Court Opinion

ID: 29087
Source: CourtListenerOpinion
Date Created: 2010-04-25 09:34:21+00
Date Added: 2024-06-11T08:03:01.607816
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                                FOR THE FIFTH CIRCUIT
                                             _______________

                                               m 01-60493
                                             Summary Calendar
                                             _______________

                                              MAXAM, LTD.,

                                                                Plaintiff-Appellee,

                                                  VERSUS

                                            STEVEN R. LANE,

                                                                Defendant-Appellant.

                                      _________________________

                              Appeal from the United States District Court
                                for the Southern District of Mississippi
                                         m 3:99-CV-740-BN
                                    _________________________
                                           October 14, 2002

Before JOLLY, JONES, and SMITH,                            Granger, Thaggard & Associates, Inc.
  Circuit Judges.                                       (“GTA”), agreed to auction property owned
                                                        by Maxam, Ltd. (“Maxam”), in separate lots
JERRY E. SMITH, Circuit Judge:*                         for future development as a subdivision. GTA
                                                        placed Steven Lane in charge of marketing and
                                                        researching the project, and Jack Granger
                                                        served as auctioneer. During the auction,
   *                                                    Granger, apparently in violation of the written
     Pursuant to 5TH CIR. R. 47.5, the court has
                                                        guidelines for the auction, asked Lane to esti-
determined that this opinion should not be pub-
lished and is not precedent except under the limited    mate the cost of building a road into the sub-
circumstances set forth in 5TH CIR. R. 47.5.4.          division that would meet county standards.
Lane misrepresented the costs, and several             that met the county’s specifications. In fact,
bidders rescinded their sales contracts. Max-          Lane had taken two bids from contractors not
am settled with the rescinding bidders by void-        licensed as civil engineers, and neither contrac-
ing their sales contracts and returning a high         tor represented that his bid met county stan-
percentage of their earnest money. Maxam               dards.
then sued Lane for indemnity.
                                                          GTA sold all twenty-seven parcels in a se-
   We affirm in part because the district court        ries of sixteen contracts. The subsequently
correctly awarded indemnity for the costs of           formed homeowners’ association took bids to
commissions paid to GTA on the rescinded               build the road and discovered that Lane’s es-
contracts. Concluding, however, that the               timate did not reflect conformity with the
court failed to assign a percentage fault to           county’s standards; the homeowners’ associa-
Granger as required by Mississippi law, we             tion received an initial, conforming bid of
reverse in part.                                       $500,000. Some of the successful bidders re-
                                                       fused to close the sales, sought to rescind their
                        I.                             sales contracts, and requested return of earnest
    In 1997, Maxam purchased 187 acres of              money.
property, proposing to subdivide it and hold an
absolute auction, which is an auction at which             Maxam sued in federal court, under diver-
the seller must accept the highest bid received.       sity jurisdiction, to consummate the sales. Six
Maxam contracted with GTA to conduct the               bidders sued in state court to rescind their
auction. The “Auction Proposal and Agree-              sales contracts and recover their earnest mon-
ment” specified that GTA would receive a               ey. Maxam settled with the six bidders by
10% commission on all contracts for sale. If a         agreeing to refund approximately 62% of the
parcel did not sell at the auction, GTA would          earnest money paid by five of the bidders and
list it for 180 days, and Maxam would pay a            75% of the earnest money paid by the sixth.
10% commission on any subsequent sale.
                                                           That left approximately one-third of the
   GTA hired Lane to prepare for the auction.          property unsold. Maxam paid the funds out of
Lane advertised the sale and showed the prop-          its general revenues because GTA had retained
erty to prospective bidders. Auction materials         the original earnest money to satisfy its 10%
informed the bidders that the property was be-         commission.
ing offered on an “as is” basis. The bidders al-
so knew they would have to join a homeown-                Maxam sued Lane for indemnity, alleging
ers’ association that would bear the cost of           that his negligent misrepresentation had cre-
paving a road through the subdivision.                 ated Maxam’s liability to the bidders. In the
                                                       pretrial order, Lane requested an allocation of
   At the auction, Granger, who was Lane’s             fault against Granger for asking Lane to esti-
supervisor, took the auctioneer stand to ex-           mate the cost of the road. Lane moved for
plain the rules. A bidder asked Granger about          summary judgment, which the court granted in
the cost of building a road. Granger asked             part and denied in part. The court limited
Lane to answer, and Lane replied that he had           Maxam’s pursuit of damages to the costs asso-
received a bid of $150,000 to complete a road          ciated with the auction, legal expenses in its

