January 8, 2019 § Leave a comment
Note: this post was edited at 11:00, am to correct a misstatement in the first paragraph that contempt is a R81 matter, not a R4 matter as originally posted. Sorry for the error
It’s a fairly common occurrence that a counterclaim for contempt is filed in a divorce action, or a motion for adjudication of contempt is filed in a pending divorce. As we all know, divorce is a R4 matter, and contempt is a R81 matter, so is new, or different, process required to proceed on the contempt claim?
Here’s what the COA said in Thornton v. Thornton, an August 14, 2018, decision:
¶22. Additionally, regarding Brenda’s assignment of error attacking the chancellor’s ruling on her petition for contempt, we recognize that “[a]lthough contempt proceedings in divorce cases often are filed in the same cause number and proceed with the underlying divorce case, they are held to be separate actions, requiring new and special summons under Mississippi Rules of Civil Procedure 81.” Shavers v. Shavers, 982 So. 2d 397, 402 (¶25) (Miss. 2008). We therefore find that Brenda’s argument regarding the contempt proceedings is not properly before this Court because “the contempt action [is] separate from the divorce judgment cited in the notice of appeal.” Williamson v. Williamson, 81 So. 3d 262, 277 (¶34) (Miss. Ct. App. 2012). We now turn to address Brenda’s other issues before us on appeal.
Shaver is a tad peculiar because it involved a removal to federal court followed by a remand back to state court, and a question about what effect that had on state court jurisdiction. Williamson involves a post-appeal contempt in which the COA ruled that the contempt action was no part of the divorce that had been appealed.
Shaver does cite Sanghi v. Sanghi, 759 So.2d 1250, 1255 (Miss. App. 2000), in which the parties were engaged in a long-dormant divorce case. Mrs. Sanghi filed a pleading to have Dr. Sanhi held in contempt for failure to pay child support, and he was served by certified mail, since he was already before the court in the divorce action via R4 summons. Here is the COA’s discussion:
¶ 24. This takes us full circle back to the question of whether Dr. Sanghi received sufficient notice of the April 13 hearing that underlies the actions at the July 2 hearing. To reiterate, Dr. Sanghi received notice of the first hearing that had been scheduled for March 9. That notice was not a summons sent by certified mail under Rule 4(c)(5), though the “motions” were sent by that procedure. Instead it was a “Notice of Court Setting” sent first class mail by the court administrator. This notice made Dr. Sanghi aware of the need to seek a postponement and presumably also to seek counsel to initiate the removal. The result of the requested delay was that the court administrator then mailed a notice on February 16, 1998, that the new hearing would be on April 13, 1998. There is nothing in the record explicitly confirming that Dr. Sanghi received the second notice, but he does state in his brief that the April 13 date was set at his request. There are several indications in the record and briefs but no direct proof that he was aware of the April 13 setting from the time that he sought a postponement of the March 9 hearing, but he just did not appear. Again, the inadequacy of the record is at the peril of the appellant Dr. Sanghi, so we proceed under the stated assumptions.
¶ 25. We have just described what was done. We now look at what should have been done. Whether the judgment is valid depends largely on the nature of the defects that occurred.
¶ 26. Rule 81(d)(3) requires that a petition or complaint be filed to modify or enforce child support and alimony judgments or to seek contempt. The mislabeling of the initiating pleading is a matter of form and would not by itself create a lack of authority for the court to act.
¶ 27. After the petition is filed, a summons is to issue notifying the respondent of the time and place for an appearance. If an answer to the petition is required, the notice should state that as well. M.R.C.P. 81(d)(4) & (5). Nothing is said about the available means of service, but the rule provides that the procedures “control to the extent that they may be in conflict with any other provision of these rules.” M.R.C.P. 81(d). The implication is that where Rule 81 does not even address a necessary procedure covered in the general rules, then the general provisions apply. Since 81 does not speak to the means for service of summons, it cannot conflict with the general rules that do. Not to be overlooked, though, is that Rule 81 controls the content of the summons. Service on an out-of-state defendant cannot be completed under Rule 4 by sending a summons by regular mail. Had a return envelope to send an acknowledgment of receipt been included and then utilized by Dr. Sanghi, that would have sufficed. M.R.C.P. 4(c)(3)(A). Certified mail service on an out-of-state defendant also is adequate, if the receipt is returned. M.R.C.P. 4(c)(5).
¶ 28. The notice of the April 13 hearing was not a Rule 81(d)(5) summons, though it provided most of the relevant information. The only required information under the Rule is that a party is to be told the time and place for the hearing and that no answer is needed. M.R.C.P. 81(d)(4) & (d)(5). The sample form that sets out the summons also indicates that the case name is to be shown, the suit number, the name of the person being served, and that failure to appear may result in a judgment with monetary or other consequences; the petition that initiated the action also is to be attached. M.R.C.P. Form 1D. These forms are not mandatory, but use of them removes any question of sufficiency under the Rules. M.R.C.P. 84. The notice sent by the court administrator contained all of the information that Form 1D would have contained, except that there was no statement regarding the need for a written response nor any language commanding attendance or warning that failure to appear could have significant consequences. The same day or perhaps the day before, the three “motions” were separately sent by certified mail and received by Dr. Sanghi.
Most often these matters get tried by consent, so there is a waiver of the objection and the parties resolve it that way.
But when you are handling a R4 case in which R81 issues later arise, especially against a pro se litigant, I strongly encourage you to issue that extra R81 summons. It’s worth the extra cost, time and effort.
August 27, 2018 § 4 Comments
The State of Mississippi filed suit in chancery court against a number of pharmacies for fraud and deceptive trade practices in connection with Medicaid reimbursements. The complaint sought the following relief:
(1) an order enjoining the Defendants from continuing the fraudulent, deceptive and/or unfair acts or practices complained of herein, and requiring correcting measures;
(2) an award of compensatory damages to the State in such amount as is
proved at trial;
(3) an award of actual damages;
(4) an award of all civil penalties provided for by statute;
(5) an award of punitive damages;
(6) an accounting of all profits or gains derived in whole or in part by the Defendants through their fraudulent, unfair and/or deceptive acts or practices complained of herein;
(7) a constructive trust of the moneys illegally and impermissibly obtained from the Defendants’ scheme;
(8) an order imposing a constructive trust on and/or requiring disgorgement by the Defendants of all profits and gains earned in whole or in part through the fraudulent, unfair and/or deceptive acts or practices complained of herein;
(9) an award of attorney fees, costs, and prejudgment interest; and
(10) such other and further relief as the Court may deem appropriate and just.
