Oppenheimer Industries, Inc. v. Johnson Cattle Co., Inc.

• Decision Date: 19 November 1986
• Docket Number: No. 16214,16214
• Citation: 112 Idaho 423,732 P.2d 661
• Parties: OPPENHEIMER INDUSTRIES, INC., a Delaware Corporation, Plaintiff-Appellant, v. JOHNSON CATTLE CO., INC., an Idaho Corporation; Dan Van Lith, an individual; Orie Leavell, D/B/A LCC Cattle Co., an individual; Owen Ranches, Inc., a California Corporation; Lee Wright, an individual; Bob Johnson, an individual; Agra Beef, an unknown business entity; Coakly Cattle Co., an unknown business entity; Boston Beef, an unknown business entity; Lokens Cattle Co., an unknown business entity, Defendants, and The State Brand Board of the State of Idaho; and the State of Idaho, Defendants-Respondents.
• Court: Idaho Supreme Court

Page 661

732 P.2d 661

112 Idaho 423

OPPENHEIMER INDUSTRIES, INC., a Delaware Corporation, Plaintiff-Appellant, v. JOHNSON CATTLE CO., INC., an Idaho Corporation; Dan Van Lith, an individual; Orie Leavell, D/B/A LCC Cattle Co., an individual; Owen Ranches, Inc., a California Corporation; Lee Wright, an individual; Bob Johnson, an individual; Agra Beef, an unknown business entity; Coakly Cattle Co., an unknown business entity; Boston Beef, an unknown business entity; Lokens Cattle Co., an unknown business entity, Defendants and The State Brand Board of the State of Idaho; and the State of Idaho, Defendants-Respondents.

No. 16214.

Supreme Court of Idaho.

Nov. 19, 1986.

On Denial of Rehearing Feb. 27, 1987.

Stephen L. Beer, Boise (argued), and Frank P. Sebree, II, Kansas City, Mo., (appeared), for plaintiff-appellant.

Brian K. Julian, Boise, for defendants-respondents.

HUNTLEY, Justice.

This appeal arises out of a grant of summary judgment for the State Brand Board on the ground that the complaint by Oppenheimer Industries (Oppenheimer) was barred by provisions of the Idaho Tort Claims Act.

In 1981, Oppenheimer contracted with Bolen Cattle Co. (Bolen) to care for several head of cattle owned by Oppenheimer. Oppenheimer alleges Bolen re-branded the cattle and sold them without Oppenheimer's permission. Oppenheimer sued Bolen and several of the purchasers of the Oppenheimer cattle for conversion in February 1983 and brought action against the State Brand Board on the theory that the Board's failure to require proof of ownership of the cattle despite presence of "fresh" brands on the cattle violated the non-discretionary directives of the Idaho Administrative Procedure Act (IDAPA) 11.02.3 ¹ and constituted actionable negligence, as such failure resulted in the conversion of Oppenheimer's cattle.

A state deputy brand inspector inspected the converted cattle prior to the sale and noticed two brands on the cattle, one of which was "fresh," (i.e. had not yet scabbed over or healed). Such "fresh" brands were, at the most, two weeks old and could have been as new as one day old. The inspector testified that he knew he had the right to require proof of ownership of such cattle before they were sold, but that it was general practice to merely rely on the reputation of the seller (here, Bolen). The inspector had heard nothing detrimental concerning Bolen's reputation. The inspector also stated that he simply could not conceive of a "scam" of such magnitude, involving so many cattle (1,681 head). As a result, the inspector neither requested proof of ownership or a bill of sale from Bolen, nor did he advise Oppenheimer that cattle bearing its brand were being sold by Bolen, which fact the inspector knew prior to the sale.

The trial court reached its ruling on two grounds. First, it ruled that the operation of IDAPA 11.02.3 (footnote 1, supra ) allows discretionary judgment by state deputy brand inspectors and, therefore, that the "discretionary function" exemption to the Idaho Tort Claims Act, I.C. § 6-904(1), applied to immunize the State Brand Board in this instance. Second, the court held that Oppenheimer's loss of its cattle was, essentially, only an economic loss, and, therefore, unrecoverable in a negligence action. We address each issue in turn, and also address respondent's additional argument that the misrepresentation exception to governmental liability under the I.T.C.A., I.C. § 6-904(4), supports dismissal of the complaint.

THE "DISCRETIONARY FUNCTION" EXEMPTION

The trial court, in examining IDAPA 11.02.3, found that the regulation permits inspectors at least two exercises of discretion. One, the inspector could determine whether or not a brand was "fresh." Second, the inspector "may inquire into the ownership of all livestock bearing two or more brands." (IDAPA 11.02.3(a)). Operating without the benefit of Sterling v. Bloom, 111 Idaho 211, 723 P.2d 755 (1986), the court then held that, pursuant to Chandler Supply Co., Inc. v. City of Boise, 104 Idaho 480, 660 P.2d 1323 (1983), "[I]t is clear that the State Brand Board's employee, the inspector, was involved in an operational decision-making process in the performance of the function of the State Brand Board" in not making further inquiry as to the ownership of the cattle.

