 1    This memorandum opinion was not selected for publication in the New Mexico Reports. Please
 2   see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions.
 3   Please also note that this electronic memorandum opinion may contain computer-generated
 4   errors or other deviations from the official paper version filed by the Court of Appeals and does
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 6 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

 7 SHARLA BRADLEY,

 8          Plaintiff-Appellant,

 9 v.                                                                                NO. 27,936

10 LOVELACE SANDIA HEALTH SYSTEM,
11 a foreign corporation doing business in
12 New Mexico,

13          Defendant-Appellee.

14 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
15 Ted Baca, District Judge

16 Gilpin & Keefe, P.C.
17 Donald G. Gilpin
18 Albuquerque, NM

19 for Appellant

20 Rodey, Dickason, Sloan, Akin & Robb, P.A.
21 R. Nelson Franse
22 Albuquerque, NM

23   Epstein Becker & Green, P.C.
24   Patrick F. Clark
25   Amelia M. Willis
26   Atlanta, GA

27 for Appellee
 1                             MEMORANDUM OPINION

 2 KENNEDY, Judge.

 3        During 2004, Appellant Sharla Bradley worked as a billing clerk in the central

 4 billing office of Appellee Lovelace Sandia Health System. In September of that year,

 5 she experienced a bout of severe depression that culminated in a failed overdose

 6 attempt. Bradley sought treatment at the Lovelace emergency room, was discharged

 7 the same evening, and was ordered by her doctor to take some time off. While

 8 recuperating, she determined that her Lovelace coworkers had accessed her medical

 9 records in the computer billing system and knew of her overdose. Embarrassed, she

10 did not return to work and chose instead to file suit against Lovelace for prima facie

11 tort, intentional infliction of emotional distress, and invasion of privacy. The district

12 court dismissed her claim for prima facie tort prior to trial and later dismissed her

13 other claims pursuant to a judgment as a matter of law. The court also refused to

14 allow her amended complaint for punitive damages and excluded hearsay testimony

15 at trial. Bradley appeals. For the reasons set out below, we affirm the district court

16 on all issues.

17 BACKGROUND

                                               2
 1        Bradley began working at Lovelace as a temporary employee in July 2003. She

 2 then transitioned to a permanent billing clerk position in the central billing office in

 3 January 2004. On September 6, 2004, she overdosed and was admitted to Lovelace’s

 4 emergency room. Her supervisor permitted her to convalesce at home, and during that

 5 time, Bradley spoke with coworker and friend, Eleanor Madrid, on the telephone.

 6 Madrid asked Bradley how she was feeling, and when Bradley indicated that she felt

 7 fine, Madrid asked, “Are you sure? . . . Because I heard that you were in the

 8 emergency room because you had taken a lot of pills.” Bradley then asked Madrid

 9 how she knew about the overdose. Madrid replied, “You know how people whisper

10 around here. . . . You know how the girls are.” Bradley understood “the girls” to refer

11 to her coworkers, Dolly Aragon and Grace Baca. Aragon had a reputation for

12 discussing the personal lives of other Lovelace employees, and based on a later

13 conversation with Madrid, Bradley began to suspect that Aragon and Baca had learned

14 of her overdose by improperly accessing her medical information in the Lovelace

15 computerized billing system.

16        That her coworkers knew of her overdose embarrassed Bradley, and she quit

17 her job as a result. She reported the incident to Becky Falance, Lovelace’s Human

18 Resources Director, and to Ann Greenberg, Lovelace’s Director of Privacy and

19 HIPAA Compliance. Falance and Greenberg then began an internal investigation.

                                              3
 1 They first identified each employee who had information relevant to Bradley’s

 2 complaint: Madrid, Dennis Lovato, Selena Romero, Aragon, and Baca. They then

 3 interviewed each person, and at the conclusion of their investigation, Falance and

 4 Greenberg published a report. In the report, they stated that the investigation was

 5 unable to establish whether Bradley’s patient records were improperly accessed in

 6 September 2004. Despite this fact, they found that Bradley had a habit of discussing

 7 her personal health condition with coworkers and that, on other occasions, Bradley

 8 and her coworkers together accessed her records in order to confirm that she was

 9 correctly billed for medical services. Employee Baca admitted to once accessing

10 Bradley’s file in order to obtain Bradley’s mobile phone number. The report

11 concluded that the accesses prior to September 2004 constituted violations of

12 Lovelace policies and practice and recommended: (1) disciplinary measures against

13 all offending employees, and (2) privacy refresher training for all employees in the

14 central billing office

15        All employees who either accessed Bradley’s record or knew of an access and

16 did not report it were disciplined by Lovelace. Baca was counseled in writing for

17 accessing Bradley’s phone number, and Lovato, Romero, Madrid, and Aragon were

18 counseled orally for not reporting the violation.       Lovelace conducted these

19 counselings with the aim of making “sure [the employees] understood the seriousness

                                            4
 1 of the allegation and what their responsibilities were as far as HIPAA.” In an October

 2 2004 letter, Lovelace formally notified Bradley of the investigation’s results and

 3 generally described the disciplinary and remedial measures it took as a consequence.

