U.S. v. Bonnette, 84-6168

• Decision Date: 07 January 1986
• Docket Number: No. 84-6168,84-6168
• Citation: 781 F.2d 357
• Parties: UNITED STATES of America, Appellee, v. Richard Emerson BONNETTE, Jr., Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 357

781 F.2d 357

UNITED STATES of America, Appellee, v. Richard Emerson BONNETTE, Jr., Appellant.

No. 84-6168.

United States Court of Appeals,

Fourth Circuit.

Argued June 4, 1985.

Decided Jan. 7, 1986.

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Eric Wm. Ruschky, Asst. U.S. Atty. (Henry Dargan McMaster, U.S. Atty.), Columbia, S.C., for appellee.

David G. Ingalls, Spartanburg, S.C., for appellant.

Before WIDENER and ERVIN, Circuit Judges, and WALTER E. HOFFMAN, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.

WALTER E. HOFFMAN, Senior District Judge:

Richard Emerson Bonnette, Jr., moved, pursuant to 28 U.S.C. section 2255, ¹ to vacate his convictions for bank fraud, relying on an interpretation of the statute under which he was convicted, 18 U.S.C. section 1014, ² in a case decided by the United States Supreme Court after Bonnette's convictions had become final. The government responded with a motion for summary judgment, which the district court granted. We affirm.

I. FACTS

The facts are not in dispute. Bonnette was an attorney practicing in Lexington, South Carolina, at the time of the events leading to his indictment on five counts of bank fraud in violation of 18 U.S.C. section 1014 and on ten counts of mail fraud in violation of 18 U.S.C. section 1341. ³ He was convicted by a jury on all counts in a seven-day trial over which Judge Charles E. Simons, Jr., presided.

The opening chapter of this unfortunate tale occurred in March 1974 with the incorporation of Capital City Auto Auction, Inc. ("Capital City") in Lexington. This automobile auction business was incorporated by Bonnette's co-defendant, Eugene Jones, and two other persons. Bonnette handled the details of the incorporation and became corporate secretary.

Capital City auctioned used cars, charging the seller $10 to auction a car and an additional fee if the car was sold. Buyers

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that were dealers could pay by "sight draft" ⁴ rather than by check or by cash. After taking a dealer's sight draft, Capital City would write a check drawn on its account at the Lexington State Bank ("Lexington"). Capital City then would deposit the sight draft in the dealer's account at Lexington, having attached to the sight draft the title to the car sold. Lexington credited Capital City's account immediately on deposit of the sight drafts

Bonnette approached another Lexington bank, Citizens & Southern Bank ("Citizens & Southern"), in May 1978. He opened an account with Citizens & Southern for the Draft Acceptance Corporation, a subsidiary of Capital City. The dealer sight drafts thereafter were deposited into this account, for which Citizens & Southern would extend immediate credit rather than postpone credit until the funds for the drafts were collected. Citizens & Southern hesitated when Bonnette initially proposed this procedure, but agreed to it after Bonnette assured the bank that only credit-worthy drafts from reputable dealers would be deposited in the account.

A major portion of the drafts deposited in the Citizens & Southern account were neither credit-worthy nor from reputable dealers. Bonnette or others at his direction deposited in the account drafts attached to titles representing cars that allegedly had been sold to Hornsby's Used Cars and Capital City Chevron & Auto Sales. In fact, employees of Capital City established and operated these businesses solely to give Capital City a purchaser through which to fake automobile sales. Drafts from these nonexistent sales, as well as drafts attached to titles from cars no longer in Capital City's inventory, were steadily deposited in the Draft Acceptance Corporation account.

On April 2, 1979, Citizens & Southern told Bonnette that credit no longer would be extended on the sight drafts, the Bank having realized that over $330,000 in funds remained uncollected. The indictment and convictions of Bonnette and Jones followed. ⁵ Bonnette appealed his convictions to the United States Court of Appeals for the Fourth Circuit, challenging only the sufficiency of the evidence. The Fourth Circuit affirmed the convictions, and the Supreme Court denied review. United States v. Bonnette, 663 F.2d 495 (4th Cir.1981), cert. denied, 455 U.S. 951, 102 S.Ct. 1456, 71 L.Ed.2d 666 (1982).

