieved of its burden.
In this case, the respondent alleged in its complaint that during the period of November 1990 to August 1991, it delivered to the petitioners or to their designated buyers, or upon their orders, credit or on consignment, tires and rubber products evidenced by the sales invoices appended to its complaint,89 and that the petitioners still had an outstanding account for products covered by the said sales invoices in the total amount of P329,944.50, inclusive of the total amount of P147,267.83 of the dishonored checks, all of which amounted to P477,212.33. The respondent was, thus, burdened to prove these allegations.
However, petitioner PeÃ±a admitted liability for the products/deliveries to Largestone Enterprises covered by the sales invoices, Annexes "B-10" to "B-19"90 in the total amount of P66,789.07, and the sales invoice, Annex "CC" of the complaint,91 in the amount of P27,235.00. Petitioner Inocencio, likewise, admitted liability for the tires and rubber products covered by the sales invoices, Annexes "I," "J," "K," "W," "X," "Z," "AA," "DD," "GG," "HH," "D," "E," "V," "W," "Y," "EE," and ""FF" in the total amount of P186,706.46. While petitioner Inocencio claimed that the aforesaid amount of P186,706.46 had already been remitted by her to the respondent, there is no record of any receipt which was issued by the respondent to serve as evidence of such payment. Neither did petitioner PeÃ±a adduce any receipt that was issued by the respondent for the amount of P27,235.00. In fine then, petitioner PeÃ±a's total admitted accountability amounted to P94,024.07, while that of petitioner Inocencio amounted to P186,706.46, or the total amount of P280,730.53.
The petitioners claim that they are not liable for the value of the merchandise covered by the other sales invoices on the ground that on the face of the said sales invoices, they had no involvement in the transactions covered by the same. Such contention of the petitioners lacks merit.
Although it appears in the other sales invoices that the petitioners were the salespersons who brokered the sales of the products covered by the said sales invoices to the vendees therein named, the said entries are not conclusive of the extent and the nature of the involvement of the petitioners in the sales of the products under the said sales invoices which are not absolutely binding. They may be explained and put to silence by all the facts and circumstances characterizing the true import of the dealings to which they refer.92 The facts contained in the said sales invoices may be contradicted by oral testimony.93 Instead, while petitioner PeÃ±a appears to be the salesperson in the sales invoices in favor of Largestone, she, however, admitted that she was in fact the purchaser of the said products. Moreover, Lao testified that the petitioners purchased the merchandise described in the said sales invoices from the respondent, to be delivered to their respective customers as shown therein, and that the petitioners even promised to pay the same but reneged on their promise, prompting the respondent to send letters of demand to the petitioners. There is no evidence on record to controvert the evidence of the respondent. Furthermore, under the surety contract, petitioner Inocencio bound and obliged herself, jointly and severally, with petitioner PeÃ±a to pay for the merchandise sold and delivered to the customers of the latter or growing out of the said sales or deliveries.94 The petitioners even drew and issued checks in partial payment of the said purchases, which checks were, however, dishonored by the drawee banks. The petitioners cannot escape liability for the transactions covered by the sales invoices.
In fine, the petitioners are jointly and severally liable to the respondent in the principal amount of P329,944.50.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 42383, and its Resolution dated August 19, 1996, are hereby AFFIRMED with the modification that the petitioners are ordered to pay, jointly and severally, to the private respondent the principal amount of P329,944.50.
Austria-Martinez, (Acting Chairman), and Chico-Nazario, JJ., concur.
Puno, J., (Chairman), on official leave.
1 Penned by Associate Justice Godardo A. Jacinto, with Associate Justices Salome A. Montoya (retired) and Oswaldo D. Agcaoili (retired), concurring.
2 Penned by Judge Amor A. Reyes.
33 Records, pp. 4, 41, 42.
34 Exhibits "D" and "E," pp. 43-44.
53 Exhibits "B-1" to "B-3."
72 Exhibits "B-10" to "B-19."
77 CA Rollo, pp. 20-21.
79 76 SCRA 98 (1977).
80 SEC. 4. Appearance of parties. - It shall be the duty of the parties and their counsel to appear at the pre-trial. The non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents.
81 Now Section 4, Rule 18 of the 1997 Rules of Civil Procedure.
82 Now Section 5, Rule 18 of the 1997 Rules of Civil Procedure.
83 SEC. 5. Effect of failure to appear. - The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless, otherwise, ordered by the court. A similar failure on the part of the defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the basis thereof.
