Maxam Ltd v. Lane

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 01-60493
Summary Calendar
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MAXAM, LTD.,
Plaintiff-Appellee,
VERSUS
STEVEN R. LANE,
Defendant-Appellant.
_________________________
Appeal from the United States District Court
for the Southern District of Mississippi
m 3:99-CV-740-BN
_________________________
October 14, 2002
Before JOLLY, JONES, and SMITH,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
Granger, Thaggard & Associates, Inc.
(“GTA”), agreed to auction property owned
by Maxam, Ltd. (“Maxam”), in separate lots
for future development as a subdivision. GTA
placed Steven Lane in charge of marketing and
researching the project, and Jack Granger
served as auctioneer. During the auction,
Granger, apparently in violation of the written
guidelines for the auction, asked Lane to esti-
mate the cost of building a road into the sub-
division that would meet county standards.
* Pursuant to 5TH CIR. R. 47.5, the court has
determined that this opinion should not be pub-
lished and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.

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Lane misrepresented the costs, and several
bidders rescinded their sales contracts. Max-
am settled with the rescinding bidders by void-
ing their sales contracts and returning a high
percentage of their earnest money. Maxam
then sued Lane for indemnity.
We affirm in part because the district court
correctly awarded indemnity for the costs of
commissions paid to GTA on the rescinded
contracts. Concluding, however, that the
court failed to assign a percentage fault to
Granger as required by Mississippi law, we
reverse in part.
I.
In 1997, Maxam purchased 187 acres of
property, proposing to subdivide it and hold an
absolute auction, which is an auction at which
the seller must accept the highest bid received.
Maxam contracted with GTA to conduct the
auction. The “Auction Proposal and Agree-
ment” specified that GTA would receive a
10% commission on all contracts for sale. If a
parcel did not sell at the auction, GTA would
list it for 180 days, and Maxam would pay a
10% commission on any subsequent sale.
GTA hired Lane to prepare for the auction.
Lane advertised the sale and showed the prop-
erty to prospective bidders. Auction materials
informed the bidders that the property was be-
ing offered on an “as is” basis. The bidders al-
so knew they would have to join a homeown-
ers’ association that would bear the cost of
paving a road through the subdivision.
At the auction, Granger, who was Lane’s
supervisor, took the auctioneer stand to ex-
plain the rules. A bidder asked Granger about
the cost of building a road. Granger asked
Lane to answer, and Lane replied that he had
received a bid of $150,000 to complete a road
that met the county’s specifications. In fact,
Lane had taken two bids from contractors not
licensed as civil engineers, and neither contrac-
tor represented that his bid met county stan-
dards.
GTA sold all twenty-seven parcels in a se-
ries of sixteen contracts. The subsequently
formed homeowners’ association took bids to
build the road and discovered that Lane’s es-
timate did not reflect conformity with the
county’s standards; the homeowners’ associa-
tion received an initial, conforming bid of
$500,000. Some of the successful bidders re-
fused to close the sales, sought to rescind their
sales contracts, and requested return of earnest
money.
Maxam sued in federal court, under diver-
sity jurisdiction, to consummate the sales. Six
bidders sued in state court to rescind their
sales contracts and recover their earnest mon-
ey. Maxam settled with the six bidders by
agreeing to refund approximately 62% of the
earnest money paid by five of the bidders and
75% of the earnest money paid by the sixth.
That left approximately one-third of the
property unsold. Maxam paid the funds out of
its general revenues because GTA had retained
the original earnest money to satisfy its 10%
commission.
Maxam sued Lane for indemnity, alleging
that his negligent misrepresentation had cre-
ated Maxam’s liability to the bidders. In the
pretrial order, Lane requested an allocation of
fault against Granger for asking Lane to esti-
mate the cost of the road. Lane moved for
summary judgment, which the court granted in
part and denied in part. The court limited
Maxam’s pursuit of damages to the costs asso-
ciated with the auction, legal expenses in its

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litigation against the bidders, and interest on
those damages.
