Title: Ochs v. Northwestern Nat. Life Ins. Co.
Citation: 254 N.W.2d 163
Docket Number: 11822
State: south-dakota
Issuer: south-dakota Supreme Court
Date: May 26, 1977

254 N.W.2d 163 (1977) Joe OCHS, Plaintiff and Appellant, v. NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY, and Time Insurance Company, and ITT Midwestern Life Insurance Corporation, Defendants and Respondents. No. 11822. Supreme Court of South Dakota. May 26, 1977. *164 Gale E. Fisher of May, Johnson &amp; Burke, Sioux Falls, for plaintiff and appellant. *165 John E. Simko of Woods, Fuller, Shultz &amp; Smith, Steven W. Sanford of Braithwaite &amp; Cadwell, Sioux Falls, for defendants and respondents. WOLLMAN, Justice. On February 25, 1974, plaintiff commenced separate actions against Northwestern National Life Insurance Company (Northwestern), Time Insurance Company (Time), and ITT Midwestern Life Insurance Corporation (ITT), alleging that defendants had refused to make payments under certain disability policies issued to plaintiff. The complaint further alleged that said refusal on the part of defendants was vexatious and/or without reasonable cause. All three defendants filed answers; in addition, Time and ITT asserted counterclaims alleging that plaintiff's applications for the policies issued by Time and ITT were of such a nature as to render the policies null and void and to entitle Time and ITT to recoup the benefits previously paid to plaintiff under the policies. In January of 1975, plaintiff made a motion to amend the complaints, which motion was granted on July 18, 1975. The amended complaints purported to state two causes of action. The first cause of action was essentially the same as the allegations set forth in the original complaints. The second cause of action restated the allegations of the first cause of action and then alleged that defendants were guilty of misrepresentation in that at the time they sold the policies to plaintiff, defendants concealed from plaintiff their true intention to delay unreasonably and to deny payments of benefits lawfully due plaintiff under the policies, that such concealment and misrepresentation was for the purpose of inducing plaintiff to purchase the policies, and that plaintiff had in fact been induced to purchase the policies in reliance upon these representations. Further, plaintiff alleged that defendants had demonstrated bad faith in the interpretation of the provisions of their policies and the payments of benefits due thereunder, there being no reasonable cause or basis for the delay and denial of the payments of benefits under the policies. Continuing, the second cause of action alleged that defendants had made the promises contained in their policies without any intention of performing them or of interpreting or construing in good faith the terms and provisions of the policies; that as a direct and proximate result of defendants' conduct in delaying and denying benefits due plaintiff under the policies, plaintiff had been subjected to economic loss and had suffered physical, mental and emotional distress and discomfort. Finally, the second cause of action alleged that defendants had acted in bad faith, oppressively and maliciously towards plaintiff and with intent to deceive and defraud him, and had intentionally caused or acted with such reckless disregard of the probability of causing emotional distress and other damages as to justify the award of punitive damages. The prayer for relief asked for compensatory damages for benefits due under the policies, special and general damages in an amount to be determined by the proof adduced at trial, and for punitive damages in the amount of $1,000,000 from both Time and ITT and in the amount of $500,000 from Northwestern. Defendants Time and ITT made a motion to dismiss plaintiff's second cause of action on the grounds that: (1) it did not state a cause of action against those defendants; (2) that SDCL 58-12-3 provides the exclusive remedy; (3) that SDCL 21-2-1 and 21-2-2 limit the amount of recovery to the amount due under the terms of the respective insurance contracts; (4) that SDCL 21-1-4 authorizes punitive damages only where expressly allowed by statute, and (5) that SDCL 21-1-5 limits the damages to the amount plaintiff could recover had there been full performance. Defendant Northwestern's answer to plaintiff's amended complaint contained a motion to dismiss the second cause of action on the ground that it failed to state a claim upon which relief could be granted. On December 16, 1975, the trial court granted defendants' motions to dismiss *166 plaintiff's second cause of action, made an express determination that there was no just reason for delay in the entry of final judgment dismissing plaintiff's second cause of action upon the merits, and directed that such final judgment should be entered forthwith. It is from the judgment of dismissal entered with respect to the second cause of action set forth in his amended complaints that plaintiff has appealed.