Maxam Ltd v. Lane

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 In fact, bidders rescinded their sales contracts.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correctly awarded indemnity for the costs of formed homeowners’ association took bids to commissions paid to GTA on the rescinded build the road and discovered that Lane’s es- contracts.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

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.”).

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).

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).

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).

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.”).

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,

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.