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Bar Journal - March 1, 2000

Lex Loci: A Survey of Recent NH Supreme Court Decisions

By:
 

The author’s task of choosing from the past quarter’s opinions of the Supreme Court upon which to comment was unusually difficult as the Court, confronted by the deadline imposed by Justice Johnson’s retirement at year end, handed down an unprecedented number of opinions. However, there were many interesting decisions from which to choose.

In a case that harkens back to a distant era in the misty past [the author’s first year at law school], Soper v. Purdy, decided October 28, 1999, was an action to recover the sale price of five heifers. If you don’t know what a heifer1 is, you were obviously born after World War II and you’ll need to look at the footnote.

This interesting case involved a written sales agreement [first agreement] for the sale of the five maiden ladies in April, 1989, with the purchase price to be paid by June of that same year with interest at 11% thereafter. The debt was not paid and in 1994, a [second] written and ambiguous agreement concerning the unpaid-for cows was signed by the parties which provided for a lower interest rate and that "[a]ny unpaid interest will be continued to be added to the principal amount owed." [Emphasis added.] The case turned on the quoted language since the purchaser never paid a cent for the heifers and by 1994 the statute of limitations had run on the first agreement. The statute of limitations had not run on the second agreement and the seller sued to recover the purchase price approximately two years after the second agreement was signed, but seven years after the first agreement, the action being brought in assumpsit and quantum meruit. Aren’t those words wonderful: assumpsit and quantum meruit? The author wonders whether the plaintiff’s action was in simple assumpsit or was it special assumpsit or even perhaps the mystical indebitatus assumpsit? Did the plaintiff consider replevin to recover the very same heifers sold [perhaps they were then damaged goods no longer being maidens?], or an action in trover for conversion of the cows? Ah, the exotic mysteries and wonders of the old common law! How boring is the modern complaint or plea at law.

The purchaser raised the defense of the statute of limitations and the trial court agreed with the purchaser that the statute of limitations barred the plaintiff’s claim. However, the Supreme Court reversed, stating that the second agreement met its earlier announced test that in such a situation, the second agreement must contain "a direct and unqualified admission by a debtor within the statutory period prior to the commencement of the action, of a subsisting debt which he is liable and willing to pay."2 The Supreme Court found that the language quoted earlier by the author "constitutes a sufficient statement from which a fact finder could find not only that the debt is presently ‘owed’ but also that there is a continuing obligation to satisfy the debt."

In another chapter in the continuing saga of the Claremont School Cases, the Supreme Court unanimously awarded attorney’s fees to the plaintiff towns, but not legal costs. Claremont School District vs. Governor, decided December 30, 1999. The interesting distinction between costs and fees made by the Court turned upon the doctrine of sovereign immunity, which the State had interposed as to both the attorney’s fees and costs. The Court traced the origins of the doctrine from the state’s early years and pointed out that it had its basis in the immunity of the British Crown which then found its way into the common law of our state. Eventually, the doctrine was codified as RSA 99-D:1, which adopted the doctrine as the law of the state, except where a statute provided an exception.

Turning to the issue of taxation of costs against the state, the Court first ruled that the State was not precluded from raising its objection even though it failed to file an objection within the time period required by Supreme Court Rules, "since sovereign immunity is a jurisdictional question that cannot be waived by conduct or undermined by estoppel." The Court found that based on its earlier rulings, since the legislature had not waived the State’s immunity from costs pursuant to its Rule 23, "the State cannot be assessed costs in this matter."

The Court then turned to whether sovereign immunity "bars an award of attorney’s fees" and concluded "that an award of attorney’s fees is not barred by sovereign immunity in this case because the underlying case is not barred by the doctrine, the relief the plaintiffs seek in the form of fees is within our inherent equitable power, and we have equitable jurisdiction over the case." The Court held that

the plaintiffs…are entitled to an award of fees under the substantial benefit theory. An award of attorney’s fees to the prevailing party where the action conferred a substantial benefit on not only the plaintiffs who initiated the action, but on the public as well, has been recognized as an exception to the American rule that each party must bear its own attorney’s fees.

The Court went on to point out that the "purpose of the fee award in this case is not to penalize the State, but rather to compensate the plaintiff towns for their efforts on behalf of the public."

