Opinion
No. 1998 C.D. 2006.
Submitted: February 23, 2007.
Filed: April 5, 2007. Order: June 29, 2007.
ORDER
AND NOW, this 29th day of June, 2007, it is ORDERED that the above-captioned opinion filed April 5, 2007 shall be designated OPINION rather than MEMORANDUM OPINION, and it shall be reported.
Richard A. Minford (Minford) petitions for review from the order of the Secretary of the Commonwealth, Pedro A. Cortes (Secretary), which determined that the initial financing statement (Financing Statement) Minford filed, involving the Porter Tower Municipal Authority (Authority) was fraudulent and ordered the Department of State (Department) to file a correction statement (Correction Statement) and refer the matter to the Pennsylvania Office of the Attorney General for criminal prosecution.
Section 9518(d)(1)(ii) of the Uniform Commercial Code, Division 9, Secured Transactions (Act), 13 Pa.C.S. § 9518(d)(1)(ii), provides:
The Department of State may conduct an administrative hearing to determine if an initial financing statement was fraudulently filed in accordance with the following:
. . . .
(ii) If the department determines that the initial financing statement was fraudulently filed and no timely appeal of the determination was filed, the department shall file a correction statement with respect to the initial financing statement indexed there. In addition to complying with the requirements of subsection (b), the correction statement filed by the department under this paragraph shall state all of the following: (A) the correction statement was filed by the department under this subsection;
(B) the department has determined that the initial financing statement was fraudulently filed and that the person had the right to appeal the decision to a court of competent jurisdiction;
(C) the initial financing statement found to be fraudulently filed may be ineffective; and
(D) the reasons why the department found the initial financing statement to have been fraudulently filed. (emphasis added).
Minford had owned property in the Authority's service area and was a customer. Minford became delinquent on sewage bills. The Authority placed at least one lien against Minford in the Court of Common Pleas of Schuylkill County. On July 13, 1994, the Authority ceased water service to Minford's property.
On July 12, 2004, Minford sent the Authority an invoice in the total amount of $56,099,000.00. Along with the invoice, Minford included a letter which stated that failure to pay the invoice within ten days "may result in legal action or collection activities wherein you may lose rights important to you." Letter from Richard A Minford, July 12, 2004, at 1. Minford sent similar letters to the Authority which the Authority ignored on the advice of counsel. Minford sued the Authority in the Court of Common Pleas of Schuylkill County but did not receive a judgment in his favor.
The following items were listed on the invoice:
Item 1. Cost for exceeding the limitations and violating the conditions of our master contract to which your actions resulted in the loss of use of property located at 5-7 East Grand Avenue, Tower City, Pennsylvania 17960 based on date you arbitrarily took control of service necessary for life, living, and habitation. . . July 13, 1994 through September 25, 2003, during which time said property remained uninhabitable under your arbitrary control, and unable to produce necessary revenue, was sold at tax sale by the County.
Income potential of property = 875.00 per month at 116 months under your arbitrary control ____ = $101,500.00
Item 2. Cost for exceeding the limitations and violating the conditions of our master contract to which your actions resulted in the loss of property located at 5 — 7 East Grand Avenue, Tower City Pennsylvania, which was sold at a tax sale resulting from your arbitrary control of necessary life sustaining services which rendered the dwelling uninhabital [sic] and thus unable to produce income under your control.
Amount Due __ =$37,500.00
Item 3. Cost for exceeding the limitations and violating the conditions of our master contract to which your actions resulted in civil injuries inflicted by the deprivation of Rights secured in, and guaranteed by, the Constitution of this Commonwealth and the Constitution of the United States of America at a cost of $1000 per each deprivation (this invoice = 15 deprivations) per day with each being a separate violation form the date of your `taking' control of said property (July 13, 1994) until date property was sold at tax sale (Sept. 25, 2003), being 3,364 days.
Amount Due__=$50,460,000.00
Item 4. Cost for exceeding the limitations and violating the conditions of our master contract to which your actions resulted in injuries inflicted upon the peace, dignity, reputation, as well as the mental and physical aspects of my living being by your actions.
Amount Due ___ $5,500,000.00
TOTAL AMOUNT _________ DUE AND PAYABLE = $56,099,000.00.
On August 25, 2005, Minford filed the Financing Statement with the Department which listed the Authority as a debtor and stated, "[t]his lien is intended to cover all collateral and accounts recievable [sic] owned or controlled [sic] by the debtor, it's [sic] Officers, employees, principals, and agents, in their official, professional, and private capacities, until satisfaction of undisputed debt amount of $56,099,000.00 is paid." UCC Financing Statement, August 25, 2005, at 1. Minford included a document he titled as a "Truth Affidavit in the Nature of Supplemental Rules for Administrative and Maritime Claims Rules C(6)" (Truth Affidavit) which asserted:
Along with the Financing Statement, Minford filed a "Truth Affidavit in the Nature of Supplemental Rules for Administrative and Maritime Claims Rules C(6)" which listed seventeen "facts" regarding his dealings with the Authority and which stated that the Authority was estopped from asserting any rights in its defense because the Authority had not responded to the invoices.
