Leslie v. Estate of TavaresLeslie v. Estate of Tavares
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.
Aso on January 24, 1997, Fresch’s counsel mailed a demand letter on behalf of “Leimo-mi Fresch[,] as Next Friend for [Leslie],” to
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 Waimánalo. 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 underin-sured 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 Hawaii Rules of Civil Procedure (HRCP) Rule 41(a)(1)(A) (1996).
3
On April 1, 1998, Leslie filed a motion, pursuant to HRCP
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 ease, 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, Freseh 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,
In the specific circumstances of this ease, including that the settlement documents were executed by [Leslie] after he was discharged from hospitalization for rehabilitation and each of the three settlement amounts were for policy limits and that none of them addressed apportionment of the proceeds, this Court declines to exercise its inherent power to set aside the dismissal for the purpose of subjecting the terms of settlement to further court review. The Court is satisfied that exercise of [its] inherent power to set aside the dismissal is not necessary to prevent unfair results or to correct a wrong.
On that same day, the circuit court filed an order, “[p]ursuant to the First Amended Findings of Fact and Conclusions of Law filed June 18, 1998,” denying Leslie’s motion to alter or amend.
Leslie filed a timely notice of appeal on July 10,1998.
II. STANDARDS OF REVIEW
A. Motions For Relief From Judgment
A
circuit court’s denial of a motion for relief from judgment filed pursuant to HRCP Rule 60(b) is reviewed for abuse of discretion.
See Kawamata Farms, Inc. v. United Agri Products,
B. Findings Of Fact And Conclusions Of Law
We review a trial court’s FOFs under the clearly erroneous standard.
“A[n] [FOF] is clearly erroneous when, despite evidence to support the finding, the appellate court is left with the definite and firm conviction in reviewing the entire evidence that a mistake has been committed.” State v. Kane,87 Hawai'i 71 , 74,951 P.2d 934 , 937 (1998) (quoting Aickin v. Ocean View Investments Co.,84 Hawai'i 447 , 453,935 P.2d 992 , 998 (1997) (quoting Dan v. State,76 Hawai'i 423 , 428,879 P.2d 528 , 533 (1994))). An FOF is also clearly erroneous when “the record lacks substantial evidence to support the finding.” Alejado v. City and County of Honolulu,89 Hawai'i 221 , 225,971 P.2d 310 , 314 (App.1998) (quoting Nishitani v. Baker,82 Hawai'i 281 , 287,921 P.2d 1182 , 1188 (App.1996)). See also State v. Okumura,78 Hawai'i 383 , 392,894 P.2d 80 , 89 (1995). “We have defined ‘substantial evidence’ as credible evidence which is of sufficient quality and probative value to enable a person of reasonable caution to support a conclusion.” Roxas v. Marcos,89 Hawai'i 91 , 116,969 P.2d 1209 , 1234 (1998) (quoting Kawamata Farms v. United Agri Products,86 Hawai'i 214 , 253,948 P.2d 1055 , 1094 (1997) (quoting Takayama v. Kaiser Found. Hosp.,82 Hawai'i 486 , 495,923 P.2d 903 , 912 (1996) (citation, some internal quotation marks, and original brackets omitted))).
Kotis,
Hawai'i appellate courts review conclusions of law de novo, under the right wrong standard. See Associates Fin. Services Co. of Hawaii, Inc. [v. Mijo], 87 Hawai'i [19] at 28, 950 P.2d [1219] at 1228. “Under the right/wrong standard, this court ‘examine[s] the facts and answer[s] the question without being required to give any weight to the trial court’s answer to it.’” Estate of Marcos,88 Hawai'i at 153 ,963 P.2d at 1129 (citation omitted).
Robert’s Hawaii School Bus, Inc. v. Laupahoehoe Transportation Co., Inc.,
A. Neither The Estate Nor The Insurance Carriers Were Entitled To Deal Directly With Leslie In Concluding A Settlement Agreement Inasmuch As He Was Represented By A Next Friend.
HRCP Rule 17(c) allows the trial court to appoint a next friend or guardian ad litem
7
for a minor or incompetent person for purposes of prosecuting a lawsuit.
See supra
note 6. The appointment of a next friend presupposes a finding by the trial court that the affected party labors under a disability, making it necessary for another person to represent his or her interests in the litigation.
8
See, e.g., Nawahie v. Peterson,
The purpose of appointing a guardian ad litem is to protect the person under disability. Indeed, courts should appoint guardians ad litem for parties litigant when reasonably convinced that a party litigant is not competent, understanding^ and intelligently, to comprehend the significance of legal proceedings and the effect and relationship of such proceedings in terms of the best interests of such party litigant.