                                                   2
litigation against the bidders, and interest on             regime and the resulting fault allocations.2
those damages.                                              When ascertaining the law of a state, we look
                                                            to the decisions of its highest court. Labichie,
   The court then held a bench trial, during 31 F.3d at 351.
which Lane requested an allocation of fault
analysis under MISS. CODE ANN. § 85-5-7(7).                                          II.
The court ruled in Maxam’s favor and award-                     Lane argues that Mississippi’s comparative
ed it $23,657.22 for commissions paid on the                fault statute required the district court to as-
rescinded contracts and $14,525,29 in attor-                sess Granger’s share of responsibility for mis-
neys’ fees. Lane moved for new trial, or in the             leading the homeowners. The court’s oral rul-
alternative, to alter or amend judgment under               ing did not address Granger’s potential liabil-
FED. R. CIV. P. 59, repeating the request for an            ity. When Lane filed his rule 59 motion, the
allocation of fault. The court denied the mo-               court refused to reconsider its fault allocation,
tion, explaining that “[c]ounsel for Lane never             explaining that Lane had failed to make this ar-
mentioned the prospect of joint liability on the            gument at or before trial. Lane consistently
part of Granger” and that “Lane never made                  had argued that Granger bore some responsi-
this argument during the bench trial and did                bility for altering the terms of the “as is” auc-
not request a ruling on this issue by the                   tion, so the district court erred by failing to
Court.”                                                     evaluate this claim.

    Lane appeals the final judgment but asks us                                    A.
to review only the denial of his rule 59 motions                On their face, none of the district court’s
for a new trial and to alter or amend the judg-             rulings satisfied Mississippi’s requirement that
ment. We review the denial of a motion for                  the court consider Granger’s possible liability.
new trial to determine whether the court                    Mississippi law establishes a presumption that
abused its discretion or misapprehended the                 negligent tortfeasors bear only several liabili-
substantive law.1 We review for abuse of dis-               ty.3 Because the Mississippi fault regime relies
cretion the denial of a motion to alter or                  primarily on several liability, it also directs
amend judgment. Midland W. Corp. v. FDIC,
911 F.2d 1141, 1145 & n.4 (5th Cir. 1990).
                                                               2
We review de novo, as questions of law, the                      Krieser v. Hobbs, 166 F.3d 736, 739 (5th Cir.
interpretation of a state’s comparative fault               1999) (“[W]e review de novo the district court’s
                                                            conclusions of law, such as the effect to be given a
                                                            settlement under Mississippi law . . . .”) (citation
                                                            omitted); Labichie v. Legal Sec. Life Ins. Co., 31
   1
      Munn v. Algee, 924 F.2d 568, 575 (5th Cir.            F.3d 350, 351 (5th Cir. 1994) (“The apportion-
1991) (“Because the availability of damages is a            ment of recovery costs under state law is a legal is-
question of law, we do not afford the district              sue that we review de novo.”) (citation omitted).
court’s decision any deference.”); Dixon v. Int’l
                                                               3
Harvester Co., 754 F.2d 573, 586 (5th Cir. 1985)                 MISS. CODE ANN. § 85-5-7(3) (1999); Estate
(“The decision to grant or deny a motion for new            of Hunter v. Gen. Motors Corp., 729 So. 2d 1264,
trial generally is within the sound discretion of the       1274 (Miss. 1999) (“The principal effect of § 85-
trial court and will not be disturbed unless there is       5-7 is that it abolishes joint and several liability for
an abuse of that discretion or misapprehension of           up to 50% of the plaintiff’s injuries and replaces it
the law.”).                                                 with several liability up to this amount.”).

