Leslie v. Estate of Tavares, No. 21693.

• Court: Supreme Court of Hawai'i
• Writing for the Court: MOON, C.J., KLEIN, LEVINSON, NAKAYAMA, and RAMIL, J.
• Citation: 91 Haw. 394,984 P.2d 1220
• Parties: Howard K. LESLIE, Jr., Plaintiff-Appellant, and Leimomi Leslie Fresch, Individually, and as Next Friend for Howard K. Leslie, Jr., and Howard K. Leslie, Sr., Plaintiffs-Appellees, v. The ESTATE OF Jamie K. TAVARES, deceased, Defendant-Appellee, and John Does 1-10; Jane Does 1-10; Doe Partnerships 1-10; Doe Corporations 1-10; and Doe Entities 1-10, Defendants; State of Hawai`i, Department of Human Services, Lien Holder-Appellee.
• Docket Number: No. 21693.
• Decision Date: 31 August 1999

984 P.2d 1220
91 Haw. 394

Howard K. LESLIE, Jr., Plaintiff-Appellant, and Leimomi Leslie Fresch, Individually, and as Next Friend for Howard K. Leslie, Jr., and Howard K. Leslie, Sr., Plaintiffs-Appellees,
v.
The ESTATE OF Jamie K. TAVARES, deceased, Defendant-Appellee, and John Does 1-10; Jane Does 1-10; Doe Partnerships 1-10; Doe Corporations 1-10; and Doe Entities 1-10, Defendants;
State of Hawai`i, Department of Human Services, Lien Holder-Appellee

No. 21693.

Supreme Court of Hawai`i.

August 31, 1999.

984 P.2d 1222

Frederick W. Rohlfing III, on the briefs, Lorrie Lee Stone, and J. Stevens Keali`iwahamana Hoag (of Rohlfing & Stone) for the plaintiff-appellant Howard K. Leslie, Jr

Gary W.B. Chang, Honolulu, on the briefs, (of Matsui Chung Sumida & Chang) for the defendant-appellee The Estate of Jamie K. Tavares.

Joseph L. Wildman and Guy A. Sibilla, on the briefs, (of Sibilla & Wildman) for the plaintiffs-appellees Leimomi Leslie Fresch and Howard K. Leslie, Sr., joined in defendant-appellee The Estate of Jamie K. Tavares's Answering Brief.

MOON, C.J., KLEIN, LEVINSON, NAKAYAMA, and RAMIL, J.

Opinion of the Court by LEVINSON, J.

The plaintiff-appellant Howard K. Leslie, Jr. appeals from the circuit court's orders denying his (1) motion to (a) vacate the dismissal of his lawsuit against the defendant-appellee Estate of Jamie K. Tavares (hereinafter, "the Estate"), (b) rescind the settlement agreements and releases, and (c) reinstate his civil case against the Estate (hereinafter, "the motion to vacate") and (2) his motion to alter or amend the circuit court's findings of fact (FOFs), conclusions of law (COLs), and order concerning his motion to vacate. Leslie argues that the circuit court erred because (1) the Estate and its insurers were not entitled to deal directly with Leslie in reaching settlement agreements, inasmuch as the circuit court's appointment of Leimomi Leslie Fresch as Leslie's next friend rendered Leslie presumptively incompetent for purposes of the present litigation, (2) Fresch was not entitled to settle Leslie's claims against the Estate without the approval of the circuit court, and (3) the settlement agreements were unfair to Leslie. We agree with the first two of Leslie's points of error. With regard to his third, we hold that the circuit court failed adequately to analyze the fairness of the settlement agreements. Accordingly, we vacate the circuit court's order denying Leslie's motion to vacate and remand for further proceedings concerning the fairness of the settlement agreements.¹

I. BACKGROUND

On January 24, 1997, Fresch tendered an ex parte motion to the first circuit court for an order appointing her as next friend to Leslie, her son, for the purpose of prosecuting a claim on his behalf against the Estate arising out of an automobile accident, involving Tavares, in which Leslie was gravely injured. In an attached affidavit, Fresch's counsel averred in relevant part that Leslie "has been and is currently hospitalized in the Intensive Care Unit of Queen's Medical Center as a result of the injuries sustained" in the subject automobile accident and that Leslie was "incompetent to represent himself[.]" The circuit court granted Fresch's motion by order signed on January 30, 1997.

Also on January 24, 1997, Fresch's counsel mailed a demand letter on behalf of "Leimomi Fresch[,] as Next Friend for [Leslie]," to

984 P.2d 1223

Liberty Mutual Insurance Company (Liberty Mutual), Tavares's automobile insurance carrier. Fresch's counsel alleged that Leslie's medical expenses had already exceeded $513,000.00 as of the date of the letter and were estimated eventually to total "$1,500,000.00 [to][$]2,500,000.00." With the addition of pain and suffering, lost wages, and other damages, Fresch's counsel listed an "anticipated jury verdict" of "$3,030,796.70 [to][$]5,030,796.70." He offered to settle the claim for the policy limit of $250,000.00 if a response was received by January 31, 1997

Apparently, no such agreement was immediately reached because, on February 3, 1997, Fresch's counsel filed a complaint against the Estate on behalf of Fresch, in her individual capacity and as next friend to Leslie, and Howard K. Leslie, Sr. (Howard), Leslie's father (collectively, "the plaintiffs"). The complaint alleged that, in the early morning hours of December 22, 1996, Leslie's truck was struck by a vehicle driven by Tavares, when Tavares negligently crossed the center lane of the Farrington Highway near Maili, in the City and County of Honolulu. As a result of the accident, the complaint alleged, Leslie "suffered severe injuries and/or severe physical pain and suffering and/or severe emotional and mental distress and/or medical and/or hospital expenses and/or loss of earnings and/or impairment of future earning capacity and/or loss of enjoyment of life and/or such other expenses ... as will be proven at time of trial." The complaint also alleged that Fresch and Howard had suffered "severe emotional and mental distress."