11. FACT: The Authority has been advised of the loss of rights they may have possessed with regards to the claim at hand, and have chosen by their actions to waive those rights.
12. FACT: Porter Tower Joint Municipal Authority, et.al. [sic] is now estopped from asserting any rights which may have been precluded by their acts, conduct, or silence when it was their duty to speak pursuant to the doctrine of estopple [sic].
Truth Affidavit in the Nature of Supplemental Rules for Administrative and Maritime Claims Rules C(6), Paragraphs 11-12 at 2; Reproduced Record at R-4a.
In May 2006, the Authority was notified by letter from the Department of State, Office of Chief Counsel of the existence of the Financing Statement. On May 30, 2006, the Authority's counsel notified Minford by letter that the Authority believed that the Financing Statement was fraudulent and planned to take action, including possible referral to the Pennsylvania Office of Attorney General for criminal prosecution, if the Financing Statement was not satisfied in ten days. On June 15, 2006, the Authority petitioned the Secretary and requested that the Department file a Correction Statement because no rational basis existed for the Financing Statement under Section 9509(a) of the Act, 13 Pa.C.S. § 9509(a).
Section 9509(a) of the Act, 13 Pa.C.S. § 9509(a), provides:
(a) Person entitled to file a record.— A person may file an initial financing statement, amendment which adds collateral covered by a financing statement or amendment which adds a debtor to a financing statement only if:
(1) the debtor authorizes the filing in an authenticated record or pursuant to subsection (b) or (c); or
(2) the person holds an agricultural lien which has become effective at the time of the filing and the financing statement covers only collateral in which the person holds an agricultural lien.
The Chief Hearing Examiner for the Secretary heard the matter on July 14, 2006. Minford appeared at the hearing "to remove any presumption you may have, whether it be implied or real, that I am given this authority, jurisdiction to conduct that hearing." Notes of Testimony, July 14, 2006, (N.T.) at 3-4. Minford objected to the proceeding and claimed he was not a party because he had not "knowingly or intentionally agreed to be bound by Statute, codes, regulations, which were enacted to govern the control and behavior of the statutorily created corporations." N.T. at 9-10. Minford submitted a "Denial of Corporation Existence" which stated that he, the Authority, the Department, and the Commonwealth of Pennsylvania among other entities did not exist as corporations. He further explained that the Secretary did not have jurisdiction over him:
I do not acquiesce or consent to the rules of your house as established for your artificial children.
If a controversy were to exist regarding the instant matter, which it does not, a Court of competent jurisdiction could be convened to deal with that controversy.
This disputed proceeding, however, does not have jurisdiction to impose its limited color of law authority upon me or the matter it conspired to raise.
This proceeding in essence is a sham. It was designed to misrepresent, conceal, or ignore vital qualifying material facts.
Now, the administrative process does have a very specific intent and purpose and legitimacy when it comes to deciding issues between consenting parties or between fictions that the state created.
It does not, however, have the jurisdiction to impose its authority on a real living person like myself.
N.T. at 13-14.
On the merits, Minford asserted that the Authority authorized him to speak for them and file the Financing Statement because it did not respond to his Truth Affidavit. N.T. at 17. Minford admitted that he was delinquent on his bill to the Authority in 1994 because of some "bad tenants." N.T. at 46. Minford explained that he tried to negotiate a payment schedule for the delinquency, but the Authority refused. When the water service was turned off, his new tenants moved out. N.T. at 47. Minford admitted that the amounts he billed the Authority were "questionable." N.T. at 49. Wayne Orlick (Orlick), Superintendent of the Authority, testified that the Authority filed liens against Minford's property and arranged for the water to be shut off. N.T. at 29. Orlick testified that the Authority never agreed to pay Minford any money, never acknowledged that it owed Minford any money, and never entered into a security agreement with Minford which secured any debt owed to Minford. N.T. at 30. Orlick further testified that the Authority never agreed to the filing of the Financing Statement and that Minford had no agricultural lien against the Authority. N.T. at 32.
The Secretary determined that he had jurisdiction:
The Secretary has subject matter jurisdiction in this matter under section 9518 (claim concerning inaccurate or wrongfully filed record). The Secretary has personal jurisdiction over Respondent [Minford] in this matter because Respondent [Minford] filed the financing statement at issue under section 9509 (persons entitled to file a record). Respondent [Minford] cannot avail himself of the laws of the Commonwealth of Pennsylvania for purposes of filing a financing statement and then turn around and assert that he is not subject to those same laws for purposes of determining whether the financing statement was fraudulently filed.
Secretary of the Commonwealth, Adjudication and Order, September 26, 2006, at 11.