An interesting probate case involving the imposition of the legacy and succession tax on a joint bank account was before the Supreme Court in In Re Estate of David R. Pratt, decided December 29, 1999. The petitioner was the recipient of the proceeds of a joint account held with the defendant’s decedent. The petitioner and the defendant were not related. One day before the decedent’s death, the petitioner withdrew all monies in the account which had been provided entirely by the decedent. This subjected the monies to the legacy and succession tax. RSA 86:6-a; RSA 86:8. The decedent’s will had the usual tax payment clause which provided that the executor was to pay all legacy and succession taxes, whether the property was disposed of by the decedent’s will or not. The Department of Revenue Administration sent the petitioner (the surviving joint tenant) a tax bill for the legacy and succession taxes and she, in turn, asked the executor to pay the taxes in accordance with the will. The executor refused and submitted his final account to the probate court for approval without providing for payment of the tax and the petitioner objected to the final accounting. The probate court dismissed the plaintiff’s objection on the basis that it had not been filed within one year from the grant of administration and was time barred pursuant to RSA 556:5. The Supreme Court addressed that issue only and found that the claim of the petitioner was not a claim against the decedent that would be time barred by RSA 556:5 but rather was a claim against the defendant executor which was not time barred. The Supreme Court remanded to the probate court the issue of who is ultimately responsible for the payment of the inheritance tax on the gift. The answer to that question will be an interesting one.

Under continuing pressure from the legislature and numerous critics, the Supreme Court, on January 4, 2000, adopted two new rules relating to the establishment and operation of the Committee on Judicial Conduct, Supreme Court Rules 39 and 40, to become effective April 1, 2000. The new Rules have the effect of opening up the proceedings of the Committee on Judicial Conduct so that under the new Rules "all discipline imposed by the committee or the Supreme Court will be public, including informal resolutions such as an admonishment or the imposition of conditions on the judge’s conduct." The Rules provide that once a grievance is filed and is docketed, it becomes a complaint and both grievances and complaints will be made available for public review. Accompanying this change was an Order of the Court, dated December 29, 1999, that revised Supreme Court Rule 38 which amends Cannon 4 of the Code of Judicial Conduct and now requires any full time judge who intends to enter into a teaching contract to obtain written approval, in advance, from the Chief Justice of the Supreme Court and goes on to limit "the income that a full-time judge may derive from these activities to 15% of the judge’s salary, unless an exception is granted in writing in the case of ‘extraordinary circumstances.’" The Rule also provides that all financial disclosure forms shall be made public. A full-time judge under the new Rule is limited, "subject to the proper performance of his or her judicial duties and other appropriate limitations, to speak, write, lecture, teach and participate in other activities concerning the law, the legal system and the administration of justice."

Fabich v. Fabich, Sr., decided December 30, 1999, is a divorce case raising an issue of first impression in this state, "whether disability retirement benefits constitute a pension divisible as marital property, or compensation that is not part of the marital estate." The facts showed that all during his marriage, the defendant husband participated in the New Hampshire State Retirement System as a firefighter. After the plaintiff filed a libel for divorce, the defendant was injured at work and was deemed to be permanently disabled. The defendant husband applied for and received accidental disability retirement from the Retirement System and during the divorce proceedings, the plaintiff sought to collect one-half of the defendant’s monthly disability retirement benefit as a property settlement. The defendant husband asserted that these payments were not pension benefits and, thus, not divisible marital property. Rather he argued that the disability payments were compensation for lost income that he would have earned had he not been disabled and could be considered in the calculation of alimony and support obligations only. The superior court disagreed and concluded that his entire monthly benefit was attributable to the marital estate and was subject to a 50% distribution to the wife. On appeal, the Supreme Court, since it was a case of first impression in New Hampshire, reviewed the law of other jurisdictions and found that the issue divided the state courts. The Court unanimously opted for the rule adopted in a significant number of jurisdictions which employed a functional approach:

Depending on the circumstances surrounding the award of the pension…courts may apportion part of the benefits received as retirement pay to the marital estate and deem the rest to be compensation that is separate property….Courts employing this functional approach have not hesitated, however, to conclude that an employee spouse’s entire disability pension is truly compensatory and thus is separate property available for the calculation of only support and alimony obligations.

The Court rejected the adoption of

[a]n inflexible rule that disability pension benefits are always income and never contain a retirement component ‘would have the effect of permanently depriving [the non-employee spouse] of any share of [the employee spouse’s] pension. That would run counter to our recognition that marriage is, among other things, an economic partnership and that pension benefits can be one of the largest assets of that partnership.

The Court remanded the case to the superior court for action in accordance with its ruling. Before doing so, however, it rejected the plaintiff wife’s intention that "a finding that any part of the defendant’s disability pension benefits are separate property would render the retirement system unconstitutional under the New Hampshire Constitution under Part I, Article 36." "Accordingly, although we conclude that the defendant’s accidental disability payments are partly compensatory in nature and thus not part of the marital estate, those benefits do not constitute payment of ‘boons, bounties and favors’ to the defendant in violation of Part I, Article 36."

An interesting banking law case decided November 18, 1999, is Ahrendt v. Granite Bank. The plaintiff sought to recover money of which she was defrauded by a third party from the bank in which she had a money market account. Through a series of withdrawals, carried out by four handwritten notes, the plaintiff requested the defendant bank to pay the defrauding party for purported home repairs and each was presented to the bank by the crook. Each time a bank employee carefully verified the plaintiff’s signature and then called the plaintiff to confirm her desire to make the transaction. Each time she received an affirmative answer and the bank employee paid the money as requested to the crook although she stated that she felt "uncomfortable" and felt that the transactions were not wise ones.