State ex rel. McMahon v. Hamilton,
The Estate does not appear to dispute the above-stated principles, but nevertheless relies on Leslie’s own ratification of the settlement agreement. The Estate suggests that Leslie regained his competency at some point prior to his execution of the relevant settlement agreements,
9
at which time Fresch’s status as next friend automatically terminated, even though no motion was brought before the circuit court, and the circuit court took no action on the issue. In support of its contention, the Estate cites language from
[t]he authority of a representative under Rule 17(c) does not necessarily survive until the action has been terminated; rather, his power is dependent upon the continued disability of the person being protected. State law controls the question whether the represented party’s disability has ended during the action and once it is determined that this has occurred, the fiduciary loses authority to maintain the suit on behalf of the former infant or incompetent. One view is that a guardian ad litem’s power expires as a matter of law upon termination of the disability. As a matter of good practice, it probably always is wise to seek the formal removal of the guardian by motion and this procedure has been required by one federal court.
6A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure
§ 1570, at 507 (1990) (emphases added) (footnotes omitted) (hereinafter,
Federal Practice and
Procedure). However, as the portions highlighted above indicate, the quoted text offers only the faintest support to the Estate’s assertion that the determination of a party’s return to competency may be made by the opposing party or the allegedly incompetent party himself without the participation of the trial court. It is noteworthy, moreover, that the cases upon which the authors of
Federal Practice and Procedure
authors rely concern minors reaching the age of majority.
See Mason v. Royal Indem. Co.,
The second treatise quoted by the Estate states that “a representative’s appointment automatically terminates when the person represented sheds the disability that led to [the] need for a representative.” J. Moore,
Moore’s Federal Practice
§ 17.28, at 17-116 to 17-117 (3d ed.1999). Curiously, Moore relies on
Ju Shu Cheung,
in which the court expressly required the parties to bring the issue of the loss of the minor’s legal disability,
i.e.,
his achievement of the age of majority, before it in the form of a motion to dismiss the minor’s next friend.
See
We believe that the more rational approach is that any question regarding the continuing incompetence of an adult party for whom a next friend has previously been appointed must be raised before the trial court.
Cf. Nawahie ex rel. Lamnui v. Kamalani,
We therefore hold that Leslie’s signatures on the settlement agreements and his apparent authorization of the dismissal of his own claims were not binding against him.
B. Fresch Was Required To Obtain The Circuit Court’s Approval Of The Settlement Agreements.
Fresch also signed and apparently approved the settlement agreements in this case. It is unclear whether she meant to do so in her capacity as next friend or merely in her capacity as coplaintiff. Assuming,
ar-guendo,
that Fresch
did
purport to execute the agreements in her capacity as Leslie’s
In
Lalakea v. Lawpahoehoe Sugar Co.,
[cjourts have always been exceedingly zealous in guarding the rights and interests of minors. They have usually permitted guardians and guardians ad litem to do such things as were clearly to the advantage of the ward, and when the advantage to the ward was not clear[] they have instituted inquiry, and have sometimes referred the question of advantage to a master, before giving heed to the agreement of such guardian. The agreement of the guardian ad litem in regard to mere formal matters, such as relate to the speeding of the cause, as, for instance, entering into a stipulation to transfer the case from one court to another court of like jurisdiction, has been sanctioned. On the other hand, courts have refused to permit a guardian ad litem to make an agreement that the decision in one case shall determine that in another, although the cases involve precisely the same facts and the same parties, and substantially the same points of controversy, on the ground that a guardian ad litem had but one duty to perform, and that was to defend the suit. The courts have been practically unanimous in holding that a guardian ad litem can admit nothing against and waive nothing in favor of his ward[.]
Id. at 283 (citations and internal quotation marks omitted) (emphases added). Based on its extensive survey of the then-current case law, the Lalakea court held that
it may be said to be the settled rule in this State and elsewhere that a next friend or guardian ad litem cannot[] by admission or stipulation[,] surrender the rights of the infant. It is the duty of the court to protect the interests of the infants, and to see to it that their rights are not bargained away by those who represent them.
Id.
at 285 (emphasis added). The
Lalakea
court further ruled that, “where the consent decree waives or surrenders substantial rights of the minor, the decree will not be binding because it would denote a surrender of the rights of the infant without investigation by the court.”
Id.
at 283.
See also In re Estate of Campbell,
As Leslie points out, a number of other jurisdictions share the position that the trial court must approve a settlement agreement negotiated by a next friend or guardian ad litem.