                                                        3
courts to “determine the percentage of fault                        In his answer, Lane lists, as his first de-
for each party alleged to be at fault.” MISS.                   fense, Granger’s responsibility for overseeing
CODE ANN. § 85-5-7(7). The Mississippi Su-                      the auction. In his second defense, Lane ar-
preme Court has interpreted the statute to re-                  gues that the acts or omissions of others actu-
quire courts to determine the percentage fault                  ally caused the auction to go awry. The joint
attributable to all alleged nonparty tortfeasors.4              pretrial order describes one of Lane’s legal is-
Mississippi law plainly required the district                   sues as “[w]hether Jack Granger was negligent
court to assign fault percentages to both Lane                  in performing his duties as auctioneer by re-
and Granger.                                                    questing estimates of the road construction
                                                                from the auction stand and whether said negli-
    In its original decision, the court did not                 gence, if any, is imputed to Maxam so as to
obviously or directly address Granger’s share                   reduce any recovery.”6 During his closing ar-
of fault. When Lane moved for a new trial and                   gument, Lane’s counsel and the district court
an amendment of the judgment, the court held                    engaged in a lengthy discussion (reproduced in
that he had waived his right to argue Grang-                    the appendix) about whether Granger should
er’s responsibility. The record belies the                      bear a portion of the fault and about the effect
court’s assertion.                                              on Lane’s liability.

   A party can preserve an issue by making the                      Maxam makes only one argument to sup-
argument in its pleadings, identifying it in the                port the court’s waiver findingSSthat after de-
joint pretrial order, or trying it by consent.5                 livering its opinion from the bench, the court
Lane satisfies this test readilySShe argued, at                 gave both parties an opportunity to request ad-
every stage of the proceeding, that Granger                     ditional rulings or clarifications, but Lane’s
bore responsibility for the alteration of the                   counsel failed to respond. This argument lacks
bid’s terms.                                                    merit.

                                                                   Where a party has raised an argument at
                                                                every juncture of the pretrial proceedings and
   4
      Smith v. Payne, __ So. 2d __, 2002 Miss.                  at trial, it has given the opposing party and
LEXIS 13, at *10 (Miss. Jan. 10, 2002) (“[A]ny                  court sufficient notice. Lane did not have an
tortfeasor, even absent ones, that contributed to the           obligation to repeat every argument he had
injury must be considered by the jury when appor-               made in pretrial motions and on the merits
tioning fault.”) (citation omitted); Estate of Hunter,          once the district court delivered an adverse,
729 So. 2d at 1276 (“[T]he term ‘party,’ as used in             oral opinion. Waiting, digesting the opinion,
§ 85-5-7(7) refers to any participant in an occur-              and later asking the court to revisit its conclu-
rence which gives rise to a lawsuit, and not merely             sions was a reasonable approach that should
the parties to a particular lawsuit or trial.”).
   5
     Mongrue v. Monsanto Co., 249 F.3d 422, 427
                                                                   6
(5th Cir. 2001) (“A party has presented an issue in                   The joint pretrial order notes Maxam’s ob-
the trial court if that party has raised it in either the       jection that Lane failed to plead this issue, but we
pleadings or the pretrial order, or if the parties have         have long held that the joint pretrial orderSSnot the
tried the issue by consent . . . .”); Portis v. First           initial pleadingsSSgoverns the issues to be tried.
Nat’l Bank, 34 F.3d 325, 331 (5th Cir. 1994)                    McGehee v. Certainteed Corp., 101 F.3d 1078,
(same).                                                         1080 (5th Cir. 1996).

