JOHNSON v. STATE

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Docket Number

No. 95-383

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Smart Summary

Factual and Procedural Background

Plaintiffs John Johnson and Marion Johnson entered into a purchase and sale agreement in July 1987 to purchase a motel. Their obligation to purchase was contingent on receipt of necessary state and local licenses. Plaintiffs applied to the State Department of Health for a lodging license. Inspector Julia Schmitz discovered that the motel owner had installed a new septic system without a permit and was informed by the Agency of Natural Resources that a permit was required. Schmitz initially informed the owner and plaintiffs that she could not approve the license because of the septic system problem. The owner orally assured Schmitz that he would personally guarantee the system was or would be brought into compliance; Schmitz consulted her supervisor, Al Burns, who told her she could issue the permit if the owner put his guarantee in writing. The owner wrote on the inspection report that he "agree[d] to be responsible for the submission of plans and specifications to the District Environmental Office and the repair, if necessary, to receive State approval of the septic system repairs." Schmitz then issued the lodging license, and plaintiffs completed the purchase. The previous owner failed to perform the promised work; plaintiffs claim repair costs exceed $100,000.

Plaintiffs brought a tort action under the Tort Claims Act, 12 V.S.A. § 5601, against the State Department of Health and the two employees. Defendants moved for summary judgment, asserting sovereign immunity for the State and qualified immunity for the individual defendants. The trial court granted summary judgment for defendants. Plaintiffs appealed. The Supreme Court of Vermont affirmed.

Legal Issues Presented

Whether sovereign immunity bars the plaintiffs' tort claim against the State Department of Health (i.e., whether the State owed a duty of care to the plaintiffs distinct from its duty to the public at large).
Whether the individual Department of Health employees (Julia Schmitz and Al Burns) are protected from tort liability by the doctrine of qualified immunity for issuing the lodging license.

Arguments of the Parties

Defendants' Arguments

The State Department of Health is protected by the doctrine of sovereign immunity from the plaintiffs' tort claim.
The individual employees are protected by qualified immunity because they acted within their discretionary authority and in good faith when issuing the lodging license.

Plaintiffs' Arguments

Plaintiffs challenged the trial court's holding that the State is protected by sovereign immunity, thereby contesting the dismissal of their tort claim under the Tort Claims Act.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Sabia v. State, 164 Vt. 293, 299, 669 A.2d 1187, 1191 (1995)	The four-factor test to determine whether a governmental body has assumed a duty of care to specified persons above and beyond its duty to the public at large: (1) whether a statute sets forth mandatory acts for the protection of a particular class of persons; (2) whether the government has knowledge that particular persons within that class are in danger; (3) whether those persons have relied on the government's representations or conduct; and (4) whether the government's failure to use due care would increase the risk of harm beyond what it was at the time the government acted or failed to act.	The court applied the Sabia factors and emphasized the importance of the first factor (a statutory mandate protecting a particular class). It concluded that the licensing statute and related statutes did not create a duty to plaintiffs distinct from the public at large, so Sabia's test weighed against recognizing a duty here.
Denis Bail Bonds, Inc. v. State, 159 Vt. 481, 489, 622 A.2d 495, 500 (1993)	Illustration that certain statutory schemes create duties for the protection of the general public, not for particular private plaintiffs.	The court analogized the Department's public-health mandate to the regulatory duty in Denis Bail Bonds, concluding the Department's duty was to the public at large and did not run to plaintiffs as a particular class.
Hudson v. Town of East Montpelier, 161 Vt. 168, 171, 638 A.2d 561, 563 (1993)	The doctrine that lower-level government employees are immune from tort liability when they perform discretionary acts in good faith, and the need for case-by-case examination to distinguish discretionary-decisional acts from ministerial-operational acts.	The court relied on Hudson to find that the inspector's and supervisor's decision to issue the license was discretionary and thus entitled them to qualified immunity.
Libercent v. Aldrich, 149 Vt. 76, 81, 539 A.2d 981, 984 (1987)	Discussion of the doctrine of qualified immunity for government employees.	The court cited Libercent as supportive authority for applying qualified immunity to the individual defendants who made discretionary licensing decisions.