The court then held a bench trial, during
which Lane requested an allocation of fault
analysis under MISS. CODE ANN. § 85-5-7(7).
The court ruled in Maxam’s favor and award-
ed it $23,657.22 for commissions paid on the
rescinded contracts and $14,525,29 in attor-
neys’ fees. Lane moved for new trial, or in the
alternative, to alter or amend judgment under
FED. R. CIV. P. 59, repeating the request for an
allocation of fault. The court denied the mo-
tion, explaining that “[c]ounsel for Lane never
mentioned the prospect of joint liability on the
part of Granger” and that “Lane never made
this argument during the bench trial and did
not request a ruling on this issue by the
Court.”
Lane appeals the final judgment but asks us
to review only the denial of his rule 59 motions
for a new trial and to alter or amend the judg-
ment. We review the denial of a motion for
new trial to determine whether the court
abused its discretion or misapprehended the
substantive law.1 We review for abuse of dis-
cretion the denial of a motion to alter or
amend judgment. Midland W. Corp. v. FDIC,
911 F.2d 1141, 1145 & n.4 (5th Cir. 1990).
We review de novo, as questions of law, the
interpretation of a state’s comparative fault
regime and the resulting fault allocations.2
When ascertaining the law of a state, we look
to the decisions of its highest court. Labichie,
31 F.3d at 351.
II.
Lane argues that Mississippi’s comparative
fault statute required the district court to as-
sess Granger’s share of responsibility for mis-
leading the homeowners. The court’s oral rul-
ing did not address Granger’s potential liabil-
ity. When Lane filed his rule 59 motion, the
court refused to reconsider its fault allocation,
explaining that Lane had failed to make this ar-
gument at or before trial. Lane consistently
had argued that Granger bore some responsi-
bility for altering the terms of the “as is” auc-
tion, so the district court erred by failing to
evaluate this claim.
A.
On their face, none of the district court’s
rulings satisfied Mississippi’s requirement that
the court consider Granger’s possible liability.
Mississippi law establishes a presumption that
negligent tortfeasors bear only several liabili-
ty.3 Because the Mississippi fault regime relies
primarily on several liability, it also directs
1 Munn v. Algee, 924 F.2d 568, 575 (5th Cir.
1991) (“Because the availability of damages is a
question of law, we do not afford the district
court’s decision any deference.”); Dixon v. Int’l
Harvester Co., 754 F.2d 573, 586 (5th Cir. 1985)
(“The decision to grant or deny a motion for new
trial generally is within the sound discretion of the
trial court and will not be disturbed unless there is
an abuse of that discretion or misapprehension of
the law.”).
2 Krieser v. Hobbs, 166 F.3d 736, 739 (5th Cir.
1999) (“[W]e review de novo the district court’s
conclusions of law, such as the effect to be given a
settlement under Mississippi law . . . .”) (citation
omitted); Labichie v. Legal Sec. Life Ins. Co., 31
F.3d 350, 351 (5th Cir. 1994) (“The apportion-
ment of recovery costs under state law is a legal is-
sue that we review de novo.”) (citation omitted).
3 MISS. CODE ANN. § 85-5-7(3) (1999); Estate
of Hunter v. Gen. Motors Corp., 729 So. 2d 1264,
1274 (Miss. 1999) (“The principal effect of § 85-
5-7 is that it abolishes joint and several liability for
up to 50% of the plaintiff’s injuries and replaces it
with several liability up to this amount.”).

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courts to “determine the percentage of fault
for each party alleged to be at fault.” MISS.
CODE ANN. § 85-5-7(7). The Mississippi Su-
preme Court has interpreted the statute to re-
quire courts to determine the percentage fault
attributable to all alleged nonparty tortfeasors.4
Mississippi law plainly required the district
court to assign fault percentages to both Lane
and Granger.