 4        Bradley filed suit against Lovelace on March 23, 2005. Her complaint

 5 demanded compensatory damages against Lovelace for prima facie tort, intentional

 6 infliction of emotional distress, and invasion of privacy. The parties engaged in

 7 discovery, and on June 2, 2006, Lovelace filed a motion for summary judgment,

 8 which was granted in part when the district court dismissed Bradley’s claim for prima

 9 facie tort.

10        In her complaint, Bradley originally sought only compensatory damages. She

11 asked to be compensated for past and future “earnings she would have received” and

12 “mental anguish and humiliation.” After the parties completed discovery, Bradley

13 filed a pre-trial motion in limine dated December 1, 2006. In it, Bradley made clear

14 that she was seeking “lost wages, lost benefits, emotional distress damages and

15 punitive damages.” Lovelace responded by filing a motion to dismiss Bradley’s

16 punitive damages claim as untimely. The court granted Lovelace’s motion.

17        On June 18 and 19, 2007, the district court held a jury trial. During Bradley’s

18 case in chief, she sought to admit the testimony of Lovato. He would have testified

19 that Romero told Aragon about an improper access of Bradley’s medical records in

                                             5
 1 September 2004. The district court sustained Lovelace’s objection to the testimony

 2 on the basis that it was hearsay within hearsay. At the close of Bradley’s case in chief,

 3 Lovelace made a motion for a judgment as a matter of law on the issue of intentional

 4 infliction of emotional distress, which the district court granted. Later, at the close of

 5 its own case in chief, Lovelace moved for another judgment as a matter of law on the

 6 issue of whether it could be held vicariously liable for the intentional torts of its

 7 employees and on Bradley’s claim for invasion of privacy. The district court granted

 8 Lovelace’s motion on the issue of vicarious liability, and as a result, likewise granted

 9 Lovelace a judgment as a matter of law on the issue of invasion of privacy.

10        Bradley appeals and argues that the district court erred in a number of ways.

11 She contends that it improperly granted Lovelace’s motion for summary judgment on

12 the issue of her prima facie tort claim. Likewise, she claims that she should have been

13 given leave to amend her complaint to include a claim for punitive damages. She

14 argues that the district court improperly excluded the testimony of Lovato and that it

15 improperly dismissed her claim for intentional infliction of emotional distress.

16 Finally, Bradley urges us to reverse the district court’s finding that Lovelace’s

17 employees were not acting within the course and scope of their employment, and she

18 argues that the court should not have dismissed her claim for invasion of privacy. We

19 analyze each argument below and affirm the district court.

                                               6
 1 DISCUSSION

 2 1.     Prima Facie Tort

 3        Bradley first asserts that the district court improperly granted summary

 4 judgment to Lovelace on her claim of prima facie tort. We review a district court’s

 5 grant of summary judgment de novo.              Self v. United Parcel Serv., Inc.,

 6 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. Summary judgment constitutes

 7 an appropriate remedy “where there are no genuine issues of material fact and the

 8 movant is entitled to judgment as a matter of law.” Id. When reviewing summary

 9 judgments, we entertain all reasonable inferences and view “the facts in a light most

10 favorable to the party opposing the motion.” Gushwa v. Hunt, 2008-NMSC-064, ¶ 9,

11 145 N.M. 286, 197 P.3d 1 (internal quotation marks and citation omitted).

12        The doctrine of prima facie tort allows tort claims to proceed against defendants

13 whose tortious acts do not fit neatly within common law categories. Bogle v. Summit

14 Inv. Co., 2005-NMCA-024, ¶ 22, 137 N.M. 80, 107 P.3d 520. As our Supreme Court

15 has held, prima facie tort “provides a remedy for plaintiffs who have been harmed by

16 a defendant’s intentional and malicious acts,” even where those acts fall outside the

17 elements of traditional common law torts. Schmitz v. Smentowski, 109 N.M. 386, 394,

18 785 P.2d 726, 734 (1990).