                                                            4
not sacrifice Lane’s right to an appeal.               ings.7 In the instant case, however, the rulings
                                                       are not necessarily consistent with an implied
                        B.                             finding that Granger bore no fault.
   Maxam argues that Lane did not establish a
factual basis for Granger’s liability, but both           In its oral bench ruling, the court intimated
Lane’s proof and the district court’s findings         that Lane should have refused to answer
suggest that the court should have addressed           Granger’s question about road estimates be-
Granger’s potential liability. Lane introduced         cause of the nature of “as is” offers; this sug-
evidence that the parties had advertised the           gests that Granger may have acted improperly
auction as an “as is” sale. Maxam intended for         by posing the question as an auctioneer. The
the bidders to purchase the lots without guar-         denial of Lane’s rule 59 motion describes the
antees or frills. Granger served as auctioneer         argument as waived, confirming that the court
and Lane’s supervisor. At the auction, a bid-          did not consider it in the original decision. We
der asked about the estimated cost of building         will not imply a finding of fact where the
a road. Despite the agreement between Max-             court’s statements and rulings suggest it did
am and GTA to offer the lots “as is,” Granger          not resolve the question.
requested that Lane share the estimates for a
road. Lane argued that Granger negligently                                   III.
decided to provide an answer to the bidder.               Lane maintains that the district court im-
                                                       properly included the commissions that Max-
   In its bench ruling, the district court found       am paid on the rescinded contracts in its in-
that providing any information about the cost          demnity award. The court considered those
of the road should have raised a red flag to           costs indemnifiable as a direct consequence of
Lane. The court noted that Lane should have            Lane’s misrepresentation and the bidders’
second-guessed Granger’s request and con-              rescission.
sulted with Granger privately before answering
the question. Although we do not presume to               Mississippi’s indemnity doctrine permits in-
pass on the ultimate question of Granger’s             nocent payers of judgments and settlements to
fault, if any, both Lane’s evidence and the            recover money from the person actually re-
district court’s factual findings suggest the          sponsible. Bush v. City of Laurel, 215 So. 2d
court at least should have considered Grang-           256, 259 (Miss. 1968) (citing 42 C.J.S. § 20
er’s share of liability.                               (1944)). A person seeking non-contractual

                     C.
   Maxam urges us to interpret the district               7
court’s decision as impliedly finding that                   Texas Mortgage Servs. Corp. v. Guadalupe
                                                       Sav. & Loan Ass’n, 761 F.2d 1068, 1075-76 & n.7
Granger bore no fault. Maxam points to a line
                                                       (5th Cir. 1985) (inferring from three specific fact
of cases in which, despite the court’s silence,        findings and record that bank had promised to
we have implied factual findings consistent            maintain separate accounts); Clinkenbeard v. Cent.
with the record and the court’s broader rul-           Southwest Oil Corp., 526 F.2d 649, 652-53 (5th
                                                       Cir. 1976) (implying finding about duration of
                                                       agency relationship where district court had based
                                                       its ruling on the existence of formal agency rela-
                                                       tionship).

                                                   5
implied indemnity must prove two elements:            costs and ruled that Lane should indemnify
                                                      Maxam for those costs. Lane concedes that
   (1) The damages which the claimant                 the commissions satisfy the general require-
   seeks to shift are imposed upon him as a           ments set forth by Mississippi’s indemnity doc-
   result of some legal obligation to the in-         trine, but he has two specific objections.
   jured person; and
                                                          Lane argues that because the district court
   (2) it must appear that the claimant did           describes its award as one for costs, the court
   not actively or affirmatively participate          was limited to awarding attorneys’ fees and
   in the wrong.                                      litigation costs. This contention is somewhat
                                                      puzzling.
Hartford Cas. Ins. Co. v. Halliburton Co., __
So. 2d __, 2001 Miss. LEXIS 247, at *24                  The primary purpose of indemnity is to
(Miss. Sept. 27, 2001) (citations omitted). If        compensate the initially liable party for paying
the person seeking indemnity paid the damages         out an award or settlement, not for paying the
under a settlement, he also must prove that he        incidental attorneys’ fees, which are recover-
settled under compulsion and paid a reason-           able only because the cost of the underlying
able amount. Keyes v. Rehab. Ctrs., Inc., 574         judgment or settlement is recoverable.8 A
So. 2d 579, 584 (Miss. 1990).                         court also may award costs incidental to the
                                                      equitable remedy of rescission.
    Through no fault of its own, Maxam for-
feited the commissions to GTA without selling            The wasted auction costs incidental to the
the lots. Maxam had agreed to pay GTA                 bidders’ rescission are not analytically distinct
commissions for the sales contracts formed at         from the wasted litigation costs incidental to a
auction or within 180 days after the auction.         defending against a potential judgment or ne-
After the all the lots sold at auction, Maxam         gotiating a settlement. The court employed
permitted GTA to retain the earnest money as          the commission costs as a useful estimate of
partial satisfaction of its commissions. When         those wasted auction costs, and Lane does not
six bidders rescinded their sales contracts be-
cause of Lane’s negligence, Maxam settled
with them by permitting them to abandon the
purchase and refunding a high percentage of
their earnest money. Maxam lost money from
                                                         8
three sourcesSSthe abandonment of the sale,                 Celotex Corp. v. Becknell Constr., Inc., 325
the refund of earnest money, and the commis-          So.2d 566, 568 (Miss. 1976) (“The general rule is
sions paid on invalid contracts for sales.            that an award of attorneys’ fees in indemnity cases
                                                      is limited to the defense of the claim indemnified
                                                      against.”); Bush, 215 So. 2d at 259-60 (explaining
   Presumably because Maxam could re-sell             that right to indemnity for attorneys’ fees stems
the property and avoid losing the actual sale         from right to indemnity for the underlying judgment
price and earnest money, the district court fo-       or settlement); Mims v. Frady, 461 F. Supp. 736,
cused on the wasted commissions. The court            741 (N.D. Miss. 1978) (awarding amount paid to
identified commissions charged and retained           satisfy judgment and incidental attorneys’ fees);
on the rescinded contracts as fruitless auction       Cent. Soya Co. v. Cox Towing Corp., 431 F.
                                                      Supp. 502, 505 (N.D. Miss. 1977) (same).

