Henry A. Knott Co., Div. of Knott Industries, Inc. v. Chesapeake and Potomac Telephone Co. of West Virginia

• Decision Date: 12 September 1985
• Docket Number: No. 84-1770,84-1770
• Citation: 772 F.2d 78
• Parties: , 3 Fed.R.Serv.3d 945 HENRY A. KNOTT COMPANY, DIVISION OF KNOTT INDUSTRIES, INC., a Maryland corporation, Appellant, v. The CHESAPEAKE AND POTOMAC TELEPHONE COMPANY OF WEST VIRGINIA, A West Virginia corporation, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 78

772 F.2d 78

54 USLW 2165, 3 Fed.R.Serv.3d 945

HENRY A. KNOTT COMPANY, DIVISION OF KNOTT INDUSTRIES, INC. a Maryland corporation, Appellant, v. The CHESAPEAKE AND POTOMAC TELEPHONE COMPANY OF WEST VIRGINIA, A West Virginia corporation, Appellee.

No. 84-1770.

United States Court of Appeals Fourth Circuit.

Argued Feb. 4, 1985.

Decided Sept. 12, 1985.

Charles W. Yeager, Christopher P. Bastien, Charleston, W.Va. (Steptoe & Johnson, Charleston, W.Va., on brief), for appellant.

Charles Woody, Charleston, W.Va. (Carl L. Fletcher, Jr., Spilman, Thomas, Battle & Klostermeyer, Charleston, W.Va., on brief), for appellee.

Before RUSSELL, PHILLIPS, and SNEEDEN, Circuit Judges.

SNEEDEN, Circuit Judge:

Henry A. Knott Company, a Maryland corporation, filed a contract action against the Chesapeake and Potomac Telephone Company of West Virginia (C & P) for an alleged breach of an agreement for the construction of a four-story penthouse addition to a telephone building located in downtown Charleston, West Virginia. Knott claimed damages in the amount of $500,000 and invoked the district court's jurisdiction on the basis of diversity. C & P filed a counterclaim against Knott for $153,667.00 and requested a jury trial. Knott alleged that C & P was responsible for the delays in completion of the telephone building construction project and that C & P should bear the costs of the delayed construction.

C & P requested that the court appoint a special master to resolve the complex factual dispute, and on February 25, 1983, with the consent of Knott and C & P, the court referred the case to United States Magistrate Jerry D. Hogg, acting as a special master pursuant to Rule 53 of the Federal Rules of Civil Procedure. ¹ Magistrate Hogg, as special master, heard the evidence and listened to all the witnesses in a trial that began on March 21, 1983, and continued intermittently until July 12, 1983. At the completion of the trial, the parties submitted proposed findings of fact and conclusions of law, and the special master took the matter under advisement.

Almost a full year later, Magistrate Hogg notified counsel that he had entered into a contract for the sale of his house to counsel for C & P and he offered to recuse himself from further consideration of the case at the request of either party. Knott's counsel requested that Magistrate Hogg withdraw from the case in a letter dated March 16, 1984. Magistrate Hogg, acting as special master, never filed findings of fact or conclusions of law.

The parties received no notice of the status of the pending action until June 14, 1984, when the district court issued an order relieving the special master from his duties. No recusal order was entered before the district court decided the case. Without notifying the parties or giving them an opportunity to object, the district court took the full evidentiary record and made findings of fact and conclusions of law based upon the record taken before the special master. On the same day it notified the parties that the reference to the special master was revoked, the district court entered a judgment awarding Knott $23,540.32 on its claim and C & P $146,833.28 on its counterclaim. Knott filed no post-trial motions in district court before filing its notice of appeal to this Court.

As noted, the parties consented to the referral of this contract case to the special master, and the referral order specifically provided that the master prepare findings of fact and conclusions of law. ²

Knott argues that the district court erred in deciding the case upon the cold evidentiary record from the special master without giving the parties an opportunity to object and re-submit evidence. C & P argues that Knott waived the right to challenge the procedures when it failed to object before the district court issued its memorandum and order. We find that Knott did not waive its objection and that the district court erred in making findings of fact and conclusions of law based upon the record developed before the special master. We reverse and remand the case for proceedings consistent with this opinion.

I

C & P argues that Knott waived the right to challenge the procedures used below when it failed to object before the district court judge issued his findings of fact and conclusions of law. We recognize that Knott had no notice of the district court's intentions; therefore, we reject C & P's argument that Knott has waived its right to contest the issue on appeal.