Defendants responded asking that the matter be transferred to circuit court because of the claims for money damages, and because they wanted to protect their right to a jury trial. The State objected.
The chancellor agreed with the defendants
In his order, the chancellor found that, although the State prayed for some equitable relief, the claims primarily involved recovery of actual and punitive damages. In deference to the Mississippi Constitution’s right to a trial by jury, the judge ruled that, when claims are connected to a contractual relationship or are otherwise involve a question of law, the questions of both law and equity are more appropriately presented in
circuit court. The judge held that the main relief sought was legal, and ordered that the case be transferred to circuit court. The State appealed.
In State of Mississippi v. Walgreen Co., et al., the MSSC affirmed. Justice Beam wrote the August 8, 2018, opinion for a unanimous court. The court first addressed and rejected the State’s argument that an injunction sought under MCA § 75-24-9 must be brought in chancery court. It then went on to deal with the transfer from the equity court to the law court. This is the portion of the opinion addressing chancery vs. circuit jurisdiction:
¶29. We recognize the importance of the State’s request for remedies, including an accounting and a constructive trust, which typically require the chancellor’s equitable review, and we certainly do not intend to devalue that importance here. But an application of the State’s equitable claims is not enough to limit jurisdiction to the chancery court; not even through the application of Section 75-24-9. We have held that chancery courts maintain “the discretion to award legal and even punitive damages as long as” their jurisdiction has attached. Southern Leisure Homes, Inc. v. Hardin, 742 So. 2d 1088, 1090 (Miss. 1999). Though, in matters like the one before us today, “it is more appropriate for a circuit court to
hear equity claims than it is for a chancery court to hear actions at law since circuit courts have general jurisdiction but chancery courts enjoy only limited jurisdiction.” McDonald’s Corp. v. Robinson Indus., Inc., 592 So. 2d 927, 934 (Miss. 1991); see also Hardin, 742 So. 2d at 1090; Union Nat’l Life Ins. Co. v. Crosby, 870 So. 2d 1175, 1182 (Miss. 2004).
¶30. We reiterated this position in Era Franchise Systems, Inc. v. Mathis, 931 So. 2d 1278 (Miss. 2006). There, we noted that “equitable claims are more appropriately brought before a circuit court when they are connected to a contractual relationship or other claims tied to questions of law.” Mathis, 931 So. 2d at 1283 (citing Copiah Med. Assocs. v. Mississippi Baptist Health Sys., 898 So. 2d 656, 661 (Miss. 2005); Crosby, 870 So. 2d at 1175; RE/Max Real Estate Partners v. Lindsley, 840 So. 2d 709 (Miss. 2003)). In Mathis, Venit Mathis filed a complaint against multiple defendants alleging various claims, framed as a derivative action on behalf of REP–an organization in which he alleged to have a fifty-percent stake. Like the State in the matter before us, Mathis pleaded several causes of action and prayed for both legal and equitable relief. After the chancery court determined that it would be best to bifurcate the action, leaving the equitable claims in chancery court and transferring the legal claims to the circuit court, the defendants appealed. This Court reviewed the matter and determined that the chancellor had committed reversible error. Mathis, 931 So. 2d at 1283-1284. Following our holding in Crosby (stating that where a complaint seeks both actual and punitive damages, the “remedy is clearly legal rather than equitable in nature,” Crosby, 870 So. 2d at 1179), we determined that the circuit court’s general jurisdiction is better suited to try a case when doubt exists as to whether the claims are equitable or legal. Mathis, 931 So. 2d at 1282 (citing Burnette v. Hartford Underwriters Ins. Co., 770 So. 2d 948, 952 (Miss. 2000)). Finding that Mathis’s action revolved around issues stemming from contractual obligations not met by the defendants, we reversed the chancellor’s decision denying the defendant’s motion to transfer the matter to the circuit court. Id. at 1283.
¶31. Similarly, in the often-cited Crosby case, the plaintiffs brought an action to recover against the defendants for several common-law and statutory claims arising out of sale of insurance policies and allegedly exorbitant premiums. Crosby, 870 So. 2d 1175 (Miss. 2004). Although the plaintiffs requested a constructive trust, an accounting, and injunctive relief, the defendants claimed that the complaint sounded in tort and contract law–not equity–and requested the case be transferred to circuit court. Reviewing the matter on interlocutory appeal, this Court reversed the chancellor’s denial of the defendant’s motion to transfer, and determined that “each and every one of Crosby’s claims, even the equitable claims of unjust enrichment and constructive trust, arise from the sale and alleged breach of an insurance contract.” Id. at 1182. We noted that an argument alleging otherwise ignores the fact that, unless there was a contractual relationship between Union National and Crosby, she would have no claims arising from the sales, administration and service of the insurance policy. . . .The alleged mismanagement and misappropriation of premium money concerns Crosby’s contractual duty to pay for the insurance policy and Union National to provide her coverage. Id.
¶32. This analysis is directly applicable to the State’s claims against the pharmacies. While it is true that the State’s complaint does not plead the facts necessary to establish a breach-of-contract cause of action, we must look to “the substance, and not the form” of the claims in our resolution of a matter. Copiah Med. Assocs., 898 So. 2d at 661. With the State’s single theory of wrongdoing arising from the defendant’s obligations under the Medicaid provider agreements, the State’s decision to omit a breach-of-contract claim in no way affects the complaint’s substance: the claims asserted and the relief requested present legal arguments and legal remedies. Moreover, much like Crosby and Mathis, the heart of the complaint concerns a provider agreement (a contract), its terms, and the parties who failed to abide by the arrangement. While the equitable issues pleaded are relevant and not to be ignored, the legal issues which flowed from the pharmacies’ alleged inflated reimbursement requests predominate the State’s claims and requests for relief. As a result, jurisdiction properly lies in the circuit court.