84 Now Sections 5, 6 and 7, Rule 13 of the 1997 Rules of Civil Procedure.
85 Now Section 8, Rule 13 of the 1997 Rules of Civil Procedure.
86 Johnson and Johnson (Phils.), Inc. v. Court of Appeals, 201 SCRA 768 (1991).
87 Exhibits "B" to "B-32."
88 Section 1, Rule 131 of the Revised Rules of Evidence; Section 1, Rule 133, id.
89 Exhibits "B," "B-1" to "B-32."
90 Exhibits "B-10" to "B-19."
92 Furst Brothers v. Commercial Bank, 43 S.E. 728 (1903).
93 Flag Fish Company, Inc. v. Main Seafood, Inc., 34 S.E.2d 294 (1945).
95 Exhibits "B" to "B-32."

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Bonuses: When Are They 'Wages' Under New York Labor Law?
EMPLOYERS IN New York frequently face claims by their former employees for unpaid discretionary bonuses under Article Six of the New York Labor Law. In the past, former employees have asserted such claims even when the bonus arrangement expressly conditions the payment obligation upon continued employment on the date the bonuses are to be paid.
Specifically, such former employees have asserted that the employer's failure to pay a bonus constitutes a failure to pay "wages" upon termination of employment under N.Y. Labor Law @ 191 and/or @ 193.
Last year, in Truelove v. Northeast Capital & Advisory, Inc., 738 N.E.2d 770 (N.Y. 2000), the New York Court of Appeals severely weakened any possible claim for unpaid bonuses under both @@ 191 and 193 by holding that discretionary bonuses that are dependent solely on the employer's overall financial success are not "wages" under Article Six. Additionally, the Truelove Court held that employers may predicate bonus payments upon an employee's continued employment at the time payment is due, and that an employee has no "vested right" to a bonus under Article Six solely because the employer has announced that a bonus will be paid and calculated the amount.
Following the Truelove decision, employers enjoy greater protection when they deny discretionary bonuses under their bonus policies and practices. However, the more recent decision of Fiorenti v. Centr. Emergency Physicians, No. 17813-00, 21-180, 2001 WL 409724 (N.Y. Sup. March 30, 2001) confirms that protection from liability for nonpayment of bonuses is not absolute, and will depend on a close analysis of the specific bonus arrangement at issue. In contrast to Truelove, the Fiorenti Court denied a motion to dismiss a cause of action brought by two employees to recover unpaid bonus payments from their employer and its sole shareholder under an unspecified provision of Article Six. The Court distinguished Truelove because the bonus arrangement at issue was neither discretionary nor based upon the employer's overall financial success, but rather based on an objective standard and each plaintiff's individual contributions to the business.
In this month's column, we analyze Truelove and Fiorenti in order to illustrate when employers are justified in refusing to make bonus payments under Article Six of the Labor Law on the ground that such payments do not constitute "wages" under the statute.
Over the years, New York courts have recognized several important defenses to employee claims for "wages" under Article Six. For example, in Gottlieb v. Kenneth D. Laub & Co., 626 N.E.2d 29 (N.Y. 1993), the court held that an employee cannot recover liquidated damages and attorney's fees available under @ 198 on a common-law breach of contract claim against his employer. Rather, such remedies are only available for violations of the substantive provisions of the Labor Law, such as @ 191. n5 Another potential defense available to employers, to which New York courts have come to varying conclusions, is that highly compensated salaried employees cannot assert claims for unpaid wages. n6 Such a defense will remain a possibility until the New York State Court of Appeals decides the question of whether a high level executive is an "employee" entitled to the protections of Article Six. Finally, as discussed below, there now exists a defense that certain kinds of bonuses are not "wages" as defined in Article Six under Truelove.
once established, would be calculated based on a graduated percentage schedule of firm revenues; 2) the bonus distributions would be allocated in the CEO's sole discretion; 3) the payments would be paid in quarterly installments, with each payment contingent upon the recipient's continued employment at Northeast; and 4) employees were required to have an "acceptable" performance rating to be eligible for participation in the bonus pool.
At the end of 1997, Northeast established a bonus/profit sharing pool of $ 240,000 based upon its revenue for that year -- $ 160,000 of which the CEO allocated to Mr. Truelove. Mr. Truelove resigned from Northeast after receiving an initial payment of $ 40,000. Following his resignation, Northeast refused to make any of the subsequent bonus payments. Mr. Truelove sued to recover the remaining installments of his bonus, alleging that his bonus constituted "wages," and that Northeast's failure to pay violated Labor Law @ 193.