In Sterling, 723 P.2d at 770-776, we overruled Chandler, supra, to the extent that its analysis of the "discretionary function" exemption ² did not comport with the federal planning-operational test. Dalehite v. United States, 346 U.S. 15, 73 S.Ct. 956, 97 L.Ed. 1427 (1953); Indian Towing Co. v. United States, 350 U.S. 61, 76 S.Ct. 122, 100 L.Ed. 48 (1955). (See also, Jones v. City of St. Maries, 111 Idaho 733, 727 P.2d 1161 (1986). Lewis v. City of Blackfoot, 111 Idaho 755, 727 P.2d 1183 (1986). Pursuant to this test, discretionary or planning functions of government are exempt from liability in tort, whereas operational functions conducted without "ordinary care" give rise to no governmental immunity. I.C. § 6-904(1). In Lewis, supra, we further explained this test by noting that decisions made under statutes and regulations which leave room for policy judgment in their execution are discretionary. Lewis, supra, at 757, 727 P.2d at 1185.

In the instant case, IDAPA 11.02.3 sets forth the standard of conduct required of a state brand inspector in two distinct contexts: When confronted with a "fresh" brand, and when confronted with two or more brands. The regulation clearly states that, "fresh brands ... shall not be accepted as proof of ownership unless accompanied by a brand inspection certificate or a bill of sale covering older brands." (Emphasis added). That regulation further provides:

"(a) The state brand inspector may inquire into the ownership of all livestock bearing two or more brands." (Emphasis added).

The language of the regulation speaks for itself. While a state brand inspector may exercise discretion in deciding whether to inquire into the ownership of livestock bearing two or more brands, the appearance of a "fresh" brand mandates that the same inspector shall not accept such a brand as proof of ownership absent a certificate or bill of sale covering older brands. There is no room for discretion in implementing this policy directive. Accordingly, since the deputy brand board inspector in the instant case testified that the brands he encountered were "fresh," but he nevertheless did not require further proof of ownership of the cattle, the trial court erred as a matter of law in dismissing the complaint on the basis of the "discretionary function" exemption of I.C. § 6-904(1).

"ECONOMIC" DAMAGES

The trial court also ruled that Oppenheimer's claims against the State Brand Board failed to state a cause of action in tort because Oppenheimer's claims were based upon economic damages, i.e., loss of the cattle, which loss alone, it held, may not support a tort action, incorrectly construing Clark v. International Harvester Co., 99 Idaho 326, 581 P.2d 784 (1978).

In Clark, the purchaser of a defective product who had sustained no property damage or personal injury was not permitted to recover purely economic losses based upon a complaint alleging negligence. In the instant case, Oppenheimer is not alleging mere economic damage. Unlike the plaintiff in Clark, Oppenheimer is not still in possession of defective goods. Rather, Oppenheimer has suffered the loss of its property (i.e. the cattle) due to the negligence of the deputy brand inspector.

It is a long-held legal maxim that animals are tangible property and that intentional acts leading to the destruction or loss of such chattels give rise to a cause of action for conversion (conversion being a tort). Graham v. Smith, 100 Ga. 434, 28 S.E. 225 (1897). It is also black-letter law that a cause of action in negligence is available for one whose chattel is lost or destroyed through the negligence of another. "A conversion can result only from conduct intended to affect the chattel. For merely negligent interference with it, such as failure to protect it against loss, damage or theft, the remedy is an action for negligence; ...." (Prosser & Keeton on Torts, § 15 p. 92, 5th ed. 1984). (See also, Armored Car Service, Inc. v. First National Bank of Miami, 114 So.2d 431 (Fla.App.1959). Thus, whether the actions of the deputy brand inspector were intentional or negligent, Oppenheimer has a cause of action in tort.

THE "MISREPRESENTATION" THEORY

The Board also seeks to invoke the "misrepresentation" exception to governmental liability under the Idaho Tort Claims Act, I.C. § 6-904(4). ³ The Board alleges that the gist of Oppenheimer's complaint is that the State Brand Board's certification of the Oppenheimer cattle for sale under the Bolen brand was a "misrepresentation" invoking § 6-904(4). The Board cites several cases as supporting this position. Without exception, each case cited by the Board involves a plaintiff who had suffered damage through reliance upon some communication made by the government. (United States v. Neustadt, 366 U.S. 696, 81 S.Ct. 1294, 6 L.Ed.2d 614 (1961) (claim of purchaser of real property who allegedly paid purchase price in excess of value of property in reliance upon an inaccurate FHA inspection barred by the misrepresentation exception); Hall v. United States, 274 F.2d 69 (10th Cir.1959) (claim of plaintiff alleging negligent inspection and report of plaintiff's cattle as diseased by Department of Agriculture inspectors, leading to sale of the cattle at a loss, barred by the misrepresentation exception); Saxton v. United States, 456 F.2d 1105 (8th Cir.1972) (claim alleging governmental officials had given plaintiffs notice that their cattle were not diseased, when in fact they were, preventing treatment of the cattle, barred by the misrepresentation exception); Preston v. United States, 596 F.2d 232 (7th Cir.1979) (cert. den. 444 U.S. 915, 100 S.Ct. 228, 62 L.Ed.2d 169 (1979), later app....