¶33. Putting aside the State’s requests for restitution, accountings, constructive trusts, and injunctions, the complaint prays for millions of dollars in actual and punitive damages based on the defendants’ alleged unwillingness to comply with the signed provider agreements. Whether the State disagrees that the basis of these complaints sounds in contract is of no moment. Rather, as most of the claims are legal in nature, the circuit court is the appropriate forum to rule on the matter.
¶34. This decision in no way strips the Attorney General of his constitutional authority to pursue an injunction. Rather, it allows the State fully and fairly to pursue all claims against the defendants, while providing the defendants with an opportunity to have those issues presented to a jury.
The State, therefore, should fully and ably proceed with its complaint in circuit court.
I could quibble all day with the “general jurisdiction” vs. “limited jurisdiction” fiction and how it is so unhelpful to this discussion, but I’ll pass and submit to the principle that if the matter is an action for damages, it should go to circuit.
Having said that … <HERESY ALERT> … my question is, “Why, Mississippi, do we continue to put ourselves through this contortion when we could resolve it easily by merging our law and equity courts into one system?” I know that’s heretical, coming especially from a chancellor, but merger of law and equity has worked handsomely in almost all of the other United States for as many as 150 years without jurisprudential armageddon.
In a merged system, we would not have tug-of-wars between circuit and chancery. As many claims for relief as one has could be joined in a single action to be addressed by the court as appropriate.
Some say that would sacrifice the expertise in minor’s issues, probate, and family law that has been accumulated in chancery over the centuries. That is a somewhat valid concern, but I don’t see that the quality of judicial decisions in merged states is significantly less than Mississippi’s. Also, in some jurisdictions where number of judges and caseload are adequate, judges specialize in certain areas such as family law and criminal law, allowing development of expertise.
Some do not want to sacrifice the jobs of sitting chancellors in a merger, but I don’t think that merger would result in the loss of a single judge slot. We would still have the same number of cases to be handled, requiring at least as many judges as we have now.
Others say, “If it ain’t broke …” etc. To that I concede that it ain’t necessarily broke … but is it functioning as efficiently, justly, and equitably as it can and should?
We ought always be ready and willing to discuss and debate the best ways to fashion our court system.
March 21, 2018 § 1 Comment
As far back as the days when dinosaurs roamed the Jackson prairie, the rule in Mississippi was that divorce venue as spelled out in MCA 93-5-11 conferred subject matter jurisdiction, and, thus, could not be waived or conferred by consent.
Fast forward to the days when Wal-Mart roamed the area, and the rule changed. In Lewis v. Pagel, decided last June, the MSSC reversed ancient precedent and held that subject-matter jurisdiction was conferred not by statute, but by the Mississippi Constitution. The statute, the court held, governs venue and controls the court’s exercise of personal jurisdiction over the defendant.
I posted about Lewis at this link. I urged readers to “stay tuned” to see how the court’s ruling plays out.
Well, as it turns out, we now have a case that applies Lewis. In Ridgeway v. Hooker, decided February 15, 2018, Patrick Ridgeway appealed from the chancery court’s denial of his R60(b)(6) motion for relief from judgment based on his argument that the trial court lacked subject matter jurisdiction to grant a divorce between him and his ex-wife, Louise Hooker. Here is how Justice Kitchens’s opinion addressed Patrick’s argument:
¶21. Mississippi Code Section 93-5-2(1) provides:
Divorce from the bonds of matrimony may be granted on the ground of irreconcilable differences, but only upon the joint complaint of the husband and wife or a complaint where the defendant has been personally served with process or where the defendant has entered an appearance by written waiver of process.
Miss. Code Ann. § 93-5-2(1) (Rev. 2013). Mississippi Rule of Civil Procedure 60(b)(4) allows a court to “relieve a party . . . from a final judgment” if “the judgment is void . . . .” Ridgeway argues that the chancery court lacked subject-matter and personal jurisdiction because the complaint he filed was not a joint complaint, he never served the complaint on Hooker, and Hooker never entered an appearance by written waiver.
¶22. “Subject matter jurisdiction is the power of the court to hear and determine cases in the general class to which the particular case belongs.” In re Estate of Kelly, 951 So. 2d 543, 548 (Miss. 2007) (citing Case v. Case, 246 Miss. 750, 758, 150 So. 2d 148 (1963)). “Subject matter jurisdiction is conveyed by the Mississippi Constitution.” Lewis v. Pagel, 2017 WL 2377690, *6 (Miss. June 1, 2017). “Section 159 of the Mississippi Constitution vests subject matter jurisdiction in the chancery courts over divorce proceedings.” Id. at *6 (citing Miss.
Const. art. 6, § 159 (“The chancery court shall have full jurisdiction in the following matters and cases, viz.: . . . (b) Divorce and alimony . . . .”)).
¶23. It is true, as Ridgeway argues, that “the defense of lack of subject matter jurisdiction cannot be waived.” Stuart v. Univ. of Miss. Med. Ctr., 21 So. 3d 544, 548-49 (Miss. 2009) (citing Capron v. Van Noorden, 2 Cranch 126, 6 U.S. 126, 127, 2 L. Ed. 229 (1804) (“[I]t was the duty of the Court to see that [it] had jurisdiction, for the consent of the parties could not give it.”)). But this Court recently overruled cases holding that the venue requirements of Mississippi Code Section 93-5-11 (Rev. 2013) [Fn 1] “could not be waived as it vested subject matter jurisdiction over divorce actions in the chancery court.” Lewis, 2017 WL 2377690, at *6. This Court overruled “these past cases to the extent that they hold that Section 93-5-11 confers subject-matter jurisdiction on chancery courts.” Id. Instead, the Court held that, while the Mississippi Constitution confers subject-matter jurisdiction,“Section 93-5-11 governs the venue of a divorce action and limits the chancery court’s exercise of personal jurisdiction over the defendant,” and the “Mississippi Rules of Civil Procedure control the procedure to be utilized when venue is improper.” Id.