The dispositive issue for the Truelove court was whether Mr. Truelove's bonus compensation constituted "wages" within the meaning of New York's Labor Law. After recognizing that other courts had interpreted the statutory definition of "wages" as excluding "incentive compensation based on factors falling outside the scope of the employee's actual work," n7 the court concluded that Mr. Truelove's bonus payments were not "wages" under the statute.
The court reached its conclusion based on two key factors. First, the bonus compensation plan was not predicated upon Mr. Truelove's own personal productivity, and did not confer upon him a contractual right to bonus payments based upon his productivity. Rather, the bonus pool was "dependent solely upon his employer's overall financial success." The second factor emphasized by the court in determining that Mr. Truelove's bonus payments were not "wages" was that his share in the bonus pool was entirely discretionary and subject to the non-reviewable determination of his employer.
Accordingly, the court held that "[discretionary] additional remuneration, as a share in a reward to all employees for the success of the employer's entrepreneurship, falls outside the protection of the statute."
already declared that the bonus will be paid and determined the precise amount.
The very recent holding in Fiorenti, supra, is a clear indicator that New York courts do not view Truelove as barring all causes of action for wages by an employee under the Labor Law to recover payments under an incentive compensation plan. Indeed, the case demonstrates that the particular plan will be closely scrutinized to determine whether bonus payments are discretionary, and whether such payments are predicated upon the success of the employee or the employer.
At issue in Fiorenti was a bonus compensation plan set forth in a contract between two plaintiffs and their employer, Central Emergency Physicians PLLC (CEP). Pursuant to this contract, plaintiffs, as employees, provided emergency room services to CEP. After allegedly not receiving bonus payments during a two-year period of their contract, plaintiffs sued CEP under the Labor Law n9 for wrongfully "withholding" wages. Relying on Truelove, CEP moved to dismiss the cause of action, arguing that payments under plaintiffs' incentive compensation plans were not wages because the plans were dependent on CEP's profitability.
The Fiorenti Court first closely examined the Truelove decision, noting its narrow finding that bonus payments, which were within the discretion of the employer and dependent on the employer's success, were not wages under the Labor Law. n10 "It follows," the court stated, "that a compensation scheme which is predicated upon an employee's personal productivity and the objective success of the venture -- not the employer's discretion or any subjective standard -- is a contractual right of the employee."
Compensation -- A bonus amount in addition to the guaranteed hourly rate will be determined by establishing the Relative Value Unit (RVU) of the Employee from billing reports maintained from Medical Data Processing after the operating costs of C.E.P. are deducted. The physician's RVU shall be divided by the RVU for the total practice and multiplied by the net practice revenues exceeding expenses.... The bonus shall be paid biannually on June 30th and December 31st on each respective year. The physician, upon request, may inspect the books and records of C.E.P. with regard to the net RVU and expenses.
CEP's motion to dismiss, and upheld plaintiffs' cause of action for wages.
The Truelove and Fiorenti decisions indicate that employers facing claims from their current or former employees for bonuses under incentive compensation plans are not subject to Article Six liability under circumstances in which the bonus payments cannot be characterized as "wages" under the law. The Truelove Court emphasized that employers are not liable under Article Six when: 1) the establishment of the bonus pool to be distributed to employees is entirely depended on the employer attaining a specific financial goal; and 2) payments under the plan are within the employer's discretion. As made clear in Fiorenti, employers who wish to ensure that their incentive compensation plans come within the Truelove safe harbor should closely examine the terms of such plans to make certain that a discretionary element is included.
n1 As an exception to this rule, employers may deduct amounts for "insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, payments for dues or assessments to a labor organization, and similar payments for the benefit of the employee," provided that the employee authorizes such deductions in writing. See N.Y. Labor Law @ 193(1)(b).
n2 The definition of "wages" also includes "wage supplements," which include "reimbursement for expenses; health, welfare and retirement benefits; and vacation, separation or holiday pay." See Labor Law @@ 190(1) and 198-c(2). However, a @ 191(3) cause of action cannot be asserted for non-payment of wage supplements. See N.Y. Labor Law @ 190(1).
n3 See N.Y. Labor Law @ 198(1-a).
n4 It is a misdemeanor for the first wage payment offense and a felony for the second offense, and such violations can result in fines and/or imprisonment. See N.Y. Labor Law @ 198-a.
n5 N.Y. Labor Law @ 191, entitled "Frequency of payments," sets forth various time periods in which employers are required to pay wages.
