National Life Insurance Company v. Silverman

• Decision Date: 23 March 1971
• Docket Number: No. 23594,23595.,23594
• Citation: National Life Insurance Company v. Silverman, 454 F.2d 899, 147 U.S.App.D.C. 56 (D.C. Cir. 1971)
• Parties: NATIONAL LIFE INSURANCE COMPANY, a corporation v. Jerome SILVERMAN et al., Appellants. CARROLL ARMS ASSOCIATES, a District of Columbia Limited Partnership, et al., Appellants, v. NATIONAL LIFE INSURANCE COMPANY, a Vermont Corporation, a/k/a National Life of Vermont, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

147 US App. DC 56, 454 F.2d 899 (1971)

NATIONAL LIFE INSURANCE COMPANY, a corporation v.Jerome SILVERMAN et al., Appellants.

CARROLL ARMS ASSOCIATES, a District of Columbia Limited Partnership, et al., Appellants, v.NATIONAL LIFE INSURANCE COMPANY, a Vermont Corporation, a/k/a National Life of Vermont, et al.

Nos. 23594, 23595.

United States Court of Appeals, District of Columbia Circuit.

Argued June 19, 1970.

Decided March 23, 1971.

On Reconsideration December 9, 1971.

COPYRIGHT MATERIAL OMITTED

Mr. Edward L. Genn, Washington, D. C., for appellants.

Mr. John C. Joyce, Washington, D. C., with whom Mr. E. Tilman Stirling, Washington, D. C., was on the brief, for appellees.Mr. William W. Beckett, Washington, D. C., also entered an appearance for appelleeNational Life Insurance Company.

Before BAZELON, Chief Judge, WRIGHT, Circuit Judge, and MATTHEWS,^*Senior District Judge, U. S. District Court for the District of Columbia.

On Reconsideration En Banc December 9, 1971.

MATTHEWS, Senior District Judge:

This litigation centers around a foreclosure sale of the Capitol Hill Hotel by trustees pursuant to a deed of trust.From a judgment of the United States District Court upholding the foreclosure and awarding possession of the hotel to the purchaser at the sale, the prior owners appeal.They are: Carroll Arms Associates(hereafter "Carroll Arms"), a District of Columbia limited partnership, and its general partners, Jerome Silverman and his wife, Greta Silverman.The appellees are the National Life Insurance Company(hereafter "National Life"), — the party secured by the deed of trust on the hotel property —, and Thomas J. Owen and Robert W. Kidwell, the trustees who made the foreclosure sale under such deed of trust.

As grounds for this appeal Carroll Arms assert that the district court erred (1) in granting partial summary judgment in favor of National Life as to the issue of usury, (2) in holding that the District of Columbia Money Lenders Act exempts National Life from obtaining a license as a money lender, (3) in striking the demand of Carroll Arms for a jury trial, and (4) in the standards used in its fact-finding determinations in respect of the trustees.

We relate the background of this litigation.National Life made a loan of $1,300,000 to Carroll Arms, then owners of the hotel property, the loan being evidenced by a promissory note dated November 30, 1967, signed by Mr. Silverman and his wife, the general partners of Carroll Arms.The purpose of the loan was to provide funds for refinancing the hotel property and for completely refurbishing and renovating the hotel, its restaurant and bar.In order to secure the payment of the $1,300,000 note, a deed of trust of the same date, also signed by the Silvermans, was placed on the real property of the hotel and on the chattels used in and about the hotel operation.

Carroll Arms has made no payment whatsoever to National Life since the day the $1,300,000 was loaned, and various requirements of the deed of trust have not been met.

On May 6, 1968the trustees under the deed of trust, at the request of the noteholder, advertised the property for sale on May 21, 1968, and notified Carroll Arms accordingly.On May 17, 1968counsel for Carroll Arms advised the trustees of an error in the advertisement relative to the amount of the deposit,¹ and simultaneously filed an action against National Life and the trustees challenging the proposed foreclosure.²

Recognizing the error in the advertising, the trustees cancelled the sale scheduled for May 21, and set June 13 as a new date for the sale.The advertisement containing the corrected deposit figure was placed in the Washington Star on June 1, 1968, and was published in 5 different issues over a period of 13 days.In addition to personal notice to Carroll Arms and the newspaper advertisements, notice of the proposed foreclosure sale was furnished to the so-called "Lusk Report" which is circulated to the top investors and real estate brokers in the Washington Metropolitan Area.

On the afternoon of Thursday, June 13, 1968, in front of the hotel the foreclosure sale itself was held.About 20 to 30 people were present.National Life, the noteholder, bid $900,000 and after several requests for other bids, the auctioneer declared the property sold to National Life.There was at least one other person present who exhibited a $25,000 check, $25,000 being the deposit specified in the June advertisements of the sale.