[Fn 1] Mississippi Code Section 93-5-11 governs proper venue for divorce actions:
All complaints, except those based solely on the ground of irreconcilable differences, must be filed in the county in which the plaintiff resides, if the defendant be a nonresident of this state, or be absent, so that process cannot be served; and the manner of making such parties defendants so as to authorize a judgment against them in other chancery cases, shall be observed. If the defendant be a resident of this state, the complaint shall be filed in the county in which such defendant resides or may be found at the time, or in the county of the residence of the parties at the time of separation, if the plaintiff be still a resident of such county when the suit is instituted.
A complaint for divorce based solely on the grounds of irreconcilable differences shall be filed in the county of residence of either party where both parties are residents of this state. If one (1) party is not a resident of this state, then the complaint shall be filed in the county where the resident party resides. Transfer of venue shall be governed by Rule 82(d) of the Mississippi Rules of Civil Procedure.
Miss. Code Ann. § 93-5-11 (Rev. 2013).
¶24. The chancery court has jurisdiction of divorce cases, including irreconcilable differences divorces. See Miss. Const. art. 6, § 159. No case cited by Ridgeway stands for the proposition that the requirements of Section 93-5-2(1), if not strictly complied with, deprive the chancery court of subject-matter jurisdiction of an irreconcilable differences divorce. As in Lewis, Section 93-5-2(1) limits the chancery court’s exercise of personal jurisdiction over the defendant, requiring a joint complaint and either personal service on the defendant or the defendant’s “entry of appearance by written waiver of process.” Miss. Code Ann. § 93-5-2(1).
¶25. Personal jurisdiction “is an individual right that can be waived.” Pekin Ins. Co. v. Hinton, 192 So. 3d 966, 971 (Miss. 2016) (citing Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703, 102 S. Ct. 2099, 2105, 72 L. Ed. 2d 492 (1982)). More specifically, “[o]ne waives process and service . . . upon making a general appearance.” Isom v. Jernigan, 840 So. 2d 104, 107 (Miss. 2003). This Court held, in a case in which the defendant had “appeared by counsel and filed a plea to the jurisdiction of the court, which he later withdrew, and also filed cross-interrogatories to appellant in the taking of her deposition,” that “personal appearance by a defendant in a cause gives the court jurisdiction of his person as completely as if he had been personally served with process within this state.” Clay v. Clay, 134 Miss. 658, 99 So. 818, 819 (1924). The Mississippi Court of Appeals has held that, while actual service of process had not been issued, the signature of
the defendant and his attorney “under the caption, ‘Read, Agreed, and Approved’” constituted the defendant’s having made “a legal appearance in the matter.” James v. McMullen, 733 So. 2d 358, 360 (Miss. Ct. App. 1999).
¶26. Our Mississippi Rules of Civil Procedure also contemplate waiver in this circumstance: “A defense of lack of jurisdiction over the person, . . . insufficiency of process, or insufficiency of service of process is waived (A) if omitted from a motion in the circumstances described in subdivision (g), [Fn 2] or (B) if it is neither made by a motion under this rule nor included in a responsive pleading or an amendment thereof . . . .” Miss. R. Civ. P. 12(h)(1). Ridgeway makes the statement in his brief that, “[a]ll know that where the [Irreconcilable Divorce Act] and, here, Rule 12 conflict, that the IDA governs.” But the converse is true. See Newell v. State, 308 So. 2d 71 (Miss. 1975) (Article 6, Section 144, of the Mississippi Constitution, which states that the State’s “‘judicial power . . . shall be vested in a Supreme Court and other courts as are provided for in this constitution.’ . . leaves no room for a division of authority between the judiciary and the legislature as to the power to
promulgate rules necessary to accomplish the judiciary’s constitutional purpose.”).
[Fn 2] Mississippi Rule of Civil Procedure 12(g) provides that “[a] party who makes a motion under this rule may join with it any other motions herein provided for and then available to him. . . .” Miss. R. Civ. P. 12(g).
¶27. Here, Ridgeway did not comply with Section 93-5-2(1) in filing a joint complaint, in serving the complaint on Hooker, or in obtaining Hooker’s appearance by written waiver. But Hooker never objected to a lack of jurisdiction, to insufficiency of process, or to insufficiency of service of process. She participated in discovery. She initialed every page of the agreement, signed the agreement, and signed the Judgment of Divorce – Irreconcilable Differences. Hooker’s voluntary appearance obviated the necessity of service of process and she consented to the chancery court’s jurisdiction. By failing to raise the defense of lack of personal jurisdiction, insufficiency of process, or insufficiency of service of process, Hooker waived those defenses pursuant to Rule 12(h)(1).
¶28. It was Ridgeway’s failure to comply with Section 93-5-2(1) which created the alleged jurisdictional defect. As the chancellor correctly observed, Ridgeway cannot complain now of an error of his own creation. This Court has held, an “‘[a]ppellant has no standing to seek
redress from [an] alleged error of his own creation.’” Caston v. State, 823 So. 2d 473, 494-95 (Miss. 2002) (quoting Evans v. State, 547 So. 2d 38, 40 (Miss. 1989)).
¶29. In Kolikas v. Kolikas, 821 So. 2d 874, 876 (Miss. Ct. App. 2002), the husband filed a complaint for divorce in Marshall County, Mississippi, but failed to provide notice to his nonresident wife. The chancery court granted the divorce to the husband, and the Mississippi
Court of Appeals reversed and remanded, holding that “[t]he chancery court had not acquired personal jurisdiction over Ms. Kolikas due to lack of proper service of process based on the Mississippi Rules of Civil Procedure . . . .” Id. at 879-80. The appeals court held that “Mr.
Kolikas, in consultation with his attorney, chose what actions to take in pursuit of divorce” and that “[a]s such, it was his obligation, not that of Ms. Kolikas, to ensure that his actions complied with the appropriate statutes and court rules.” Id. at 879. The court continued: “He did not do so, and cannot place the blame for this failure on Ms. Kolikas.” Id. Similarly, Ridgeway cannot place the blame on Hooker for his own failure to comply with the appropriate statutes and court rules now that doing so, if he succeeded, would inure to his benefit.