n6 Compare Daley v. Related Companies, Inc., 581 N.Y.S.2d 758, 760 (1st Dept. 1992) ("executives are within the class of employees protected by @ 198(1-a)") with Conticommodity Services, Inc. v. Haltmier, 416 N.Y.S.2d 298 (2nd Dept. 1979) (account representative acting in an executive capacity was not covered by N.Y. Labor Law @ 193).
n7 See Int'l Paper Co. v. Suwyn, 978 F.Supp. 506, 514 (S.D.N.Y. 1997) (holding that bonus award was not "wages" because bonus was not based on employee's own performance, and actual payment of the bonus not guaranteed as a term of employment); Tischmann v. ITT/Sheraton Corp., 882 F.Supp. 1358, 1370 (S.D.N.Y. 1995) (holding that a bonus was not "wages" because employer was permitted to determine what amount, if any, should be paid to a participating employee in addition the regular guaranteed salary).
n8 See Hall v. United Parcel Serv., 555 N.E.2d 273, 279 (N.Y. 1990) (where employer's written bonus plan expressly provided that bonus rights accrue upon the delivery and receipt of a Notice of Participation, and plaintiff was approved for and scheduled to receive such a Notice, but resigned from his employment prior to actually receiving a Notice, employer was not required to make the bonus payment).
n9 The Fiorenti Court's opinion does not indicate the specific statutory provision that plaintiffs alleged was violated by CEP's alleged "withholding" of wages.
n10 The Fiorenti court summarized Truelove's holding as follows: "... a bonus scheme, the payment of which was within the employer's discretion; predicated upon a combination of individual performance and corporate performance; and then based on the firm generating a set amount of revenue and establishinga bonus/profit sharing pool, was not a wage within the contemplation of the Labor Law."
This article is reprinted with permission from the June 4, 2001 edition of New York Law Journal. Copyright 2001 NLP IP Company.

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Justia › US Law › US Case Law › US Supreme Court › Volume 238 › United States v. Hiawassee Lumber Co.
In an action of ejectment brought by the United States to recover a tract of land in North Carolina, the result depended upon the validity of the probate and registration of the deeds under which the government claimed title, and after reviewing and construing the various statutes of the state regulating such probate and registration, held (a) that the deed to the grantor of the United States, made in 1868, was validated as to probate and registration by an Act of January 27, 1870, and (b) that the deed from this grantor to the United States, made in 1869, was admitted to registration, without limitation as to time by force of the Connor Act of 1885 of North Carolina, and, when so registered, was made valid to pass title by the terms of the same act.
"Grant No. three thousand, one hundred and ten, containing five thousand acres, and beginning at a chestnut on the top of Tusquita Ball [Tusquita Bald] on the Macon County Line, and runs east three hundred and twenty poles to a chestnut on a mountain side, thence south seven hundred poles to a pine, thence west twelve hundred and forty poles to a stake, thence north seven hundred poles to a stake and hickory, thence east nine hundred and twenty poles to the beginning."
Defendant's answer denied generally the allegations of the complaint, set up possession and title, in itself, to a part of the tract, and demanded judgment that it was the owner and entitled to the possession of said land. The trial court directed a verdict in favor of defendant, and the resulting judgment was affirmed by the circuit court of appeals (202 F. 35).
From the bill of exceptions, it appears that both parties claim under one Edwin B. Olmsted, who derived title to the lands from the State of North Carolina by certain grants dated November 10, 1867. One of these is grant No. 3110, for 5,000 acres, described as in plaintiff's declaration. There are 16 other grants, each for 640 acres, the tracts adjoining each other in such manner as to form a quadrangle that admittedly includes the land claimed by plaintiff, as well as much land besides. Plaintiff claims through deeds purporting to convey the 5,000-acre tract as described in grant No. 3110. Defendant claims under a series of conveyances purporting to convey the 16 tracts of 640 acres each. So far as the bill of exceptions shows, there was no evidence of possession on either side, and the question turns upon the paper titles.
"having been exhibited before me with the seal of his office attached, the same is adjudged to be in due form and according to law. Therefore let the foregoing instrument with all the certificates be registered;"
and finally, there is a certificate of the registration of the deed on May 20, 1896, in Clay County.
The second deed is dated March 15, 1869, made by Stevens and wife, of Washington, District of Columbia, to the United States, purporting to convey certain tracts granted by the State of North Carolina to E. B. Olmsted November 10, 1867, and describing 45 different tracts, one of which is the 5,000-acre tract in question. This was duly acknowledged by Stevens and wife before a Commissioner for the State of North Carolina in and for the State of Pennsylvania on March 15, 1869. It was registered in Cherokee County August 4, 1871, but this is immaterial so far as its effect upon the lands in Clay County is concerned.
