U.S. v. Harvey

• Court: U.S. District Court — Southern District of Indiana
• Writing for the Court: Tinder
• Citation: U.S. v. Harvey, 68 F.Supp.2d 1001 (S.D. Ind. 1997)
• Decision Date: 07 July 1997
• Docket Number: No. IP 96-0554-C-T/G.,IP 96-0554-C-T/G.
• Parties: UNITED STATES of America, Plaintiff, v. Charles H. HARVEY, Sam G. Craig II, Donald L. Goggins, James G. Goggins, Calvin A. Wantland Jr., Deci-Ma Management Corp., Rockwood Partnership, and Wyckford Associates, limited partnership, Defendants.

Page 1001

68 F.Supp.2d 1001

UNITED STATES of America, Plaintiff, v. Charles H. HARVEY, Sam G. Craig II, Donald L. Goggins, James G. Goggins, Calvin A. Wantland Jr., Deci-Ma Management Corp., Rockwood Partnership, and Wyckford Associates, limited partnership, Defendants.

No. IP 96-0554-C-T/G.

United States District Court, S.D. Indiana, Indianapolis Division.

July 7, 1997.

Marsha C. Massey, Assistant United States Attorney, Indianapolis, IN, for U.S.

Irving Fink, Yosha, Ladendorf & Krahulik, Indianapolis, IN.

Robert A. Rose, Charles V. Traylor, Dan, Pecar, Newman & Kleiman, Indianapolis, IN.

Thomas C. Scherer, Bingham, Summers, Welsh & Spilamn, Indianapolis, IN. Entry Addressing Summary Judgment Matters

TINDER, District Judge.

The court, having considered the numerous documents filed in conjunction with the parties' summary judgment motions in this matter, finds that Defendants' motions for summary judgment will be DENIED IN PART and GRANTED IN PART, and that Plaintiff's cross-motion for summary judgment will be DENIED.

I. Introduction

The government brought this action on behalf of the Secretary of the Department of Housing and Urban Development ("HUD"). The HUD Secretary ("Secretary") seeks civil damages allegedly arising from the "unauthorized use, unsupported expenditures of assets and income of the Woodbrook Apartments, and the retention of monies in constructive trust by the Defendants in violation [of] a regulatory agreement with the Secretary." (Second Am. Compl. ¶ 1.)

The government's Second Amended Complaint is structured in six counts. Counts I, IV and VI seek a constructive trust for allegedly unauthorized distributions of funds. (Second Am. Compl., at 6-7, 10-11.) Counts II, III and V seek statutory damages. (Id., at 7-11.) In a nutshell, the government, alleging that Defendants Harvey, Craig, D. Goggins and J. Goggins breached their contract with HUD by making unauthorized payments from project funds, seeks money damages pursuant to equitable and legal remedies. (Br. Supp. Pl.'s Mot. Summ. J. and Resp. to Def.s' Mot. Summ. J. at 1.)

Additionally, Defendant Craig filed an indemnification cross-claim against Defendant Harvey.¹ (Answer of Sam G. Craig, II, Donald L. Goggins and James G. Goggins to Second Am. Compl., Affirmative Defenses and Cross-cl. of Sam G. Craig, II at 7-9.)

A brief synopsis of the nearly twenty-five documents dealing with summary judgment filed in this case follows. Defendants Harvey, Wantland, Deci-Ma, Rockwood Partnership ("Rockwood") and Wyckford Associates ("Wyckford") (collectively "Harvey Defendants") filed a motion for summary judgment on December 30, 1996. The government incorporated in its response to this motion, filed February 10, 1997, a cross-motion for summary judgment. On February 6, 1997, Defendants Craig, D. Goggins and J. Goggins (collectively "Craig Defendants") filed an independent motion for summary judgment. The Harvey Defendants moved to join in the Craig Defendants' motion for summary judgment on February 12, 1997. The court granted the motion to join. Although the Harvey Defendants did not formally join in the Craig Defendants' reply, neither did they disavow the reply; therefore, the court deems that the Harvey Defendants have also joined in the Craig Defendants' reply. The government filed a separate response to each of the motions for summary judgment filed by the two groups of Defendants. Each group of Defendants filed oppositions to the government's summary judgment motion; the government in turn filed a separate reply to each opposition.