¶30. Ridgeway relies on the case of Alexander v. Alexander, 493 So. 2d 978 (Miss. 1986), in support of his argument that “a divorce under the [Irreconcilable Differences Act] was void without some form of personal service or written waiver.” But in that case this Court held “the chancery court exceeded its authority in granting a divorce on the ground of irreconcilable differences” because there had been “no written agreement of the parties regarding their property rights as required by the statute.” Alexander, 493 So. 2d at 980. See Gallaspy v. Gallaspy, 459 So. 2d 283, 287 (Miss. 1987) (Robertson, J., specially concurring) (“The chancery court has no authority to grant a divorce on the ground of irreconcilable differences unless the parties have reached agreement on all financial matters.”). Here, unlike in Alexander, the parties reached a “written agreement for the custody and maintenance of [the] children of [the] marriage and for the settlement of any property rights between the parties . . . .” in accordance with Section 93-5-2(2).
¶31. Accordingly, because the chancellor had subject-matter jurisdiction, because Hooker waived any objection to the exercise of personal jurisdiction, and because Ridgeway lacks standing to complain of an error of his own creation, we affirm.
Lots of nutritional value to digest here. We’ll explore it in greater detail in a future post. For now, rest easy in the understanding that personal jurisdiction, along with all of its ramifications, is what venue now is all about in Mississippi divorce.
March 12, 2018 § Leave a comment
Frankie Don Ware’s will directed that shares of three closely held corporations be distributed by his estate to a testamentary trust. When his widow, Carolyn, filed to close the estate and distribute the shares as directed, Frankie’s son, Richard, filed an objection arguing that the corporate bylaws required that the shares be offered first to the corporation before transfer. Carolyn responded that Richard lacked standing to object. Richard took the position that he had standing in his capacity as trustee of the testamentary trust. The chancellor agreed with Richard, and Carolyn appealed.
In Estate of Ware v. Ware, decided March 1, 2018, the MSSC reversed and remanded, holding that Richard did not have standing. Justice Randolph penned the opinion for a unanimous court:
¶16. Carolyn argues that Richard’s objection to the closing of the estate is a shareholder derivative action, and therefore Richard lacked standing to object. Despite Carolyn’s raising this issue throughout the proceedings, the trial court declined to address Richard’s standing.
¶17. “Standing is a jurisdictional issue.” Hotboxxx, LLC v. City of Gulfport, 154 So. 3d 21, 27 (Miss. 2015) (citations omitted). Therefore, “it may be raised by the Court sua sponte or by any party at any time, and the standard of review is de novo.” Id.
¶18. Carolyn cites Bruno v. Southeastern Services, Inc., 385 So. 2d 620, 622 (Miss. 1980), in which this Court adopted the rule
that an action to redress injuries to a corporation, whether arising in contract or in tort cannot be maintained by a stockholder in his own name, but must be brought by the corporation because the action belongs to the corporation and not the individual stockholders whose rights are merely derivative. The rule applies even though the complaining stockholder owns all or substantially all of the stock of the corporation.
¶19. Richard argues that his claim is not a shareholder derivative claim, but rather, an objection to the administration of the estate. Richard argues that because he is named a trustee of the trust created by Frankie’s will, he has standing to object to the closing of Frankie’s estate. Thus, Richard argues that Carolyn’s standing argument, as it applies to shareholder derivative actions, is inapplicable. Notably, Richard cites no authority for his position that his title of trustee confers upon him standing to object to the administration of an estate. Regardless, his argument is without merit. Richard is attempting to prevent assets from being distributed to the trust. “A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.” Miss. Code Ann. § 91-8-811(a) (Rev. 2013) (emphasis added). Richard’s title of trustee alone is insufficient to confer standing unless he is enforcing claims on behalf of the Frankie Ware Family Trust or is defending claims against the family trust. Id.
¶20. In order to address standing, the Court must determine whether Richard “had the right to participate in this cause of action.” City of Picayune v. Southern Reg’l Corp., 916 So. 2d 510, 519-520 (Miss. 2005). “Fundamental to this review” is what body of law applies to the dispute. Id. Accordingly, whether Richard’s action is indeed a shareholder derivative action will determine what law applies, and in turn, determine Richard’s standing.
¶21. “[I]n determining whether the action belongs to the corporation or the individual, the focus of the inquiry is whether the corporation or the individual suffered injury.” Scafidi v. Hille, 180 So. 3d 634, 647 (Miss. 2015) (quoting Mathis v. ERA Franchise Sys., Inc., 25 So. 3d 298, 303 (Miss. 2009)). “The action is derivative if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock or property without any severance or distribution among individual shareholders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets.” Id. Richard’s objection to the closing of Frankie’s estate is, in reality, a shareholder derivative claim. Richard was seeking solely to enforce a putative corporate right. As such, the law applying to shareholder derivative actions must apply. See City of Picayune, 916 So. 2d at 519-520 (holding that “different standing requirements are accorded to different areas of the law,” and finding that because corporate law applied to the action, citizens did not have standing to challenge actions by a corporation).
¶22. In Mississippi, a shareholder may not institute a derivative suit unless certain statutory conditions are met. 3 Miss. Practice Encyclopedia of Miss. Law § 22:210 (2d ed. 2017). Mississippi Code Section 79-4-7.41(1) (Rev. 2013) provides that a shareholder may not commence a derivative suit unless he or she was a shareholder at the time of the act or omission in question. Mississippi Code Section 79-4-7.41(2) requires that the shareholder fairly and adequately represent the interests of the corporation. Furthermore, Mississippi Code Section 79-4-7.42 (Rev. 2013) requires the complaining shareholder to make a written demand upon the corporation or appropriate officers prior to commencing the proceeding, and section two of that statute requires ninety days to elapse after the written notice, unless the corporation earlier rejects the demand, or unless irreparable injury to the corporation would result by waiting for the ninety-day period to elapse. Finally, our caselaw requires that the corporation is made a party to the derivative action. See Bruno, 385 So. 2d at 622 (“The corporation is an indispensable party” to a shareholder derivative action); see also Fairchild v. Keyes, 448 So. 2d 292, 294 (Miss. 1984) ([T]he corporation is an indispensable party to
a suit brought to protect its interest . . . .”).