On May 7, 1997, Leslie apparently was released from the hospital and began living in Fresch's home in Waimanalo. According to the affidavit of Fresch's counsel, Leslie was an active participant in the proceedings against the Estate. On March 21, 1997, Leslie executed, in his own name, a contract for Fresch's counsel's legal services.

Subsequently, the plaintiffs reached settlement agreements with Liberty Mutual for bodily injury benefits from Tavares's policy and with Fireman's Fund Insurance Company, which was both Leslie's own underinsured motorist insurance (UIM) carrier and also the UIM carrier for KKL Trucking, Inc. (KKL), Leslie's employer and owner of the truck Leslie had been driving at the time of the accident. The plaintiffs—including Leslie —executed three releases associated with the three insurance policies. The releases did not indicate whether Fresch was signing solely in her individual capacity or also as next friend for Leslie. Neither did the releases indicate the apportionment of the settlement proceeds among the three plaintiffs; instead, they merely recited that the consideration for the releases was $250,000.00 in connection with Tavares's bodily injury policy, $35,000.00 in connection with Leslie's UIM policy, and $35,000.00 in connection with KKL's UIM policy.²

The record includes documents signed by Leslie purportedly authorizing Fresch's counsel to settle his claims against the three insurance policies in the gross amounts of $105,000.00, $16,000.00, and $16,000.00, respectively. Leslie's total net recovery, after accounting for attorneys' fees and costs, amounted to $89,290.99. The record also includes a letter from Fresch's counsel to Leslie, in which counsel notes that Fresch and Howard had each received gross recoveries from the three policies of $72,500.00, $9,500.00, and $9,500.00, respectively. The record is silent with regard to their net recoveries.

Pursuant to the parties' settlement agreements, Fresch's counsel filed a "Notice of Dismissal With Prejudice As To All Claims And Parties" on July 18, 1997, relying upon Hawai`i Rules of Civil Procedure (HRCP) Rule 41(a)(1)(A) (1996).³ On April 1, 1998, Leslie filed a motion, pursuant to HRCP

984 P.2d 1224

Rule 60(b) (1996),⁴ to vacate the notice of dismissal, reopen the civil action, and rescind the settlement agreements and releases. A hearing was conducted on April 8, 1998, and the circuit court filed its FOFs, COLs, and order denying Leslie's motion on May 13, 1998. Among the circuit court's FOFs was a finding that the plaintiffs had settled for "the applicable policy limits" with regard to the three insurance policies involved in this case. In its COLs, the circuit court noted that, unlike HRCP Rule 55 (1996),⁵ "[t]here is nothing in [HRCP] Rule 41 that precludes dismissal of an action by or on behalf of an infant or incompetent person." Moreover, the circuit court noted that HRCP Rule 17(c) (1996),⁶ governing the appointment of next friends and guardians ad litem, makes no mention of court approval of settlements. Construing HRCP Rules 41 and 55 in pari materia, the circuit court concluded that "[t]he manifest policy is to reserve the most protective procedure of court review for default judgments against incompetents" and that court approval of settlements by a next friend to a plaintiff was, therefore, not required. (Emphasis in original.)

Alternatively, the circuit court ruled that it would decline to exercise its discretion to vacate the dismissal and rescind the settlement agreements because

[t]he issues of apportionment of Plaintiffs' proceeds among family members is not governed by any of the settlement agreements, is not amenable to resolution by reopening the case, and thus constitutes a "dispute regarding the agreement [which] is totally separate and distinct from the dispute underlying the original action." Gilmartin v. Abastillas, 10 Haw.App. 283, 295 [869 P.2d 1346, 1352] (1994). Similarly, [Leslie's] concerns regarding different theories of liability against other potential defendants who were not pursued in this action may be claimed in new actions which are not yet barred by the statute of limitations.

On May 26, 1998, Leslie filed a motion to alter or amend the circuit court's FOFs, COLs, and order. See supra note 1. The Estate filed a memorandum in opposition to the motion on June 2, 1998. Additionally, Fresch and Howard filed a memorandum in opposition to the motion on June 3, 1998. On June 18, 1998, the circuit court filed its first amended FOFs and COLs, in which the circuit court added a discussion of Green v. Nevers, 111 F.3d 1295 (6th Cir.), cert. denied,

984 P.2d 1225

___ U.S. ___, 118 S.Ct. 559, 139 L.Ed.2d 400 (1997), and Crawford v. Loving, 84 F.R.D. 80 (E.D.Va.1979), noting that those decisions had held that trial courts have the inherent power to vacate a stipulated dismissal in the interests of justice. The circuit court then ruled that no...