In the Matter of a Mail Dispute Between:

PANAYOTIS E. PROTOPAPAS, Ph.D., FUEL & MINERAL RESOURCES, INC.
and
JOHN NORRIS, FIRST SOUTHERN FINANCIAL CORP.

P.S. Docket No. MD-92

Mason, Randolph D., Administrative Law Judge

APPEARANCES FOR DR. PROTOPAPAS: John D. Hemenway, Esq., 4816
Rodman St., N.W., Washington, DC 20016-3237 and Laurence A. Elgin,
Esq., 8929 Sleaford Place, Annandale, VA 22003-3924

APPEARANCES FOR FIRST SOUTHERN: John Bagileo, Esq., Claire

Shapiro, Esq., 1101 30th St., N.W., Washington, DC 20007-3708

APPEARANCE FOR JOHN NORRIS: None

INITIAL DECISION

This mail dispute proceeding was docketed under Domestic Mail Manual § 153.72, which requires Regional Counsel to forward certain unresolved mail disputes to this Department for decision. Both $Sdisputants filed written submittals under 39 C.F.R. § 965.5 and comments under § 965.6. Although the comments of Dr. Protopapas were untimely, the Administrative Law Judge has exercised his discretion and considered his comments and exhibits filed prior to First Southern's first Motion to Strike. Accordingly, the first Motion to Strike is denied. Also, since the record is now complete, and each party has filed both a submittal and comments, First Southern's alternative request to file additional comments is denied.

The motion to correct the record is granted.

Disputant Protopapas filed a Motion for Dismissal alleging that there was no controversy over the identity of the corporate president. Since a controversy exists on that issue, that motion is also denied.

The request for the Administrative Law Judge to initiate an investigation of possible mail fraud is denied for lack of jurisdiction and authority.

Finally, First Southern's "Motion to Strike Second Untimely Pleading" is also denied. In this regard, the rules do not preclude the filing of motions or responses thereto in addition to submittals and comments under § 965.5 and 965.6. However, evidence filed subsequent to the Motion to Strike of July 26, 1990 is deemed untimely and will not be considered as part of the original submittal or comments upon which the decision herein is based.

The instant mail dispute concerns delivery of mail addressed to FMR Computer Sales and Service Center c/o First Southern Financial Corp., 1318 Raeford Road, Fayetteville, NC 28305-5026 or FMR Computer Sales and Service Center c/o First Southern Financial Corp., P. O. Box 2037, Fayetteville, NC 28302-2037. The following findings of fact and conclusions of law are based upon the submittals, comments, and exhibits attached thereto:

FINDINGS OF FACT

1. Disputant Dr. Panayotis E. Protopapas and James J. Davis were co-founders and directors of Fuel & Mineral Resources, Inc. ("FMR") at the time of its incorporation in 1978. Dr. Protopapas has always been the President of FMR. Mr. Davis is the current Corporate Secretary. Since 1988 Protopapas and Davis have been the only directors. FMR sells computer systems to government agencies and other customers.

2. First Southern Financial Corporation ("First Southern") is in the business of factoring accounts receivable. The company purchases accounts receivable at a discount (97%) and contracts to make immediate payment to the selling company. First Southern then collects the face value of the accounts receivable from either the customer or, if uncollectible after 90 days, from the selling company.

3. In December of 1988, First Southern entered into a factoring contract with FMR. Invoices for services and goods already delivered were First Southern's primary interest in financing, but it also agreed to finance purchase orders (where delivery has not been made) and stockroom inventory if additional factoring fees are paid. (FMR now argues there were no "additional" fees in the original deal regarding purchase orders.) Protopapas, as president of FMR, signed a power of attorney authorizing First Southern to cash checks in payment of accounts receivable which were to be sold by FMR to First Southern.

4. FMR began falling behind in making delivery of its orders because it allegedly did not have the funds to purchase the goods that it had contracted to sell. Then First Southern stated that it would start withholding from receivables, as they were paid, the moneys that had been due more than 90 days (PX-9, 10) (PX refers to Protopapas Exhibit). This aggravated FMR's shortage of funds.

5. Subsequently, customers whose accounts had been sold to First Southern were instructed to send their checks directly to either First Southern or "FMR, Inc." at First Southern's North Carolina address.

