Rincover v. State, Dept. of Finance, Securities Bureau

• Decision Date: 04 June 1996
• Docket Number: No. 21722,21722
• Citation: 128 Idaho 653,917 P.2d 1293
• Parties: , Blue Sky L. Rep. P 74,103 Lawrence RINCOVER and Wanda J. Rincover, Husband and Wife, Plaintiffs-Appellants, v. STATE of Idaho, DEPARTMENT OF FINANCE, SECURITIES BUREAU; Belton Patty, Individually and as Director of the Department of Finance; Wayne Klein, Individually and as Chief of Securities Bureau; Carol Vincent, an Individual and Carmen Totorica, an Individual, Defendants-Respondents. Boise, February 1996 Term
• Court: Idaho Supreme Court

Page 1293

917 P.2d 1293

128 Idaho 653, Blue Sky L. Rep. P 74,103

Lawrence RINCOVER and Wanda J. Rincover, Husband and Wife, Plaintiffs-Appellants, v. STATE of Idaho, DEPARTMENT OF FINANCE, SECURITIES BUREAU; Belton Patty, Individually and as Director of the Department of Finance; Wayne Klein, Individually and as Chief of Securities Bureau; Carol Vincent, an Individual and Carmen Totorica, an Individual, Defendants-Respondents.

No. 21722.

Supreme Court of Idaho,

Boise, February 1996 Term.

June 4, 1996.

Bauer & French, Boise, for appellants. Randal J. French, argued.

Alan G. Lance, Idaho Attorney General; David G. High (argued), Deputy Attorney General, Boise, for respondents.

TROUT, Justice.

This case involves tort claims by appellants Lawrence and Wanda Rincover for damages arising from the wrongful denial of registration of their securities licenses, and claims for violations of federal civil rights.

I. BACKGROUND

Lawrence Rincover was a licensed securities salesperson. In early 1990, the Idaho Department of Finance (Department) investigated certain aspects of his professional conduct, including loans obtained from a client (respondent Vincent), and unsuitable investment recommendations given to both Vincent and another client (respondent Totorica). In July of 1990, Mr. Rincover discontinued his employment as a securities salesperson in Idaho. On April 1, 1991, he again applied to become a registered securities salesperson. This application was denied on April 30, 1991, by issuance of an order and notice by the Director of the Department (Director). A hearing was held before a hearing officer who issued findings of fact, conclusions of law, and a proposed order recommending that the application be denied. On December 16, 1991, the Director entered a final order denying registration.

Mr. Rincover sought judicial review of the Director's final order in district court. The district court affirmed the denial of his application. On appeal, this Court determined that the Department denied Mr. Rincover due process by failing to provide adequate notice prior to a hearing of the reason for its ultimate decision, and that I.C. § 30-1413(7), which was relied upon by the Department, was unconstitutionally vague as applied. Accordingly, the district court's decision was reversed. See Rincover v. State, 124 Idaho 920, 866 P.2d 177 (1993). However, Mr. Rincover's Wanda Rincover was also a licensed securities salesperson. On June 26, 1991, she submitted an application to re-register her securities license with a different broker-dealer. On August 8, 1991, the Director entered an order denying registration. One of the stated reasons for denial was the conclusion that Mrs. Rincover had violated I.C. § 30-1413(7). An administrative hearing was held in January of 1992, and on September 16, 1992, the hearing officer issued a proposed order recommending that her application be denied. On September 24, 1992, the Director entered a final order denying Mrs. Rincover's application. On review the district court reversed the Director's order. However, it denied Mrs. Rincover's request for attorney fees under I.C. § 12-117.

[128 Idaho 655] request for attorney fees pursuant to I.C. § 12-117 was denied.

II. PROCEDURAL HISTORY

On October 28, 1991, the Rincovers filed a notice of tort claim dated October 26, 1991, naming the State of Idaho and Wayne Klein (chief of the securities bureau) as defendants. On October 27, 1993, the Rincovers initiated the present action by filing a complaint in district court alleging negligence, malicious prosecution, and defamation. This complaint was never formally served on the defendants. On February 24, 1994, the Rincovers filed a second tort claim notice, again naming the State and Wayne Klein as defendants. On May 9, 1994, they filed an amended complaint alleging negligence, malicious prosecution, defamation, negligent infliction of emotional distress, and violations of civil rights under 42 U.S.C. § 1983.