                                              7
 1        Prima facie tort may be pled in the alternative, but if the district court

 2 determines that the facts of the case would be more properly submitted under an

 3 established tort, it must dismiss the claim. Id. at 396, 785 P.2d at 736. Prima facie

 4 tort must “not be used to evade stringent requirements of other established doctrines

 5 of law.” Bogle, 2005-NMCA-024, ¶ 22 (internal quotation marks and citation

 6 omitted); Healthsource, Inc. v. X-Ray Assoc. of N.M., 2005-NMCA-097, ¶ 35, 138

 7 N.M. 70, 116 P.3d 861; Stock v. Grantham, 1998-NMCA-081, ¶ 38, 125 N.M. 564,

 8 964 P.2d 125. A plaintiff’s prima facie tort claim must be dismissed if it is

 9 “duplicative of . . . other claims” or used to evade “proof of essential, and appropriate,

10 elements” of such claims. Stock, 1998-NMCA-081, ¶ 39. A prima facie tort will “not

11 lie when the pleaded factual basis is within the scope of an established tort.”

12 Healthsource, Inc., 2005-NMCA-097, ¶ 35.

13        Assuming the claim adequately crosses this threshold, plaintiffs who assert

14 prima facie tort must prove the following elements: (1) the defendant committed an

15 intentional, lawful act; (2) the act was intended to injure the plaintiff; (3) the act did,

16 in fact, injure the plaintiff; and (4) the defendant committed the act without sufficient

17 justification. Bogle, 2005-NMCA-024, ¶ 22. In addition to these elements, courts

18 considering prima facie tort must also balance the claimed tortious conduct “against

19 its justification and the severity of the injury, weighing: (1) the injury; (2) the

                                                8
 1 culpable character of the conduct; and (3) whether the conduct is unjustifiable under

 2 the circumstances.” Schmitz, 109 N.M. at 394, 785 P.2d at 734. The alleged tortious

 3 conduct must also be wrongful or generally improper and unjustifiable in nature. Id.

 4 at 394-95, 785 P.2d at 734-35. In addition to balancing these factors, New Mexico

 5 courts must also consider “(1) the nature and seriousness of the harm to the injured

 6 party, (2) the nature and significance of the interests promoted by the actor’s conduct,

 7 (3) the character of the means used by the actor and (4) the actor’s motive.” Id. at

 8 395, 785 P.2d at 735 (internal quotation marks and citation omitted).

 9        Our examination of the record reveals no separate factual basis for Bradley’s

10 claim of prima facie tort. Indeed, it would appear that Bradley’s prima facie tort claim

11 relies upon the exact same factual basis as her claims for intentional infliction of

12 emotional distress and invasion of privacy. In establishing all three, she cites the

13 actions of her coworkers, the alleged inaction of Lovelace, the doctrine of respondeat

14 superior, and the harm these events caused to her. Her response to Lovelace’s motion

15 for summary judgment is illustrative. She stated, “Therefore, if the [c]ourt determines

16 that the actions of [Lovelace] are not in violation of New Mexico law for [i]nvasion

17 of [p]rivacy and [i]ntentional [i]nfliction of [e]motional [d]istress, then Plaintiff would

18 have the ability to pursue her [p]rima [f]acie [t]ort [c]laim.”

                                                9
 1        Our case law firmly establishes the impropriety of such pleading. In Stock, the

 2 plaintiff asserted a variety of claims, including both prima facie tort and intentional

 3 infliction of emotional distress. 1998-NMCA-081, ¶ 36. As in the present case, both

 4 claims were based upon identical facts, so that the plaintiff was using prima facie tort,

 5 essentially, as a fall-back claim. Id. ¶ 38. We stated that we will “not recognize a

 6 claim of intentional infliction of emotional distress in the absence of the outrageous

 7 conduct required for that tort, even if the plaintiff relabeled the cause of action as

 8 prima facie tort.” Id. (internal quotation marks omitted). “The only function of the

 9 claim of prima facie tort in [her] complaint is to escape possible restrictions imposed

10 on the tort[] of intentional infliction of emotional distress.” Id.

11        Bradley argues that she pleaded her claim for prima facie tort in the alternative,

12 and as such, the district court improperly dismissed it. The issue should have gone to

13 the jury, she contends, because her coworkers’ conduct fits within the elements of

14 prima facie tort. We hold that the district court correctly granted Lovelace’s motion

15 for summary judgment on this issue. Foremost, based on the facts before the district

16 court at the time it considered Lovelace’s motion, neither the conduct of Lovelace nor

17 the conduct of Bradley’s coworkers fit the elements of prima facie tort. Where

18 Bradley asserted that Lovelace improperly maintained its computer system or failed

19 to provide HIPPA training to its employees, she fails to establish Defendant’s intent

                                              10
 1 to injure her. See Bogle, 2005-NMCA-024, ¶ 22. Where, on the other hand, she

 2 asserted her coworkers’ improper access of her records, she fails to establish a lawful

 3 act. Id. In either case, Bradley fails to establish at least one element of prima facie

 4 tort, and dismissal was required by the district court as a matter of law. See Silverman

 5 v. Progressive Broad., Inc., 1998-NMCA-107, ¶ 36, 125 N.M. 500, 964 P.2d 61

 6 (where we held that a district court properly dismissed the plaintiff’s prima facie tort

 7 claim at the summary judgment stage because the facts in the record failed to establish

 8 one element).