                                                  6
explain why this proxy is inaccurate.9                       If the injured third party sues the employer,
                                                             then the employer will have a right to bring an
    Lane then avers that GTA had no entitle-                 indemnity suit against the employee.11 If Lane
ment to the commissions withheld because                     bears complete responsibility for the bidders’
Lane worked for GTA and it was vicariously                   rescissions, he, rather than Maxam or GTA,
liable for his actions. The strongest version of             ultimately should bear the cost of the lost and
this argument merely restates Lane’s earlier                 wasted commissions.
contention that Granger bore some responsi-
bility for the misrepresentations. Lane does                     For the reasons we have explained, the dis-
not identify a single other responsible GTA                  trict court’s inclusion of the commissions in
employee.                                                    the indemnity award is AFFIRMED. The as-
                                                             signment of total fault to Lane is REVERSED
   To the extent Lane is arguing that the court              and REMANDED for further proceedings
erred by shifting the full commission costs                  consistent with this opinion.
because Granger was partially responsible, the
court, on remand, will make an adjustment by
setting explicit fault percentages and adjusting                                  APPENDIX
the award. To the extent Lane bases his argu-
ment on the nature of respondeat superior                       MR. WILLIAMS: [W]e’ve asked the court to
liability, he misunderstands it.                             consider the comparative negligence of both Jack
                                                             Grange and Steve Lane, because there was not a
   Under respondeat superior, the negligent                  problem until the auctioneer on the auction stand
                                                             asked for input on this estimate.
employee remains primarily liable, while the
employer has only secondary liability. The in-
jured third party always has the option of suing
the negligent agent instead of his employer.10                  10
                                                                   (...continued)
                                                             behalf of a principal whom he has no power to
                                                             bind, is subject to liability to the other in an action
   9
      Lane contends that the district court should           of tort for loss caused by reliance upon such mis-
have used the cost of re-selling the lots as the prop-       representation.”); RESTATEMENT (SECOND) OF
er measure, but he does not explain why this stan-           AGENCY § 350 (1958) (“An agent is subject to
dard would be superior. The past commissions are             liability if, by his acts, he creates an unreasonable
the costs actually wasted and are the more logical           risk of harm to the interests of others protected
source for estimating the costs Maxam incurred in            against negligent invasion.”).
the transaction that Lane rendered ineffective.
                                                                11
                                                                   Leathers, 500 So. 2d at 453 (explaining that
   10
      Leathers v. Aetna Cas. & Surety Co., 500               principal will often have indemnity rights against
So. 2d 451, 456 (Miss. 1986) (“[O]ur general rule            agent for his tortious acts); RESTATEMENT (SEC-
in tort is that the agent or servant, the one whose          OND) OF AGENCY § 401 (1958) (“An agent is sub-
conduct has rendered his principal liable, has               ject to liability for loss caused to the principal by
individual liability to the plaintiff.”); RESTATE-           any breach of duty.”); 2 Dan B. Dobbs, THE LAW
MENT (SECOND) OF AGENCY § 330 (1958) (“A                     OF TORTS 906 (West 2001) (“When the employer
person who tortiously misrepresents to another that          who is not personally chargeable with tort is held
he has authority to make . . . a representation on           liable for the tort of an employee, the employer has
                                       (continued...)        the right of indemnity from the employee.”).

