Gatecliff v. Great Republic Life Ins. Co., 1

• Decision Date: 01 October 1987
• Docket Number: No. 1,CA-CIV,1
• Citation: 154 Ariz. 502,744 P.2d 29
• Parties: Kristin GATECLIFF, a married woman, and Kevin Gatecliff, her husband, Plaintiffs-Appellants, v. GREAT REPUBLIC LIFE INSURANCE COMPANY, a Washington corporation, Defendant-Appellee. 8951.
• Court: Arizona Court of Appeals

Page 29

744 P.2d 29

154 Ariz. 502

Kristin GATECLIFF, a married woman, and Kevin Gatecliff, her husband, Plaintiffs-Appellants, v. GREAT REPUBLIC LIFE INSURANCE COMPANY, a Washington corporation, Defendant-Appellee.

No. 1 CA-CIV 8951.

Court of Appeals of Arizona,

Division 1, Department A.

Oct. 1, 1987.

[154 Ariz. 503] Kunz and Waugh by Suzanne P. Clarke and Donald R. Kunz, Phoenix, for plaintiffs-appellants.

Stockton & Hing by Robert Ong Hing and Joyce Van Cott, Scottsdale, for defendant-appellee.

OPINION

FIDEL, Judge.

Plaintiffs Kristin and Kevin Gatecliff appeal the trial court's dismissal of their complaint. We must decide: (1) whether the trial court lacked subject matter jurisdiction, (2) whether plaintiffs' complaint stated a claim upon which relief could be granted, (3) whether the cause was subject to dismissal under the doctrine of forum non conveniens, and (4) whether the trial court erred in basing a 12(b)(6) dismissal order on matters outside the complaint. (Rule 12(b)(6), Arizona Rules of Civil Procedure.)

Plaintiffs commenced this case by filing a complaint against a defendant denominated only as "Great Republic Life Insurance Company". In their complaint the plaintiffs described themselves as married California residents and the defendant as a Washington corporation with its principal place of business in California, authorized to do business in Arizona as a foreign insurer. Plaintiffs alleged that defendant had acted in contractual and tortious bad faith, entitling them to recover compensatory and punitive damages. Specifically, plaintiffs alleged that defendant had insured Kristin Gatecliff under a group medical insurance policy, but had cancelled the policy in bad faith upon notice from Kristin Gatecliff that she had contracted rheumatoid arthritis, a disease entailing medical treatment at mounting frequency and expense throughout her lifetime. As exhibits to their complaint, the plaintiffs attached memoranda, letters, a certificate of insurance, and a master group policy, all of which reflected California addresses for "Great Republic Life Insurance Company".

Defendant responded with a "motion to dismiss/motion for summary judgment," arguing (1) that the complaint failed to state a claim upon which relief could be granted, (2) that the court lacked subject matter jurisdiction, and (3) that the court should dismiss the action under the doctrine of forum non conveniens. In support, defendant filed an affidavit of James O'Hanlon, who stated:

1. I am Vice President and General Counsel of GREAT REPUBLIC LIFE INSURANCE COMPANY, a Washington insurer.

2. I have personal knowledge of all facts set forth in this Affidavit, I am authorized to execute this Affidavit, and I know each matter to be true.

3. GREAT REPUBLIC LIFE INSURANCE COMPANY is an insurer formed under the laws of the State of Washington. Its principal place of business and home offices are located in Seattle, Washington.

4. GREAT REPUBLIC LIFE INSURANCE COMPANY of Washington is authorized to transact insurance in the State of Arizona as a foreign insurer.

5. GREAT REPUBLIC LIFE INSURANCE COMPANY of California is a California insurer formed under the laws of the State of California and maintains its principal place of business and home offices in Santa Barbara, California.

6. GREAT REPUBLIC LIFE INSURANCE COMPANY, a California corporation, is a separate corporation from GREAT REPUBLIC LIFE INSURANCE COMPANY of Washington. GREAT REPUBLIC LIFE INSURANCE COMPANY of California is a subsidiary corporation of GREAT REPUBLIC LIFE INSURANCE COMPANY of Washington. ¹

7. GREAT REPUBLIC LIFE INSURANCE COMPANY of California is not authorized to transact insurance in Arizona as a foreign insurer, and maintains no offices, agents, employees or property in the State of Arizona.

8. GREAT REPUBLIC LIFE INSURANCE COMPANY of Washington did not issue the insurance policy which is the subject matter of the Complaint to Plaintiff KRISTIN GATECLIFF and does not cover Plaintiff KRISTIN GATECLIFF under any policy at issue in this lawsuit.