In its original decision, the court did not
obviously or directly address Granger’s share
of fault. When Lane moved for a new trial and
an amendment of the judgment, the court held
that he had waived his right to argue Grang-
er’s responsibility. The record belies the
court’s assertion.
A party can preserve an issue by making the
argument in its pleadings, identifying it in the
joint pretrial order, or trying it by consent.5
Lane satisfies this test readilySShe argued, at
every stage of the proceeding, that Granger
bore responsibility for the alteration of the
bid’s terms.
In his answer, Lane lists, as his first de-
fense, Granger’s responsibility for overseeing
the auction. In his second defense, Lane ar-
gues that the acts or omissions of others actu-
ally caused the auction to go awry. The joint
pretrial order describes one of Lane’s legal is-
sues as “[w]hether Jack Granger was negligent
in performing his duties as auctioneer by re-
questing estimates of the road construction
from the auction stand and whether said negli-
gence, if any, is imputed to Maxam so as to
reduce any recovery.”6 During his closing ar-
gument, Lane’s counsel and the district court
engaged in a lengthy discussion (reproduced in
the appendix) about whether Granger should
bear a portion of the fault and about the effect
on Lane’s liability.
Maxam makes only one argument to sup-
port the court’s waiver findingSSthat after de-
livering its opinion from the bench, the court
gave both parties an opportunity to request ad-
ditional rulings or clarifications, but Lane’s
counsel failed to respond. This argument lacks
merit.
Where a party has raised an argument at
every juncture of the pretrial proceedings and
at trial, it has given the opposing party and
court sufficient notice. Lane did not have an
obligation to repeat every argument he had
made in pretrial motions and on the merits
once the district court delivered an adverse,
oral opinion. Waiting, digesting the opinion,
and later asking the court to revisit its conclu-
sions was a reasonable approach that should
4 Smith v. Payne, __ So. 2d __, 2002 Miss.
LEXIS 13, at *10 (Miss. Jan. 10, 2002) (“[A]ny
tortfeasor, even absent ones, that contributed to the
injury must be considered by the jury when appor-
tioning fault.”) (citation omitted); Estate of Hunter,
729 So. 2d at 1276 (“[T]he term ‘party,’ as used in
§ 85-5-7(7) refers to any participant in an occur-
rence which gives rise to a lawsuit, and not merely
the parties to a particular lawsuit or trial.”).
5 Mongrue v. Monsanto Co., 249 F.3d 422, 427
(5th Cir. 2001) (“A party has presented an issue in
the trial court if that party has raised it in either the
pleadings or the pretrial order, or if the parties have
tried the issue by consent . . . .”); Portis v. First
Nat’l Bank, 34 F.3d 325, 331 (5th Cir. 1994)
(same).
6 The joint pretrial order notes Maxam’s ob-
jection that Lane failed to plead this issue, but we
have long held that the joint pretrial orderSSnot the
initial pleadingsSSgoverns the issues to be tried.
McGehee v. Certainteed Corp., 101 F.3d 1078,
1080 (5th Cir. 1996).

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not sacrifice Lane’s right to an appeal.
B.
Maxam argues that Lane did not establish a
factual basis for Granger’s liability, but both
Lane’s proof and the district court’s findings
suggest that the court should have addressed
Granger’s potential liability. Lane introduced
evidence that the parties had advertised the
auction as an “as is” sale. Maxam intended for
the bidders to purchase the lots without guar-
antees or frills. Granger served as auctioneer
and Lane’s supervisor. At the auction, a bid-
der asked about the estimated cost of building
a road. Despite the agreement between Max-
am and GTA to offer the lots “as is,” Granger
requested that Lane share the estimates for a
road. Lane argued that Granger negligently
decided to provide an answer to the bidder.