It was not registered in the latter county until May 20, 1896, and it was then registered after compliance with all the requirements of law.
Testimony was introduced on both sides upon the question of location; a map was introduced purporting to show the location of the 5,000-acre tract, and of the sixteen 640-acre tracts; it was testified that the former was located by an actual survey beginning at a chestnut on the Tusquita Bald, in the Macon County line, as indicated by the description and the map, and it was admitted that there was evidence sufficient to go to the jury as to location.
Defendant claimed to derive title from Olmsted through, first, a decree of the Superior Court of Macon County, North Carolina, in an equity action brought by one Swepson against Olmsted in the year 1882, resulting in a deed of conveyance, made pursuant to the decree and order of the court, by Kope Elias, commissioner, to A. Rosenthal, dated October 28, 1882, and duly registered in Clay County October 17, 1890; secondly, a quitclaim deed from Olmsted and wife to Rosenthal, dated October 31, 1882, registered in Clay County November 12, 1906, quitclaiming all interest of the grantors in the lands described in the Kope Elias deed; and, thirdly, certain special proceedings in the Superior Court of Alamance County, North Carolina, taken by the executrix of Swepson in the year 1884 for the sale of Swepson's "equitable and legal real estate," which resulted in a deed made by order of the court from Swepson's executrix to Rufus Y. McAden, dated May 11, 1888, duly registered in Clay County June 28, in the same year. Both the Kope Elias deed and the deed from Swepson's executrix to McAden purport to convey some interest in the 16 grants of 640 acres each. Other deeds were introduced to show that whatever estate or interest was conveyed by the deeds specified had become vested in defendant.
against defendant, it conveys his title to the tract thus described, whether that title was derived from the state through grant No. 3110 or through the other 16 grants.
The principal controversy turns upon the probate and registration of the deed from Olmsted to Stevens. The trial court held that, under the laws of North Carolina, the registration of 1869 was invalid as notice or for any purpose, but admitted in evidence the registration of 1896. The direction of a verdict in favor of defendant was based upon the theory that, because the deed from Kope Elias, commissioner, to Rosenthal, was registered prior to the registration in 1896 of the deed from Olmsted to Stevens, Rosenthal thereby acquired the legal title as a purchaser for value without notice, and that his rights and the rights of those claiming under him were not affected by the registration of the Olmsted and Stevens deed in the year 1896.
The circuit court of appeals, apparently deeming that there was no distinction, so far as registration was concerned, between the status of the Olmsted-Stevens deed and that of the deed made by Stevens to the United States, considered the question with respect to the latter deed, and, finding that its registration prior to 1896 (erroneously assumed to have been made in Clay County in 1871) was not valid, and no title passed thereby, concluded that the same was true of the registration of the Olmsted-Stevens deed in Clay County in the year 1869. But it so happens that between the acknowledgment of the Olmsted deed in February, 1868, and the acknowledgment of the Stevens deed in March, 1869, the law of North Carolina was changed in a material respect, and, for this and other reasons that will appear, we deem it proper to consider the earlier deed first.
There is no question that the Olmsted deed was duly and properly acknowledged before a North Carolina commissioner in the District of Columbia, and the acknowledgment duly certified by him, so that, under the law as it then stood, upon the presentation of the deed with the accompanying certificate to the Court of Pleas and Quarter Sessions of Clay County, or to one of the judges of the Supreme Court or of the Superior Courts of North Carolina, a fiat for its registration would have followed, as of course.
"must be offered for probate, or a certified probate thereof must be exhibited before the judge of probate of the county in which the real estate is situated,"
and it applied this to deeds acknowledged before North Carolina commissioners in other states or in the District of Columbia at the same time requiring an adjudication that the deed was duly acknowledged, etc.
have observed, is there anything in the act of which it forms a part, that attempts expressly to regulate or impose conditions upon the registration of deeds or other instruments. We are referred to no decision by the courts of North Carolina that makes the new procedure a condition precedent to registration of a deed previously made and acknowledged and thereafter registered within two years after its date, pursuant to Rev.Code 1855, c. 37, § 1.
But we deem it unnecessary to pass upon the question here suggested, for reasons that will presently appear.
