Greenbriar Grp., L. L.C. v. Haines

• Decision Date: 09 January 2014
• Docket Number: No. 13–0569.,13–0569.
• Citation: 854 N.W.2d 46
• Parties: GREENBRIAR GROUP, L.L.C., Plaintiff–Appellant, v. Timothy HAINES, Defendant–Appellee, and Elkco Properties, Inc., and Indian Harbor Insurance Company as subrogee of Elkco Properties, Inc., Third–Party Defendants–Appellants.
• Court: Iowa Court of Appeals

854 N.W.2d 46

GREENBRIAR GROUP, L.L.C., Plaintiff–Appellant

v. Timothy HAINES, Defendant–AppelleeandElkco Properties, Inc., and Indian Harbor Insurance Company as subrogee of Elkco Properties, Inc., Third–Party Defendants–Appellants.

No. 13–0569.

Court of Appeals of Iowa.

Jan. 9, 2014.

As Amended Aug. 1, 2014.

Brian D. Nolan and Kathryn L. Hartnett of Nolan, Olson, & Stryker, P.C., L.L.O., Omaha, Nebraska, and Stanley W. Kallmann and Mark L. Antin of Gennet, Kallmann, Antin & Robinson, P.C., Parsippany, New Jersey, for appellants.

Jeffrey L. Goodman and Marcy A. O'Brien, West Des Moines, for appellee.

Heard by VOGEL, P.J., and POTTERFIELD and McDONALD, JJ.

Opinion

McDONALD, J.

Indian Harbor Insurance Company (“Indian Harbor”), as subrogee of Elkco Properties, Inc., (“Elkco”) and Greenbriar Group, L.L.C. (“Greenbriar”) (collectively, hereinafter “Greenbriar parties”) appeal the district court's order granting summary judgment in favor of Timothy Haines and the district court's order granting Haines' subsequent motion to dismiss. We affirm the judgment of the district court.

I.

This case arises out of a fire occurring at an apartment complex owned by Greenbriar. The property was managed by Elkco, which is also a majority owner of Greenbriar. The property was insured by Indian Harbor. The Greenbriar parties allege that the fire started when Haines, a maintenance worker leased from Oasis Outsourcing, Inc. (“Oasis”), negligently soldered a water valve located in the shower of an apartment at the complex. The fire damage was fairly extensive, and Indian Harbor paid $1,163,434.66 on Greenbriar and Elkco's claim.

The Greenbriar parties initiated this suit in November 2010, asserting a single claim of negligence against Haines and Oasis. On February 14, 2011, Haines filed a voluntary petition in bankruptcy under Chapter 7 of the Bankruptcy Code, thereby staying this action. The Greenbriar parties sought relief in the bankruptcy court. They filed a motion to lift stay and for leave to proceed “to prosecute a property damage claim against the debtor, Timothy J. Haines, and to proceed solely to the extent of any applicable insurance.” The Greenbriar parties believed that Haines, as a leased employee of Oasis, might be covered under Oasis's commercial general liability policy issued by Lexington Insurance Company (“Lexington”). The bankruptcy court granted the Greenbriar parties' request for relief “to the extent requested in the motion.” Subject to the order allowing the Greenbriar parties to proceed to the extent of any applicable insurance, Haines received a discharge order in the bankruptcy proceeding.

Having obtained relief from the bankruptcy court to prosecute their claim against Haines, the Greenbriar parties reengaged in this proceeding. After a flurry of procedural feints, thrusts, and parries, the parties realigned themselves and ended up with claims, counterclaims, and third-party claims against each other. As relevant here, in its second amended petition, Greenbriar asserted claims against Haines for negligence and res ipsa loquitur. Haines asserted a declaratory judgment counterclaim against Greenbriar and third-party claim against Indian Harbor, as subrogee of Elkco. In his declaratory judgment counterclaim and third-party claim, Haines sought a determination on the issue of whether he was an employee of Greenbriar or Oasis and a determination of whether he was a covered insured within the meaning of Oasis's insurance policy issued by Lexington. Because the Lexington policy was at issue, Lexington attempted to intervene in the action, but the Greenbriar parties successfully resisted Lexington's motion to intervene on the grounds that Lexington did not meet the substantive requirements for intervention as a matter of right or permissive intervention under Iowa Rule of Civil Procedure 1.407.

