Rhoads v. Harvey Publications, Inc.

• Decision Date: 02 December 1981
• Docket Number: No. 2,CA-CIV,2
• Citation: 131 Ariz. 267,640 P.2d 198
• Parties: , 1982 Copr.L.Dec. P 25,349 Fred RHOADS and Mattie Rhoads, husband and wife, Plaintiffs/Appellants, v. HARVEY PUBLICATIONS, INC., Sad Sack, Inc., Alfred Harvey, Leon Harvey, and Robert Harvey, Defendants/Appellees. 3954.
• Court: Arizona Court of Appeals

Page 198

640 P.2d 198

131 Ariz. 267, 1982 Copr.L.Dec. P 25,349

Fred RHOADS and Mattie Rhoads, husband and wife, Plaintiffs/Appellants, v. HARVEY PUBLICATIONS, INC., Sad Sack, Inc., Alfred Harvey, Leon Harvey, and Robert Harvey, Defendants/Appellees.

No. 2 CA-CIV 3954.

Court of Appeals of Arizona, Division 2.

Dec. 2, 1981.

Rehearing Denied Jan. 11, 1982.

Review Denied Feb. 2, 1982.

Lovallo & Stirton by Joseph A. Lovallo and Charles P. Stirton, Tucson, for plaintiffs/appellants.

Messing & Glicksman by William Messing and Elliot Glicksman, Tucson, for defendants/appellees.

OPINION

BIRDSALL, Judge.

This is the second appeal in a case founded upon allegations of fraud in the acquisition of copyrights. In the first appeal, this court reversed an order dismissing plaintiffs/appellants' complaint for lack of personal jurisdiction over defendants/appellees. Rhoads v. Harvey Publications, Inc. 124 Ariz. 406, 604 P.2d 670 (App.1979). In this appeal we reverse a summary judgment in favor of appellees.

The facts of the case, viewed most favorably to appellants, are as follows. Appellant Fred Rhoads is a cartoonist. Appellees are New York corporations and directors, officers, and principal shareholders of those corporations, engaged in the business of publishing comic books. For twenty-three years beginning in 1954, Rhoads was engaged by appellees to produce cartoons featuring the character "Sad Sack" for publication in appellees' comic books. During that time, appellees told Rhoads that he was an employee of their business. Believing that an employee was legally unable to reserve the copyrights to work done for his employers, Rhoads did not do so. In fact, he waived all copyrights by executing indorsements to that effect on payment checks received from appellees. Upon termination of the parties' relationship in 1977, Rhoads learned that he had actually been an independent contractor. He then brought suit alleging that appellees had fraudulently represented his status so that he would not retain the copyrights to his work.

Upon remand following the first appeal, appellees moved for summary judgment. By supporting affidavits and certified business records they contended that they had not told Rhoads that he was an employee, that Rhoads had been given no other reason to believe that he was an employee, and that Rhoads had known he was not an employee. Appellants responded with controverting affidavits alleging that appellees had repeatedly told Rhoads he was an employee and that Rhoads had received "vacation pay" on ten occasions. Other documents showed that Rhoads had been insured under a group insurance policy issued to appellees and that appellee Alfred Harvey had referred to Rhoads as an "employee" in correspondence with appellants' counsel.

The trial court granted the motion and entered judgment stating:

"The Court Concludes that, while the letter of March 17, 1978, refers to Mr. Rhoads as an employee, and while the testimony of both Mr. and Mrs. Rhoads indicates that Mr. Harvey referred to them (sic) as employees (sic), one must examine the actual factual situation as it existed by and between the parties over the term of 24 years.

The Court Further Concludes, taking all factors into consideration, that the relationship by and between the parties in this case was not that of employee and employer, but rather than (sic) Mr. Rhaods (sic) was an independent contractor. The matter of the March 17, 1978 letter, and the Plaintiffs' statements are conclusions unsupported by fact."