C & P insists that Knott knew of the master's plan to recuse himself because Knott had in fact made the request for recusal. Knott, however, could not be expected to anticipate that the master would in fact recuse himself and that the district court would revoke the referral and decide the case without alerting the parties. The record shows that Knott received no formal notice that the reference order to the master would be revoked until the district court actually revoked the reference and decided the case upon the evidentiary record produced during the trial before the master. At oral argument, counsel for Knott also represented that he had no informal notice prior to the district court's decision. Thus, Knott clearly had no opportunity to object and request either a trial de novo or a hearing in which it could present the testimony of certain witnesses firsthand.

C & P cites W.R.B. Corp. v. Geer, 313 F.2d 750 (5th Cir.1953), as holding that a party must timely demand a trial de novo or a partial re-hearing upon the death or disability of a master to whom a case has been referred under Rule 53 of the Federal Rules of Civil Procedure. We agree with the general principle enunciated in Geer; however, the facts in this case are different from the facts in Geer.

In Geer, a complex case between contractors and subcontractors was referred to a master under Rule 53. After presentation of the evidence was complete, the parties submitted memorandums to the master. The master was requested to file a report, but the referral order did not ask the special master to make findings of fact and conclusions of law. Before filing a report, the master died.

The district court in Geer entered an order appointing a successor master and directing the new master to decide the case on the basis of the record taken before the original master. Thus, the party in Geer could have objected to the replacement procedure before the decision was rendered. The successor master filed a report and the district court adopted it. The contractors objected to the substitution of a successor master only after they found out the result of the case. The Court of Appeals for the Fifth Circuit held that the contractors did not object to the reference to the successor master at the time it was done; and, therefore, they could not contend on appeal that the district court erred in failing to hold a partial rehearing of some evidence or to conduct a complete retrial.

This case is different from the Geer case in that Knott had no notice or opportunity to object before the decision was made to substitute the district judge for the original master. The parties did submit proposed findings of fact to the master; however, they had no opportunity to argue the case before the district court judge prior to the time the decision was rendered. Knott did not fail to appear at a status conference to discuss whether or not the case could be decided based upon the trial transcript. See, e.g., Townsend v. Gray Line Bus Co., 767 F.2d 11, 18 (1st Cir.1985) (Counsel waived right to new trial on grounds that original judge died by failing to appear at a successor judge's status conference.). Knott took no actions that would indicate that it was willing to waive a new trial, if the master did in fact recuse himself. See Missouri Pacific Truck Lines, Inc. v. United States, 2 Cl.Ct. 421, 424 (1983). Thus, we hold that Knott did not waive his right to object on appeal. ³

II

If the parties had been notified that a successor judge was to decide the case based upon the record developed before the first judge, before they knew the outcome of the case, they may well have consented to participating in a partial re-presentation of selected evidence before the new judge or to allowing the new judge to decide the case from the record without the benefit of any live testimony. In the procedural posture of this case, however, we are squarely presented with the question of whether or not a full trial de novo must be granted, if a party requests it, when a special master, who has presided over a non-jury trial pursuant to Rule 53, dies or is disqualified before he makes findings of fact and conclusions of law?

Knott insists that the Fourth Circuit case of Whalen v. Ford Motor Credit Co., 684 F.2d 272 (4th Cir.1982) (en banc), is directly on point. In Whalen, this Court held that, if a trial judge died or was disqualified from deciding a civil jury case before a verdict is returned, then a substitute judge could not continue the case unless the parties consented. 684 F.2d at 274. There are striking similarities between this case and the Whalen case; however, Whalen is not sufficiently on point so as to render a clear answer to the question before us.

In the Whalen case, Judge Blair was presiding over a jury trial between a partnership and a credit company; and, after three weeks of testimony, he died and was replaced by Judge Murray. At that time, one of the parties moved for a new trial and argued that under Rule 63 of the Federal Rules of Civil Procedure, ⁴ a successor judge must grant a new trial unless a verdict has been returned. Judge Murray ruled that Rule 63 did not apply in a jury case and continued the trial before the same jury. A three-judge panel affirmed this decision, but the Fourth Circuit Court of Appeals, sitting en banc, reversed the district court in a 5 to 4 decision. Whalen was the first case to address the question of judge...