On the merits, the Secretary credited Orlick's testimony. Because there was no agreement and no agricultural lien, the Secretary found that no rational basis existed for Minford to file the Financing Statement against the Authority. The Secretary also determined that Minford filed the Financing Statement to annoy, harass or harm the Authority. The Secretary ordered the Department to file a Correction Statement in conformity with Section 9518(d)(1) of the Act, 13 Pa.C.S. § 9518(d)(1) and to refer the matter to the Pennsylvania Office of the Attorney General for criminal prosecution pursuant to 13 Pa.C.S. § 9518(d)(1)(vi) and the Pennsylvania Crimes Code at 18 Pa.C.S. § 4911.
Minford contends that the Secretary erred when he determined that he had subject matter jurisdiction, when he determined there was personal jurisdiction, and when he failed to properly equate the sufficiency of the evidence. Minford further contends that the Secretary was biased.
This Court's review is limited to a determination of whether there was a violation of constitutional rights, an error of law was committed, or whether necessary findings of fact were supported by substantial evidence. Gruff v. Department of State, 913 A.2d 1008 (Pa.Cmwlth. 2006).
Initially, Minford contends that the Secretary did not have subject matter jurisdiction because Section 1103 of the Act, 13 Pa.C.S. § 1103, provides: "Unless displaced by particular provisions of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principle and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions." Minford argues that his Truth Affidavit proved that the Secretary did not enjoy "discretionary authority" over his filing of the Financing Statement. He argues there was no showing that the Secretary was vested with jurisdiction to act pursuant to Section 9509 of the Act, 13 Pa.C.S. § 9509, and that his denial and refusal to participate in a "deceptive scheme" deprived the Secretary of jurisdiction.
Subject matter jurisdiction is conferred by the Constitution and laws of this Commonwealth. Heath v. Workers' Compensation Appeal Board (Board of Probation and Parole), 580 Pa. 174, 860 A.2d 25 (2004). "[T]he test for determining whether a court has jurisdiction of the subject matter is competency of the court to determine controversies of the general class to which the case presented for its consideration belongs."Strank v. Mercy Hospital of Johnstown, 376 Pa. 305, 309, 102 A.2d 170, 172 (1954) (emphasis in original). The issue is whether "the court had power to enter upon the inquiry, not whether it might ultimately decide that it was unable to grant the relief sought in the particular case."Id.
Although the Secretary is not a "court," the same rationale applies. Under 9518(d) of the Act, 13 Pa.C.S. § 9518(d), the "Department of State may conduct an administrative hearing to determine if an initial financing statement was fraudulently filed." Here, it is undisputed that Minford filed the Financing Statement with the Department. The Authority asserted that the Financing Statement was fraudulent. Clearly, the Secretary as head of the Department, had authority to conduct a hearing to determine if the Financing Statement was, indeed, fraudulent. The Secretary had subject matter jurisdiction pursuant to the Act.
Next, Minford contends that he was not subject to personal jurisdiction because he refused to consent, submit, and cooperate and he was not a corporation or other statutorily created entity.
Personal jurisdiction is generally acquired by service upon the person within the territorial limits of the court's authority. Fraisar v. Gillis, 892 A.2d 74 (Pa.Cmwlth. 2006). Here, the Authority filed its petition and served Minford. Even if Minford returned all documents he received in connection with this controversy, it did not deprive the Secretary of jurisdiction. Minford cites no case law for the proposition that a person may decline to submit to the Department's or the Secretary's authority simply because that person refuses to participate in a "deceptive scheme." This issue has no merit.
Minford next contends that the Secretary's decision was not supported by substantial evidence. Minford asserts that because the Authority did not respond to his Truth Affidavit that the statements contained therein must be accepted as true and the Authority is estopped from any challenge. Once again, Minford does not provide statutory, regulatory, or case law support for this proposition.
In order to file a Financing Statement under Section 9509(a) of the Act, 13 Pa.C.S. § 9509(a), a creditor must have the debtor's authorization or the creditor must hold an agricultural lien against the debtor. Orlick testified that the Authority never authorized the Financing Statement and that Minford did not have an agricultural lien against the Authority. Orlick further denied that the Authority owed Minford any amount. The Secretary accepted Orlick's testimony which plainly established that the Financing Statement was fraudulent.
Finally, Minford contends that there was a conflict of interest because the Authority is statutorily created and the Secretary is part of the Commonwealth government. To show impermissible bias, the interest of the adjudicator in the outcome of the controversy must be direct and substantial. Subaru of America, Inc. v. State Board of Vehicle Manufacturers, Dealers and Salespersons, 842 A.2d 1003 (Pa.Cmwlth. 2004). Impermissible bias requires the party who asserts the bias to produce evidence particular to the adjudicator and particular to the controversy. A disqualifying bias is not simply inferred from the adjudicator's status, particularly where the status is statutorily required. Pre-Need Family Services Eastern Region v. Bureau of Professional and Occupational Affairs, 904 A.2d 996 (Pa.Cmwlth. 2006). Minford failed to produce evidence that the Secretary had a direct and substantial interest in the outcome.
Accordingly, this Court affirms.
AND NOW, this 5th day of April, 2007, the order of the Department of State, Secretary of the Commonwealth in the above-captioned matter is affirmed.