¶23. “The rationale for these procedural prerequisites has to do with the corporation’s status as a creature of the State.” 3 Miss. Practice Encyclopedia Miss. Law § 22:210 (2d ed. 2017). “Since the corporation is a separate entity, the shareholder has no legal interest in any of its property.” Id. These conditions “avoid multiple lawsuits, preserve creditors’ rights since any recovery will belong to the corporation, and provide for any recovery to benefit all shareholders.” Id.
¶24. Richard failed to satisfy the statutory conditions required of shareholder derivative actions. Notwithstanding, Richard argues that, even if his action is considered a shareholder derivative action, the chancery court has discretion to disregard the procedural prerequisites and treat the claim as a direct action if it makes certain findings under the Derouen doctrine. Derouen v. Murray, 604 So. 2d 1086, 1091 n.2 (Miss. 1992). The trial court declined to address the question of whether Richard’s action was a shareholder derivative action, and never made any findings under Derouen. In Derouen, this Court did not overrule Bruno, but stated in a footnote that [i]n the case of a closely held corporation . . . , the [chancery] court in its discretion may treat an action raising derivative claims as a direct action, exempt it from those restrictions and defenses applicable only to derivative actions, and order individual recovery, if it finds that to do so will not (i) unfairly expose the corporation or the defendants to a multiplicity of actions, (ii) materially prejudice the interests of creditors of the corporation, or (iii) interfere with a fair distribution of the recovery among all interested persons. Derouen, 385 So. 2d at 622. This Court later interpreted the Derouen doctrine to hold “that in derivative suits involving closely held corporations, the trial court may award damages on an individual basis, provided certain safeguards are met.” Investor Res. Servs., Inc. v. Cato, 15 So. 3d 412, 424 (Miss. 2009). Indeed, the facts of Derouen involved a shareholder
seeking individual recovery for his fifty-percent equity interest in proceeds from the business. Derouen, 604 So. 2d at 1089-90.
¶25. Here, Richard is not seeking individual recovery or individual damages. Rather, he has brought an action to enforce corporate bylaws. The Derouen doctrine does not apply because Richard does not seek individual recovery, but rather seeks to redress alleged wrongs to the three corporations.
¶26. The holding in Bruno applies in this case. Richard lacked standing to bring suit because the right belongs to the three corporations. It is of no consequence that Richard owns half of the shares of stock, as Bruno explicitly applies to closely held corporations, where “the complaining stockholder owns all or substantially all of the stock of the corporation.” Bruno, 385 So. 2d at 622. Accordingly, Richard lacked standing under Bruno to assert a claim individually on behalf of the corporations.
- Although shareholder derivative actions are something you won’t read about much on this blog, it’s worth giving some thought to how the rules of corporation law intersect with chancery matters, particularly estates and divorce. I can conjure up a fair number of scenarios where the holding in this case could apply.
- “Standing is a jurisdictional issue” that may jump up and bite you at any point in the litigation. Even the judge may raise it.
February 7, 2018 § 1 Comment
I see all sorts of ways that people try to amend their pleadings. Some simply file amended pleadings without leave of court, whether within or without time for responsive pleadings. Some get a court order to amend and do so. I have seen some get a court order and never file an amended pleading. A few even comply strictly with the rule.
The COA decision in Estate of Flowers: Flowers v. Estate of Flowers, Flowers and Lang, decided January 2, 2018, involved a motion for leave to amend pleadings following a R12(b)(6) dismissal, and the chancellor’s refusal to allow the amendment. The COA affirmed. Judge Carlton wrote for the court:
¶59. Finally, Claire and Jane appeal the denial of Claire’s motion for leave to admit her amended petition for compensatory and punitive damages. Claire and Jane argue that leave to amend should have been granted because none of the respondents asserted that they would
be prejudiced if the motion were granted.
¶60. In her amended petition, Claire sought to include claims against the various attorneys involved in the representation of Richard’s estate, Brenda’s estate, and the guardianship of D.A. At a hearing on Claire’s motion, the chancellor made a bench ruling wherein he granted Oakes’s Rule 12(b)(6) motion to dismiss Claire’s petition for failure to state a claim upon which relief could be granted. The chancellor also granted Oakes’s and the Meltons’ (among others) motions to strike themselves as defendants in the cause due to Claire’s failure to obtain leave from the court under Mississippi Rule of Civil Procedure 21 to add them.
¶61. As stated, in response to the chancellor’s order of dismissal under Rule 12(b)(6), on February 16, 2016, Claire filed a motion for leave to amend her petition for compensatory and punitive damages, and her amended petition for compensatory and punitive damages in accordance with Rule 15(a). In her motion, Claire stated that she “specifically requests that she be allowed to amend those portions of the complaints by which the court ruled were insufficient at stating a claim for relief. Those portions include stating fraud and negligence per se with the correct specificity.”
¶62. The defendants listed in Claire’s petition joined Oakes’s motion requesting that Claire’s motion for leave to amend be denied. The defendants argued that Claire failed to “attach a proposed amended petition that would permit the chancellor to determine whether justice requires that leave to amend be granted” and that the parties were “dismissed as [respondents] . . . as a result of [Claire’s] failure to obtain leave of court to add [them] as part[ies].”
¶63. We review the denial of a motion to amend for abuse of discretion. Crater v. Bank of New York Mellon, 203 So. 3d 16, 19 (¶7) (Miss. Ct. App. 2016). We will affirm the chancellor’s decision “unless the discretion he used is found to be arbitrary and clearly erroneous.” Breeden v. Buchanan, 164 So. 3d 1057, 1064 (¶27) (Miss. Ct. App. 2015) (quoting Poole ex rel. Poole v. Avara, 908 So. 2d 716, 721 (¶8) (Miss. 2005)).