It will be observed that, in the Code of 1855, a very different effect was given by § 5 of chapter 37 to a certificate of acknowledgment taken by one of the commissioners appointed by the governor under chapter 21, from the effect given to the proceedings of a commissioner or commissioners specially appointed under § 4 of chapter 37. Proceedings before a special commissioner, being returned to the court, simply formed the basis upon which the court might proceed to adjudge that the deed was duly acknowledged or proved. But an acknowledgment taken by a standing commissioner (an official commissioned by the governor and holding office during his pleasure), being duly certified, was not to be reviewed judicially before being ordered to registration. So it was expressly held by the Supreme Court of North Carolina in Johnson v. Eversole Lumber Co. (1908), 147 N.C. 249, 251. And see, to the same effect, Cozad v. McAden, 148 N.C. 10, 12; s.c. 150 N.C. 206, 209-210. That such was the law prior to the adoption of the Code of Civil Procedure was recognized by the circuit court of appeals (202 F. 41).
not mandatory, and that, if the deed be in fact registered after proper probate, the fiat becomes nonessential. Holmes v. Marshall, 72 N.C. 37, 40; Young v. Jackson, 92 N.C. 144, 147; Darden v. Steamboat Co., 107 N.C. 437, 445. The first two of these cases were distinguished in Evans v. Etheridge, 99 N.C. 43, 47, but this case did not hold that the absence of the fiat for registry was fatal.
"That the probate of all deeds and other instruments required to be registered, heretofore taken under laws existing prior to the adoption of the Code of Civil Procedure, is hereby declared valid to all intents and purposes, and shall be admitted to registration as if the probate had been taken under existing laws."
"There is nothing contained in the foregoing that could be construed to relate to the defects alleged as respects the probate of these deeds. In this instance, there was no probate at all [italics ours]. Therefore it cannot be said that this act, which undertakes to cure defective probates, can have any relation to instruments attempted to be registered in the manner these were. For that reason, we do not think this act applies to the case at bar."
Confining ourselves to the effect of the 1870 act upon the Olmsted-Stevens deed, in our opinion, the court erred in holding there was "no probate" of the deed, within the meaning of the curative act.
It is possible that, after the Code of Civil Procedure extended to other cases the requirement of adjudication which, before that time, had applied only with respect to acknowledgments and proofs taken before specially appointed commissioners, the word "probate" may have come to be used with reference to the act of judicial approval by the judge of probate, rather than to the certificate of acknowledgment or proof submitted for such approval.
condition precedent to registration. In early times, probate was made before the county courts. Laws 1807, ch. 16, p. 10; Laws 1814, ch. 11, p. 12; ch. 19, p. 14. Afterwards, deeds were allowed to be acknowledged or proved "either before one of the judges of the supreme court or of the superior court, or in the court of the county where the land lieth." Rev.Stat. 1837, ch. 37, § 1. And in the Revised Code of 1855, c. 37, § 2, the clerk of the county court and his deputy were included among those who might take acknowledgments and proofs within the state. Such acknowledgment or proof was frequently referred to as "probate." Thus, we find that Chapter 21 of Rev.Code 1855, under which the commissioner who took the acknowledgment in question was appointed, has for its title, "Commissioners of Affidavits and Probate of Deeds." The index at the head of the chapter and the index note in the margin read: "Governor may appoint commissioners to take and certify probate of deeds, etc., in other states." And so with respect to Chapter 37: the word "probate" is employed in the head and marginal indexes with respect to §§ 4 and 5, and is also employed in the body of § 5. In short, the word appears to have been commonly employed, prior to the Code of Civil Procedure, as referring to the proof or acknowledgment of deeds as a condition precedent to registration, irrespective of whether it was taken before a court or a commissioner. And it was so employed in judicial opinions. McKinnon v. McLean (1836), 19 N.C. (2 Dev. & Bat.) 79, 83-86; Carrier v. Hampton (1850), 33 N.C. (11 Ire.) 307, 310; Freeman v. Hatley (1855), 48 N.C. (3 Jon.) 115, 117-119; Williams v. Griffin (1856), 49 N.C. (4 Jon.) 31, 32; Johnson v. Pendergrass (1857), 49 N.C. (4 Jon.) 479, 480; Simmons v. Gholson (1858), 50 N.C. (5 Jon.) 401, 403.
this requires that deeds "must be offered for probate, or a certified probate thereof must be exhibited before the judge of probate;" and, in going on to specify the manner of doing this, it treats the certificate of acknowledgment or proof as the certified probate thus required to be exhibited.