[*] SDCL 15-6-54(b) provides: Apparently the parties have assumed that once a trial court makes an express determination that there is no just reason for delay and makes an express direction for the entry of a final judgment with respect to one or more but fewer than all of the claims in an action pursuant to SDCL 15-6-54(b) (RCP 54(b)), no further question exists concerning the appealability of the partial judgment entered pursuant thereto. Although the wording of RCP 54(b) differs from Federal Rule 54(b) (FRCP 54(b)), see Shryock v. Mitchell Concrete Products, Inc., 87 S.D. 566, 212 N.W.2d 498, we believe that there is no substantial difference between the two rules with respect to the question whether an appellate court has the power to determine whether a partial judgment entered in accordance with those rules is in fact appealable. With respect to FRCP 54(b), the United States Supreme Court has clearly held that although in the first instance it is for the trial court to determine that no just reason exists for delay in the entry of judgment and to make an express direction for the entry of final judgment, these matters are subject to review on appeal. Sears Roebuck &amp; Co. v. Mackey, 351 U.S. 427, 76 S. Ct. 895, 100 L. Ed. 1297; Cold Metal Process Co. v. United Engineering and Foundry Co., 351 U.S. 445, 76 S. Ct. 904, 100 L. Ed. 1311. See also Liberty Mutual Insurance Co. v. Wetzel, 424 U.S. 737, 96 S. Ct. 1202, 47 L. Ed. 2d 435; C. Wright &amp; A. Miller, Federal Practice and Procedure § 2655 (1973). We think that the same interpretation should be given to RCP 54(b). Accordingly, in this case and in all future cases in which the trial court has made an express determination and direction pursuant to RCP 54(b), we will review the question of appealability of a judgment entered pursuant thereto, either on the motion of the respondent or on our own motion. Shryock v. Mitchell Concrete Products, Inc., supra. In reviewing a judgment entered pursuant to RCP 54(b) an appellate court must first determine whether the action in fact involves multiple claims and thus falls within the purview of RCP 54(b) and then must decide whether the trial court abused its discretion in making the determination that there was no just reason for delay in entering judgment with respect to one or more but fewer than all of the multiple claims. C. Wright &amp; A. Miller, supra, § 2655. Although the question whether there are multiple parties involved in an *167 action is usually not difficult to resolve, the same is not necessarily true with respect to the question whether multiple claims for relief exist. Prior to the time that the Supreme Court issued its decisions in the Sears Roebuck and Cold Metal Process Company cases, supra, the Court of Appeals for the Second Circuit set forth the following test for determining whether multiple claims exist: In analyzing this test and in concluding that it appears to be consistent with the Supreme Court's decisions in the Sears Roebuck and Cold Metal Process Company cases, Professors Wright and Miller have said: In Liberty Mutual Insurance Co. v. Wetzel, supra, the United States Supreme Court recently stated: When analyzed in the light of these guidelines, plaintiff's complaints in reality state but a single claim for relief, for however one looks at the second cause of action, it sets forth an additional claim for relief based upon defendants' alleged breach of contract. True, the allegations represent an artful attempt to avoid the statutory limitation on damages for breach of contract, SDCL 21-2-1 and 21-2-2, and the statutory bar to punitive damages in claims arising out of breach of contract, SDCL 21-1-4 and 21-3-2, but at their core they are based upon defendants' breach of their *168 contractual duty to pay benefits due under their policies. As we read the complaints, there could be no recovery under the second cause of action unless plaintiff proved a breach of defendants' duty to make such payments. So considered, the claim set forth in the second cause of action is not of such a nature that it could have been separately enforced and thus is not a multiple claim within the meaning of RCP 54(b), Rieser v. Baltimore &amp; Ohio Railroad