Haines and the Greenbriar parties filed motions for summary judgment. The district court initially denied both motions. With respect to the Greenbriar parties' motion, the district court found that there were disputed issues of material fact regarding both Haines' negligence and a potential intervening cause giving rise to a defense. With respect to Haines' motion, the district court found that it was not ripe for adjudication because Haines' liability for the fire had not been established. The district court held that only after liability had been established would the issue of whether an insurer must indemnify its insured arise. Despite this ruling, the district court noted that when the issue was properly before it, it would find that Haines was not an employee of Oasis, and, therefore, Haines would not be an insured within the meaning of the Lexington policy.

Haines filed a motion to reconsider and/or enlarge findings. In ruling on this motion, the district court, relying on new authority, held that Haines' declaratory judgment action was ripe for resolution prior to any liability determination being made. The court then reached the substance of Haines' declaratory judgment action and held that Haines was not an employee of Oasis and, therefore, was not an insured within the meaning of the Lexington policy. Because the bankruptcy court order allowed the Greenbriar parties to proceed only to the extent of any applicable insurance, and because the district court determined that Haines was not covered by the Lexington policy or any other insurance policy, the district court then dismissed the Greenbriar parties' claims against Haines.

II.

The court first turns its attention to the district court order granting Haines' motion for summary judgment. We review the district court's grant of summary judgment for corrections of errors at law. See Boelman v. Grinnell Mut. Reins. Co., 826 N.W.2d 494, 500 (Iowa 2013). “The district court properly grants summary judgment when the moving party demonstrates there is no genuine issue of material fact and that he or she is entitled to judgment as a matter of law.” Id. at 501. “[W]e examine the record in the light most favorable to the nonmoving party.... [and] [w]e afford the nonmoving party every legitimate inference that can be reasonably deduced from the evidence....” Id. (citations and internal quotation marks omitted). “[I]f reasonable minds can differ on how the issue should be resolved, a fact question is generated, and the district court should deny summary judgment.” Id. (citations and internal quotation marks omitted).

A.

The Greenbriar parties first contend that the district court erred in holding that Haines' claim was ripe for adjudication. “If a claim is not ripe for adjudication, a court is without jurisdiction to hear the claim and must dismiss it.” Iowa Coal Mining Co., Inc. v. Monroe Cnty., 555 N.W.2d 418, 432 (Iowa 1996). “A case is ripe for adjudication when it presents an actual, present controversy, as opposed to one that is merely hypothetical or speculative.” State v. Wade, 757 N.W.2d 618, 627 (Iowa 2008). The ripeness doctrine's “basic rationale is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements....” Abbott Labs. v. Gardner, 387 U.S. 136, 148, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967) (abrogated on other grounds by Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977) ).

Haines filed his counterclaim and third-party claim for declaratory relief pursuant to Iowa Rule of Civil Procedure 1.1102. As relevant here, Rule 1.1102 provides that “[a]ny person interested in an oral or written contract, ... or whose rights, status or other legal relations are affected by any ... contract ... may have any question of the construction or validity thereof or arising thereunder determined, and obtain a declaration of rights, status or legal relations thereunder.” Here, Haines sought a declaration of his rights, status, and legal relationships in two respects. First, he sought a declaration of whether he was an employee of Greenbriar or Oasis under the service agreements between Greenbriar and Oasis. Second, Haines sought a determination of whether he was an “insured” within the meaning of the Lexington policy, which turned on his employment status. The relevant language of the Lexington policy provides as follows:

Each of the following is also an insured:

Your “volunteer workers” only while performing duties related to the conduct of your business, or your “employees” ... but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business.

....

“Volunteer worker” means a person who is not your “employee”, and who donates his or her work and acts at the direction of and within the scope of duties determined by you, and is not paid a fee, salary, or other compensation by you or anyone else for their work performed for you.

“Employee” includes a “leased worker.” “Employee” does not include a “temporary worker.”

“Leased worker” means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. “Leased worker” does not include a “temporary worker.”

“Temporary worker” means a person who is furnished to you to substitute for a permanent “employee” on leave or to meet seasonal or short term workload conditions.

Although not dispositive of the issue before us, it should be noted that at no point did the Greenbriar parties seek to dismiss, stay, or sever Haines' claim for declaratory relief on the grounds that the claims were not ripe. The ripeness issue was raised only in the Greenbriar parties' resistance to Haines' motion for summary judgment.

The mere filing of a declaratory judgment action does not, in and of itself, create a justiciable controversy. This is because the declaratory judgment rules do not create substantive rights; instead, they merely provide a mechanism to secure judicial relief in an expeditious manner.

Thus, even in a declaratory...