To construe the Act of 1870 as applying only to proceedings such as were first prescribed by the Code of Civil Procedure would leave it nearly or quite devoid of force. The things to be validated were probates taken under laws that existed prior to the adopting of that Code. We cannot limit this to proceedings that would be deemed probate under the test adopted by the Code itself, for these would require no validation. And in Cozad v. McAden, 148 N.C. 10, 12, the Supreme Court of North Carolina, arguendo, construed the Act of 1870 as dispensing with the adjudication by the judge of probate, and "making probates in the previous manner valid up to 27 January, 1870."
The result of this is that, at least from the ratification of the curative act, the Olmsted-Stevens deed became "good and available in law," and notice to all the world, including those under whom defendant claims.
"It was not contended by counsel for the plaintiff in the court below that the attempted registration of the deed from Olmstead to Stevens was sufficient to devest Olmstead of the legal title."
"He [meaning plaintiff's counsel] says that I am offering a deed registered in 1868 [meaning 1869], and also one which we say was registered in 1896. Defendant's counsel says this deed registered in 1868  cannot be accepted, as it is not legally registered and is void."
"not for the purpose of showing title [that purpose had already been overruled], but as evidence of notice to the purchasers, simply as a circumstance giving notice."
1869 registration, and took exceptions to the action of the trial judge in refusing these and in instructing a verdict for defendant. The question we have passed on was clearly reserved by the exceptions.
The deed from Olmsted to Stevens, its probate, and its registration in Clay County in 1869, having been validated "to all intents and purposes" by the Act of 1870 -- long prior to the derivation of defendant's title from Olmsted -- we must next consider the deed from Stevens to the United States. For, of course, plaintiff must succeed on the strength of its own title, and the latter deed is an essential link in the chain.
This deed stands upon a different footing from the Olmsted deed, for it was both made and acknowledged after the ratification of the Code of Civil Procedure in 1868, and it was not registered in Clay County within two years after its date, nor until sometime in 1896, being then accompanied with certificates of probate that complied with the provisions of the Code of Civil Procedure. It was acknowledged before the Act of January 27, 1870, but, supposing that act to be applicable to deeds acknowledged after the adoption of the Code of Civil Procedure, and in a mode not conforming to its provisions, but conforming to the provisions of the previous law, it cannot avail plaintiff, because it did not dispense with the necessity of registration within two years from the date of the deed, imposed by Rev.Code 1855, c. 37, § 1.
Nor do we think the deed comes within the Act of December 12, 1876, for it was not registered within two years after the ratification of that act, as, by its terms, was required.
North Carolina that an unregistered deed could not be introduced in evidence and did not create a perfect legal title. It was sometimes treated as an executory contract between the parties, sometimes as conferring an equitable title, or an incomplete legal title; the difference is immaterial for present purposes. Unless registered within the two years allowed by the Code of 1855, or as allowed by statutes extending the time, of which there were many, but none that applies here, the deed was not "available in law." On the other hand, when recorded within the time allowed by any act of the legislature, it related back to the time of its execution, and conveyed a complete legal title as of that date, which was paramount even to the title acquired by a purchaser for value from the same grantor without notice of the unregistered deed. Phifer v. Barnhart (1883), 88 N.C. 333, 338, and cases cited; Austin v. King (1884), 91 N.C. 286, 289; Laton v. Crowell (1904), 136 N.C. 377, 379.
either in person or by his, her, or their tenants at the time of the execution of such second deed, or when the person or persons claiming under or taking such second deed, had at the time of taking or purchasing under such deed actual or constructive notice of such unregistered deed, or the claim of the person or persons holding or claiming thereunder."
By § 2, provision was made for registering deeds executed prior to the year 1855 upon special proof. And, by § 3, all other deeds having been acknowledged or proven in the manner prescribed by law were permitted to be registered, "and all deeds so executed and registered shall be valid, and pass title and estates without livery of seisin, attornment or other ceremony whatever."
Under this act, as has been uniformly held by the supreme court of the state, there is no limitation as to the time when the deed shall be registered; the act simply provides that the deed shall not be valid against creditors or purchasers for value except from registration. Hallyburton v. Slagle, 130 N.C. 482, 484; Cozad v. McAden, 148 N.C. 10, 11; Brown v. Hutchinson, 155 N.C. 205, 208.
at the time of taking or purchasing under such deed, actual or constructive notice of such unregistered deed or the claim of the person or persons holding or claiming thereunder."
Stevens made no "second deed." And since defendant and its predecessors in title did not claim under him, but claimed under Olmsted -- of whose deed to Stevens they had constructive notice by reason of its registration in 1869 and the curative Act of 1870 -- it follows that the registration of the Stevens deed in 1896 makes it good as against defendant.
