Wednesday, December 29, 2010

Idaho Supreme Court -- Kuhn v. Coldwell Banker Landmark, Inc. et al

Kuhn v. Coldwell Bank Landmark et al is a stunning decision. It does not change the legal landscape in any dramatic fashion. It's stunning because of the rationale employed by the Court to decline review of many of the key issues on appeal. Reading through the 21 page decision reveals that the vast majority of the issues raised on appeal were simply not preserved at the trial court level, thereby precluding review on appeal. The consequences of failing to preserve issues for appeal in this case totals over a million dollars, plus fees and costs.

The long and short of the facts is that Darren and Jacquie Kuhn entered into a complex real estate transaction with Roger and Francis Schei for property located in Bannock County. Todd Bohn represented the Kuhns and John Merzlock represented the Scheis as brokers in the transaction. Bohn, Merzlock and a Kelly Fisher worked for Coldwell Banker Landmark (Landmark) at the time. Without getting bogged down in the gory details, the deal went bad and the Kuhns/Scheis sued Bohn, Merzlock, Fisher, and Landmark alleging breach of contract, unjust enrichment, fraud, misrepresentation, breach of statutory duties, and civil racketeering. They later amended to include a claim for breach of fiduciary duties and punitive damages.

The case went to a four-week jury trial and the jury returned a verdict in favor of Kuhns/Scheis and against Merzlock, Bohn, and Landmark for breach of fiduciary duties, negligence, breach of contract and unjust enrichment, along with punitive damages

At the onset of the opinion, Justice Jim Jones chastises the parties and states that this case "does not readily lend itself to review." Justice Jones notes that several issues raised on appeal were not preserved below. He also comments that issues that were preserved below were not raised on appeal. The obvious inference from his preface is that the appellate record in this case is a mess, unclear, and incomplete. He lays the responsibility for this situation at the feet of the parties, particularly the appellants, since they should have created a better, clearer record for the Court. This appellate decision is repeatedly marked with procedural errors or oversights by the appellants' counsel.

The appellants filed a JNOV motion that was denied by the trial court. The Idaho Supreme Court affirms the ruling of the trial court on the basis that the appellants essentially seek the appellate court to reweigh the evidence and pass on the credibility of witnesses. The long standing rule in Idaho is that the Idaho Supreme Court does not engage in such an exercise. The Court finds that conflicting testimony exists in the record and therefore the trial court's denial of the JNOV motion is not error.

The appellants also filed a motion for a new trial. However, the appellants failed to follow the proper procedure for a motion for a new trial pursuant to Rule 59(a)(1) & (4). Those subsections require a party to submit an affidavit along with the motion. Thus, the appellants' motion under those sections is procedurally defective and the Court affirms the trial court.

The motion for a new trial pursuant to Rule 59(a)(6) & (7) also fails to follow the rules because it never sets for the factual grounds with particularity, a requirement. The appellants never filed a memorandum with factual support within the 14-days allotted by rule for new trial motions.

The Supreme Court also reviews the trial court's denial of a 59(a)(5) motion for new trial based on damages awarded under passion or prejudice. When ruling on the motion, the trial court considered the evidence and stated that it did not shock the conscience. The Supreme Court stated that the trial court's statement about the evidence and that the verdict did not shock the trial court's conscience was sufficient to meet the court's duty under the law.

The appellants also seek review of a motion pursuant to Rule 59(e) to alter or amend the judgment, which the Court denies on the basis that there is a legal justification for the award or the appellate record is unclear and the Court is unable to evaluate the underpinnings of the awards.

The appellants also raised a motion to set aside the judgment under Rule 60(b)(3) for fraud. The Idaho Supreme Court declines to review such a request since it is tantamount to asking the Court to reevaluate and weigh witness testimony.

Another issue raised on appeal concerns the jury instructions and the special verdict form. The appellants' arguments are rejected because they never demonstrate how the jury instructions prejudiced their substantial rights. The appellants never show how the failure to give specific instructions on the statute of frauds actually constituted harmful error.

The Court acknowledges that the special verdict form is convoluted and confusing but declines to review whether it is prejudicial because the appellants never objected to the special verdict form at the trial court level. This stunning omission by the appellants' counsel is unbelievable.

One of the interesting evidentiary issues at the trial court level was the effort to admit the testimony of Les Lake, who investigated the transaction of behalf of the Idaho Real Estate Commission. Lake authored a letter stating that the appellants had not committed wrongdoing. The trial court excluded it as hearsay. Since the letter itself is excludable under Rule 803(8)(D), then testimony about the findings of the letter are similarly excludable. The rule focuses on the findings themselves rather than the person providing the testimony. Bottom Line: If the report is out, then testimony about the report should be out as well.

