Smith v. District Court, Second Judicial Dist.

• Decision Date: 29 May 1990
• Docket Number: No. 90SA49,90SA49
• Citation: 797 P.2d 1244
• Parties: Kathryn SMITH, Katherine Buggert, Lawrence Berg, and Nellie Berg, Petitioners, v. The DISTRICT COURT, SECOND JUDICIAL DISTRICT; City and County of Denver and State of Colorado; Hon. James C. Flanigan, Senior Judge; Hon. Leslie M. Lawson, Former Judge; and Calvary Temple, Inc., a Colorado corporation, Charles E. Blair, Joan Bjork, J. Allan Petersen, and John Humphreys, individually and as trustees, Respondents.
• Court: Colorado Supreme Court

Page 1244

797 P.2d 1244

Kathryn SMITH, Katherine Buggert, Lawrence Berg, and Nellie

Berg, Petitioners, v. The DISTRICT COURT, SECOND JUDICIAL DISTRICT; City and County of Denver and State of Colorado; Hon. James C.

Flanigan, Senior Judge; Hon. Leslie M. Lawson, Former

Judge; and Calvary Temple, Inc., a Colorado corporation,

Charles E. Blair, Joan Bjork, J. Allan Petersen, and John

Humphreys, individually and as trustees, Respondents.

No. 90SA49.

Supreme Court of Colorado,

En Banc.

May 29, 1990.

As Modified on Denial of Rehearing

June 18, 1990.

Daniel F. Lynch, Denver, for petitioners.

Hall & Evans, Raymond J. Connell, Steve Shappell, Denver, for respondents Calvary Temple, Inc., Charles E. Blair, Joan Bjork, J. Allan Petersen, and John Humphreys.

Justice VOLLACK delivered the Opinion of the Court.

Petitioners initiated this original proceeding pursuant to C.A.R. 21 to seek reversal of two district court orders, which denied petitioners' request to certify a class pursuant to C.R.C.P. 23 and denied their motion to compel production of a list of individuals who donated money to a Calvary Temple, Inc., (Calvary Temple) fund. We issued a rule to show cause, and make the rule absolute.

I.

Prior to 1974 the petitioners (Investors) invested money in Life Center, Inc., (Life Center), a residential care facility owned and operated by the Calvary Temple church. In 1974, Life Center and Charles E. Blair Foundation, Inc., (Foundation), which raised money for Life Center, filed for bankruptcy. In 1989 the final proceeds from the sale of Life Center's assets were distributed to creditors; a federal bankruptcy court discharged the remaining $6 million of unpaid debts. The bankruptcy court approved the Foundation's reorganization plan in which Calvary Temple would raise $50,000 twice each year toward payment of the principal of investments made by the Foundation's unsecured creditors.

In 1986, Calvary Temple initiated a fund-raising project titled "Second Mile Campaign." Calvary Temple stated that the campaign was intended to pay $3,924,000 to 787 investors and creditors to whom Life Center and the Foundation owed money prior to Life Center's request in bankruptcy court for protection from creditors.

A Calvary Temple brochure describing how the campaign would operate stated, "On the church sanctuary wall, a visual of the Second Mile is portrayed. Each cobblestone is covered by a footprint representing one of the distressed investors." The brochure also stated that each donation would be "used in its entirety for the Second Mile project." The brochure invited individuals to designate the recipient of their donations by selecting a "footprint," on which were printed monetary amounts. Calvary Temple also announced to donors that their names would appear on a permanent "honor roll" to be painted on a Calvary Temple church wall. During the campaign, Calvary Temple officials in church sermons read excerpts of letters from donors and identified the donors and the amounts of their donations, and church publications regularly identified various donors and the amount of their donations. Calvary Temple deposited donations to the campaign in a restricted account titled "Calvary Temple Second Mile Fund."

In December 1987 the Investors filed this lawsuit in Denver County District Court against Calvary Temple and four Calvary Temple officials, requesting an accounting and alleging numerous claims for relief, including fraud and breach of fiduciary duty. In the lawsuit the Investors alleged that Calvary Temple wrongfully disbursed monies to businesses and individuals who were not among the 787 investors whom the Second Mile Campaign was created to reimburse.

In October 1989 the district court judge denied the Investors' motion to designate a class pursuant to C.R.C.P. 23, which would have allowed the Investors to prosecute its proposed class action lawsuit. Subsequently, a different district court judge ¹ ruled that the Investors could not obtain through discovery the names of the campaign donors.

II.

We first address Calvary Temple's assertion that the district court's orders concerning certification of a class and discovery are not properly reviewed in an original proceeding.

A.

