LEGAL TRENDS Claims Against Perpetual Care Cemeteries: An Exclusive … · LEGAL TRENDS Claims...
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LEGAL TRENDS Claims Against Perpetual Care Cemeteries: An Exclusive Remedy By DARREN P. LINDAMOOD and BRETT J. YOUNG I n Texas, many cemeteries operate as “Perpetual Care Fund Cemeteries.” Under this statutory and regulatory scheme, the cemetery must put a por- tion of proceeds from the sale of each cemetery plot into a trust fund. Revenue from the fund is used for the maintenance, repair and care of the cemetery into per- petuity. The Special Audits Division of the Texas Department of Banking audits this fund. Occasionally, visitors or plot owners may disapprove of a cemetery’s level of maintenance, repair, or care. Visitors may make a complaint with the Texas Depart- ment of Banking, which has the author- ity to investigate the visitor’s allegations. Alternatively in 1989, the state legislature created a statutory cause of action permit- ting plot owners to force a cemetery to properly maintain the cemetery’s perpetu- al care fund under § 712.026 of the Texas Health and Safety Code. Entitled Suit by Plot Owners to Maintain Perpetual Care, the Statute provides that, “if the directors of a corporation do not generally care for and maintain the cor- poration’s perpetual care cemetery, the district court of the county in which the perpetual care cemetery is located may [ei- ther] (1) by injunction compel the direc- tors to expend the net income of the cor- poration’s fund as required by this chapter; or (2) appoint a receiver to take charge of the fund and expend the net income of the fund as required by this chapter.” A suit for relief under this Statute must be brought by at least five owners of plots in the perpetual care fund cemetery. Im- portantly, this is a “loser pays” statute, whereby attorneys’ fees are awarded to the cemetery if it is found that the cemetery is “substantially expending” the available net income of the fund – or – attorneys’ fees are awarded to the plot owners if the cemetery is not “substantially expending” the available net income. Although no Texas court of appeals has interpreted this Statute yet, legal prec- edent strongly indicates that the Statute is the mandatory and exclusive remedy. In other words, the Statute precludes all other causes of action related to the per- petual care fund for breach of contract, fraud, violations of the Texas Deceptive Trade Practices, or any other cause of ac- tion relating to the cemetery’s appearance. The Statute is mandatory and exclusive for two reasons. First, the Texas Supreme Court has stated that “The general rule is that where the cause of action and remedy for its enforcement are derived not from the common law but from the statute, the statutory provisions are mandatory and exclusive, and must be complied with in all respects or the action is not main- tainable.” Serna v. H.E. Butt Grocery Co. , 21 S.W.3d 330, 335–36 (Tex. App.—San Antonio 1999, no pet.) (quoting Mingus v. Wadley , 285 S.W. 1084, 1087 (Tex. 1926)). This Statute is very specific. There is no similar cause of action derived from the common law relating to a cemetery’s per- petual care fund. There is also no cause of action for injunctive relief or for a re- ceivership at common law for problems with a perpetual care fund. Because this perpetual care Statute is a part of a statu- tory and regulatory scheme that has no re- lationship to the common law, this Statute is mandatory and exclusive. Second, the legislature’s inclusion of a cost-shifting mechanism requires this Statute to be a mandatory and exclusive remedy. No plaintiff would ever elect to plead a statute with cost-shifting mecha- nism if the plaintiff could obtain the same remedy without subjecting itself to the risk of being liable for attorneys’ fees. The Texas Supreme Court has acknowl- edged that the existence of a cost-shifting mechanism is evidence of the legislature’s intent. See, e.g., Edwards Aquifer Authority v. Day , 369 S.W.3d 814, 845 (Tex. 2012). An interpretation that this Statute is not mandatory and exclusive means that it will never be invoked, which cannot be the legislature’s intent. Perhaps the most important conse- quence of this Statute is that plaintiffs are not permitted to conduct any discovery on a cemetery’s perpetual care fund without first pleading the statute. See Dillard Dept. Stores, Inc. v. Hall , 909 S.W.2d 491, 492 (Tex. 1995) (discovery may not be used to obtain documents on a claim not yet as- serted). Plaintiffs cannot have the benefit of discovering information regarding the fund without bearing the risk of the attor- neys’ fees cost-shifting mechanism. The statutory interpretation contained above is the legislature’s intent. It also pro- vides for the most efficient resolution of complaints regarding cemeteries’ mainte- nance, repair, and care. Darren P. Lindamood is a litigation associ- ate in the Mass Torts and Products Liability Group at Fulbright & Jaworski LLP (Norton Rose Fulbright). His practice is focused on products and premises liability defense, per- sonal injury defense, and commercial litiga- tion. He also handles death care law matters. Brett J. Young is a partner in the Disputes Group at Fulbright & Jaworski LLP (Norton Rose Fulbright). In his practice, he directs the defense of significant tort matters, responds to catastrophic events, provides crisis response counseling for clients, and formulates strategy for defending product liability and toxic tort matters across the country. The Houston Lawyer 44 January/February 2014 thehoustonlawyer.com
Transcript of LEGAL TRENDS Claims Against Perpetual Care Cemeteries: An Exclusive … · LEGAL TRENDS Claims...