The day following the foreclosure sale, the trustees executed and delivered a deed conveying the hotel property to National Life as the successful bidder at the sale.On that same day, National Life requested Carroll Arms to vacate the hotel but this request was refused.

Thereafter National Life, treating Carroll Arms as a tenant at will pursuant to statute,³ gave Carroll Arms notice to quit the hotel premises.⁴When they did not quit, National Life sued Carroll Arms in the Landlord and Tenant Branch of the District of Columbia Court of General Sessions for possession of the real estate, alleging that it was held without right by Carroll Arms.However, Carroll Arms interposed a plea of title.The Court of General Sessions, not having jurisdiction to try title, certified the action to the United States District Court in accordance with D.C.Code § 16-1504(1967 ed.).It was consolidated for trial with the action Carroll Arms had previously filed in District Court.

THE JURY TRIAL DEMAND

A demand for a jury trial was made by Carroll Arms in each of the two consolidated cases.They claim that a jury trial was their right.

We refer briefly to the historical background of this claim.The United States Constitution, Article III, Section 2, provides: "The judicial Power shall extend to all Cases, in Law and Equity, * *" The Seventh Amendment to the Constitution guarantees the right of trial by jury in "Suits at common law."⁵Originally there was no blending together in one suit of legal and equitable remedies, but the "remedies in the courts of the United States" were either "at common law or in equity * * *"Lindsay v. First Nat. Bank of Shreveport, 156 U.S. 485, 493, 15 S.Ct. 472, 39 L.Ed. 505(1895).At common law a jury trial was available as of right in an action brought at law; in suits in equity, on the other hand, questions of fact were determined by the court sitting without a jury.

Under the Federal Rules of Civil Procedure which in 1938 became effective for the District Courts of the United States provision is made for but one form of action, known as a civil action, and a litigant is allowed to assert and to have resolved in one civil action both legal and equitable claims.As stated in Rule 18(a) thereof a party"may join, either as independent or as alternate claims, as many claims, legal, equitable, or maritime, as he has against an opposing party."

Although the joinder of legal and equitable claims is allowed in one action, the Federal Rules safeguard the right to jury trial of legal issues.Rules 38and39.

Nevertheless, the 1938 merger of the federal courts of law and equity caused considerable uncertainty in the determination of jury trial rights.But clarification came with two Supreme Court decisions each growing out of the denial by a United States Court of Appeals of a petition for mandamus to compel a district judge to vacate his order striking a demand for trial by jury.Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988(1959);Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44(1962).

In Beacon Theatresthe defendant had threatened to sue the plaintiff for treble damages on the ground that certain exclusive "first run" contracts plaintiff had with movie distributors violated the Sherman Act.But plaintiff beat the defendant to the court, seeking a declaratory judgment that its contracts were lawful and to enjoin defendant from bringing an antitrust suit against plaintiff and its distributors pending final resolution of plaintiff's action.Defendant answered, counterclaimed for treble damages, and demanded a jury trial on factual issues.The trial court, regarding the issues raised by the complaint as essentially equitable, ordered a separate trial of these issues before the court without a jury.The Supreme Court reversed and ordered the case submitted to a jury on the ground that where both legal and equitable issues are presented in a single case "only under the most imperative circumstances, circumstances which in view of the flexible procedures of the Federal Ruleswe cannot now anticipate, can the right to a jury trial of legal issues be lost through prior determination of equitable claims."359 U.S. 510-511, 79 S.Ct. 957.

Significantly the Supreme Court stated in Beacon Theatres:"Our decision is consistent with the plan of the Federal Rules and the Declaratory Judgment Act to effect substantial procedural reform while retaining a distinction between jury and nonjury issues and leaving substantive rights unchanged."(Emphasis added.)359 U.S. 508, 509, 79 S.Ct. 955, 956.

Dairy Queen involved a dispute about a written licensing agreement for the exclusive right to use the trademark "Dairy Queen" in a specified area.Plaintiffs alleged that defendant had breached the agreement as to certain payments due plaintiffs; that such breach resulted in cancellation of the contract; that defendant was contesting the cancellation and continuing to deal with the trademark despite plaintiffs' notice of cancellation; that to continue such business after the cancellation of the contract constituted an infringement of plaintiffs' trademark.The plaintiffs prayed for injunctive relief and an accounting to determine the exact amount owing by defendant to plaintiffs and a judgment for that amount.The defendant's answer included a denial that there had been any breach of contract, apparently based chiefly upon its allegation that the...