The trial court granted the defendant’s motion for summary judgment and on appeal to the Supreme Court, plaintiff’s scatter shot argument was rejected on all counts by a unanimous Supreme Court. Of most interest is the language of the Court describing the relationship between a bank and its customer as follows:

As a general rule, the relationship between a bank and a customer is not a fiduciary one unless the law otherwise specifies….The relationship between a bank and its depositor is a debtor-creditor relationship….As such, the relationship between an ordinary depositor and the bank is contractual in nature….A fiduciary relationship, however, can arise under certain facts if equity so requires….We have found, for example, such relationship between a mortgagee and a mortgagor in a foreclosure sale….That a fiduciary relationship exists between a bank and its customer/depositor in certain cases, however, does not mean that a fiduciary relationship always exists.

Upon a careful review of the facts, the Supreme Court found that the bank did not owe a fiduciary relationship to its customer simply because the plaintiff was a long-time customer of the bank and because the bank employee had reservations about the customer’s wisdom in making the withdrawals: "In accepting written instructions from the plaintiff, the bank reasonable exercised its discretion. The purpose of the contract between the plaintiff and the bank was for the bank to hold her funds and to return them or to pay them upon her request." In the end, the Court upheld the granting of the defendant bank’s summary judgment motion.

Recently, the New York Times published news of a shocking report by the prestigious National Academy of Sciences highlighting the astounding number of citizens injured or killed by mistakes made by hospitals when administering health care to Americans.3 In hospitals alone, the Academy reported that as many as 98,000 people a year are killed by medical errors, substantially higher than fatalities from workplace injuries, highway accidents, breast cancer or AIDS!! "Most medical errors…result not from individual recklessness, but from basic flaws in the way hospitals…operate." This background makes the next case even more perplexing.

In Royer v. Catholic Medical Center, decided November 23, 1999, a unanimous Supreme Court, not surprisingly in light of earlier decisions, took a narrow view of New Hampshire’s strict liability doctrine for the physical harm done by anyone who sells a product in a defective condition unreasonably dangerous to the user. New Hampshire has adopted § 402A of the Restatement (Second) of Torts, establishing such strict liability but in an "issue of first impression" the Court was asked "to determine whether a health care provider that supplies a defective prosthesis [in this case a defective knee was supplied by a hospital and surgically implanted in the plaintiff] in the course of delivering health care services is a ‘seller’ of prosthetic devices, or is merely providing a professional service." The Court opted for the view of the majority of states which "have declined to extend strict liability….[to] a health care provider who supplies a defective prosthesis."

The plaintiffs argued cogently [and the author believes correctly] "that the distinction between selling products and providing services is a legal fiction," saying that the defendant "acted both as a seller of the prosthetic knee and as a provider of professional services in the transaction….The defendant. . . primarily supplied a prosthesis, while the surgeon provided the professional ‘services.’" This argument fell on deaf ears. A unanimous Supreme Court ruled that "the policy rationale underlying strict liability [in New Hampshire] does not support extension of the doctrine." This case should put to rest the argument of many conservatives in New Hampshire who, disagreeing with the Court in the Claremont decisions, argue that the Court is a liberal or activist court.

State v. Therrien, decided December 13, 1999, is another one of those stomach-churning felonious sexual assault cases where the defendant was convicted of sexually assaulting his own daughter while she was a first grader. Unfortunately, that was only the beginning of the daughter’s travail since the assaults continued for many years and in great number and in two states. At trial, the defense made a very basic error by questioning the victim daughter about an excerpt from a letter from the daughter to her father ten years after the first assault in which the defendant claimed that the daughter had not mentioned the alleged sexual abuse which had occurred ten years earlier. However, on redirect by the State, it appeared that the letter also contained statements from the daughter that

[e]ven when we were a family, you treated me with no respect at all. You didn’t treat me like a daughter, you treated me like something else, and I think you know what that is. I will never forget that. You don’t know how wounded I am because of it.

The State, without objection, then inquired of the daughter about the meaning of those sentences and she testified that the defendant father had sexually violated her "many, many, many times." The Supreme Court summarily rejected the defendant’s appeal that this exchange improperly allowed evidence of the defendant’s other bad acts to be admitted. How can one explain this sort of repellant behavior: when finally asked "how many times would you say your father had you perform fellatio" on him, the daughter responded, "I can’t count that high."

ENDNOTES

1. According to Webster's New World Dictionary of American Language (Second College Edition, 1982), a heifer is "a young cow that has not borne a calf."
2. Levensaler v. Batchelder, 84 N.H. 192 (1929).
3. The New York Times, November 30, 1999, Page 1.

The Author

Attorney Charles A. DeGrandpre is a director and treasurer in the firm of McLane, Graf, Raulerson & Middleton, P.A., Portsmouth, New Hampshire.

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