There are some other issues resolved in the case but the real lesson to be taught to trial attorneys comes when the Court considers the issue of the punitive damage award in the case. The Court first considers whether there is evidentiary support for the punitive damage award. The Court finds that there was sufficient evidence of misrepresentations, failure to disclose vital information, and double contracting despite ethical and statutory prohibitions. In short, the Court finds that there was sufficient evidence in the record to justify the entry of punitive damages.

Punitive damage awards are only appropriate within the bounds of due process. However, the appellants' counsel mishandled the trial so badly that the clients are stuck with the punitive damage award. The Court declines to review the punitive damage award under the constitutional strictures because the special verdict form is not specific and fails to items the specific damages used in reaching the compensatory award. The court has concerns about the verdict form because it awards a single total of punitive damages against Bohn, Merzlock and Landmark without disarticulating the damage calculations or allocations. The Court finds that "it is nearly impossible to detemermine a base compensatory damage award relevant to a corresponding punitive damage award, such that could actually consider its excessiveness." The Court concludes that "had the appellants made an objection to the special verdict form below and appealed the issue, perhaps a different conclusion might have resulted."

The primary lesson from the Kuhn decision, in my opinion, is that during trial you had better object at all necessary times. Failure to do so could come back to haunt on an appeal because without an adverse ruling, there's nothing to discuss with the Supreme Court.

Tuesday, December 28, 2010

Idaho Supreme Court -- Terra-West, Inc. v. Idaho Mutual Trust, LLC --Decided 12-23-2010

Terra-West, Inc. v. Idaho Mutual Trust, LLC is decided on a 3-2 split among the justices. Justice Jim Jones authored the opinion and the decision answers the question of whether a motion to amend a complaint commences a proceeding to foreclose a mechanics lien pursuant to Idaho Code Section 45-510.

Section 45-510 requires proceedings to enforce liens to be commenced within six months after the claim has been filed. Here, Terra-West sued to enforce a mechanic's lien on May 30, 2008. The first lien was invalidated on September 3, 2008. However, Terra-West had also recorded a second lien on August 12, 2008, which encompassed all work performed by Terra-West on the project. On January 16, 2009, Terra-West filed a motion to amend the complaint to foreclose the August 12, 2008 lien. The Court ultimately finds that "filing of the motion to amend commences the action and stands in the place of the amended complaint . . ." The rationale for the Court's decision mirrors federal case law that has held that a party has no control over when a court renders its decision regarding the proposed amended complaint. Parties have absolute control over when the initial complaint is filed but when leave of the court is required, the parties' lose a significant portion of that control. Various factors can impact when courts render decisions on motions to amend, and therefore, the Idaho Supreme Court finds that filing the motion to amend is sufficient to commence a proceeding when there is already an action pending between the parties. But since Idaho Mutual was a party to the litigation and had notice of the filing of the motion to amend, that gave Idaho Mutual sufficient notice of the commencement of the action.

The Idaho Supreme Court rejects Idaho Mutual's argument that the proper procedure would be for a lien claimant to file a second, separate foreclosure action and then move to consolidate the cases. The rejection of this argument is based on principles of judicial economy and practicality. Justice Jones writes, "Requiring a plaintiff to file a separate action, followed by a motion to consolidate, in order to meet the statutory time requirement, would create needless confusion and duplication in the perfection of a mechanic's lien." The Court doubts that the procedural hurdles suggested by Idaho Mutual "were intended by the Legislature."

The dissent, authored by Chief Justice Eismann, articulates a rationale for rejecting the liberal construction of the lien statute and relies on former precedent, Griggs v. Nash, 775 P.2d 120 (Idaho 1989). In Griggs, the Idaho Supreme Court rejected the argument that the filing of a motion to amend was not the commencement of an action. Chief Justice Eismann views that case as dispositive on the issue.

He also perceives the lien statute itself as being a strict bar to bringing suit. He cites several cases where the Court refused to liberally construe the statute and notes that the statute creates and limits the duration of the lien, which is different than a statute of limitation.

The Court also considers the award of attorney fees. Since the case involves an interlocutory appeal, attorneys fees are not awarded. However, the Court does state that when the trial court makes a prevailing party analysis on remand that it may include appellate fees.

