D.K. Buskirk & Sons, Inc. v. State

• Decision Date: 21 March 1997
• Docket Number: No. S-94-270,S-94-270
• Citation: 560 N.W.2d 462,252 Neb. 84
• Parties: D.K. BUSKIRK & SONS, INC., et al., Appellants, v. STATE of Nebraska, Appellee.
• Court: Nebraska Supreme Court

Page 462

560 N.W.2d 462

252 Neb. 84

D.K. BUSKIRK & SONS, INC., et al., Appellants, v. STATE of Nebraska, Appellee.

No. S-94-270.

Supreme Court of Nebraska.

March 21, 1997.

Syllabus by the Court

1. Judgments: Appeal and Error. When reviewing a question of law, an appellate court reaches a conclusion independent of the lower court's ruling.

2. Summary Judgment. Summary judgment is proper only when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

3. Tort Claims Act: Liability. Performance of or failure to perform a discretionary function or duty cannot be the basis for liability under the State Tort Claims Act.

4. Tort Claims Act: Liability: Words and Phrases. The discretionary function or duty exemption in the State Tort Claims Act extends only to the basic policy decisions made in governmental activity and not to ministerial activities implementing such policy decisions.

5. Tort Claims Act: Liability. In cases where the facts are undisputed, the application of the discretionary function exemption of the State Tort Claims Act presents a question of law.

6. Summary Judgment: Proof. The party moving for summary judgment has the burden to show that no genuine issue of material fact exists and must produce sufficient evidence to demonstrate that the moving party is entitled to judgment as a matter of law.

7. Tort Claims Act: Liability. The discretionary function or duty exemption in the State Tort Claims Act is inapplicable to a claim if a statute, regulation, or policy specifically prescribes a course of governmental action or conduct.

Michael J. Franciosi, of Atkins, Ferguson & Carney, P.C., and James M. Carney, of Simmons, Olsen, Ediger, Selzer, Ferguson & Carney, P.C., Scottsbluff, for appellants.

Don Stenberg, Attorney General, Charles E. Lowe, and L. Jay Bartel, Lincoln, for appellee.

WHITE, C.J., CAPORALE, LANPHIER, WRIGHT, CONNOLLY, and GERRARD, JJ., and RIST, District Judge.

GERRARD, Justice.

In this case, the Nebraska Court of Appeals reversed the order of the district court which had sustained a motion for summary judgment in favor of the State of Nebraska and dismissed 19 separate claims, based on the discretionary function exemption in the State Tort Claims Act, Neb.Rev.Stat. § 81-8,209 et seq. (Reissue 1987 & Cum.Supp.1990). D.K. Buskirk & Sons v. State, 96 NCA No. 6, case No. A-94-270, 1996 WL 45196 (not designated for permanent publication). The State has successfully sought further review in this court.

FACTUAL BACKGROUND

Nineteen plaintiffs brought separate actions against the State of Nebraska, Public Service Commission (PSC), pursuant to the State Tort Claims Act, with respect to the PSC's alleged negligent regulation of Quality Processing, Inc. (QPI), a grain dealer/warehouser. The plaintiffs are all farmers and ranchers who had entered into contracts with QPI for the sale or storage of dry edible beans and popcorn. The substance of the plaintiffs' claims was that the PSC was negligent in regard to its duty to enforce the Grain Warehouse Act, Neb.Rev.Stat. § 88-525 et seq. (Reissue 1987 & Cum.Supp.1990), and the Grain Dealer Act, Neb.Rev.Stat. § 75-901 et seq. (Reissue 1990). As a consequence, when QPI filed for bankruptcy in February 1990, the plaintiffs collectively suffered losses of over $400,000.

QPI was licensed by the PSC as a grain dealer pursuant to the Grain Dealer Act, beginning in about July 1988. As a licensed grain dealer, QPI was permitted to purchase grain from producers for the purpose of selling such grain. QPI was not licensed by the PSC as a grain warehouse pursuant to the Grain Warehouse Act. Accordingly, QPI was not permitted to accept grain for storage. An individual or an entity that is licensed as a grain warehouse may also operate as a grain dealer.

The only evidence submitted in the summary judgment proceeding was the deposition of John Fecht, grain warehouse director for the PSC. Fecht was responsible for enforcing the terms of the Grain Warehouse Act. Fecht testified that during a September 8, 1989, telephone conversation with one of the owners of QPI, he learned for the first time that QPI was engaged in the storage of beans. In order to bring QPI into compliance with the Grain Warehouse Act, Fecht arranged for the appropriate application forms and instructions to be sent to QPI. Fecht also dispatched two PSC inspectors to investigate and report on QPI's two grain storage facilities: one in Hemingford and the other in Ogallala.

