Ross v. Marshall

• Decision Date: 21 September 2005
• Docket Number: No. 03-20989.,03-20989.
• Citation: 426 F.3d 745
• Parties: Dwayne ROSS; Maria Ross, individually and as next friend of Sydney Ross and Johnathon Ross, minor children; Sydney Ross, minor child; Johnathon Ross, minor child, Plaintiffs-Appellees, v. Matthew Curtis MARSHALL; et al., Defendants, Allstate Texas Lloyds Insurance Co., Movant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

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426 F.3d 745 Dwayne ROSS; Maria Ross, individually and as next friend of Sydney Ross and Johnathon Ross, minor children; Sydney Ross, minor child; Johnathon Ross, minor child, Plaintiffs-Appellees,
v.
Matthew Curtis MARSHALL; et al., Defendants,
Allstate Texas Lloyds Insurance Co., Movant-Appellant. No. 03-20989. United States Court of Appeals, Fifth Circuit. September 21, 2005.

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Benjamin Lewis Hall, III, Sheryl Scott Chandler, The Hall Law Firm, Byron Charles Keeling (argued), Holman & Keeling, David Wallace Holman, Robert Alan York, Godwin Gruber, Houston, TX, for Plaintiffs-Appellees.

Ronald J. Restrepo (argued), Max Christian Weber, Doyle, Restrepo, Harvin & Robbins, Houston, TX, for Allstate Texas Lloyds Ins. Co.

Appeals from the United States District Court for the Southern District of Texas.

Before HIGGINBOTHAM, DAVIS and GARZA, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

An insurer sought to intervene as of right in a suit against its insured for the purpose of appealing a judgment holding the insured vicariously liable for $10 million in damages. The district court denied the intervention and struck the insurer's answer and notice of appeal. The insured subsequently abandoned his appeal and assigned all rights and claims against his insurer to the plaintiffs. The insurer appealed. After first addressing our jurisdiction, we conclude that the district court erred in denying intervention and abused its discretion in entering an amended judgment holding the insured vicariously liable for the criminal acts of his child. Accordingly, we reverse the district court's order denying intervention and its amended final judgment, and remand with instructions.

I

On the night of June 18, 2000, Wayne Mathews, then a 20-year old college student, gathered with some of his friends outside his parents' home in Katy, Texas. At approximately 10:30 p.m., Wayne's father Kent Mathews instructed Wayne to "wrap things up," and then retired for the evening to go to sleep. The record indicates that Wayne and his friends were drinking at this time, but is inconclusive as to whether Kent was aware of this fact.

Far from "wrapping things up," Wayne and his friends continued imbibing alcohol, and decided to construct a large wooden cross and burn it in front of an African-American family's home. Using materials gathered in part from the garage of the Mathews' residence, the group set to work on the cross in the driveway and front lawn of the Mathews' home. This activity took place during the early morning hours of June 19. After completing the cross, the group of friends transported it to the home of the Rosses, an African-American family, placed it in their yard and set it ablaze.¹

The Rosses filed a civil suit against Wayne and his friends, alleging various intentional torts and civil rights violations.² In addition, the Rosses sought to recover from Wayne's parents, Kent and Sally Mathews, on grounds that they "knew or should have known that their properties and household effects were being used in [ ] a negligent and reckless manner." At the time of the cross-burning incident, Kent and Sally Mathews owned a homeowner's insurance policy issued by Allstate covering "damages because of bodily injury . . . caused by an occurrence" for which coverage was provided. Allstate provided an attorney to defend Kent and Sally

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Mathews subject to a reservation of rights.³

The court initially dismissed Kent and Sally Mathews from the suit pursuant to Federal Rule of Civil Procedure 12(b)(6), but reinstated them as defendants when the Rosses clarified that they were seeking to hold them directly liable under a negligence theory, and vicariously liable as principals for their son's intentional acts. The Rosses eventually dismissed their claims against Sally, and went to trial on their claims against Kent, Wayne, and Wayne's friends.