Thursday, December 23, 2010

Today's Opinions

The Idaho Supreme Court issued eight opinions today. Two of them are substitute opinions for prior rulings from the Court but the remaining six are new opinions that will be analyzed over the next few days.

Family Law Update

Just a quick post about the December 22, 2010 decision from the Idaho Supreme Court: In the Matter of Termination of Parental Rights (father). This case arises out of Ada County and is a 5-0 decision. This is an extremely narrow opinion construing the application of the Termination of Parent and Child Relationship Act to proceedings where parental relationships are not sought to be terminated.

This is a case where a man had been deemed in a prior action to be the "legal father" of a child and was ordered to pay child support. Health & Welfare later brought a second action to terminate the man's parental rights because he was not the father of the child. Health & Welfare did not seek to set aside the prior order. The magistrate, in the second action, granted the petition to terminate the relationship between the child, the mother, and the appellant/father.

The Idaho Supreme Court reverses on various grounds. First, John Doe is not the child's parent, i.e., he is not the adopted or biological parent of the child. The term "parent" is defined by law. By defining the term, the law "excludes other relationships with a child from being that of a parent." The Idaho Supreme Court found that in this case there is no statutory basis for terminating the parental rights under Section 16-2005(1) because John Doe does not fall within the "parent" definition. Idaho law requires a statutory basis for termination and a showing that termination is in the best interests of the child. Since Health & Welfare never showed a statutory basis to terminate whatever relationship John Doe did possess with the child, the magistrate decision had to be reversed.

The Idaho Supreme Court also reverses on the basis that if John Doe is not a parent, then there are no parental rights to be terminated. The magistrate can only state that John Doe does not have parental rights rather than terminating those rights.

The decision, authored by Chief Justice Eismann, is clearly limited to odd situations where a third-party claims some sort of parental right to a child without qualifying as a parent under the Idaho Code. The relationship of the third-party can be terminated through the appropriate proceeding but not through a proceeding to terminate the relationship between parent and child.

Wednesday, December 22, 2010

Krempasky v. Nez Perce County Planning and Zoning--Decided December 20, 2010

HERE is the opinion.

Krempasky v. Nez Perce Conty Planning and Zoning
is another opinion written by Justice Warren Jones. It's a narrow opinion dealing with whether the appellant had a claim under Section 67-5279(3) of the Idaho Code.

The facts involved a Mr. Gary Kazda seeking a permit from Nez Perce County to develop a wedding and event center on a five-acre parcel of property. Ms. Krempasky lived in a single-family dwelling adjacent to the five-acre parcel. Krempasky objected to Kazda's application during the public hearing on whether Nez Perce County would grant the conditional use permit. Justice Nones notes that Krempasky and the other residents who objected "provided no actual evidence to support" fears over noise and traffic. Kazda's application for a conditional use permit was approved by Nez Perce County. Krempasky sought her appellate remedies before the County Commissioners and eventually filed for judicial review in district court. Judge Brudie affirmed the issuance of the permit and held that the Commission did did not abuse its discretion.

Krempasky's burden under the statute and before the Supreme Court is that she has to show that the statute was violated by issuing the permit and that a substantial right has been prejudiced. Her only argument in support of prejudice to a substantial right was her claim that there would be "noise, commercial traffic and a disproportionately large building in the residential area." But Justice Jones points out that those concerns do not constitute "prejudice to a substantial right." Justice Jones also notes that Judge Brudie expressly ruled against Krempasky on this issue in the district court proceedings and that she did not challenge that finding on appeal.

Krempasky also raises due process arguments on appeal for the first time. The Idaho Supreme Court has long standing precedent that issues raised for the first time on appeal will not be considered by the appellate court. This is because there has to be some adverse ruling b the court below in order to raise the issue to the higher court. Absent such a ruling, there can be no basis for an appeal.

Finally, the Supreme Court finds that the Commission's actions were not arbitrary, capricious, and within its discretion. Justice Jones notes that the Commission based its decision on the evidence presented by Kazda during the public hearing and even made accommodations to the residents, including Krempasky, by lowering the maximum decibel level from what Kazda originally requested. The Commission also considered other commercial ventures in the county that are located in areas similar to the Kazda location, along with the impact on the community. Since the Commission's decision was harmonious with the comprehensive plan, the decision was appropriate.

Krempasky also challenges the procedure used by the Commission to reach its decision. The Court rejects her argument and finds that the Commission followed the statutory procedure required in Idaho for issuing a conditional use permit and that the application conformed to the applicable ordinances.

