Case Title: Denis Bail Bonds Inc. v. State

Citation: 

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1992-09-01T00:00:00Z

Document:
NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 91-613


 Denis Bail Bonds, Inc.                       Supreme Court

                                              On Appeal from
      v.                                      Windsor Superior Court

 State of Vermont                             September Term, 1992



 Richard W. Norton, Jr., J.

 Thomas M. French, Brattleboro, for plaintiffs-appellants

 John A. Serafino of Ryan Smith & Carbine, Ltd., Rutland, for defendant-
   appellee



 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.



      DOOLEY, J.   Plaintiff Denis Bail Bonds, Inc. appeals the decision of
 the Windsor Superior Court granting defendant State of Vermont's motion for
 judgment on the pleadings.  Plaintiff's lawsuit alleged that the State was
 liable in tort for the damages caused by the failure of the Vermont
 Department of Banking and Insurance to inform plaintiff of complaints of
 wrongdoing by plaintiff's agent.  The court held that the claim failed to
 demonstrate that the State's actions were analogous to any actions for
 which a private person could be liable, and that the State owed no duty to
 the plaintiff.  We affirm.
      Plaintiff is a New Hampshire corporation engaged in the issuance of
 bail bonds in New Hampshire and Vermont, under contract as general agent for
 American Bankers Insurance Company (ABIC).  In turn, plaintiff was the
 assignee of a contract that designated Charles M. Detore as its agent for
 Vermont and part of New Hampshire and authorized him to issue bail bonds
 underwritten by ABIC.  Under these agency contracts, Detore was ultimately
 liable for any bail forfeitures, financial irregularities or other lost
 property related to bail bond transactions to which he was a party, and
 plaintiff was secondarily liable on these obligations.
      Beginning in March of 1988, the Vermont Department of Banking and
 Insurance (Department) (FN1) began receiving complaints of misconduct 
 concerning
 Detore.  Generally, the complaints alleged that Detore improperly converted
 funds placed with him as collateral in bail bond transactions.  The
 Department did not notify plaintiff of these complaints.  In November,
 1988, the Commissioner of Banking and Insurance (Commissioner) audited
 Detore's files but did not obtain a court order authorizing their seizure.
 Apparently as a result of Detore's access to his files, all meaningful
 records had been removed by the time the audit was completed.  The
 Commissioner revoked Detore's license and obtained a stipulation from Detore
 to repay the claims arising from his misconduct; Detore subsequently
 defaulted on this agreement.  Under its contracts with ABIC and Detore,
 plaintiff was obligated to pay these claims.
      In March of 1991, plaintiff filed suit in Windsor Superior Court to
 recover from the State of Vermont the amounts paid in satisfaction of the
 claims against Detore. (FN2) The court granted the State's motion for judgment
 on the pleadings, ruling that because the State was protected by sovereign
 immunity, which it had not waived, plaintiff had failed to state a claim
 upon which relief could be granted.  On appeal in this Court, plaintiff
 renews its argument that the State waived its sovereign immunity, and
 therefore has a duty, as demonstrated by 8 V.S.A. {{ 3563-3566 and 4726, to
 investigate serious complaints of wrongdoing perpetrated by insurers or
 their agents and to notify interested parties of the complaints.  This duty,
 plaintiff claims, has a private analog in the duty of a certified public
 accountant to disclose the results of an audit to foreseeably interested
 persons.  Plaintiff contends that the State negligently failed to provide
 notice of the complaints against Detore, resulting in losses that otherwise
 would have been preventable.
      Absent due process violations, lawsuits against the State for acts
 essentially governmental in nature are barred unless the State waives its
 sovereign immunity and consents to be sued.  See Williams v. State, 156 Vt.
 42, 55, 589 A.2d 840, 848 (1991).  The State has waived its sovereign
 immunity with respect to certain tort actions by the Vermont Tort Claims
 Act (VTCA).  See 12 V.S.A. {{ 5601-5606.  The central provision of the
         statute is { 5601, which provides that the State
         shall be liable for injury to persons or property or
         loss of life caused by the negligent or wrongful act or
         omission of an employee of the state while acting within
         the scope of employment, under the same circumstances,
         in the same manner and to the same extent as a private
         person would be liable . . . .

 12 V.S.A. { 5601(a).  Even if subject to liability under this provision, the
 State still may be immune to suit under several exceptions, notably those in
 subsection (e).  This latter provision contains the "discretionary function"
 exception, which limits the liability of the state for the discretionary
 acts or omissions of state agencies or employees.  See id. { 5601(e).
      The language of { 5601(a) resembles certain provisions of the Federal
 Tort Claims Act (FTCA).  The FTCA provides that the federal government is
 liable only "to the same extent as a private individual under like
 circumstances . . . ."  28 U.S.C.A. { 2674 (West 1965 & Supp. 1992).  This
 concept is also included in the jurisdictional provision of the FTCA, which
 waives sovereign immunity only "under circumstances where the United
 States, if a private person, would be liable to the claimant . . . ."  Id. {
 1346(b).
      The Vermont Tort Claims Act, like the FTCA, is merely a procedural
 remedy and does not create any substantive cause of action against the
 state.  See generally Stencel Aero Engineering Corp. v. United States,