LEGAL TRENDS
Claims Against Perpetual Care Cemeteries: An Exclusive Remedy By Darren P. LinDamooD and Brett J. Young
In Texas, many cemeteries operate as “Perpetual Care Fund Cemeteries.” Under this statutory and regulatory scheme, the cemetery must put a por-tion of proceeds from the sale of each
cemetery plot into a trust fund. Revenue from the fund is used for the maintenance, repair and care of the cemetery into per-petuity. The Special Audits Division of the Texas Department of Banking audits this fund.
Occasionally, visitors or plot owners may disapprove of a cemetery’s level of maintenance, repair, or care. Visitors may make a complaint with the Texas Depart-ment of Banking, which has the author-ity to investigate the visitor’s allegations. Alternatively in 1989, the state legislature created a statutory cause of action permit-ting plot owners to force a cemetery to properly maintain the cemetery’s perpetu-al care fund under § 712.026 of the Texas Health and Safety Code.
Entitled Suit by Plot Owners to Maintain Perpetual Care, the Statute provides that, “if the directors of a corporation do not generally care for and maintain the cor-poration’s perpetual care cemetery, the district court of the county in which the perpetual care cemetery is located may [ei-ther] (1) by injunction compel the direc-tors to expend the net income of the cor-poration’s fund as required by this chapter; or (2) appoint a receiver to take charge of
the fund and expend the net income of the fund as required by this chapter.”
A suit for relief under this Statute must be brought by at least five owners of plots in the perpetual care fund cemetery. Im-portantly, this is a “loser pays” statute, whereby attorneys’ fees are awarded to the cemetery if it is found that the cemetery is “substantially expending” the available net income of the fund – or – attorneys’ fees are awarded to the plot owners if the cemetery is not “substantially expending” the available net income.
Although no Texas court of appeals has interpreted this Statute yet, legal prec-edent strongly indicates that the Statute is the mandatory and exclusive remedy. In other words, the Statute precludes all other causes of action related to the per-petual care fund for breach of contract, fraud, violations of the Texas Deceptive Trade Practices, or any other cause of ac-tion relating to the cemetery’s appearance. The Statute is mandatory and exclusive for two reasons. First, the Texas Supreme Court has stated that “The general rule is that where the cause of action and remedy for its enforcement are derived not from the common law but from the statute, the statutory provisions are mandatory and exclusive, and must be complied with in all respects or the action is not main-tainable.” Serna v. H.E. Butt Grocery Co., 21 S.W.3d 330, 335–36 (Tex. App.—San Antonio 1999, no pet.) (quoting Mingus v. Wadley, 285 S.W. 1084, 1087 (Tex. 1926)). This Statute is very specific. There is no similar cause of action derived from the common law relating to a cemetery’s per-petual care fund. There is also no cause of action for injunctive relief or for a re-ceivership at common law for problems with a perpetual care fund. Because this perpetual care Statute is a part of a statu-tory and regulatory scheme that has no re-lationship to the common law, this Statute is mandatory and exclusive.
Second, the legislature’s inclusion of a cost-shifting mechanism requires this
Statute to be a mandatory and exclusive remedy. No plaintiff would ever elect to plead a statute with cost-shifting mecha-nism if the plaintiff could obtain the same remedy without subjecting itself to the risk of being liable for attorneys’ fees. The Texas Supreme Court has acknowl-edged that the existence of a cost-shifting mechanism is evidence of the legislature’s intent. See, e.g., Edwards Aquifer Authority v. Day, 369 S.W.3d 814, 845 (Tex. 2012). An interpretation that this Statute is not mandatory and exclusive means that it will never be invoked, which cannot be the legislature’s intent.
Perhaps the most important conse-quence of this Statute is that plaintiffs are not permitted to conduct any discovery on a cemetery’s perpetual care fund without first pleading the statute. See Dillard Dept. Stores, Inc. v. Hall, 909 S.W.2d 491, 492 (Tex. 1995) (discovery may not be used to obtain documents on a claim not yet as-serted). Plaintiffs cannot have the benefit of discovering information regarding the fund without bearing the risk of the attor-neys’ fees cost-shifting mechanism.
The statutory interpretation contained above is the legislature’s intent. It also pro-vides for the most efficient resolution of complaints regarding cemeteries’ mainte-nance, repair, and care.
Darren P. Lindamood is a litigation associ-ate in the Mass Torts and Products Liability Group at Fulbright & Jaworski LLP (Norton Rose Fulbright). His practice is focused on products and premises liability defense, per-sonal injury defense, and commercial litiga-tion. He also handles death care law matters.
Brett J. Young is a partner in the Disputes Group at Fulbright & Jaworski LLP (Norton Rose Fulbright). In his practice, he directs the defense of significant tort matters, responds to catastrophic events, provides crisis response counseling for clients, and formulates strategy for defending product liability and toxic tort matters across the country.
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