In its bench ruling, the district court found
that providing any information about the cost
of the road should have raised a red flag to
Lane. The court noted that Lane should have
second-guessed Granger’s request and con-
sulted with Granger privately before answering
the question. Although we do not presume to
pass on the ultimate question of Granger’s
fault, if any, both Lane’s evidence and the
district court’s factual findings suggest the
court at least should have considered Grang-
er’s share of liability.
C.
Maxam urges us to interpret the district
court’s decision as impliedly finding that
Granger bore no fault. Maxam points to a line
of cases in which, despite the court’s silence,
we have implied factual findings consistent
with the record and the court’s broader rul-
ings.7 In the instant case, however, the rulings
are not necessarily consistent with an implied
finding that Granger bore no fault.
In its oral bench ruling, the court intimated
that Lane should have refused to answer
Granger’s question about road estimates be-
cause of the nature of “as is” offers; this sug-
gests that Granger may have acted improperly
by posing the question as an auctioneer. The
denial of Lane’s rule 59 motion describes the
argument as waived, confirming that the court
did not consider it in the original decision. We
will not imply a finding of fact where the
court’s statements and rulings suggest it did
not resolve the question.
III.
Lane maintains that the district court im-
properly included the commissions that Max-
am paid on the rescinded contracts in its in-
demnity award. The court considered those
costs indemnifiable as a direct consequence of
Lane’s misrepresentation and the bidders’
rescission.
Mississippi’s indemnity doctrine permits in-
nocent payers of judgments and settlements to
recover money from the person actually re-
sponsible. Bush v. City of Laurel, 215 So. 2d
256, 259 (Miss. 1968) (citing 42 C.J.S. § 20
(1944)). A person seeking non-contractual
7 Texas Mortgage Servs. Corp. v. Guadalupe
Sav. & Loan Ass’n, 761 F.2d 1068, 1075-76 & n.7
(5th Cir. 1985) (inferring from three specific fact
findings and record that bank had promised to
maintain separate accounts); Clinkenbeard v. Cent.
Southwest Oil Corp., 526 F.2d 649, 652-53 (5th
Cir. 1976) (implying finding about duration of
agency relationship where district court had based
its ruling on the existence of formal agency rela-
tionship).

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implied indemnity must prove two elements:
(1) The damages which the claimant
seeks to shift are imposed upon him as a
result of some legal obligation to the in-
jured person; and
(2) it must appear that the claimant did
not actively or affirmatively participate
in the wrong.
Hartford Cas. Ins. Co. v. Halliburton Co., __
So. 2d __, 2001 Miss. LEXIS 247, at *24
(Miss. Sept. 27, 2001) (citations omitted). If
the person seeking indemnity paid the damages
under a settlement, he also must prove that he
settled under compulsion and paid a reason-
able amount. Keyes v. Rehab. Ctrs., Inc., 574
So. 2d 579, 584 (Miss. 1990).
Through no fault of its own, Maxam for-
feited the commissions to GTA without selling
the lots. Maxam had agreed to pay GTA
commissions for the sales contracts formed at
auction or within 180 days after the auction.
After the all the lots sold at auction, Maxam
permitted GTA to retain the earnest money as
partial satisfaction of its commissions. When
six bidders rescinded their sales contracts be-
cause of Lane’s negligence, Maxam settled
with them by permitting them to abandon the
purchase and refunding a high percentage of
their earnest money. Maxam lost money from
three sourcesSSthe abandonment of the sale,
the refund of earnest money, and the commis-
sions paid on invalid contracts for sales.
Presumably because Maxam could re-sell
the property and avoid losing the actual sale
price and earnest money, the district court fo-
cused on the wasted commissions. The court
identified commissions charged and retained
on the rescinded contracts as fruitless auction
costs and ruled that Lane should indemnify
Maxam for those costs. Lane concedes that
the commissions satisfy the general require-
ments set forth by Mississippi’s indemnity doc-
trine, but he has two specific objections.
Lane argues that because the district court
describes its award as one for costs, the court
was limited to awarding attorneys’ fees and
litigation costs. This contention is somewhat
puzzling.
