Hayes v. Kingston

• Decision Date: 09 August 2004
• Docket Number: No. 29815.,29815.
• Citation: 140 Idaho 551,96 P.3d 652
• Parties: Scott HAYES, Scott Worthen, Sharla Worthen, Steve Ryals, Tom Morgan, Sue Allison and Tom Laws, Plaintiffs-Respondents, v. David O. KINGSTON, Defendant-Appellant, and Collabware Corporation, an Idaho corporation, William J. Inman, an individual, Barry L. Moyer, an individual, and Michael J. Lightfoot, an individual, Defendants. William J. Inman, Cross-Claimant, v. Collabware Corporation, an Idaho corporation, David O. Kingston, an individual, Barry L. Moyer, an individual, and Michael J. Lightfoot, an individual, Cross-Defendants. David O. Kingston, both individually and derivatively on behalf of CollabWare Corporation, Cross-Claimant, v. Collabware Corporation, an Idaho corporation, William J. Inman, an individual, and Barry L. Moyer, an individual, Cross-Defendants. David O. Kingston, Third-Party Plaintiff, v. Michael J. Lightfoot, an individual, Michael J. Lightfoot, P.C., Gary Blume, an individual, and Blume Law Firm, P.C., Third-Party Defendants. Barry L. Moyer, Cross-Claimant, v. Collabware Corporation, an Idaho corporation, William J. Inman, an individual, David O. Kingston, an individual, and Michael J. Lightfoot, an individual, Cross-Defendants. Gary Blume, an individual, and Blume Law Firm, P.C., Cross-Claimants, v. Michael J. Lightfoot, an individual, and Michael J. Lightfoot, P.C., Cross-Defendants. Gary Blume, an individual, and Blume Law Firm, P.C., Counterclaimants, v. David O. Kingston, an individual, and Collabwar Corporation, an Idaho corporation, Counterdefendants.
• Court: Idaho Supreme Court

96 P.3d 652

140 Idaho 551

Scott HAYES, Scott Worthen, Sharla Worthen, Steve Ryals, Tom Morgan, Sue Allison and Tom Laws, Plaintiffs-Respondents, v. David O. KINGSTON, Defendant-Appellant, and Collabware Corporation, an Idaho corporation, William J. Inman, an individual, Barry L. Moyer, an individual, and Michael J. Lightfoot, an individual, Defendants.

William J. Inman, Cross-Claimant, v. Collabware Corporation, an Idaho corporation, David O. Kingston, an individual, Barry L. Moyer, an individual, and Michael J. Lightfoot, an individual, Cross-Defendants.

David O. Kingston, both individually and derivatively on behalf of CollabWare Corporation, Cross-Claimant, v. Collabware Corporation, an Idaho corporation, William J. Inman, an individual, and Barry L. Moyer, an individual, Cross-Defendants.

David O. Kingston, Third-Party Plaintiff, v. Michael J. Lightfoot, an individual, Michael J. Lightfoot, P.C., Gary Blume, an individual, and Blume Law Firm, P.C., Third-Party Defendants.

Barry L. Moyer, Cross-Claimant, v. Collabware Corporation, an Idaho corporation, William J. Inman, an individual, David O. Kingston, an individual, and Michael J. Lightfoot, an individual, Cross-Defendants.

Gary Blume, an individual, and Blume Law Firm, P.C., Cross-Claimants, v. Michael J. Lightfoot, an individual, and Michael J. Lightfoot, P.C., Cross-Defendants.

Gary Blume, an individual, and Blume Law Firm, P.C., Counterclaimants, v. David O. Kingston, an individual, and Collabwar Corporation, an Idaho corporation, Counterdefendants.

No. 29815.

Supreme Court of Idaho, Boise, May 2004 Term.

August 9, 2004.

Hawley, Troxell, Ennis & Hawley, Boise, for appellant. Eugene A. Ritti argued.

Cosho, Humphrey, Greener & Welsh, Boise, for respondents. Daniel L. Glynn argued.

BURDICK, Justice.

In this permissive appeal, pursuant to I.A.R. 12(c), David O. Kingston appeals from the district court's denial of his motion to change venue from Ada County, where the plaintiffs allege the fraudulent representations which form the basis of the action took place, to Bonneville County, where the corporation has its principal place of business, some of the defendants reside and, according to Kingston, where the plaintiffs suffered a loss.

FACTUAL AND PROCEDURAL BACKGROUND

CollabWare Corporation is an Idaho corporation whose principal place of business is Idaho Falls, Bonneville County, Idaho. In soliciting investors in the corporation, the defendants prepared and distributed a Private Placement Memorandum explaining the investment opportunity and scheduled presentations in Boise, Ada County, where Kingston and Michael Inman made further key representations about the corporation's business, financial condition and development progress. Each plaintiff signed a subscription agreement, which was directed to the corporation and was ultimately accepted and executed by the corporation at its Idaho Falls business location.

The plaintiffs are all shareholders of the defendant corporation. The defendants, Kingston and William Inman, are residents of Bonneville County, Idaho; the other named defendants are not Idaho residents. In an action filed in the Ada County District Court, the plaintiffs allege that the corporation and its officers and directors, who were involved in marketing and promoting the purchase of series A preferred stock in the corporation, committed fraud in the issuance of unregistered securities to the plaintiffs. According to the plaintiffs' complaint, the defendant corporation had represented itself as a provider of software and services to engineering companies, in particular a Computer Aided Design (CAD) system called the GS-Design that the corporation boasted was the new generation of CAD technology developed by Lockheed Martin. The corporation claimed it had been formed to market the GS-Design, whose inventors were unable to market the same pursuant to non-compete agreements with their previous employer, Lockheed Martin.