The bottom line for the Krempasky case is (1) it is narrowly tailored to the facts of the case and likely has no broad application or effect other than clarifying the procedures for Commissioners to issue conditional-use permits; (2) worries about noise and potential traffic are insufficient to support an objection to development absent some evidence of the noise and traffic impact; and, (3) parties don't get attorney fees when appealing from administrative decisions to the Idaho Supreme Court

Tuesday, December 21, 2010

Coward v. Hadley--Decided December 20, 2010

Click HERE to go straight to the opinion. This is a case arising out of beautiful Sandpoint, Idaho.

Coward v. Hadley reads almost like a law school exam answer in a first year property course. Justice Warren Jones meticulously analyzes Idaho law about the establishment of easements. It is almost as if Justice Jones consciously decided to employ the IRAC (Issue, Rule, Analysis, Conclusion) method of legal analysis, which makes sense since it's both a logical and persuasive method of legal writing. The Coward opinion is a 5-0 decision, something not uncommon with the Idaho Supreme Court.

The decision comes down to a fairly rudimentary application of real property common law. Nothing in the opinion is especially novel, at least until the ISC reverses the district court's denial of attorney fees. That's an interesting portion of the decision. However, the easement issues are fairly fundamental and I am somewhat surprised that the appellants even brought this before the Supreme Court.

The Cowards argued for an easement over Hadley's property under the theory of express easement, implied easement, and dedicated easement. Justice Jones dismisses each theory with aplomb and exacting analysis.

The express easement argument is dismissed on the basis that the actual legal instrument never states that an easement exists over Hadley's property for the benefit of the Cowards' property. The whole concept of express easements rests in the idea that legal instruments contain express language creating those easements. Here, Justice Jones simply concludes that "the document itself provides no basis for an express easement here."

The implied easement issue is dealt with in a similar manner because such an easement requires "continuous use" and reasonable necessity of the easement. Justice Jones finds that the Cowards presented no evidence at trial even suggesting that the easement was reasonably necessary, especially because the Coward's property abuts a public street. Again, the fact that the Cowards raise such an argument on appeal is surprising.

Even more surprising is the dedicated easement argument by the Cowards. Idaho law only recognizes dedicated easements when the land is dedicated for public use. Private landowners simply cannot dedicate an easement for private use. The Cowards argued that the land was dedicated for use by a restricted class of individuals rather than the public at large. The Court rejects the Cowards' argument because a restricted class of individuals is not what is intended under the dedicated easement law. The general public has to have access to the property; restrictions on those with access defeats the fundamental purposes of a dedicated, public easement.

The ISC, finally, reverses the district court's denial of attorney fees under Section 12-121 and awards fees on appeal and below to Hadley. This is unusual under this particular statute. It requires that the appeal be frivolous, unreasonable, and without foundation. Justice Jones states that "none of [the Cowards'] claims was legitimate." If nothing else, this aspect of the decision emphasizes the need for attorneys to objectively evaluate their clients' respective cases and be willing to tell clients that they're going to lose. If you have nothing of merit to appeal, just take the loss and move on.

Monday, December 20, 2010

Welcome to the Idaho Supreme Court Update

Welcome to the Idaho Supreme Court Update blog. This blog is intended to discuss the decisions issued by the Idaho Supreme Court and, to a lesser extent, the decisions from the Idaho Court of Appeals. The focus will be on the Idaho Supreme Court since it most frequently deals with commercial and business issues. The Court of Appeals' primary focus is on the criminal aspect of the appellate docket. Since I do not practice criminal law, I'll leave the analysis of the criminal appeals to another, more educated colleague.

I hope to be able to provide concise and prompt insight into the ISC's future decisions. I might even go back in time to prior decisions that are altered by the instant decisions of the Court. I intend on doing at least a few updates every week. I also intend on providing an update on the most recent decisions either the day the decision is issued or the day after. The Court typically issues several opinions every month and oftentimes several on a single day. So I'll see how it goes trying to digest the decisions and updating immediately. The instant updates will probably be quick summations of the decisions with the in-depth analysis a day or so after the opinion has been issued.

Some of the Court's decisions are fairly benign and limited to their specific facts. Other decisions have far ranging consequences for businesses and individuals that might not be foreseen by the Court. Ideally, the blog will illustrate some potential outcomes based on extending the Court's logic in the various opinions.

This is a work-in-progress but I hope that it will be useful to those interested in the workings of the judiciary.

I am also on twitter. You can follow me at @TeamTednova.