The following material facts are not in dispute. Defendants Harvey, Craig, D. Goggins and J. Goggins became general partners in the "Woodbrook Associates" limited partnership formed under Indiana's Uniform Limited Partnership Act on July 2, 1980. (Br. Supp. Pl.'s Mot. Summ. J. and Resp. to Def.s' Mot. Summ. J. at 2.) On August 20, 1980, Harvey, on behalf of the partnership, entered into a Regulatory Agreement for Insured Multi-Family Housing Projects ("Agreement") covering the Woodbrook Apartments project. (Id. at 2-3.) The Agreement provides that "surplus cash" cannot exist if Woodbrook Associates defaults on its mortgage to HUD. (Id. at ¶ 16(f).) Woodbrook Associates defaulted on the mortgage in 1987. (Br. Supp. Pl.'s Mot. Summ. J. and Resp. to Def.s' Mot. Summ. J. at 3.) The Agreement further specifies that the Secretary must give the partnership written approval to distribute assets of Woodbrook Associates, other than "surplus cash, except for reasonable operating expenses and necessary repairs." (Def.s' Ex. E, Agreement ¶¶ 8(b) & (e).) The following allegedly improper post-1987 payments made by Woodbrook Associates, therefore, were definitionally not made from surplus funds: (1) $166,944 repayment of advances paid to Deci-Ma Management between April 29 and December 14, 1988, (id. at 5); (2) $10,000 management fee paid to Wantland, on June 29, 1988, (id. at 5-8); (3) $378.28 travel expenses paid to Wantland on August 23, 1988, (id. at 8); (4) $3,825 repayment of advances paid to Rockwood Apartments on April 29, 1988, (id. at 8-9); and (5) $3,000 repayment of advances paid to Wyckford Commons on December 14, 1988, (id.). The foregoing payments were revealed to HUD in Woodbrook Associates's monthly income and expenditures reports. (Id. at 8-10.) On December 8, 1988, and January 4 and 31, 1989, HUD protested to, and demanded repayment from, Woodbrook Associates for all of the foregoing disbursements except for the repayment of advances to Rockwood and Wyckford. (Id. at 5-8.) HUD received an audit of Woodbrook Associates's 1988 financial statements on August 18, 1992. (Id. at 9.)

The monthly reports also revealed that Woodbrook Associates used other than surplus funds to make allegedly improper disbursements between December 5, 1990, and April 25, 1996, to pay: (1) $24,810.00 to Chateau, Inc. for market studies, (id. at 10); (2) $32, 350.00 to the bankruptcy trustee, (id. at 11-13); (3) $1,500 in appraisal fees, (id. at 13-14); (4) $3,887.00 to Harvey for general partner travel expenses, (id. at 14-15); (5) $5,606.00 for partnership legal fees, (id. at 15-16); and (6) $2,284.00 for secretarial services, (id. at 16-17).

II. Summary Judgment Standard

The Seventh Circuit stated the standard for summary judgment in Logan v. Commercial Union Ins. Co., 96 F.3d 971 (7th Cir.1996):

Under Fed. R. CIV. P. 56(c), summary judgment is warranted only if "there is no genuine issue as to any material fact and [] the moving party is entitled to a judgment as a matter of law."

The initial burden of production rests with the moving party to identify "those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986) (quoting Fed. R.Civ.P. 56(c)). Once the moving party satisfies this burden, the nonmovant must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).

Id. at 978. The nonmovant cannot just demonstrate some factual disagreement between the parties; the issue must be "material." Irrelevant or unnecessary facts do not preclude summary judgment even when they are in dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). There is no genuine issue for trial "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party...." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); see also Sokaogon Chippewa Community v. Exxon Corp., 2 F.3d 219, 225 (7th Cir.1993), cert. denied, 510 U.S. 1196, 114 S.Ct. 1304, 127 L.Ed.2d 655 (1994); Colosi v. Electri-Flex Co., 965 F.2d 500, 503-04 (7th Cir.1992). If there is no genuine issue of material fact, the only question is whether the moving party is entitled to judgment as a matter of law. Miranda v. Wisconsin Power & Light Co., 91 F.3d 1011, 1014 (7th Cir.1996).

III. Discussion

Before discussing the merits, the court must address Defendants' evidentiary objections to the Declaration of Sam Burch. The gist of Defendants' objection is that witnesses cannot testify as to ultimate issues. (Def.s' Evidentiary Objs. to Certain Ev. Offered Supp. Pl.'s Mot. Summ. J.) To the contrary, however, testimony "is not objectionable because it embraces an ultimate issue to be decided by the trier of fact." Fed.R.Evid. 704(a); United States v. Allen, 10 F.3d 405, 414 (7th Cir.1993). Thus, testimony that is rationally based on Burch's personal perception is admissible to the extent that it is helpful to the trier of fact. United States v. Saulter, 60 F.3d 270, 276 (7th Cir.1995); Allen, 10 F.3d at 415. Mr. Burch, of course, cannot make legal conclusions for the court; however, while not dispositive, an Agency's interpretations of its regulations is given deference. Green v. Shalala, 51 F.3d 96, 100 (7th Cir.1995). Consequently, Defendants' objection to portions of Burch's declaration is OVERRULED with respect to factual issues helpful to the court, and SUSTAINED with respect to legal issues.

The court now addresses a second preliminary matter concerning the applicable law in this case. The Defendants' imply that Indiana state law should govern the imposition of a constructive trust in this case. (Harvey Def.s' Br. Opp'n Pl.'s Mot. Summ. J. at 4-6.) The government counters that Indiana law is not applicable because the United States is a party. (Pl.'s Reply Harvey Br. Opp'n Pl.'s Mot. Summ. J. at 5.) Neither side cites any authority for these contradictory assertions.

The court finds that Indiana law should inform its decision. Although it is axiomatic that federal law governs questions concerning the interpretation of a federal statute, see Kamen v. Kemper...