The plaintiffs began the fraud action when they learned of the falsity of the corporation's claims and upon receipt of correspondence from the corporation informing them that CollabWare had run out of capital and was discontinuing all operations. Plaintiffs filed the action in the forum where the initial contacts, the solicitations, and the dealings with the corporation's agents had taken place, Ada County.

The plaintiffs' first amended complaint was filed on July 24, 2002. Defendant Kingston filed a motion pursuant to I.R.C.P. 12(b)(3) asserting that the complaint was filed in an improper county as no defendants resided in Ada County and no cause of action arose in Ada County. Defendant Inman joined in Kingston's motion requesting a change of venue, which motion was heard by the district court on January 8, 2003. The district court issued an order denying the motion, concluding that the fraudulent representations forming the basis of the fraud claims and securities fraud were made in Ada County, which therefore is the proper venue for the action.

Kingston filed a motion for permissive appeal to the district court pursuant to I.R.C.P. 12(b). The district court heard the motion and denied the same on April 11, 2003. Kingston then filed a motion with the Idaho Supreme Court seeking permission to pursue an interlocutory appeal under I.A.R. 12(c), which the Court granted. Kingston's notice of appeal was filed in accordance with the Court's order, on July 10, 2003.

ISSUE OF APPEAL

The sole issue raised in this appeal is whether I.C. § 5-404 mandates venue in Bonneville County, which is the corporation's principal place of business and where defendant Kingston argues the cause of action arose.

STANDARD OF REVIEW

Interpretation of a statute is a question of law over which a court will exercise free review. Gooding County v. Wybenga, 137 Idaho 201, 204, 46 P.3d 18, 21 (2002). Statutory interpretation begins with the literal words of the statute, giving the language its plain, obvious and rational meaning. International Ass'n of Firefighters, Loc. No. 672 v. City of Boise City, 136 Idaho 162, 169-70, 30 P.3d 940, 947-48 (2001). Where a statute or constitutional provision is clear, the Court must follow the law as written and, thus, when the language is unambiguous, there is no occasion for application for rules of construction. Sweeney v. Otter, 119 Idaho 135, 138, 804 P.2d 308, 311 (1990).

DISCUSSION

Kingston argues that the plaintiffs' suit may be tried in Ada County only if "the cause of action arose in" Ada County. Kingston asserts that until the plaintiffs obtained ownership of the CollabWare Corporation stock, they suffered no damages as set forth in their claims for relief; the plaintiffs obtained ownership of the stock when the corporation accepted the subscription agreement offers in Idaho Falls. The plaintiffs, now respondents, argue they were induced to invest in the corporation in Boise, which is the forum where the representations were communicated, making Ada County an appropriate venue for the action.

The plaintiffs filed their action against CollabWare Corporation and the individual officers and directors of the corporation in Ada County. In the amended complaint, the plaintiffs claimed that the corporation and its officers and directors (1) violated the Idaho Securities Act, I.C. § 30-1401 et seq., (2) committed fraud in soliciting the plaintiffs' investment in the corporation, and (3) breached a fiduciary duty owed to the stockholders. Defendant Kingston, prior to answering the complaint, filed a motion pursuant to I.R.C.P. 12(b)(3) asserting that venue in Ada County was improper. Kingston asserted that the principal place of business of the corporation was in Bonneville County and the fraud cause of action arose upon the acceptance by the corporation of the plaintiffs' subscription agreement offers, which took place at the corporation's principal place of business in Bonneville County. Thus, argued Kingston, venue was not proper in Ada County, and the action should have been transferred to Bonneville County.

It is immediately recognized that the action seeking damages for fraud and deceit is transitory, Andre v. Morrow, 106 Idaho 455, 472, 680 P.2d 1355, 1372 (1984), and governed by I.C. § 5-404. Pintlar Corp. v. Bunker Limited Partnership, 117 Idaho 152, 154, 786 P.2d 543, 546 (1990). In relevant part, the venue statute provides:

[I]n all actions against any corporation organized under the laws of the state of Idaho, suit or action shall be commenced and tried in the county of this state where the defendant has its principal place of business or in the county in which the cause of action arose.

I.C. § 5-404. The language of the statute that appellant seeks to have defined is "the county in which the cause of action arose." Idaho appellate courts have interpreted "the cause of action arose" language of I.C. § 5-404 in a civil libel action, P.C. O'Malley v. Statesman Printing Co., 60 Idaho 326, 91 P.2d 357 (1939) (where "the cause of action arose" held to be in Ada County where the newspaper was composed, printed and published, requiring a change of venue), and in a breach of contract action, Corder v. Idaho Farmway, Inc., 133 Idaho 353, 358, 986 P.2d 1019, 1024 (Ct.App.1999) (where "the cause of action arose" held to be where the contract was made, where the contract was breached or where the damage occurred). No Idaho case has interpreted the relevant language as it applies to a fraud or securities case.

The test in Idaho to determine venue is set forth in Banning v. Minidoka Irrigation Dist., 89 Idaho 506, 406 P.2d 802 (1965):

Our venue statutes are couched in mandatory language. Bentley v. Lucky Friday Extension Mining Co., 70 Idaho 511, 223 P.2d 947 (1950); McCarty v. Herrick, 41 Idaho 529, 240 P. 192 (1925). Determination of venue is within the discretion of the court only in cases where conflicting issues of fact must be resolved, such as the actual residence of a defendant, Jarvis v.

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