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Vanderbilt Law Review

Article Title

Recent Cases

First Page

357

Abstract

Civil Procedure--Service of Process--California Long-Arm Statutes Abrogate State's Immunity Doctrine

Seeking recovery of money owed him by defendant European corporations;' plaintiff brought suit in a California state court.While attending federal district court in Florida for the sole purpose of giving a deposition in a trademark infringement suit instituted by one of the corporations, defendants' representative was personally served with process in the California action on behalf of himself and the defendant corporations. Defendants moved to quash service of process on the ground that the immunity rule prohibited service of civil process upon a witness in attendance in a court outside of the territorial jurisdiction of his residence. Plaintiff countered by challenging the validity of the immunity rule in light of California's long-arm statutes. On the basis of the immunity doctrine as invoked by defendants, the California trial court granted defendants' motion to quash service of process made upon them in Florida. On appeal to the California Court of Appeal, held, reversed. The enactment of statutes expanding the reach of California's judicial process to every state and to territories outside the United States abrogates the state's common-law immunity doctrine, since such long-arm statutes eliminate the traditional justifications for the immunity rule.

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Constitutional Law--Right to Counsel--Due Process Entitles Convicted Indigents to Appointed Counsel in Petitioning for Discretionary Appeals

Appellant, an indigent whose separate felony convictions'had been affirmed on appeals as of right, sought writs of habeas corpus in two federal district courts alleging that state court refusals to appoint attorneys to assist him in the preparation of petitions for writs of certiorari in his efforts to obtain further, discretionary appellate review' denied him a constitutionally protected right to counsel. He contended that since the constitution required appointment of counsel on a guaranteed appeal, he should likewise be entitled to representation in seeking an analogous discretionary review by the state and federal supreme courts. Finding his argument without merit, the district courts refused to issue the writs. On appeal to the United States Court of Appeals for the Fourth Circuit, held, reversed and remanded.' Due process of law requires that an indigent defendant seeking permissive appeal be given the same assistance of court-appointed counsel to which he is entitled in exercising an initial appeal as of right.

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Constitutional Law --Right of Privacy--Personality Test Used by School to Identify Potential Drug Abusers Without Informed Consent of Parents Violates Student's and Parents' Right of Privacy

Plaintiffs, an eighth grade student' and his mother, brought suit against defendant school board to enjoin the implementation of a drug-abuse-prevention program (CPI) in which students were psychologically tested and then required to participate further in the program if test results showed them to be potential drug abusers. Plaintiffs alleged that the testing program, despite any positive aspects it might have, invaded their rights of privacy by asking personal questions relating to the family relationship' and by not specifically assuring confidentiality of test results. Plaintiffs further argued that students are entitled to exercise their constitutional rights and that the program was involuntary in the sense that the parental consent letter did not provide information sufficient to enable the making of an informed waiver of the constitutionally protected right of privacy. Defendants maintained, however, that the legislature had vested the school board with the discretionary power to act, to include the testing of its students, and that the program was justified by the overwhelming public interest in drug prevention. Rejecting defendants' contentions, the United States District Court for the Eastern District of Pennsylvania, held, judgment for plaintiffs." A school's use of a personality test that asks intimate questions about the family relationship to identify potential drug abusers without first obtaining the consent of properly informed parents constitutes a violation of the student's and parents' constitutionally protected right of privacy.

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Taxation--Capital Gains--Payment to Lessor in Satisfaction of Lessee's Obligation to Restore Premises Appears to Create Taxable Gain From the Sale or Exchange of Property Pursuant to Section 1231

Taxpayer-lessor reported payment received in satisfaction of alessee's obligation to restore the leased premises to their pre-lease condition as long-term capital gain pursuant to section 1231 of the Internal Revenue Code, which provides capital gains treatment for gains from the sale, exchange, or involuntary conversion of certain property used in the trade or business of the taxpayer.Taxpayer contended that the transaction constituted a "sale or ex-change" as an alternative to its other argument that the payment compensated for the destruction and removal of parts of the premises and therefore qualified as gain derived from involuntary conversion of the property. Rejecting taxpayer's contentions, the Tax Court characterized the payment as consideration for modification"' of the lessee's contractual obligation to restore the premises and upheld the commissioner's ruling that the payment yielded ordinary income. On appeal to the Second Circuit Court of Appeals, held, vacated and remanded. Payment to a lessor in satisfaction of a lessee's obligation to restore leased premises to pre-lease condition appears to be entitled to capital gains treatment as a sale or exchange of property pursuant to section 1231 of the Internal Revenue Code." The court reserved its final decision, however, pending resolution by the Tax Court of the latter's inconsistent treatment of restoration payments.

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Uniform Commercial Code--Suretyship--Surety's Equitable Priority in Defaulting Con-tractor's Retained Proceeds Does Not Extend to Contractor's Personal Property

Plaintiff surety brought a declaratory judgment action' to determine priorities between the surety and defendant bank-lender to proceeds from the sale of a defaulting contractor's personal property. The surety contended that completion of its suretyship obligations under performance bonds upon default of the contractor created a prevailing equitable lien' upon the proceeds. Surety maintained alternatively that even if its claim under the bond application provisions constituted a security interest under the Uniform Commercial Code, the secured transaction provisions of the Code did not apply." Arguing that the UCC properly governs this surety-lender conflict, defendant bank-lender, who had taken a security interest in the contractor's equipment to secure loans, asserted that it acquired priority over the surety' in the equipment sale proceeds by perfecting its security interest in the contractor's personal property in accordance with the applicable UCC provisions.'" The United States District Court for the District of South Dakota, held,judgment for the defendant." When a surety and a lender are assigned rights in the same personal property of a defaulting contractor under a bond application and a security agreement respectively,the UCC governs; the secured lender who has perfected his security interest in the property under the Code takes priority over the surety who asserts equitable claims arising from completion of its bond obligations.

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