¶64. Rule 15(a) provides as follows:
On sustaining a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Rule 12(b)(6), . . . leave to amend shall be granted when justice so requires upon conditions and within time as determined by the court, provided matters outside the pleadings are not presented at the hearing on the motion.
Regarding Rule 15 amendments to pleadings, the supreme court has held as follows:
While proposed amendments have been liberally permitted throughout Mississippi legal history and are encouraged under Rule 15[,] a party cannot fail to convey the subject matter of the proposed amendment to the trial judge and if they do so fail, no error can be predicated on the judge’s failure to allow the amendment.
Parker v. Miss. Game & Fish Comm’n, 555 So. 2d 725, 730-31 (Miss. 1989). Additionally, in Price v. Price, 430 So. 2d 848, 849 (Miss. 1983) (citing Watts v. Patton, 66 Miss. 54, 5 So. 628 (1888)), the supreme court explained that a chancellor’s refusal to allow the amendment of a pleading cannot be reviewed on appeal where the record fails to show the proposed amendment.
¶65. In his order denying Claire’s motion for leave to amend in accordance with Rule 15(a), the chancellor explained the following: “[T]he motion filed by [Claire] fails to state how she would amend her prior pleadings or fails to attach a proposed amended pleading which would allow the court to determine whether justice required that she be given leave to file amended pleadings[.]” The record reflects that the motion to amend filed by Claire contained only bare allegations and contained no facts or actions from which to determine the existence of a cause of action. See also M.R.C.P. 9(b) (providing that fraud must be pled with specificity); Faul v. Perlman, 104 So. 3d 148, 156 (¶26) (Miss. Ct. App. 2012)
(discussing the elements a plaintiff must show to establish negligence per se). The record reflects that the chancellor thus properly found that Claire failed to state a basis for amending her pleadings. See Parker, 555 So. 2d at 730-31.
¶66. Additionally, with respect to a claim of fraud, we recognize the following guidance:
[T]he facts on which the charge of fraud is predicated must be specifically stated with full definiteness of detail. No general averment of a fraudulent course of business, and no bare statement of a corrupt design on the part of the defendant, is sufficient. The acts themselves which are claimed to be fraudulent must be clearly set out. It must further appear by definite averment in what manner the fraudulent acts wrought injury to the complainant. Fraud cannot be inferred, but must be distinctly charged, and with such fullness and precision that a court of chancery would be enabled to grant full and complete relief and redress should the bill of complaint be taken as confessed.
Weir v. Jones, 84 Miss. 602, 36 So. 533, 534 (1904). Claire’s failure to provide a basis for amending her pleadings and her failure to plead fraud and negligence with the required specificity prevented the chancellor from determining whether Claire had a cause of action or just allegations without facts.
¶67. Furthermore, as previously stated, the record also shows that Oakes, Stuckey, Melton Jr., and Melton III were dismissed from the litigation as defendants because Claire failed to obtain leave of court before she added the attorneys as parties as required by Rule 21. Claire filed no appeal of the dismissal of the attorneys as parties. In Crater, 203 So. 3d at 21 (¶16), this Court addressed a Rule 15(a) motion to amend filed against a nonparty:
Because the motion to amend asserted claims only against a nonparty, devoid of any factual allegation, after the statute of limitations had run, and sought to exercise a statutory right that does not exist, the claims raised by [the petitioner] in her amended complaint were futile. Because the amendment was futile, the chancery court was not required to grant leave for the amendment. Therefore, the chancery judge did not abuse his discretion in ruling on the motion to dismiss prior to ruling on [the petitioner’s] motion to amend.
¶68. Accordingly, we find no abuse of discretion in the chancellor’s denial of Claire’s motion to amend.
- Of course, any amended pleading must comply with R15 in order to do its job. My suggestion is to read the rule. I’ll bet most of you will be surprised at how many times you’ve failed to do it right.
- When leave of court to amend is required, you must attach a copy of your proposed pleading so that the court can determine whether the motion should be granted. That’s especially true, as this case points out, where you are seeking to plead matters such as fraud that require specific allegations.
- If you do not attach a copy of a proposed pleading and the judge overrules your motion to amend, you can’t complain about it on appeal.
- When your pleadings are dismissed for failure to state a claim, don’t assume that you have the automatic right to amend. File a motion and attach your proposed pleading. Then, if the judge grants your motion, file the proposed pleading.
- Again: if the judge grants your motion to amend, remember to file the pleading.
- R21 requires a court order to add parties. In this case, the plaintiffs merely added parties without a court order, which allowed those parties to escape on a motion to dismiss, which snagged the plaintiffs on the statute of limitations (SOL).
- SOL is seldom fatal in chancery matters, but that’s no reason not to amend and join parties per the rules.
October 31, 2017 § Leave a comment
Figuring out which state has jurisdiction in a UCCJEA case can be baffelizing, confuserating, miserizing, and flusterating.
To the rescue comes Attorney David A. Blumberg, who has devised a set of brilliant flow-charts that help analyze the law and apply it to your case. You can access them at this link. The charts include an intro that will send you to the chart applicable to your case. Charts include: initial orders; modification; enforcement; and decline jurisdiction. You can print the charts on a color printer.
I have played with them, and each appears quite accurate under Mississippi’s UCCJEA. Before you invest too much in them, however, I urge you to vet them for yourself.
Mr. Blumberg is a Wisconsin attorney who specializes in child custody jurisdiction and enforcement cases. His website includes resource material about the UCCJEA that you might find useful.
Thanks to Attorney William Wright, who introduced this to the chancery judges at our Fall Conference
October 10, 2017 § Leave a comment
- The sole purpose of process is to give parties notice that there is a legal proceeding involving them. They are invited to participate.
- Once a party is served with process, or once a party voluntarily appears and participates, the court has personal jurisdiction over that person for the entire remainder of the proceeding, all the way to final judgment, and no further process is necessary (But see the exception of R81 below).
- When a party voluntarily submits to the personal jurisdiction of the court, no further process is necessary. A person can voluntarily submit to personal jurisdiction by filing a lawsuit as a plaintiff, or by filing a responsive pleading and/or counterclaim, or by simply appearing personally and participating.