Co., supra; Campbell v. Westmoreland Farm, Inc., 2 Cir., 403 F.2d 939; United States v. Kocher, 2 Cir., 468 F.2d 503, but rather is so inextricably linked to the cause of action based upon breach of contract as to constitute a single claim. Aetna Casualty &amp; Surety Company v. Giesow, 2 Cir., 412 F.2d 468. Because we hold that the judgment entered pursuant to the order dismissing plaintiff's second cause of action is not appealable under RCP 54(b), we do not reach the merits of plaintiff's contention that the second cause of action states a claim upon which relief could be granted. For an interesting discussion of some aspects of the questions raised, however, see Sullivan, "Punitive Damages in the Law of Contract: The Reality and the Illusion of Legal Change," 61 Minn.L.Rev. 207 (1977). Although our holding that this case does not involve multiple claims for relief renders unnecessary a holding on the second facet of appellate review of RCP 54(b) certifications, because this is the first occasion we have had to address ourselves to the matter in a published opinion, we feel an obligation to express some general observations concerning the factors that are to be considered by trial courts in deciding whether a partial judgment should be certified for appeal. Once it has been determined that an action involves multiple claims for relief and thus satisfies the first test of appealability under RCP 54(b), the appellate court must determine whether the trial court abused its discretion in making an express determination that there was no just reason for delay in entering final judgment. This question is not always easy of resolution, for there is no hard and fast test that can be applied in a mechanical manner. The following quotation from a decision of the Court of Appeals for the Third Circuit seems to us to represent a thoughtful, workable approach to the application of FRCP 54(b) and, accordingly, to RCP 54(b): In Allis-Chalmers Corporation v. Philadelphia Electric Co., 3 Cir., 521 F.2d 360, the court of appeals reiterated the principles governing the proper exercise of discretion with respect to Rule 54(b) certifications as outlined in the Panichella case, supra, and enumerated some of the other factors that courts have considered in such cases: The court went on to summarize the principles to be applied by the district courts in exercising their discretion whether to grant Rule 54(b) certifications: See also C. Wright &amp; A. Miller, supra, § 2659. Although we need not decide whether the trial court abused its discretion in entering the certification in the instant case, we do express our general agreement with the principles outlined in the authorities cited above, and we would expect our trial courts to be guided by them in future cases, for it is to be expected that appeals under RCP 54(b) will be considered appropriate in only the rare case, just as petitions for appeals from intermediate orders under the provisions of SDCL 15-26-9 through 15-26-18 are granted only infrequently. Finally, we note that in addition to discussing the principles governing Rule 54(b) certifications, the court in the Allis-Chalmers cases, supra, stated: The court then went on to hold that in all Rule 54(b) certifications it would require the district courts to make a statement of the reasons supporting the decision to make the certification. In reaching this decision, the court adopted the practice suggested by *170 the Court of Appeals for the Second Circuit in Gumer v. Shearson, Hammill &amp; Co., Inc., 2 Cir., 516 F.2d 283, wherein the court stated: We believe that the views expressed by the courts in the Allis-Chalmers and Gumer cases, supra, with respect to FRCP 54(b) certifications are sound and that we should follow them with respect to certifications under RCP 54(b). Accordingly, henceforth we will expect that our trial courts will include in their certifications of appeals under RCP 54(b) the reasons in support of their decision to enter such certifications. The appeal is dismissed and the case is remanded to the circuit court for further proceedings. All the Justices concur. [*] The trial court granted defendants' motion to consolidate the cases for trial and denied plaintiff's subsequent motion to separate the cases. Defendants have moved to dismiss that portion of plaintiff's appeal that attempts to have reviewed the latter order. In view of our decision on plaintiff's appeal from the dismissal of the second cause of action, we need not reach the merits of plaintiff's contention that the order in question is properly reviewable under the provisions of SDCL 15-26-19.