6. On April 21, 1989, First Southern notified FMR that it would not do any more factoring until payment was made on a check returned for insufficient funds. At that time, the Business Bank indicated to First Southern that the Bank wished to exercise a prior security interest in FMR's assets, including the accounts receivable.

7. On June 23, 1989, Protopapas, FMR, First Southern, and The Business Bank entered into an Agreement which, in pertinent part, restructured the bank loan and gave First Southern power to collect all accounts and debts owing to FMR and to pay certain listed expenses incurred by FMR. Also, the bank subordinated its security interest in certain accounts receivable (FSX-7)("FSX" refers to First Southern Exhibit). First Southern agreed to pay FMR 97% of the face value of purchase orders which it approved in the future, thereby dropping the additional factoring fees and restrictive arrangement previously required for purchase orders.

8. By agreement dated June 29, 1989, Protopapas was stated to be President of FMR, Director, and owner of 700 out of 800 total voting shares of stock of FMR (PX-16). The agreement purports to grant to First Southern proxy voting rights of FMR shares representing 51% of all voting rights. The proxy was restricted to issues pertaining to the disbursement of revenues generated from funds invested by First Southern. This was also described as giving First Southern "total control of the decision-making process of fiscal management of all revenues resulting from the working relationship of the two corporations" (ID. P7). The proxy was to remain in effect until December 31, 1990, or until payment in full of all amounts owed to First Southern. It provided, in part, that the accounts receivable would be payable directly to First Southern in North Carolina (FSX-8).

9. The June 29 agreement provided that First Southern would retain all proceeds from accounts receivable and advance to FMR funds necessary to operate the business. The funds would be advanced to a business checking account in The Business Bank in accordance with a budget attached to the agreement. The Business Bank would monitor the disbursement of funds from the account to assure compliance with the agreed budget (Id.).

10. Finally, the June 29 agreement provided that the proxy rights must be exercised so as to retain Dr. Protopapas as Director and President of the Corporation assuming all the conditions in the agreement were met. FMR signed the agreement on June 29, 1989, and First Southern signed on July 3, 1989 (Id.).

11. Soon after this agreement, Kenny James, Vice President of First Southern, began dealing solely with Mr. John Norris of FMR, asserting that he did not trust or wish to deal with Protopapas. Protopapas claims that Norris was never given the authority to assign government billings to First Southern and he objected to such assignments when they were made.

12. Thereafter, James (on behalf of First Southern) asked Protopapas to sign a letter of resignation and leave the company. On October 20, 1989, Protopapas signed a document entitled "Agreement" which stated, in part, as follows (FSX-9):

Dr. Protopapas will resign his position as President of Fuel & Mineral Resources, Inc. (FMR), effective upon execution of the present agreement by both parties.

13. Under the proposed agreement, he would also physically move his personal office out of the FMR premises upon execution of the agreement by both parties. First Southern would pay him a salary of $4,000 per month until he obtained new employment, and make past due and future rental payments to him for the offices at the rate of $3,600 per month. The Agreement concluded: "[t]he present agreement will be nullified upon violation of its terms specified above." Protopapas sent the above agreement to Mr. Kenny James to sign on behalf of First Southern together with a cover letter of the same date in which he indicated he was seeking new employment and that he would remain committed to all of their business arrangements.

14. Although the agreement in the record now contains James's signature purportedly dated October 23, 1989, James never told Protopapas that it had been signed. In fact, he rejected the document and told Protopapas that a new document in proper legal language needed to be drafted. Such a document was not submitted at that time. Also, First Southern never paid the salaries and rents specified in the document. (Proto. Affid. P42; FSX-9).

15. On October 27, 1989, Protopapas asserted himself as President of FMR by calling the police when certain equipment and accounting files were being removed from the premises at 297 Herndon Parkway at the instruction of Mr. Norris. He asserted that Norris had no authority to move the offices of FMR (PX-24). Protopapas also dismissed all employees involved in the incident, including John Norris. Norris ignored this and moved FMR to a new location at 950 Herndon Parkway, Suite 330, Herndon, VA.