See, e.g., Kingsbury v. Buckner,
The Estate relies upon
Eagan v. Jackson,
It is an ancient precept of Anglo-American jurisprudence that infant and other incompetent parties are wards of any court called upon to measure and weigh their interests. While the infant sues or is defended by a guardian ad litem or next friend, every step in the proceeding occurs under the aegis of the court.
Id. (emphasis added).
We agree with the
Eagan
court’s conclusion that the trial court’s power and responsibility to approve a proposed settlement of a ward derives from its common law inherent power, rather than from the plain language of HRCP Rule 17(c). As implied by
Eagan,
moreover, we hold that the HRCP present no impediment to the foregoing power and duty. We reject the circuit court’s reasoning that, merely because HRCP Rule 55 expressly provides that default is not to be entered against an infant or incompetent under certain circumstances, and HRCP Rule 41(a)(1)(A) contains no express provision for the trial court’s review of a settlement agreement executed by a next friend, the protection of the HRCP is “manifestly” limited to the interests of minors and incompetent party
defendants
and does not extend to minors and incompetent
plaintiffs.
Such an interpretation does not comport with the HRCP’s goal of “reflect[ing] the essentials of due process and fair play,”
see Bank of Hawaii v. Horwoth,
Accordingly, we adhere to our decision in Lalakea and hold that the next friend of an incompetent adult may not validate a settlement agreement on behalf of the incompetent party without the approval of the court.
C. The Circuit Court Abused Its Discretion In Failing To Assess The Fairness Of The Apportionment Of The Settlement Proceeds.
In its amended COLs, the circuit court ruled that, “[i]n the specific circumstances of this case,” the “exercise of inherent power to set aside the dismissal is not necessary to prevent unfair results or to correct a wrong.” We interpret the circuit court’s COL as essentially deciding, notwithstanding Leslie’s rejection of the settlement agreements, that the agreements were fair and should remain in force. In arriving at the foregoing conclusion, the circuit court expressly declined to investigate the fairness of the apportionment of the settlement proceeds among the plaintiffs. We hold that the circuit court thereby abused its discretion.
The parties appear to agree with the circuit court that the settlement amounts were for “policy limits” with respect to all three policies.
11
However, Leslie complains
Relying on the Intermediate Court of Appeals’ (ICA) decision in Gilmartin, the circuit court ruled that it need not consider the fairness of the apportionment between the plaintiffs because it “constitute[d] a ‘dispute regarding the agreement [which] is totally separate and distinct from the dispute underlying the original action.’ ” Gilmartin, however, is inapposite.
In
Gilmartin,
the plaintiff filed a motion for the
enforcement
of a settlement agreement with the trial court after a dispute developed between the parties as to its terms.
if a motion to vacate a prior dismissal and enforce a settlement agreement is brought years after the original action was terminated, or the dispute regarding the agreement is totally separate and distinct from the dispute underlying the original action, a trial court could, in the exercise of its discretion HRCP Rule 60(b), decline to vacate a prior dismissal.
Id.
at 295,
As Leslie points out, the motion under consideration in this case was not proffered for purposes of enforcing a settlement agreement; rather, it sought recission of the agreement. Moreover, unlike the parties in Gilmartin, neither Leslie nor Fresch possessed the independent authority to ratify the settlement agreement in the first instance.
In
Dacanay,
a minor’s guardian ad litem initially concurred in a settlement agreement but then repudiated it prior to the trial court’s approval.
Id.
at 1077. The Ninth Circuit held that a guardian ad litem may repudiate his or her approval of a settlement agreement on behalf of his or her ward if he or she does so prior to the trial court’s approval, so long as the repudiation is not “arbitrarfy] and capricious[] in the sense that [the guardian ad litem’s] conduct is inimical to the best interests of the court’s ward.”
Id.
at 1080. If the trial court finds that the repudiation
is
arbitrary and capricious, it may approve the settlement despite the guardian ad litem’s change of heart.
Id.
In this way, the guardian ad litem’s opinion is accorded some degree of deference, but the court does not “surrender” its jurisdiction over the ward to its officer.
Id. See also Scruton v. Korean Air Lines Co., Ltd.,
In the present case, it is the ward himself, rather than the next friend, who has
The circuit court’s duty in this regard was rendered all the more crucial by Fresch’s apparent conflict of interest. As a coplaintiff, Freseh’s self-interest regarding her personal share of the aggregate settlement proceeds was plainly adverse to her fiduciary duty to maximize the result for Leslie.