The primary purpose of indemnity is to
compensate the initially liable party for paying
out an award or settlement, not for paying the
incidental attorneys’ fees, which are recover-
able only because the cost of the underlying
judgment or settlement is recoverable.8 A
court also may award costs incidental to the
equitable remedy of rescission.
The wasted auction costs incidental to the
bidders’ rescission are not analytically distinct
from the wasted litigation costs incidental to a
defending against a potential judgment or ne-
gotiating a settlement. The court employed
the commission costs as a useful estimate of
those wasted auction costs, and Lane does not
8 Celotex Corp. v. Becknell Constr., Inc., 325
So.2d 566, 568 (Miss. 1976) (“The general rule is
that an award of attorneys’ fees in indemnity cases
is limited to the defense of the claim indemnified
against.”); Bush, 215 So. 2d at 259-60 (explaining
that right to indemnity for attorneys’ fees stems
from right to indemnity for the underlying judgment
or settlement); Mims v. Frady, 461 F. Supp. 736,
741 (N.D. Miss. 1978) (awarding amount paid to
satisfy judgment and incidental attorneys’ fees);
Cent. Soya Co. v. Cox Towing Corp., 431 F.
Supp. 502, 505 (N.D. Miss. 1977) (same).

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explain why this proxy is inaccurate.9
Lane then avers that GTA had no entitle-
ment to the commissions withheld because
Lane worked for GTA and it was vicariously
liable for his actions. The strongest version of
this argument merely restates Lane’s earlier
contention that Granger bore some responsi-
bility for the misrepresentations. Lane does
not identify a single other responsible GTA
employee.
To the extent Lane is arguing that the court
erred by shifting the full commission costs
because Granger was partially responsible, the
court, on remand, will make an adjustment by
setting explicit fault percentages and adjusting
the award. To the extent Lane bases his argu-
ment on the nature of respondeat superior
liability, he misunderstands it.
Under respondeat superior, the negligent
employee remains primarily liable, while the
employer has only secondary liability. The in-
jured third party always has the option of suing
the negligent agent instead of his employer.10
If the injured third party sues the employer,
then the employer will have a right to bring an
indemnity suit against the employee.11 If Lane
bears complete responsibility for the bidders’
rescissions, he, rather than Maxam or GTA,
ultimately should bear the cost of the lost and
wasted commissions.
For the reasons we have explained, the dis-
trict court’s inclusion of the commissions in
the indemnity award is AFFIRMED. The as-
signment of total fault to Lane is REVERSED
and REMANDED for further proceedings
consistent with this opinion.
APPENDIX
MR. WILLIAMS: [W]e’ve asked the court to
consider the comparative negligence of both Jack
Grange and Steve Lane, because there was not a
problem until the auctioneer on the auction stand
asked for input on this estimate.
9 Lane contends that the district court should
have used the cost of re-selling the lots as the prop-
er measure, but he does not explain why this stan-
dard would be superior. The past commissions are
the costs actually wasted and are the more logical
source for estimating the costs Maxam incurred in
the transaction that Lane rendered ineffective.
10 Leathers v. Aetna Cas. & Surety Co., 500
So. 2d 451, 456 (Miss. 1986) (“[O]ur general rule
in tort is that the agent or servant, the one whose
conduct has rendered his principal liable, has
individual liability to the plaintiff.”); RESTATE-
MENT (SECOND) OF AGENCY § 330 (1958) (“A
person who tortiously misrepresents to another that
he has authority to make . . . a representation on
(continued...)
10(...continued)
behalf of a principal whom he has no power to
bind, is subject to liability to the other in an action
of tort for loss caused by reliance upon such mis-
representation.”); RESTATEMENT (SECOND) OF
AGENCY § 350 (1958) (“An agent is subject to
liability if, by his acts, he creates an unreasonable
risk of harm to the interests of others protected
against negligent invasion.”).