16. On October 28, 1989, Protopapas opened a P. O. Box in the name of FMR at the Herndon, VA Post Office and instructed the Postal Service to forward all FMR mail to this box. Thereafter, Mr. Norris claimed all FMR mail. In resolution of that mail dispute, on October 29, 1989, Edward Schaben, a postal supervisor in the Herndon, VA Post Office determined that the FMR mail should be delivered to Protopapas rather than Norris (FS Comment, FSX-B).

17. It is clear from the actions of the parties that the resignation agreement was never accepted and that the offer was, in fact, withdrawn. On November 10, 1989 the FMR Board of Directors wrote to First Southern that the offer of resignation was nullified by the Board since (1) the offer was unacceptable to First Southern in its present form, (2) the latter wanted an additional contract giving Norris authority to operate a minority corporation, and (3) First Southern refused to pay Protopapas salaries and office rents. Protopapas signed the letter on behalf of the Board as President- Treasurer and James Davis signed as Secretary (PX-24). The Board also ennumerated various alleged breaches of the June 23, 1989 agreement by First Southern, and indicated an intention to file suit.

18. Later, Protopapas prepared another draft of a resignation agreement with terms more advantageous to himself but it was never signed (PX-30). The parties discussed alternative terms for this latter proposal (PX-31, 32). This offer was withdrawn by Protopapas by telegram on December 1, 1989 "because you have failed to sign and confirm it" (PX-33).

19. Since the agreement was never made, and Protopapas did not have the written promise of First Southern to make the requisite salary and rental payments to him and to accept his other conditions, he would have had no reason to deliver his resignation to FMR, and he did not do so.

20. FMR corporate records have always reflected Protopapas's status as President. Further, the annual report of the company filed with the Virginia State Corporation Commission in May or June of 1990 indicates that he is still President (Proto. Comments Exh. 1; PX-A).

21. A loan and security agreement dated November 9, 1988 between FMR, Protopapas and The Business Bank was assigned to First Southern on March 19, 1990 in settlement of litigation. Thus First Southern now has a security interest in virtually all assets of FMR including all accounts receivable now owned and later acquired (FSX-12, P2).

22. The parties are currently involved in litigation in the U. S. District Court in Alexandria, VA. By order dated March 9, 1990, the Court denied a Motion by First Southern which sought a preliminary injunction directing that Protopapas return to FMR mail which was sent to FMR's address at 950 Herndon Parkway, Herndon, VA, and collected by Protopapas since October 1989 at P. O. Box 1760, Herndon, VA (FSX-A & B). The Court did not wish to resolve the underlying issues of corporate control and property ownership at that time, and held that an injunction would be inappropriate (Proto. Submittal Exh. 2, p. 21).

23. Then First Southern sent out FMR invoices with a sticker or printed label covering the Herndon, VA return address. The return address now reads (Proto. Submittal Exh. 7):

FMR Computer Sales and Service Center c/o First Southern Financial Corp., 1318 Raeford Road, Fayetteville, NC 28305-5026

or

FMR Computer Sales and Service Center c/o First Southern Financial Corp., P. O. Box 2037, Fayetteville, NC 28302-2037.

Also, a letter dated May 7, 1990 on FMR stationery was sent to FMR customers over the signature "John Norris, President" [Norris now denies that he is president and claims that was a mistake, PX-39], instructing them to address correspondence to:

FMR Computer Sales and Service Center c/o First Southern Financial Corp., 1318 Raeford Road, Fayetteville, NC 28305-5026

24. This dispute concerns mail sent to the above addresses which Protopapas now wishes to be delivered to his P. O. Box in Herndon, VA.

25. On March 19, 1990, Protopapas filed a motion in the U. S. District Court for a temporary restraining order requesting, in part, that First Southern be directed to "stop their diversion of FMR mail to the post office address at their offices on Raeford Road in North Carolina until a receiver is appointed and a preliminary injunction motion can be heard" (FSX-C, p. 13 P3). The Motion was denied (FSX-D). However, as before, the Court merely considered an injunction to be inappropriate and wished to have the matter resolved by a trial on the merits. The Court made no instructions with respect to delivery of the mail in question and did not decide that First Southern was the owner of the mail in question (FSX-A).

26. In May 1990 Protopapas filed a motion for a cease and desist order seeking to enjoin First Southern from evading the earlier order of the court. That motion was also denied (FSX-E & F).