Court's Reasoning and Analysis

The court's analysis proceeded in two primary parts: (1) whether the State owed a duty of care to plaintiffs such that sovereign immunity would not bar suit, and (2) whether the individual employees were shielded by qualified immunity.

On the duty question, the court applied the four-factor Sabia test to determine if the government assumed a duty to a particular class beyond its duty to the public. The court focused on the first factor—whether a statute imposes mandatory acts to protect a particular class—and concluded that the licensing statute, 18 V.S.A. § 4351, does not set forth procedures or standards imposing such a duty; it merely mandates that persons intending to operate lodging establishments obtain a permit. The general statutory mandate for the Commissioner to "take cognizance of the interest of the life and health of the inhabitants of the state" (18 V.S.A. § 107(a)) was characterized as a public-protection obligation analogous to regulatory duties discussed in Denis Bail Bonds. Thus, any statutory duty was to the general public, not to purchasers of noncompliant motels as a distinct class.

The court addressed the remaining Sabia factors and found they likewise did not support a duty: plaintiffs did not rely on the State's representations; issuing the license did not increase plaintiffs' risk of harm because plaintiffs knew of the septic-system defect when they purchased the motel; and the Department's inspection arguably benefited plaintiffs by bringing the problem to their attention. Given these findings, the court concluded the State owed no duty of care to plaintiffs and sovereign immunity barred their claim against the State.

On the qualified-immunity question, the court determined that issuing a lodging license involved discretionary decisionmaking. The licensing decision required the inspector's subjective evaluation across multiple categories without "bright-line rules" and involved weighing various factors. The inspector consulted her supervisor and, based on the owner's written promise, they issued the license. While the decision may have been unwise in hindsight, it was discretionary in nature and therefore the employees were protected by qualified immunity under Hudson and related authority.

Holding and Implications

Holding: The Supreme Court of Vermont affirmed the trial court's grant of summary judgment for the defendants.

Implications: The direct effect is that plaintiffs' tort action against the State Department of Health is barred because the State owed no duty of care to them distinct from its public duty (sovereign immunity), and the individual employee-defendants are protected from tort liability by qualified immunity for discretionary licensing decisions. The opinion applies existing precedents to the facts and does not announce a new legal rule beyond those applications; it treats the statutory scheme as creating duties to the public at large rather than to the particular class of motel purchasers in this case.

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John JOHNSON and Marion Johnson v. STATE of Vermont Department of Health, Julia Schmitz and Al Burns

Plaintiffs brought a tort action under the Tort Claims Act, 12 V.S.A. § 5601, against the State Department of Health (Department) and two of its employees, alleging that the Department negligently issued a lodging license for a motel that plaintiffs purchased. Defendants moved for summary judgment, arguing that sovereign immunity protects the State from suit, and qualified immunity protects the individual defendants from suit. The trial court granted the motion, and plaintiffs appeal. We affirm.

The material facts are undisputed. Plaintiffs entered into a purchase and sale agreement to purchase a motel in July of 1987. Under the agreement, their obligation to purchase the motel was contingent on receipt of necessary state and local licenses. Plaintiffs applied for a lodging license from the Department. Defendant Julia Schmitz, at the time an employee of the Department, conducted an inspection of the motel. Schmitz discovered that the owner of the motel had installed a new septic system without a permit. She contacted the Agency of Natural Resources, and was told that the system required a permit.

Schmitz first informed the owner and plaintiffs that she could not approve the license because of the problem with the septic system. The owner of the motel, however, assured Schmitz that if she approved the license he would personally guarantee that the system was in compliance, or that he would bring it into compliance. Schmitz contacted her supervisor, defendant Al Burns, who told her that she could issue the permit if the owner put his guarantee in writing. The owner wrote on the inspection report that he "agree[d] to be responsible for the submission of plans and specifications to the District Environmental Office and the repair, if necessary, to receive State approval of the septic system repairs." Schmitz then issued the lodging license to plaintiffs.

After plaintiffs purchased the motel, the previous owner failed to carry through on his promise to apply for a permit and repair the septic system if necessary. Plaintiffs claim that the cost to repair the septic system exceeds $100,000.

Plaintiffs challenge the trial court's holding that the State is protected by the doctrine of sovereign immunity. We conclude that the grant of summary judgment was proper, because the State owed no duty of care to plaintiffs under these circumstances.