11 Leathers, 500 So. 2d at 453 (explaining that
principal will often have indemnity rights against
agent for his tortious acts); RESTATEMENT (SEC-
OND) OF AGENCY § 401 (1958) (“An agent is sub-
ject to liability for loss caused to the principal by
any breach of duty.”); 2 Dan B. Dobbs, THE LAW
OF TORTS 906 (West 2001) (“When the employer
who is not personally chargeable with tort is held
liable for the tort of an employee, the employer has
the right of indemnity from the employee.”).

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Had there never been any question asked about
the road cost, then I would say the contract is pa-
tently clear that it’s as is, where is. But it’s not
until Jack Granger asked Lane for those estimates
that we even get this $150,000 figure announced
from the stand.
THE COURT: All Right. Lane testified that
he wished his boss had not asked him that.
MR. WILLIAMS: Yes, sir.
THE COURT: Which would indicate that he
clearly knew that he should not answer that
question. And he did not argue with his boss, Mr.
Granger, about it. He simply answered it. He did-
n’t have a little side conference with Mr. Granger
that “Look, we’re getting ready to get ourselves in
trouble her.” He simply answered. Granger is not
being sued. Lane is being sued. How does all of
that work out?
MR. WILLIAMS: Well, that’s correct. Grang-
er is not being sued in this case; but it’s been our
position ever since we filed our initial answer that
the wrong that was committed during this auction,
if any, resulted in partSSin large part, to Granger
asking the question in the first place.
And I think that under the present status of
Mississippi law, under 8557, we’re entitled, wheth-
er this was a jury trial or a bench trial, to point the
finger at any party that’s alleged to be at fault. I
think that’s what the decision of the Mississippi
Supreme Court holds in Estate of Hunter; that if
there is another party that’s alleged to be at fault,
then the court can consider the negligence of that
party and allocate fault to a party that’s not even in
court.
So that’s what we’re saying. And the question,
quite simplySSand I think I asked Mr. Rotenstreich
this about Jack Granger’s question in the first
place. What would a reasonable auctioneer have
done when a sked how much the road is going to
cost?
Well, I would submit that a reasonable auc-
tioneer would have gone back to the terms of the
bidders’ acknowledgment agreement and said,
“We’re not here about the road. We’re not here to
talk about the cost of the road. It doesn’t matter if
it’s a penny or a million dollars. We’re not here to
talk about that.” But inviting a response, that’s
were I think the negligence of Granger comes in.
THE COURT : Does it make any difference
that both Granger and Lane are employees of the
auction company?
MR. WILLIAMS: I don’t know if itSSif that
makes any difference at all if you have two dif-
ferent parties whose combined negligence leads to
a wrong. I think if it’s possible for this courtSSI’m
sorry.
THE COURT: What parties’ combined neg-
ligence did that? Was it Lane and Granger
andSSwhat’s theSS
MR. WILLIAMS: Granger, Thaggard &
Associates?
THE COURT: Yes, sir.
MR. WILLIAMS: Well, it seems to be that this
an issue that could have beenSS
THE COURT: Are there three parties among
whom to apportion fault according to your theory
or are there only two?
MR. WILLIAMS: I’d say that there’s only two
parties, because if there was a wrong that was
committed, we can put a dollar amount on that. If
the court were to then allocate faultSSfor instance,
if the damage, just for the sake of making this easy,
was $100,000 and the court found that Jack
Granger was 60 percent at fault and Steve Lane
was 40 percent at fault, then, you know, each
would be responsible for 60,000 and 40,000. The
total amount would still be 100,000.
And, ultimately, if that is passed back to GTA,

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they still only pay $100,000. So I think there’s
only two parties that we’re talking about. And
whether or not that gets imputed back to GTA is
just a question of respondeat superior.
So I think that’s my presentation on the neg-
ligent misrepresentation, unless your Honor has
any other questions you’d like for me to address.
THE COURT: All right. Thank you.

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