See Grunewald v. Technibilt Corp.,
IV. CONCLUSION
We are hesitant to usurp the proper role of the circuit court by rendering our own independent judgment regarding the fairness of the apportionment of settlement proceeds. Accordingly, based on the foregoing analysis, we vacate the circuit court’s order denying Leslie’s motion for an order vacating the stipulated dismissal and for re-cission of the settlement agreements and remand for further proceedings, consistent with this opinion, concerning the fairness of the apportionment. In light of this court’s historic interest in protecting the rights and interests of wards of the court,
see Lalakea,
Notes
. Leslie's purported motion to alter or amend the circuit court's FOFs, COLs, and order consisted of nothing more than a request that the circuit court replace its findings, conclusions, and order with language favorable to Leslie and granting his motion. As such, Leslie's motion was, in reality, a
de facto
motion for reconsideration, raising no new arguments or newly discovered evidence. “The purpose of a motion for reconsideration is not to simply relitigate old matters, but to allow the parties to present new evidence or make fresh arguments that could not have been presented or made in the earlier proceeding.”
Pancakes of Hawaii, Inc. v. Pomare Properties Corp.,
. The entire text of the three policies has apparently not been made part of the record on appeal. However, the record does include a "Declarations” page from Tavares's automobile policy, which indicates that she carried bodily injury liability coverage of "$250,000 EACH PERSON” and “$500,000 EACH ACCIDENT."
. HRCP Rule 41(a)(1)(A) provides in relevant part that "an action may be dismissed by the plaintiff without order of court ... by filing a notice of dismissal at any time before service by the adverse party of an answer or of a motion for summary judgment, whichever first occursf.]”
. HRCP Rule 60(b) provides in relevant part that, ‘‘[u]pon motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceedings for ... any ... reason justifying relief from the operation of the judgment.”
. HRCP Rule 55 provides in relevant part:
Default.
(a) Entry. When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules and that fact is made to appear by affidavit or otherwise, the clerk shall enter his default.
(b) Judgment. Judgment by default may be entered as follows:
(1) By the Clerk. When the plaintiff's claim against a defendant is for a sum certain or for a sum which can by computation be made certain, the clerk upon request of the plaintiff and upon affidavit of the amount due shall enter judgment for that amount and costs against the defendant, if he has been defaulted for failure to appear and if he is not an infant or incompetent person.
(2) By the Court. In all other cases the party entitled to a judgment by default shall apply to the court therefor; but no judgment by default shall be entered against an infant or incompetent person unless represented in the action by a guardian, or other representative who has appeared therein, and upon whom service may be made under Rule 17....
(Emphases added.)
.HRCP Rule 17(c) provides:
Infants or Incompetent Persons. Whenever an infant or incompetent person has a guardian, whether appointed as to his person or property, such guardian as to his property, or if no guardian has been appointed as to his property, then such guardian appointed as to his person, may sue or defend on behalf of the infant or incompetent person. If an infant or incompetent person does not have a duly appointed guardian he may sue by his next friend or by a guardian ad litem. The court shall appoint a guardian ad litem for an infant or incompetent person not otherwise represented in an action or shall make such other order as it deems proper for the protection of the infant or incompetent person.
(Emphasis added.)
.Traditionally, and in some jurisdictions to this day, the term "next friend” was applied to appointed representatives of parties
plaintiff,
whereas "guardian ad litem” applied to the representative of parties
defendant. See, e.g., LaRosa v. Lupoli,
. As the Estate points out, the appointment of a guardian ad litem or next friend pursuant to HRCP Rule 17(c) does not operate as a
general
adjudication of incompetency.
See State ex rel. McMahon v. Hamilton,
. The parties dispute whether the evidence in the record demonstrates Leslie’s continuing incompetence. Based on our holding, infra, that, as a general rule, the trial court must make the determination whether a party has regained competence, we need not address the merits of the parties’ arguments on this question.
. The state law to which the Eagan court referred was a New Jersey statute. Id.
. Inasmuch as Fresch and Howard appeared to assert claims for relief for negligent infliction of emotional distress, their claims were derivative of Leslie’s claim for personal injury.
Cf. Tabieros v. Clark Equip. Co.,
. Leslie also claims that the settlement agreements could potentially reduce the amount of damages he might recover from joint tortfeasors, such as a provider of alcohol to Tavares or Ta-vares’s mother, if she were liable for negligent entrustment. As the circuit court pointed out, however, these theoretical problems are speculative, at best, inasmuch as Leslie has not shown that he has attempted to file any additional claims or to join other alleged tortfeasors in the present lawsuit.