It thus appears that plaintiff's paper title as registered must prevail over that of defendant. This renders it unnecessary to consider whether, aside from registration of the Olmsted deed in 1869, defendant and those under whom it claims were purchasers without notice within the meaning of the second proviso of § 1 of the Connor Act. Upon this question, therefore, we express no opinion.
Judgment reversed, and the cause remanded for further proceedings in accordance with this opinion.
MR. JUSTICE DAY and MR. JUSTICE HUGHES concur in the result, because, while agreeing with the circuit court of appeals as to its disposition of the case otherwise, they think there was testimony tending to show that Rosenthal was not a purchaser for value, and that question should have been submitted to the jury under proper instructions, since, unless Rosenthal was such purchaser within the terms of the Connor Act, plaintiff was entitled to recover.
"1. No conveyance for land shall be good and available in law unless the same shall be acknowledged by the grantor, or proved on oath by one or more witnesses in the manner hereinafter directed, and registered in the county where the land shall lie within two years after the date of the said deed, and all deeds so executed and registered shall be valid, and pass estates in land, without livery of seisin, attornment, or other ceremony whatever."
"2. All deeds, . . . and other instruments of writing required or allowed to be registered may be admitted to registration in the proper county, upon being acknowledged by the grantor, or proved on oath before one of the judges of the supreme or superior court, or in the county court of the county where the land or estate is situate, unless otherwise directed, or before the clerk of such court, or his deputy. Provided, that nothing herein contained shall be construed to allow the privy examination of femes covert to be taken otherwise than by law is specially directed."
"4. When any person shall desire to have registered any such deed [if the grantor or subscribing witness be beyond the limits of the state] . . . , the court of pleas and quarter sessions . . . may issue a commission . . . to a commissioner or commissioners, authorizing any one or more of them to take the acknowledgment of the parties, or the examination of any one of the subscribing witnesses thereto, or other due proof thereof, and also the examination of any feme covert party to the same, and the proceedings of the commissioners, so authorized, being returned to the court, the court may proceed to adjudge that such deed or other instrument of writing is duly acknowledged or proved, and that the said examination is in due form: and thereupon the same, with the said proceedings, shall be registered, and such registration shall have the same effect as if the proceedings had been in open court."
"5. When any deed conveying lands in this state . . . shall have been executed by any person, and it may be desired to take the probate or acknowledgment thereof out of this state, but within the United States, and the same shall be personally acknowledged by the person executing the same . . . before some one of the judges of supreme jurisdiction, or a judge of the courts of law of superior jurisdiction within the state, territory, or district where the parties may be, and if any of the parties shall be a feme covert and she shall be privily examined by such judge, whether she doth voluntarily assent thereto -- . . . Or when such deed, . . . or other instrument as aforesaid shall be so acknowledged or proved, and the privy examination taken as aforesaid, before any commissioners appointed by the governor of this state, according to law, and duly certified by him, such deed . . . or other instrument, being exhibited in the court of pleas and quarter sessions of the county where the property is situate, or to one of the judges of the supreme court or of the superior courts of this state, shall be ordered to be registered with the certificates thereto annexed, and the same being registered in the county wherein the property may be situate, pursuant to such order . . . shall be valid in law for the purpose intended thereby, and shall be received in evidence in any court without further proof."
"2. The governor is hereby authorized to appoint and commission one or more commissioners in such of the states of the United States, or in the District of Columbia, or any of the territories, as he may deem expedient, who shall continue in office during the pleasure of the governor, and shall have authority to take the acknowledgment or proof of any deed, mortgage, or other conveyance of lands, tenements, or hereditaments lying in this state, and to take the private examination of married women, parties thereto, or any other writings to be used in this state. Any such acknowledgment or proof, taken or made in the manner directed by the laws of this state, and certified by the commissioner, shall have the same force and effect, for all purposes, as if the same had been made or taken before any competent authority in this state."
"CODE OF CIVIL PROCEDURE, 1868."
"All deeds conveying lands in this state . . . must be offered for probate, or a certified probate thereof must be exhibited before the judge of probate of the county in which the real estate is situated, in the manner following:"
"4. Where the acknowledgment or proof of any deed or other instrument is taken or made, in the manner directed by the laws of this state, before any commissioner of affidavits for the State of North Carolina, appointed by the governor thereof, in any of the states or territories of the United States or in the District of Columbia, and where such acknowledgment or proof is certified by such commissioner, the judge of probate, having jurisdiction, upon the same being exhibited to him, shall adjudge such deed or other instrument to be duly acknowledged or proved in the same manner as if made or taken before him."

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