9. Plaintiffs' counsel, Donald R. Kunz, informed me that he is the father of Plaintiff KRISTIN GATECLIFF.

In a minute entry setting a briefing schedule and date for oral argument on defendant's motion, the trial court stated:

The Defendant's Motion to Dismiss/Motion for Summary Judgment will be considered as a Motion to Dismiss only because the Motion does not contain the statement of specific facts required by Uniform Rule IV(f). ²

Despite the court's restrictive minute entry, defendant's counsel relied at oral argument on the O'Hanlon affidavit. He stated in part:

The complaint states that Great Republic is organized and existing under the laws of the State of Washington with its principal place of business in the State of California.

The affidavit that we supplied shows that's not true. The principal place of business of Great Republic of Washington is the State of Washington. The principal place of business of Great Republic of California is the State of California. California is where the plaintiff resides, where her employer resides, where the offices of the insurance company are, where its employees are, where its agents are, where all the transactions occurred.

Plaintiffs' counsel replied that, because defendant failed to comply with Uniform Rule IV(f), he assumed that its motion would not be considered as a motion for summary judgment and that oral argument should be directed solely at its motion to dismiss.

Later in the argument this exchange occurred:

DEFENSE COUNSEL: This action, even if you were to find there was some misleading conduct, it would appear that plaintiff has to bring forward some indication that she had some dealing with a corporation which she's suing, the parent corporation. She's not done that.

Everyone who has had anything to do with this insurance policy, including plaintiffs and defendants, all are in the State of Arizona--excuse me--California. If the Court rules anything at all, it could rule the [forum] is simply not appropriate. It's not appropriate. There's no one here. There's no one in Arizona. There's been nothing to touch the State of Arizona.

THE COURT: Alright. This is a fascinating little case.

PLAINTIFF'S COUNSEL: I'd like the record to reflect, your Honor, the only reason I've not filed an affidavit is because of your Honor's order of November 7 of 1985, explicitly stating the motion today would be considered as a motion to dismiss only. Elsewise, of course, I would have filed an affidavit.

THE COURT: And the order did indicate that, and I do consider this as a motion to dismiss rather than as a motion for summary judgment, and I am going to grant the motion to dismiss.

I couldn't find anything that's on point on this. There are, I guess, a number of theories that you could talk about here, but it basically boils down to a question of whether or not there's any sort of basis upon which you can exercise--Arizona can exercise jurisdiction over an entity that doesn't seem to have done anything in Arizona to create a basis for Arizona exercising jurisdiction.

Now, the troubling part of this to me is that my decision here seems to be based upon a factual assertion--that is that there is a distinction between the two corporations--that's been controverted at this point.

Mr. Kunz, you have not had an opportunity or have not, because of the previous order of the Court, had any kind of an opportunity to present something on that point. It's not something you contested. If in fact you can establish some basis or you have some basis for believing that there really are not two separate corporate entities--

PLAINTIFF'S COUNSEL: I have no reason not to believe that, your Honor.

THE COURT: --then, I was going to say, I would be willing to give you some time to provide me with an affidavit to do something other than what we--present me something other than what you've already presented me. But as the case stands now, if I make the factual assumption that there are two separate corporate entities, then I simply don't see basis for jurisdiction.

PLAINTIFF'S COUNSEL: Very good, your honor.

(The proceedings concluded.)

On January 9, 1986, the trial court entered a formal order "granting Defendant's Motion to Dismiss." The order did not include the basis for dismissal. The trial court later denied plaintiffs' motion to alter or amend pursuant to Rule 59(l ), Arizona Rules of Civil Procedure. Though asked to explain the basis for its order, the court declined to do so, indicating that its reasons were adequately expressed at the time of argument (the passage quoted above). The trial court awarded defendant its attorney's fees and costs. This timely appeal followed. Adequacy of Findings

We first address the trial court's refusal to elaborate on the basis for its ruling. Our Supreme Court has recently urged trial judges "to articulate their reasoning so appellate courts can determine on appeal whether the ruling was erroneous." Hawkins v. Allstate Ins. Co., 152 Ariz. 490, 495 n. 3, 733 P.2d 1073, 1078 n. 3 (1987). Although recorded bench comments are an expeditious and generally adequate method for a busy trial court to explain its ruling (see, for example, Rule 52(a), Arizona Rules of Civil Procedure), we find the trial court's oral comments in this case inadequate. Defendant moved to dismiss under Rule 12(b)(6) for failure to state a claim, under 12(b)(1) for lack of subject matter jurisdiction, and upon the ground of forum non conveniens. Of these three grounds for dismissal, only the first would have accomplished a disposition on the merits. A 12(b)(6) dismissal, unlike dismissal for reasons enumerated in the other subsections of Rule 12(b), disposes of the merits and takes res judicata effect. 2A Moore's Federal Practice, § 12.07 at 12-45. When, as here, a trial court is presented with alternative 12(b) grounds for dismissal, 12(b)(6) among them, it is...