We do not see how the finding embodied in this judgment can support a summary judgment in favor of appellees. On its face, it appears to be a finding as to a disputed fact, which has no place in a summary judgment, since the very existence of disputed facts, if material, precludes summary judgment. In actuality, however, the finding that Rhoads was an independent contractor did not resolve a factual dispute. Both parties were in complete agreement that Rhoads had been an independent contractor. The questions before the trial court were whether appellees had told Rhoads that he was an employee and whether Rhoads had believed he was an employee. Those questions could not be answered without weighing the conflicting evidence presented by the parties. Appellees, therefore, were not entitled to judgment on the grounds raised in their motion.

The parties, however, have complicated this case by making new arguments on appeal. Fearing, perhaps, that we will affirm on the grounds now urged by appellees, appellants contend that their fraud claim is based not only upon the misrepresentation of Rhoads' status, but also upon the publishers' failure to inform Rhoads of the true value of his work and of his rights to retain copyrights to his work. Relying upon Roberts v. Sears, Roebuck and Co., 573 F.2d 976 (7th Cir. 1978), they contend that a relationship of trust and confidence existed between Rhoads and the publishers, that the publishers therefore had a duty to make full disclosure, and that their failure to do so was the equivalent of a fraudulent misrepresentation. See Leigh v. Loyd, 74 Ariz. 84, 244 P.2d 356 (1952).

Adhering to the rule that a summary judgment may not be reversed on grounds first advanced on appeal, Sullins v. Third and Catalina Construction Partnership, 124 Ariz. 114, 602 P.2d 495 (App.1979), we will not consider this new argument. If appellants intended to present a claim of fraud based upon non-disclosure, it was their duty to plead that claim in their complaint, and to plead it with particularity. Rule 9(b), Arizona Rules of Civil Procedure, 16 A.R.S. Even a strained reading of appellants' complaint reveals no indication that their claim of fraud is based upon anything except the alleged misrepresentation that Rhoads was an employee.

Appellees' arguments, which they also failed to present below, are 1) that the alleged representation, if made, was not material and therefore not a proximate cause of appellants' claimed damages, and 2) that the alleged representation will not support an action in fraud because it is one of law or legal opinion, rather than one of fact. They therefore argue that they were entitled to judgment as a matter of law and that the judgment should be affirmed even though it was entered for the wrong reasons.

There is certainly ample authority to suggest that an appellate court may affirm a summary judgment on grounds not considered below. E.g., Helena Rubinstein, Inc. v. Bau, 433 F.2d 1021, 1023 (9th Cir. 1970); See also 10 Wright and Miller, Federal Practice and Procedure, § 2716 p. 440. This power, however, must be exercised with extreme caution. A party moving for summary judgment always bears the burden of proving the absence of a material factual dispute, e.g., United Bank v. Pfeffer, 18 Ariz.App. 386, 502 P.2d 535 (1972), and the party opposing the motion is only required to show a dispute as to material facts relevant to the legal issues which the moving party claims to be dispositive of the cause. Fountain v. Filson, 336 U.S. 681, 69 S.Ct. 754, 93 L.Ed. 971 (1949). Affirming a summary judgment on new grounds, therefore, may deprive the non-moving party of the opportunity to present facts which are relevant to the new issues, but which were not relevant to the issues raised below. Keeping in mind that the slightest factual doubt must be resolved in favor of the non-moving party, Grain Dealers Mutual Insurance Co. v. James, 118 Ariz. 116, 575 P.2d 315 (1978), the appellate court may affirm on new grounds only if there are no conceivable facts which would allow the non-moving party to prevail on the new issues. That is not the case here.

To facilitate discussion, we shall set forth the nine essential elements of fraud repeatedly enumerated in Arizona cases:

1) a representation

2) its falsity

3) its materiality

4) the speaker's knowledge of its falsity or ignorance of its truth

5) the speaker's intent that it be acted upon by and in the manner reasonably contemplated

6) the hearer's ignorance of...