CONCLUSIONS OF LAW

1. Mail marked "In Care Of" another is delivered to the first of the two persons named who may call for it or to the address of the person in whose care it is directed, in the absence of instructions from the addressee. DMM § 153.16. Here the "addressee" is FMR, and its alleged President has given specific instructions to the Postal Service regarding delivery of that mail.

2. DMM § 153.51 provides that where disagreement arises among corporate officers and others connected with the company, the mail is delivered in accordance with the order of the president of the corporation. Disputant Protopapas claims to be the President of FMR. First Southern contends that Protopapas resigned in October of 1989. For the purposes of DMM § 153.51, it is concluded that First Southern is "connected with the company" by virtue of its contractual arrangements with FMR and its unusual degree of control of the company.

3. Accordingly, the primary issue presented for consideration is whether Dr. Protopapas is the President of FMR and is thereby entitled to dictate the mail delivery instructions provided for in DMM § 153.16. A second issue raised by First Southern can be resolved at this point. There is no basis for its argument that the mail in question is "intended for" First Southern since it was addressed "in care of" the latter. This mail is addressed to FMR c/o First Southern, and the regulation provides for delivery in accordance with FMR's instructions. Also, First Southern cites cases for the principle that mail should be delivered to the entity to which the bulk of senders intended delivery. However, those cases are inapposite since they involve mail addressed to companies with confusingly similar names and addresses.

4. First Southern contends that its factoring, loan, and proxy agreements with FMR demonstrate the former's right to receive payment of accounts receivable, its right to cash checks payable to FMR in payment of receivables assigned to First Southern, and other broad control over FMR's business. Protopapas disputes First Southern's rights under those agreements. However, the instant mail dispute does not determine who ultimately will own the property contained in the disputed mail. The only question at this time is whether delivery should be made by the Postal Service in accordance with Protopapas's instructions.

5. On October 20, 1989, Protopapas made an offer to resign which would not be effective until the agreement was executed by both parties. Thus the first questions are whether the offer was accepted and whether the agreement was executed by both parties.

6. A separate question is whether Protopapas ever took the necessary action to effectuate his resignation. By statute in Virginia, an officer of a corporation may resign at any time by

"delivering notice to the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date."

Va. State Code § 13.1-695. It is not necessary for a corporation to formally accept a resignation. 19 C.J.S. § 736 (b).

7. Thus the resignation must be deliberate and the officer must "deliver" a "notice" to the corporation. Protopapas merely offered to resign as President of FMR under certain specified conditions, and he made that offer to First Southern, not FMR. If Kenny James actually signed that agreement on behalf of First Southern, he never informed Protopapas that he had done so. On the contrary, James told him that the drafted language was legally insufficient and that a new agreement would have to be drafted. Protopapas was only willing to resign under certain conditions, which included First Southern paying him certain monthly salary and rent payments. He would not have tendered his resignation to FMR until he knew that his conditions had been accepted.

8. As indicated in the findings, during this period after the above offer was made, Protopapas continued to assert himself as the President of his company and the parties continued to negotiate the terms of the proposed resignation agreement. On November 10, 1989, when it became clear to Protopapas that the parties could not reach agreement, the FMR board of directors wrote to First Southern to withdraw and nullify the offer of resignation.

9. Since the resignation agreement was never made, and First Southern never informed him that it would meet his conditions, Protopapas had no inclination to resign as President of FMR. Also, the corporate records have always indicated that he was President. Accordingly, it is concluded that he never delivered his resignation to FMR and that he is the current President of FMR.

10. Finally, it is concluded that the orders of the U. S. District Court herein have no effect on the instant mail dispute. DMM § 153.73 provides that when the same mail is claimed by different persons, and a court decides to whom delivery should be made, the mail will be delivered in accordance with the court order. Here, the Court has not yet decided to whom delivery should be made. It merely refused to decide any questions of ownership and control prior to a trial on the merits. Although this had the effect of leaving certain mail in the hands of Protopapas, at one point, and First Southern, at another, at no time did the Court issue an order directing delivery of mail.

11. Accordingly, the mail in issue should be delivered in accordance with the instructions of Dr. Protopapas, and the Judicial Officer should issue the attached Order.