BLUEWATER BACKSPLASH

April 3, 2012 § 3 Comments

The MSSC decision in Bluewater Logistics v. Williford, 55 So.3d 148 (Miss. 2011), is notable for several reasons. First, it’s of value to lawyers who litigate over LLC’s and contracts as a guide to the parameters of litigation in that field. Second, it spelled the demise of the “heightened scrutiny” and “lessened deference” rules formerly applied when judges adopt verbatim one side’s proposed findings of fact and conclusions of law; a post in which I touched on that point is here.

To me, though, the most potentially far-reaching impact of Bluewater is its treatment of the pleadings and the scope of relief granted by the trial judge. The COA had reversed, ruling that the chancellor had impermissibly gone beyond the scope of the pleadings. The COA decision rested on three 19th-century cases.

The MSSC granted cert and the Bluewater appellants argued to the high court that the COA was correct because Williford’s complaint had sought only injunctive relief in the form of reinstatement as a member of the LLC, and that, as a result, the chancellor was in error in awarding him equitable relief in the form of a judgment for the value of his interest in the LLC. Here’s what Justice Dickinson, writing for the majority, said, beginning at page 157:

¶ 35. Mississippi has been a “notice pleading” state since January 1, 1982, when we adopted the Mississippi Rules of Civil Procedure. [citation omitted] Under Rule 8, a complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief,” and “a demand for judgment.” [citation omitted] “No technical forms of pleading or motions are required.” [citation omitted] Moreover, “[a]ll pleadings shall be so construed as to do substantial justice.” [citation omitted] Rule 54(c) states that every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled by the proof and which is within the jurisdiction of the court to grant, even if the party has not demanded such relief in his pleadings …. ” [citation omitted]

¶ 36. Our decisions have reflected the shift from older forms of “code pleading” to the Rules’ “notice pleading” paradigm. In Pilgrim Rest Missionary Baptist Church v. Wallace, we stated “it is axiomatic that the relief need not be limited in kind or amount by the demand but may include relief not requested in the complaint.” [citation omitted] And in Turner [Turner v. Terry, 799 So.2d 25, 39 (Miss.2001)], we stated: “A trial judge may award a party any relief to which he is entitled, even if the party fails to make a specific demand for such.” [citation omitted]

¶ 37. In holding that the chancellor erred in granting Williford money damages, the Court of Appeals inexplicably relied on three pre–rules cases, two of which date to the 1850s. [citation omitted] We now overrule Barnes, French, and Tucker to the extent that they conflict with the requirements and provisions of the Mississippi Rules of Civil Procedure and subsequent decisions of this Court.

¶ 38. We hold that Williford’s complaint was clearly sufficient to support an award of monetary damages. The complaint is titled “Complaint for Preliminary and Permanent Injunction and Damages.” The opening paragraph stated that Williford was seeking damages. Paragraph 5 alleged the ouster was unlawful, “warranting equitable and monetary relief.” Count I of the complaint was titled “Breach of Contract” and alleged breach of contract, for which the remedy is compensatory damages. In Count III, titled “Violation of the Mississippi Limited Liability Company Act,” Williford asserted “all rights and remedies available under the applicable statute, Miss.Code Ann. § [79–29–101], et seq.” [citation omitted] Under the section titled “Damages and Relief Sought,” Williford sought (among other things) compensatory damages, an accounting of all company assets, an appraisal of the fair-market value of his share of the company, and “any other relief to which he may be entitled.”

¶ 39. Viewed as a whole, we cannot say the chancellor was in error by finding that the complaint was sufficient to put Bluewater on notice that Williford was seeking monetary relief. Accordingly, Defendants’ argument that the chancellor granted Williford relief that was beyond the scope of the pleadings is without merit.

One of those 19th-century cases reversed by the court Terry v. Jones, was referred to by me in a prior post to emphasize that pleadings are not proof.

