Com., Dept. of Transp. v. Mitchell

• Decision Date: 29 February 1988
• Citation: 535 A.2d 581,517 Pa. 203
• Parties: COMMONWEALTH of Pennsylvania, DEPARTMENT OF TRANSPORTATION, Appellee, v. Harold L. MITCHELL, individually, and Mark G. Shultz, individually, and Edward A. Cummins, individually, and Harold L. Mitchell, Mark G. Shultz, Edward A. Cummins, t/a Cummins Construction Company and/or Appalachian Pipeline, Inc. Appeal of Mark G. SHULTZ.
• Court: Pennsylvania Supreme Court

Page 581

535 A.2d 581

517 Pa. 203

COMMONWEALTH of Pennsylvania, DEPARTMENT OF TRANSPORTATION, Appellee, v. Harold L. MITCHELL, individually, and Mark G. Shultz individually, and Edward A. Cummins, individually, and Harold L. Mitchell, Mark G. Shultz, Edward A. Cummins, t/a Cummins Construction Company and/or Appalachian Pipeline, Inc Appeal of Mark G. SHULTZ.

Supreme Court of Pennsylvania.

Submitted Sept. 23, 1987.

Decided Dec. 29, 1987.

Reargument Denied Feb. 29, 1988.

George Retos, Jr., Retos, Held & Mascara, Washington, for appellants.

Kenneth Lee Sable, Michael J. McCaney, Jr., Asst. Counsels, Kenneth B. Allen, Dept. of Transp., Harrisburg, for appellee.

Robert M. Keener, Sayers, King, Keener & Nalitz, Waynesburg, for Harold L. Mitchell.

Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, ZAPPALA and PAPADAKOS, JJ.

OPINION ANNOUNCING THE JUDGMENT OF THE COURT

FLAHERTY, Justice.

On October 19, 1978, Harold L. Mitchell, Mark G. Shultz, and Edward G. Cummins were named in a federal indictment for fraudulently obtaining state highway contracts. These three men, acting with one Stephen Koratich, formed a business entity, the Cummins Construction Company, to lease construction equipment to the Pennsylvania Department of Transportation, (hereinafter "the department"), Greene County Maintenance Office. Shultz, the appellant herein, was the Greene County Sheriff and the Democratic Chairman. He had the power to determine who would lease equipment to the department and who would be hired by the department. Mitchell worked in the department from 1971 until 1978. During this time, Mitchell personally approved and signed thirty-six rental agreements between the department and Cummins Construction Company, of which he was a secret owner.

The State Adverse Interest Act provides:

No State employe shall influence, or attempt to influence, the making of or supervise or in any manner deal with any contract in which he has an adverse interest.

71 P.S. § 776.4. The contracts which were executed between Cummins Construction Company and the department contained the following provisions:

NO OWNER, whether as an individual, member of a firm as partner, manager, officer, stockholder, shall be an employee of the Department of Transportation nor be related by blood or marriage to any employee in a supervisory capacity with the Department of Transportation, nor shall any employee of the Department of Transportation have any pecuniary interest in the proceeds of the agreement either as an employee of OWNER or otherwise, and OWNER hereby certifies such to be the fact. The OWNER hereby agrees that for violation of this condition of the agreement, the agreement shall be terminated and the OWNER shall, upon demand, pay to the COMMONWEALTH under the terms of this agreement, and further, upon failure, refusal or default, OWNER or OWNERS do hereby empower any attorney, or the prothonotary of any court of record within this COMMONWEALTH or elsewhere to confess judgment against said OWNER or OWNERS for the full amount of all rentals paid by the COMMONWEALTH under and by virtue of this agreement, with the costs of suit and release of all errors, together with attorneys commission of 5% and interest, without stay of execution, waiving inquisition and condemnation of any real estate and do hereby waive the benefit of any law or laws in force or which may hereafter become in force, exempting property from levy and sale upon execution.

This contract provision requires that no department employee be an owner or have any pecuniary interest in the leasing company. However, Mitchell was a departmental employee and also an owner of Cummins Construction Company, and Mitchell and the other owners concealed Mitchell's ownership interest in Cummins Construction from the department. The essence of the fraud with which Shultz, Mitchell and Cummins were charged was that they made misrepresentations to the department concerning ownership of the leasing company, and as a result of these misrepresentations, were able to secure leasing contracts. Federal law was involved because the United States mails were utilized in securing signed copies of the contracts.