QPI failed to return a completed application in a timely manner. On October 24, 1989, Fecht instructed a PSC staff account-ant to contact QPI's accountant to discuss the status of QPI's grain warehouse license application. Specifically, the PSC staff accountant was to inform QPI that it should either complete the application and become licensed as a warehouse or use its grain dealer's license to purchase all the beans it was holding in storage.

QPI later informed Fecht that it had misplaced the application materials he had sent. Fecht provided QPI with another set of application materials on November 8, 1989. On December 11, the PSC received QPI's grain warehouse application. However, QPI failed to provide a required audited or reviewed financial statement with this application. QPI never corrected its omission, nor did it purchase all of the grain it was holding in storage. Notwithstanding, Fecht allowed QPI to continue functioning as a grain warehouse without a license, with the intent of eventually bringing it into compliance.

On February 12, 1990, Fecht was informed by a deputy sheriff in Alliance that QPI had issued insufficient-fund checks totaling $37,000. After further investigation, on February 27, Fecht filed a complaint with the PSC and set in motion proceedings for the suspension of QPI's grain dealer license.

Sometime after the suspension of its grain dealer license, QPI financially failed. Thirty-four individuals and businesses filed 44 claims with the PSC, seeking a share of QPI's forfeited grain dealer's bond. Only eight of these claims were allowed, and the bond covered approximately half of these Nineteen of the individuals and businesses whose claims against QPI were denied filed suit against the State in the district court for Box Butte County, alleging negligence on the part of the PSC in its enforcement of the Grain Warehouse Act. On the State's motion, the matter was transferred to the district court for Lancaster County on November 12, 1991. The plaintiffs' individual claims were consolidated by order of the district court on January 12, 1992. The State answered and raised as an affirmative defense that it was acting within the meaning of the discretionary function exemption of the State Tort Claims Act.

allowed claims. The majority of the claims were denied for one of two reasons: either the claim was not filed in a timely manner or the claim was based on a contract for storage and not for the sale of grain. As a licensed grain dealer, QPI's bond could reimburse only those contracts in which QPI acted in its capacity as a [252 Neb. 87] grain dealer. The bond could not be used to compensate losses occasioned by QPI's conduct as an unlicensed grain warehouse.

The parties stipulated to bifurcate the issues of liability and damages. The State then moved the district court for summary judgment on the issue of liability. The State based its motion on the grounds that the undisputed facts show that the plaintiffs' claims may not proceed, as the State is exempted from suit pursuant to § 81-8,219(1), the discretionary function exemption of the State Tort Claims Act. Both parties offered in evidence the deposition of Fecht in support of their respective positions.

The district court granted the State's motion for summary judgment, finding in pertinent part:

No rules or regulations have been established by the PSC setting forth a procedure to be used in issuing a grain warehouse license to an applicant. No rule or regulation exists which says that an application must be filled out and received by the PSC within "x" number of days after the PSC becomes aware that a person is operating without the appropriate license. No rule or regulation authorizes Fecht to allow a person to operate as a grain warehouse while the application process is ongoing. Conversely, no rule or regulation prohibits Fecht from trying to work with an operator while attempting to bring it into compliance.

Broad discretion is to be afforded state agencies where the manner and method of carrying out the agencies' statutory duties is not specifically prescribed. When a statute does not prescribe the action to be taken, leaving the agency or employee to make a judgment and this judgment is based on social, economic or political considerations, it will be protected by the discretionary function. See, Security Investment Co. v. State, 231 Neb. 536, 437 N.W.2d 439 (1989); First Nat'l Bank of Omaha v. State, 241 Neb. 267, 488 N.W.2d 343 (1992); Jasa v. Douglas County, 244 Neb. 944, N.W.2d (1994).

The court finds that Fecht's decision on how to handle the grain warehouse licensing procedure for QPI falls within the discretionary function exemption. The court will not second-guess Fecht's decisions in that regard.

The Court of Appeals reversed the judgment of the district court and remanded the cause for further proceedings. The Court of Appeals cited this court's decision in Wickersham v. State, 218 Neb. 175, 354 N.W.2d 134 (1984), as standing for the proposition that in the context of a motion for summary judgment such as in the instant case, whether the State is entitled to the discretionary function exemption presents a question of fact. In reversing the judgment of the district court, the Court...