To determine whether a governmental body has assumed a duty of care toward specified persons above and beyond its duty to the public at large, we consider four factors:

(1) whether a statute sets forth mandatory acts for the protection of a particular class of persons; (2) whether the government has knowledge that particular persons within that class are in danger; (3) whether those persons have relied on the government's representations or conduct; and (4) whether the government's failure to use due care would increase the risk of harm beyond what it was at the time the government acted or failed to act.

Sabia v. State, 164 Vt. 293, 299, 669 A.2d 1187, 1191 (1995). In Sabia we emphasized the first factor, noting that the Department of Social and Rehabilitation Services (SRS) had a statutory mandate to investigate reports of child abuse and render appropriate services and that the stated purpose of the statute was to "`protect children whose health and welfare may be adversely affected through abuse or neglect.'" Id. at 299, 669 A.2d at 1192 (quoting 33 V.S.A. § 4911). We concluded that it was "beyond dispute" that SRS had a duty "to assist a particular class of persons to which plaintiffs belong and to prevent the type of harm suffered by plaintiffs." Id.

In this case, we cannot perceive any duty that the Department owed to persons such as plaintiffs, as distinct from the public at large. The license statute, 18 V.S.A. § 4351, does not establish any procedures or standards with which the Department must comply; rather, the only mandate is that persons such as plaintiffs, who intend to operate a lodging establishment, obtain a permit from the Department. Moreover, the general mandate placed on the Commissioner of Health is to "take cognizance of the interest of the life and health of the inhabitants of the state." 18 V.S.A. § 107(a).

The Commissioner's obligation to protect the public from health hazards is analogous to the obligation of the Commissioner of Banking, Insurance, and Securities to conduct examinations of foreign insurers to protect policyholders, and more generally to protect the public from unfair insurance practices. See 8 V.S.A. §§ 1, 3564. In Denis Bail Bonds, Inc. v. State, 159 Vt. 481, 489, 622 A.2d 495, 500 (1993), we concluded that any duty created by that statutory scheme "was for the protection of the general public," and did not run to the plaintiff, an insurer who had hired an untrustworthy agent. Similarly, here, the Department has no duty of care running to the particular class of persons to which plaintiffs belong, namely those who purchase motels that do not comply with public health regulations.

The other factors similarly weigh against finding a duty of care in this case. Plaintiffs did not rely upon the State's representations, nor did the conduct at issue increase the risk of harm to plaintiffs. Plaintiffs had full knowledge that the septic system was faulty and still chose to purchase the motel. Whether or not they received a lodging license for the motel, they knew that the problem with the septic system had to be addressed. If anything, the Department's inspection should have benefitted plaintiffs, because it brought this problem to their attention. When they chose to ignore the problem, they did so with full knowledge of the risk.

The court also held that the individual defendants were protected from suit by the doctrine of qualified immunity. "[L]ower-level government employees are immune from tort liability when they perform discretionary acts in good faith during the course of their employment and within the scope of their authority." Hudson v. Town of East Montpelier, 161 Vt. 168, 171, 638 A.2d 561, 563 (1993); see also Libercent v. Aldrich, 149 Vt. 76, 81, 539 A.2d 981, 984 (1987) (discussing doctrine of qualified immunity). We acknowledged in Hudson that the distinction between discretionary-decisional acts and ministerial-operational acts cannot be reduced to literal or dictionary definitions of the terms, but must be based on a "case-by-case examination of the act" in question. Hudson, 161 Vt. at 171-72, 175, 638 A.2d at 564, 566.

Here, we agree with the trial court that the employees of the Department of Health were carrying out a discretionary function. The decision to issue a lodging license is based on the inspector's subjective evaluation of a number of factors. The inspection report reveals no "bright-line rules" for rating any of the twenty categories, which range from "building condition" to "food handling" and "rodent and insect control," or for weighing the results in coming to a final decision. After inspecting this motel, the inspector noted two problems: that the shower stalls needed refurbishing, and that the septic system had been worked on and needed to be approved. She consulted with her superior and together they decided that the license could be issued based on the owner's written promise. In hindsight, that decision may have been unwise. It was, however, within the discretion of the employees, and they are therefore protected from suit by the doctrine of qualified immunity.

Affirmed.