Shultz, Mitchell and Cummins were brought to trial on the federal indictment and the trial resulted in a hung jury. When Shultz and Mitchell learned that Cummins would testify against them at a second trial, they entered into a plea bargain with federal authorities. After a lengthy plea bargain colloquy, Shultz and Mitchell pled guilty to one count of violating 18 U.S.C. § 1341 and § 2. At the guilty plea colloquy, the trial court explained the offenses to both defendants as follows:

Now if this case were to go to trial, with respect to count one, the government would have to prove three essential elements of this offense and they would have to prove it to the satisfaction of a unanimous jury, and the three essential elements which the government would be required to prove are, first, the act or acts of having devised or having intended to devise a scheme or artifice to defraud, or to attempt to defraud a department of government out of property or money or credit by means of false or fraudulent representations.

Second, the government would have to prove the act or acts of placing or causing to be placed in an authorized depository for mail matter a letter intended to be sent or delivered by the post office department as charged; and third, the act or acts of so using or causing the use of the United States mails willfully and with the specific intent to carry out some essential step in the execution of the scheme or artifice to defraud or to attempt to do so as charged....

The other section of the United States Code with which you are charged with violating is 18 United States Code, Section 2, and it states that whoever commits an act against the United States or aids, abets, counsels, induces or procures its commission is punishable as a principal, and what that means is that if a person helps another in procuring the commission of a crime, that person may be punished just as the principal person in the commission of the crime is punished.

Reproduced Record 178a-180a.

Following this explanation and a colloquy on the defendants' rights generally, the court questioned Shultz as follows:

THE COURT: Mr. Shultz, why did you decide to plead guilty?

MR. SHULTZ: Well, basically what's in the indictment is true, Your honor.

Reproduced Record, 189a. ¹

As a result of the guilty plea colloquy, the United States District Court for the Western District of Pennsylvania accepted the guilty pleas of Shultz and Mitchell to Count One of the federal indictment, one act of mailing materials connected with their fraudulent scheme to secure leasing contracts with the Pennsylvania Department of Transportation. The remaining twenty counts of the indictment, which concerned other mailings based on the same scheme, were dismissed, and on July 6, 1979, Mitchell and Shultz were sentenced to six months in prison, three years probation, and fined $1,000 each.

On January 26, 1981 the department filed a complaint in equity in Commonwealth Court against Mitchell, Shultz, Cummins and two corporations formed by these individuals. An amended complaint was filed on December 29, 1982. Shultz and Mitchell filed answers to both complaints. Mitchell is now deceased and is succeeded by the Estate of Harold L. Mitchell. Default judgment was entered against Cummins for lack of appearance and defense. One of the corporations, Appalachian Pipeline, was removed at the request of the defendant.

Based on the guilty plea, the department moved for summary judgment. On May 20, 1985, Commonwealth Court granted summary judgment as to liability only against Shultz and Mitchell. An appeal to this Court from that judgment was quashed on November 22, 1985. Thereafter the department moved for summary judgment on the issue of damages, and on May 2, 1986 Commonwealth Court granted that motion also, awarding damages in the amount of $892,450.71, the full amount of rentals paid by the department. The damages were assessed against Shultz and the estate of Mitchell. Shultz now appeals as of right from the lower court's order.

The issues in this case are whether summary judgment may be granted in a civil case based upon a plea bargained admission of guilt to the charge of defrauding the Commonwealth; and secondly, whether summary judgment was properly granted in this case as to damages.

The first issue is whether summary judgment may be granted based upon a guilty plea in a criminal case, the operative facts of which are identical to those which would be litigated in the civil case, and which, if proved, would establish civil liability. In Hurtt v. Stirone, 416 Pa. 493, 206 A.2d 624 (1965), the trustee in bankruptcy of a concrete contractor sued to recover sums extorted from the contractor by one Stirone. The trustee's claim was that Stirone threatened to use his position as a "labor leader" to cause the contractor to lose certain construction contracts which he then had unless the contractor paid a certain sum of money. As a result of the payments at issue in the trustee's case, but prior to trial of the trustee's case in Pennsylvania courts, Stirone was tried and convicted in federal court of violation of the Hobbs AntiRacketeering Act. His federal conviction was introduced in the trustee's case as some evidence of duress and to impeach Stirone. The trial court charged the jury that the defendant's record of criminal conviction was conclusive evidence of extortion, and therefore, the plaintiff was entitled to a directed verdict for the sums paid. In the appeal which followed, this Court formed the issue as follows:

In a civil suit against a convicted extortioner to recover the extorted money, is proof of the conviction of the extortion conclusive evidence of the fact of extortion?

416 Pa. at 496, 206 A.2d at 625. After noting that...