On June 27, 1994, defendants filed a motion to dismiss and for summary judgment. They requested that the original complaint be dismissed pursuant to I.R.C.P. 4(a)(2) for lack of service. They also sought dismissal of the tort claims because: (1) they were time barred; (2) collateral estoppel precluded re-litigation of the applicable standard of care; (3) as to defendant Belton Patty (director of the Department), no tort claim notice was filed; and (4) as to defendants Totorica and Vincent, the Rincovers failed to state a claim, and the communications and testimony of these defendants were privileged. Defendants also requested dismissal or summary judgment with regard to the defamation claim.

With regard to the § 1983 claims, the defendants requested the trial court to dismiss or grant summary judgment because: (1) these claims were time barred; (2) collateral estoppel precluded re-litigation of issues determinative of defendants' qualified immunity; (3) the State and State officers acting in their official capacity are not "persons" within the meaning of 42 U.S.C. § 1983; and (4) as to Totorica and Vincent, the Rincovers failed to state a claim, and failed to plead the count with particularity.

The Rincovers consented to dismissal of the § 1983 action against the State and defendants Patty and Klein in their official capacities. In resolving the remaining issues presented by defendants' motion, the district court held as follows: (1) summary judgment was denied on the issue of failure to file a tort claim notice against Patty; (2) the tort claims in the original complaint were time barred; (3) the § 1983 claims against Patty and Klein were time barred; (4) the claims in the amended complaint did not relate back to the original complaint; (5) the original complaint was dismissed for lack of service; (6) collateral estoppel precluded re-litigation of issues essential to the tort claims; (7) defendants Klein and Patty were shielded from liability on the § 1983 claims by qualified immunity; and (8) the claims against Totorica and Vincent were meritless.

III. STANDARDS OF REVIEW

A. Claims Against the State and State Officials

The district court granted summary judgment with regard to the claims against

[128 Idaho 656] the State and State officials. When reviewing a ruling on a motion for summary judgment, this Court's standard of review is the same as that used by the district court in passing on the motion; it must liberally construe the facts in favor of the non-moving party and determine whether there is a genuine issue as to any material fact, and whether the moving party is entitled to judgment as a matter of law. I.R.C.P. 56(c); Curtis v. Firth, 123 Idaho 598, 610, 850 P.2d 749, 761 (1993). In this case, the material facts are not in dispute. Thus, the question is whether in light of these undisputed facts, the defendants are entitled to judgment as a matter of law.

B. Claims Against Vincent and Totorica

I.R.C.P. 12(b) provides that if a motion to dismiss under 12(b)(6) is made and matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment under Rule 56. Even though the defendants only sought dismissal of the claims against Vincent and Totorica under Rule 12(b)(6), with regard to the claims for malicious prosecution, the district court relied upon the record, concluding that there is no evidence that these defendants acted with improper motives, lied, or misused the process. Therefore, we will review the ruling on these claims as a grant of summary judgment.

With regard to the remaining claims against Vincent and Totorica, there is no indication that the district court considered the record, and the court simply stated that it was "granting the motion" on various grounds. Thus, we will treat the rulings on these claims as dismissals pursuant to Rule 12(b)(6). In reviewing a ruling on a motion to dismiss for failure to state a claim upon which relief may be granted, the question is whether the non-movant has alleged sufficient facts in support of his claim which, if true, would entitle him to relief. E.g., Orthman v. Idaho Power Co., 126 Idaho 960, 895 P.2d 561 (1995).

IV. CIVIL RIGHTS CLAIMS AGAINST STATE OFFICIALS

The Rincovers have alleged that defendants Klein and Patty engaged in a course of conduct which resulted in the violation of certain of their constitutional rights. Therefore, they contend that they are entitled to recover damages from these defendants pursuant to 42 U.S.C. § 1983. The district court set forth two bases for its decision to grant summary judgment with regard to these claims. It first concluded that the claims were barred by application of the statute of limitations. Alternatively, it determined that defendants Klein and Patty were immune from liability. Because our resolution of the immunity issue is dispositive of this group of claims, we will not address the issues relating to whether the applicable limitations period has run.

The district court determined that defendants Klein and Patty were shielded from liability by the doctrine of qualified immunity, citing Hunter v. Bryant, 502 U.S. 224, 112 S.Ct. 534, 116 L.Ed.2d 589 (1991). See also Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982) ("[G]overnment officials performing discretionary functions generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known."). However, the United States Supreme Court has held that although qualified immunity is the general rule for executive officials charged with constitutional violations, absolute immunity applies to those officials performing prosecutorial or adjudicative functions. See Butz v. Economou, 438 U.S. 478, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978). ¹ With regard to the former, the Court held that officials...