Following trial, a jury found Wayne and his friends liable for approximately $10 million in damages. The jury also found that Kent had delegated his authority to Wayne over the Mathews' property on the night in question, and that this delegation was negligent. However, the jury concluded that this negligent delegation of authority was not a proximate cause of the cross-burning. Based on these findings, the court concluded that

while it is undisputed that Wayne Mathews' use of the Mathews' property was within the scope of [the delegated] authority, the wrongful acts were not. Therefore, the Court holds that the plaintiff shall take-nothing against Kent Mathews for his wrongful act. Moreover, the wrongful acts and the damages found against Wayne Mathews are not attributable to him.⁴

The Rosses filed a motion to amend the judgment, arguing that they were entitled to recover against Kent on a theory of vicarious liability. Conceding that the jury verdict precluded a finding of direct liability under a negligence theory, the Rosses urged the court to amend its judgment to reflect that they could recover against Kent, as principal, for the acts of his agent, Wayne. They argued that the existence of a principal-agent relationship was supported by the jury's finding that Kent had delegated authority over the Mathews' house to Wayne on the night of the cross-burning. Further, they contended that Wayne's acts, while not necessarily foreseeable to Kent, were within the scope of authority delegated to Wayne. Kent opposed this motion, arguing that he could not be found liable as a principal because his son's criminal acts fell outside the scope of Wayne's delegated authority.

On August 20, 2003, the district court entered is amended final judgment, finding as a matter of law that Kent was vicariously liable for Wayne's conduct. Despite the jury's finding that Kent's negligent delegation of authority did not cause the Ross's injury, the court found "that it is undisputed that Wayne Mathews' use of the Mathews' property was within the scope of authority granted by Kent Mathews. Therefore, the Court holds that while Kent Mathews is not directly liable, he is, nevertheless, indirectly liable."⁵ In its Order on Motion to Amend Judgment, the Court explained that it "erroneously circumscribed and omitted a treatment of Kent Mathews' conduct under a vicarious liability theory" in its original judgment.⁶

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The court then recounted evidence that Kent was aware of his son's extensive problems with alcohol, noting that a jury could have inferred that Kent knew that Wayne was not a person to whom authority over his personal and real property should be granted. The court continued:

Based on the jury's findings and the reasonable inferences to be drawn from their findings, the Court concludes that Kent Mathews is, as a matter of law, vicariously liable for delegating authority over his premises and materials to an untrustworthy son. The Court also finds and holds that the act of delegation of authority by Kent Mathews was negligent, and [more so] an accident as that term is defined in the policy of insurance.⁷

On September 3, 2003, Kent, through counsel appointed by Allstate, filed a notice of appeal from the amended judgment. On that same day, Allstate filed a post-judgment answer, notice of appeal, and motion to intervene as of right based in part on the district court's coverage finding, and in part on its concern that Kent would not appeal the judgment. Allstate also sought to supersede the judgment by agreeing to a bond in the full amount of its $300,000 policy limit. On September 4, 2003, Kent filed a motion to alter or amend the court's amended judgment. On September 12, 2003, the court struck Allstate's answer and notice of appeal, and denied its motion to intervene and Kent's motion to amend judgment. In addition, the court denied the motion for approval of Allstate's supersedeas bond without opinion. Allstate timely appealed the court's denial of its motion to intervene.

Following these events, Kent agreed to fire his appellate counsel, dismiss his appeal, and assign all his rights against Allstate to the Rosses. In exchange, the Rosses agreed to delay filing writs of execution against his property. We dismissed Kent's appeal for want of prosecution on February 5, 2004.

II

Allstate contends that the district court erred in denying its motion to intervene as of right. In addition, Allstate attacks the amended judgment of the district court on several grounds. First, it argues that the district court erred in making findings on an agency theory that had been waived by the Rosses. Second, it contends that the district court erred in entering judgment against Kent as a matter of law based on the agency theory. Third, Allstate urges that the district court abused its discretion by amending its judgment under Rule 59(e) to find Kent liable on a theory that had previously been abandoned. Finally, Allstate argues that the court erred in attempting to hold Kent liable on a negligence theory that was expressly rejected by the jury.

In response, the Rosses contend that this appeal must be dismissed because the district court lacked jurisdiction to rule on Allstate's motion to intervene after Kent filed his notice of appeal. The Rosses also argue that Allstate failed to satisfy the requirements for intervention as of right. Finally, the Rosses argue that they neither waived nor abandoned their agency theory, and that the district court's judgment was supported by both the jury's finding that Kent negligently delegated his authority to Wayne, and undisputed evidence that Wayne's acts were within the scope of that authority.

III

We first address the Rosses's argument that this appeal must be dismissed because the district court lacked jurisdiction

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to decide Allstate's motion to intervene. Although this argument was raised for the first time at oral argument, we must consider it as it goes to our...