We ordinarily will not review in an original proceeding a trial court's order denying a motion to certify a class since trial courts have broad discretion over such matters. See Goebel v. Colorado Dep't of Insts., 764 P.2d 785, 794 (Colo.1988). However, we have not limited the reach of our original jurisdiction by reference to particular subject areas of the law. The common denominator of cases we have reviewed on original jurisdiction is concern that a lower court has exceeded its jurisdiction, or the court has abused its discretion and an appellate remedy would not be adequate. See, e.g., Halliburton v. County Court of Denver, 672 P.2d 1006, 1009 (Colo.1983). Accordingly, we have exercised original jurisdiction even on issues concerning class actions. See Mountain States Tel. and Tel. v. District Court of Denver, 778 P.2d 667 (Colo.), cert. denied, 493 U.S. 983, 110 S.Ct. 519, 107 L.Ed.2d 520 (1989).

Because of this case's unique facts, we conduct a limited review of the trial court's ruling denying certification of the Investors' proposed class. We begin by noting that the record supplied to this court is too incomplete for this court to affirm or overrule the trial court's order. We also note that the Investors' proposed class action, apparently like their individual lawsuit, claims that the Second Mile fund was an express trust with Calvary Temple as the trustee, that Calvary Temple breached its fiduciary duty, and that Calvary Temple committed fraud and theft by appropriating monies from the fund.

The Investors' proposed class comprised "natural persons" who had invested in Life Center or the Foundation ² before each filed for bankruptcy, who had not recovered the principal on their investment in either corporation, and who "have indicated an economic, emotional or spiritual distress, and expressed a desire to recover all or part of such investments." The trial court ruled that the Investors' proposed class did not comply with C.R.C.P. 23. ³ First, the court found that the Investors, the proposed class representatives, had not proven that their claims were typical of the claims of the proposed class because, "[f]or example, the non-individual creditors of the Foundation would not be represented by [the Investors'] counsel"; second, the court found that the Investors had not demonstrated that they, as the proposed class representatives, would protect the interests of the rest of the class; finally, the court concluded that the Investors' proposed class would preclude or impede the ability of others not members of the proposed class to protect their interests, contrary to C.R.C.P. 23(b)(1)(B).

The trial court's ruling not to certify the proposed class appears to rely exclusively on an assumption or finding of fact that corporations and other non-individual entities invested money in Life Center and the Foundation, and that these nonindividual entities should be included in a class action filed under the Investors' theories of liability. The Investors' claims for relief, however, are based on the theory that the Second Mile project constituted a trust for the benefit of only those natural persons who had lost money investing in Life Center and the Foundation. The critical questions, therefore, include whether entities other than natural persons invested in Life Center or the Foundation and, if so, whether they were included among the intended beneficiaries of the Second Mile project. The parties do not agree on these subjects, and the record does not reveal that the court made findings of fact regarding them.

Because of the status of this record, we do not decide whether the trial court erred in declining to certify the proposed class. However, we make absolute our rule to show cause on this issue to permit the court, if requested, to determine if a class action can be maintained under the provisions of C.R.C.P. 23.

B.

Pretrial discovery orders are interlocutory and not normally considered in original jurisdiction proceedings. Bond v. District Court of Denver, 682 P.2d 33, 36 (Colo.1984). However, we have not hesitated to exercise original jurisdiction where such orders place a party at an unwarranted disadvantage in litigating the merits of its claim. E.g., Caldwell v. District Court of Denver, 644 P.2d 26, 30 (Colo.1982); Hawkins v. District Court, 638 P.2d 1372, 1375 (Colo.1982). In Caldwell, the plaintiffs initiated a lawsuit alleging fraud, misrepresentation, and civil conspiracy. On the plaintiffs' motion to compel discovery of documents held by the defendants, the trial court denied the motion, ruling that the documents were privileged. Similarly in Hawkins the plaintiffs sought to compel discovery, and the trial court denied the motion on the grounds that the information sought to be discovered was privileged and not discoverable. In both cases, we accepted original jurisdiction because of our conclusion that the trial court's rulings precluded the plaintiffs from "obtaining information vital" to their claims for relief. Hawkins, 638 P.2d at 1375.

In this case, without the donors' names the Investors will be impeded in proving at least one of their allegations--that Calvary Temple fraudulently and in breach of trust transferred from the Second Mile campaign fund monies that donors had specifically donated to the fund to relieve distressed creditors. We thus conclude that the trial court's ruling denying the Investors access to the names of donors significantly reduced the Investors' ability to prosecute their lawsuit, and that this impediment to the Investors' lawsuit warrants our exercise of original jurisdiction.

III.

The trial court ruled that the Investors were not entitled to the names of donors because the "names and...