- R4 process requires the defendant to answer within 30 days.
- R81 process requires the defendant to appear on a day certain. No answer is required, but the defendant may file an answer if he chooses, or if the court orders it. If the defendant does not appear on the specified day, or has not filed a responsive pleading contesting the matter on or before the specified day, then the court can hear the matter on the merits and rule accordingly.
- We refer to the day specified in the R81 summons as the “return day” because process is “returnable” to that day.
- If a matter can not be heard for whatever reason on the return day, then you must get an order signed that same day continuing the case to another day certain. And every continuance order thereafter has to be entered on the same day as that to which the case was continued. If you do not do this, your R81 process will be void, and you will have to re-issue process.
- You do not need to issue process to the plaintiff when you file a counterclaim. That’s because the court already has personal jurisdiction over the plaintiff because he invoked the jurisdiction of the court. Once a party is in the court’s personal jurisdiction, you simply need to give notice per MRCP 5.
- You can not obtain process by publication over a resident unless you first make diligent inquiry for that person’s whereabouts and then file an affidavit per R4(D)(4) that he is a resident but is not to be found in the state. Only after the affidavit is filed can the publication commence.
October 2, 2017 § Leave a comment
I posted here previously about the Lewis v. Pagel case, which changed the law of venue in divorce cases. It held that venue relates to personal jurisdiction, which can be waived or conferred voluntarily, rather than subject matter jurisdiction, which may not be waived or conferred voluntarily. The law up to Pagel had been that divorce venue conferred subject matter jurisdiction. Pre Pagel, if venue was wrong, the court was deprived of subject matter jurisdiction and any judgment it entered would be void.
In that same post I questioned whether Pagel would give rise to forum shopping. If personal jurisdiction can be waived, and venue is a function of personal jurisdiction, then venue should likewise be waivable.
How would that work? One example would be where two pro se litigants in Jasper County decide they can get an ID divorce quicker and easier in Jones County. So they file there. Or in a contested case the lawyers, after exhausting negotiations, mutually decide with their clients to file for divorce in Hinds County where their offices are, instead of in Simpson County where the parties live. Can or should the courts in Jones and Hinds entertain those actions?
Well, the language of MCA 93-5-11 has a lot to say about it:
“All complaints, except those based solely on the ground of irreconcilable differences, must be filed in the county in which the plaintiff resides, if the defendant be a nonresident of this state, or be absent, so that process cannot be served; and the manner of making such parties defendants so as to authorize a judgment against them in other chancery cases, shall be observed. If the defendant be a resident of this state, the complaint shall be filed in the county in which such defendant resides or may be found at the time, or in the county of the residence of the parties at the time of separation, if the plaintiff be still a resident of such county when the suit is instituted.
The operative verbs are must and shall, so the statute mandates where venue will lie. Pagel, on the other hand, says that venue only confers personal jurisdiction, which may always be waived.
So which controls? My best guess is that most chancellors will say that the statute controls, and a divorce filed contrary to the statute will be transferred to the proper venue. The right to waive personal jurisdiction would have to yield to the mandatory language of the statute.
But that’s just me. Your local experience may vary, and there are nine justices on the MSSC, as well as another ten on the COA, who could see it completely differently. Stay tuned.
September 11, 2017 § 2 Comments
Last week I invited your comments on this language from the MSSC’s decision in Lewis v. Pagel, the case that changed the law of venue in Mississippi divorce actions:
¶34. It is uncontested in the record that Drake did not answer Tonia’s complaint for divorce. While Drake was not required to do so, he was permitted to do so under Mississippi Rule of Civil Procedure 81. M.R.C.P 81(d)(4); see also M.R.C.P. 12. Drake certainly could have responded to Tonia’s complaint and challenged venue. Instead, Drake chose to litigate the entire divorce and several ancillary matters, including several appeals, before raising his venue objection once a contempt judgment appeared imminent.
A couple of commentors hit the nail on the head.
The problem with that statement is that divorce is not a R81 matter; it is a R4 matter. Read R81(d) for yourself. Other than a motion for temporary relief in a divorce, there is no mention of divorce in R81(d). That’s because process in a divorce is made pursuant to R4, and an answer is required within 30 days of service or the defendant will be in default. Now, it is true that a divorce complaint may not be taken as confessed, so that failure to file an answer can not result in entry of a default judgment as would be the case in a law suit; however, it is not R81 process that would be returnable to a day certain, and failure to file an answer does have consequences unlike R81.
It is true that R81 is “subject to limited applicability” to Title 93, which includes divorces. But that provision yields to statutory “procedures” that may be in conflict with the rules, and there are no statutory procedures spelled out in Title 93 that conflict with R4, or with R81 for that matter.
The reason I am pointing this out is not because I like to challenge the justices. It’s because I think it’s important for us to keep these things straight to avoid confusion. The above unfortunate language now sleeps in our jurisprudence, possibly to awaken and do mischief in some later case.
I think sometimes that lawyers who have not spent much time dealing with R81 see it as some kind of mystical incantation that must be invoked in chancery matters, and that unless the rituals are properly observed and the magic is properly invoked, jurisdiction will not attach.
The fact is that R4 and R81 are simply two different systems for service of process. Every matter is a R4 action unless it is specifically mentioned in R81(d). It’s as simple as that.
September 6, 2017 § 9 Comments
Yesterday we discussed Lewis v. Pagel, the June 1, 2017, MSSC case that changed Mississippi divorce law with respect to venue.
Can anyone tell me what is wrong with this statement from the opinion:
¶34. It is uncontested in the record that Drake did not answer Tonia’s complaint for divorce. While Drake was not required to do so, he was permitted to do so under Mississippi Rule of Civil Procedure 81. M.R.C.P 81(d)(4); see also M.R.C.P. 12. Drake certainly could have responded to Tonia’s complaint and challenged venue. Instead, Drake chose to litigate the entire divorce and several ancillary matters, including several appeals, before raising his venue objection once a contempt judgment appeared imminent.
I’ll revisit this next week.