On March 11, 1982, Bonnette filed a Rule 35 motion for the reduction or modification of his sentence. Initially, he grounded the motion in the disparity between his sentence and that of his co-defendant Jones. See supra note 5. While the motion was pending, the Supreme Court in Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982), reversed a conviction under section 1014 for "check-kiting," which Bonnette's counsel then urged as an additional basis for granting the motion. Chief Judge Robert W. Hemphill, who had sentenced Bonnette, denied the motion on

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September 7, 1982. In his order, Judge Hemphill distinguished the facts underlying Bonnette's convictions on the bank fraud counts from those underlying the defendant's convictions for bank fraud in Williams

Bonnette filed, on July 7, 1983, a motion to vacate his sentence under section 2255, also requesting release from incarceration pending a decision on his motion. He again relied on Williams as well as a Fourth Circuit case, United States v. Carlisle, 693 F.2d 322 (4th Cir.1982), which reversed the convictions under section 1014 based on Williams. ⁶ The government moved for summary judgment. Having previously denied Bonnette's motion for release on bail, the district court granted the government's motion for summary judgment on the recommendation of the magistrate. Both the magistrate's report and the district court order distinguished Williams as a case of pure check-kiting, ⁷ unlike the events underlying Bonnette's convictions, which involved assertions--express and implied--that the title-attached drafts were worth what they were represented to be worth. Bonnette appeals from the district court order granting summary judgment, arguing that the interpretation of section 1014 in Williams makes his convictions under that section invalid.

II. APPLICABILITY OF "CAUSE" AND "ACTUAL PREJUDICE" STANDARD

A threshold question, not addressed by the district court but argued by the government

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on this appeal, is whether Bonnette has shown the elements of cause and actual prejudice necessary to support section 2255 relief. The Supreme Court established in Frady v. United States, 456 U.S. 152, 102 S.Ct. 1584, 71 L.Ed.2d 816 (1982), that the appropriate standard for review of a section 2255 motion is the "cause and actual prejudice" standard: "Under this standard, to obtain collateral relief based on trial errors to which no contemporaneous objection was made, a convicted defendant must show both (1) 'cause' excusing his double procedural default, and (2) 'actual prejudice' resulting from the errors of which he complains." Id. at 167-68, 102 S.Ct. at 1594

Assuming actual prejudice, an interesting question arises whether a nonconstitutional change in the law can satisfy the Frady cause requirement. Cf. Stone v. Powell, 428 U.S. 465, 477 n. 10, 96 S.Ct. 3037, 3044 n. 10, 49 L.Ed.2d 1067 (1976) ("Even those nonconstitutional claims that could have been asserted on direct appeal can be raised on collateral review only if the alleged error constituted 'a fundamental defect which inherently results in a complete miscarriage of justice' ") (quoting Hill v. United States, 368 U.S. 424, 428, 82 S.Ct. 468, 471, 7 L.Ed.2d 417 (1962)) (internal quotation marks omitted); Kerr v. Finkbeiner, 757 F.2d 604 (4th Cir.), cert. denied, --- U.S. ----, 106 S.Ct. 263, 88 L.Ed.2d 269 (1985) (same). But cf. Davis v. United States, 417 U.S. 333, 94 S.Ct. 2298, 41 L.Ed.2d 109 (1974) (holding cognizable under section 2255 a nonconstitutional claim, which had been raised on direct appeal, involving a change in the controlling law of a federal circuit).

The initial question in fleshing out this analysis is whether Bonnette could have argued, on direct appeal, the interpretation of section 1014 that he now advocates. At the time that he was tried and convicted in May 1980, a conflict of sorts existed in two federal circuits over the proper interpretation of section 1014. The United States Court of Appeals for the Fifth Circuit had departed from the reading of section 1014 taken by a district court in another federal circuit. See United States v. Payne, 602 F.2d 1215 (5th Cir.1979), cert. denied, 445 U.S. 903, 100 S.Ct. 1079, 63 L.Ed.2d 319 (1980) (rejecting United States v. Edwards, 455 F.Supp. 1354 (M.D.Pa.1978)). In Edwards, the United States District Court for the Middle District of Pennsylvania held that presentation of a worthless check to a federally insured bank was not proscribed by section 1014, the same result later reached by the Supreme Court in Williams. Another district court within the Third Circuit followed Edwards in a decision issued on January 9, 1981, four months before Bonnette's case was argued on direct appeal before the Fourth Circuit. See United States v. Sher, 505 F.Supp. 858 (W.D.Pa.1981). About three weeks before Bonnette's argument on direct appeal, the United States Court of Appeals for the Third Circuit noted the conflict in a footnote, see United States v. Pinto, 646 F.2d 833, 838 n. 14. (3d Cir.), cert. denied, 454 U.S. 816, 102 S.Ct. 94, 70 L.Ed.2d 85 (1981), although an outright split in the circuits did not exist until August 14, 1981, when the Third Circuit affirmed the district court in Sher, see 657 F.2d 28 (3d Cir.1981), cert. denied, 458 U.S. 1121, 102 S.Ct. 3509, 73 L.Ed.2d 1383 (1982).

The effect of developments in the law on the availability of collateral review more often has dealt with constitutional claims. The inquiry generally has been framed in terms of whether a constitutional claim is novel, thus supporting the cause requirement of the cause-and-prejudice standard. Compare Engle v. Isaac, 456 U.S....