                                                         7
   Had there never been any question asked about                  Well, I would submit that a reasonable auc-
the road cost, then I would say the contract is pa-           tioneer would have gone back to the terms of the
tently clear that it’s as is, where is. But it’s not          bidders’ acknowledgment agreement and said,
until Jack Granger asked Lane for those estimates             “We’re not here about the road. We’re not here to
that we even get this $150,000 figure announced               talk about the cost of the road. It doesn’t matter if
from the stand.                                               it’s a penny or a million dollars. We’re not here to
                                                              talk about that.” But inviting a response, that’s
   THE COURT: All Right. Lane testified that                  were I think the negligence of Granger comes in.
he wished his boss had not asked him that.
                                                                 THE COURT : Does it make any difference
   MR. WILLIAMS: Yes, sir.                                    that both Granger and Lane are employees of the
                                                              auction company?
    THE COURT: Which would indicate that he
clearly knew that he should not answer that                       MR. WILLIAMS: I don’t know if itSSif that
question. And he did not argue with his boss, Mr.             makes any difference at all if you have two dif-
Granger, about it. He simply answered it. He did-             ferent parties whose combined negligence leads to
n’t have a little side conference with Mr. Granger            a wrong. I think if it’s possible for this courtSSI’m
that “Look, we’re getting ready to get ourselves in           sorry.
trouble her.” He simply answered. Granger is not
being sued. Lane is being sued. How does all of                   THE COURT: What parties’ combined neg-
that work out?                                                ligence did that? Was it Lane and Granger
                                                              andSSwhat’s theSS
    MR. WILLIAMS: Well, that’s correct. Grang-
er is not being sued in this case; but it’s been our             MR. WILLIAMS:           Granger, Thaggard &
position ever since we filed our initial answer that          Associates?
the wrong that was committed during this auction,
if any, resulted in partSSin large part, to Granger              THE COURT: Yes, sir.
asking the question in the first place.
                                                                 MR. WILLIAMS: Well, it seems to be that this
    And I think that under the present status of              an issue that could have beenSS
Mississippi law, under 8557, we’re entitled, wheth-
er this was a jury trial or a bench trial, to point the           THE COURT: Are there three parties among
finger at any party that’s alleged to be at fault. I          whom to apportion fault according to your theory
think that’s what the decision of the Mississippi             or are there only two?
Supreme Court holds in Estate of Hunter; that if
there is another party that’s alleged to be at fault,              MR. WILLIAMS: I’d say that there’s only two
then the court can consider the negligence of that            parties, because if there was a wrong that was
party and allocate fault to a party that’s not even in        committed, we can put a dollar amount on that. If
court.                                                        the court were to then allocate faultSSfor instance,
                                                              if the damage, just for the sake of making this easy,
    So that’s what we’re saying. And the question,            was $100,000 and the court found that Jack
quite simplySSand I think I asked Mr. Rotenstreich            Granger was 60 percent at fault and Steve Lane
this about Jack Granger’s question in the first               was 40 percent at fault, then, you know, each
place. What would a reasonable auctioneer have                would be responsible for 60,000 and 40,000. The
done when a sked how much the road is going to                total amount would still be 100,000.
cost?
                                                                 And, ultimately, if that is passed back to GTA,

                                                          8
they still only pay $100,000. So I think there’s
only two parties that we’re talking about. And
whether or not that gets imputed back to GTA is
just a question of respondeat superior.

    So I think that’s my presentation on the neg-
ligent misrepresentation, unless your Honor has
any other questions you’d like for me to address.
    THE COURT: All right. Thank you.

                                                    9