It remains to be seen how far the courts will go in applying the pleadings aspects of Bluewater. If the decision is limited to the underlying facts, then it should not be too earthshaking because the pleadings arguably did invoke the remedies that the trial court applied. If, however, the decision is taken to mean that notice pleadings require only notice of subject matter jurisdiction, thereby opening the door to all species of relief available thereunder, then your practice of chancery law may change dramatically.

Or maybe not. It has long been the law in Mississippi that in granting equitable relief the chancellor may order all relief necessary to effect an equitable remedy, whether pled for or not. For instance, in awarding lump sum alimony the chancellor may impose an equitable lien on real propterty to secure the payment. Or, where custody is sought, the judge may order the noncustodial parent to pay child support even where it was not sought. So perhaps Bluewater is not so much a dramatic shift in the tide as it is a mere ripple on the pond.

FYI, the Bluewater holding also calls into question a prior post of mine in which I stressed that you have to ask for specific relief in your pleadings if you expect to get it.

I encourage you to read the Bluewater decision carefully to get a handle on how it can help or hurt you. You will likely come up with ways to argue it to your advantage.

UNDUE INFLUENCE IN INTER VIVOS GIFTS BETWEEN SPOUSES

February 28, 2011 § 6 Comments

Mansfield and Patricia were married in 1994, when both were in their 40’s. It was the second marriage for each, and they had children by the previous marriages. Patricia suffered health problems during the marriage, and she received a Phen-Phen settlement in 2001.

On March 15, 2002, Patricia executed a will devising her entire estate to her three adult children and her sister. The will included this language: “Mansfield Langston, my husband, has his own estate in his name, therefore no provision for him is made in this will.”

Soon after in 2002, there was a series of transactions between the parties that ultimately resulted in a home being titled in joint ownership between Mansfield and Patricia, with right of survivorship. The home had formerly been in her sole name. There were other related transactions, the most significant of which was that a $200,000 CD was converted to joint tenancy with right of survivorship.

On May 11, 2005, Patricia died of a sudden illness, and Patricia’s estate was opened by her mother. The estate sought to set aside the joint tenancies in the marital home and the certificate of deposit in order to bring those assets into the estate for distribution to the will beneficiaries, who were Patricia’s adult children and Patricia’s sister.

Following the trial, the chancellor found that a confidential relationship existed between Mansfield and Patricia. Therefore, the chancellor ruled that the burden shifted to Mansfield to prove by clear and convincing evidence that the creation of the joint tenancies was not the result of undue influence. The chancellor held that Mansfield did not meet this burden, and both joint tenancies were set aside and brought into Patricia’s estate.

In the case of Estate of Langston, in a well-reasoned, authoritative opinion by Judge Griffis, the COA on March 30, 2010, reversed the chancellor and held that the presumption of undue influence did not apply to inter vivos transactions between husband and wife.  The ruling in effect extended the prior rule that the presumption of undue influence did not apply to testamentary dispositions between spouses.

On February 24, 2011, the Mississippi Supreme Court affirmed the COA in the case of Estate of Langston v. Williams in an opinion authored  by Justice Dickinson and joined by all but Graves, who has departed for his federal gig in New Orleans, that concludes with this key language:

“A confidential relationship between spouses does not create a presumption that one spouse used undue influence over the other to obtain an inter vivos gift. And one who claims the gift was the product of undue influence bears the burden of proof.”

The burden of proof is by clear and convincing evidence.

The case was remanded to Sunflower County Chancery Court to allow the estate to make a record on the issue, since the chancellor had ruled (properly under the law in effect at the time) that such a presumption did exist, so that the estate was neither required to prove, nor was it given the opportunity to prove, undue influence.

It’s not uncommon for issues like these to surface in second marriages of older couples where there are children by a prior marriage.  If you find yourself being presented with undue influence claims in a similar case, I encourage you to read Judge Griffis’s COA opinion.  It’s about as good an exposition of all the applicable case law that you will find.

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