Mobile Enterprises, Inc. v. Conrad
177 Ind. App. 475, 24 U.C.C. Rep. Serv. (West) 1031, 380 N.E.2d 100 (1978)
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Rule of Law:
Public officials, including the Secretary of State and Director of the Uniform Commercial Code Division, may be held liable for negligence in performing ministerial duties, even without bad faith, if their office has made a prior discretionary decision that gives rise to the ministerial act. This liability extends to instances where incorrect information is provided in response to requests, regardless of whether the request was in writing, if the office accepts alternative methods.
Facts:
- In December 1970, Larry A. Conrad assumed duties as Indiana Secretary of State, and Francis E. Chambers was designated Director of the Uniform Commercial Code Division.
- On January 2, 1973, Michigan National Bank properly perfected a security interest in Skelog, Inc.'s existing and after-acquired inventory, including house trailers, by filing a financing statement with the Secretary of State's office.
- On August 15, 1973, Mobile Enterprises, Inc. telephoned the Secretary of State's office and requested information identifying all prior security interest holders in Skelog, Inc.'s collateral.
- The response to Mobile Enterprises, Inc.'s request failed to indicate Michigan National Bank's prior security interest in Skelog, Inc.'s inventory.
- On the same date, August 15, 1973, Mobile Enterprises, Inc., believing itself able to perfect a prior security interest, entered into a security agreement with Skelog, Inc. to finance new inventory and then sold house trailers to Skelog, Inc., creating an indebtedness of $39,362.
- Skelog, Inc. failed to pay its indebtedness to both Michigan National Bank and Mobile Enterprises, Inc.
- In January 1974, Michigan National Bank, pursuant to its security agreement, took possession of the house trailers Mobile Enterprises, Inc. had sold and financed for Skelog, Inc. and disposed of them to satisfy its indebtedness, leaving Mobile Enterprises, Inc. with no collateral and an unpaid loan.
Procedural Posture:
- Mobile Enterprises, Inc. (Mobile) brought an action alleging negligence against Larry A. Conrad, Francis E. Chambers, and their surety, Allied Fidelity Company, for breaches of legal duty and negligent actions.
- Conrad, Chambers, and their surety filed motions to dismiss Mobile's complaint under Indiana Trial Rule 12(B)(6), asserting Mobile's failure to submit a written request for information and claiming immunity for officials absent bad faith or malice.
- The trial court granted the motions to dismiss and entered an order dismissing Mobile's complaint.
- Mobile Enterprises, Inc. appealed the trial court's order dismissing its complaint to the Indiana Court of Appeals.
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Issue:
Does a complaint alleging that the Secretary of State's office provided incorrect information in response to a telephone request for security interests, resulting in financial loss, state a claim upon which relief can be granted, or are the officials immune from liability if the request was not written or if they did not act in bad faith?
Opinions:
Majority - Chipman, J.
Yes, Mobile's Amended Complaint states a legally sufficient claim against Conrad, Chambers, and their surety and should not have been dismissed, as liability for negligence in performing ministerial duties is not precluded merely because the request was telephonic or because of a theory of governmental immunity for executive officers in Indiana. The court emphasized that a complaint should only be dismissed under Rule TR. 12(B)(6) if it appears to a certainty that the plaintiff would not be entitled to relief under any set of facts. Relying on Salem Bank & Trust Company v. Whitcomb, the court held that public officers with a statutory duty to give information from official security records can be held liable for negligence resulting in incorrect information, even without bad faith. The court clarified that the comprehensive immunity previously enjoyed by such officials has been 'eviscerated,' and the scope of immunity is now determined by the specific duties with which the officials are sought to be made to respond in damages, rather than the title of their office. The court distinguished between discretionary acts (like the decision to accept telephone requests) and ministerial acts (the actual answering of those requests once the discretionary decision to accept them has been made). Once the Secretary of State’s office decided to answer telephone requests, the actual answering of these requests became a ministerial act requiring the exercise of reasonable care. Whether reasonable care was exercised by these officials, or by Mobile in relying on a telephone request, are factual questions that must be determined by the trial court upon remand.
Analysis:
This case significantly limits the scope of governmental immunity for public officials in Indiana, particularly concerning "ministerial acts." By differentiating between discretionary decisions (e.g., whether to accept phone requests) and ministerial performance (e.g., how to answer a phone request once accepted), the court clarifies when officials can be held liable for negligence without requiring proof of bad faith. This ruling expands potential liability for public officers and their sureties, encouraging greater diligence in their routine duties, and may lead to more successful negligence claims against state agencies when ministerial errors cause harm. It reinforces that the government is not immune from the consequences of its employees' carelessness in performing everyday tasks.