 9 2.     Punitive Damages

10        Bradley next argues that the district court erred when it refused her leave to

11 amend her pleadings with a claim for punitive damages. She relies on Rule 1-015(A)

12 NMRA, noting that a party may amend its complaint until such time as the jury

13 receives the case. We agree insofar as Bradley’s statement is factually correct, but her

14 reliance on Rule 1-015(A) fails to acknowledge that such amendments are granted

15 “only by leave of the court or by written consent of the adverse party.” Rule 1-

16 015(A). As our Supreme Court held in Constructors, Ltd. v. Garcia, the decision of

17 whether to grant a party leave to amend rests in the sound “discretion of the [district]

18 court.” 86 N.M. 117, 118, 520 P.2d 273, 274 (1974). A district court abuses this

19 discretion when its actions exceed “the bounds of reason, all the circumstances before

                                              11
 1 it being considered.” Martinez v. Ponderosa Prods., Inc., 108 N.M. 385, 386, 772

 2 P.2d 1308, 1309 (Ct. App. 1988) (emphasis omitted) (internal quotation marks and

 3 citations omitted). And we will not reverse a district court’s ruling under this standard

 4 unless its “decision is clearly untenable, or when it is clearly contrary to the logic and

 5 effect of the facts and circumstances of the case.” Id. (internal quotation marks and

 6 citation omitted). When analyzing for abuse of discretion, we examine the entire

 7 record, not only those facts that favor the plaintiff. Minor v. Homestake-Sapin

 8 Partners Mine, 69 N.M. 72, 73-74, 364 P.2d 134, 135 (1961).

 9        The district court did not abuse its discretion by disallowing Bradley’s punitive

10 damages claim. In her original complaint, dated March 23, 2005, Bradley sought

11 relief for prima facie tort, intentional infliction of emotional distress, and invasion of

12 privacy. As compensation, she asked the court to award compensatory damages for

13 past and future “earnings she would have received” and for “mental anguish and

14 humiliation.”

15        Bradley never formally moved for leave to amend her complaint. She waited

16 until discovery was complete and then included a claim for punitive damages in her

17 motion in limine. Neither did she demonstrate any intent to seek punitive damages

18 during the discovery phase of the case, nor have we located any facts in the record to

19 suggest that any new evidence prompted her claim. Lovelace’s interrogatory No. 6,

                                               12
 1 asked Bradley to “[i]dentify with specificity and particularity each and every element

 2 and item of damage . . . that you contend you are entitled to recover.” In her response,

 3 Bradley stated her intent was to seek “Lost Wages, Benefits, Emotional Distress, and

 4 Costs.” She made no mention of punitive damages. Likewise, during her deposition,

 5 Bradley never mentioned punitive damages.

 6        A year and a half after her original complaint, after the conclusion of discovery,

 7 Bradley raised the issue of punitive damages in passing, in her pre-trial motion in

 8 limine filed on December 1, 2006. In that document, which purported to state the

 9 “factual basis of plaintiff’s claims,” Bradley made clear that she was seeking “lost

10 wages, lost benefits, emotional distress damages and punitive damages.” Naturally,

11 Lovelace was somewhat caught off-guard by this new development, and on December

12 27, 2006, it filed a motion to dismiss Bradley’s punitive damages claim as untimely.

13 Prior to trial, the court denied Bradley’s request to seek punitive damages.

14        Thus, in this case, the district court refused to consider a claim for punitive

15 damages—raised months after the conclusion of discovery—where no new evidence

16 had arisen to implicate such damages. Bradley never filed a formal motion to amend

17 under Rule 1-015(A). Not having pled a claim for punitive damages, and having only

18 implied such a claim’s existence, the district court was well within its discretion when

19 it barred her tardy attempt to assert one. We cannot say that such a refusal

                                              13
 1 contravenes the bounds of reason and logic, such as to create an abuse of discretion.

 2 We affirm.

 3 3.      Vicarious Liability

 4         We consider now the issue of vicarious liability because it constitutes the

 5 dispositive basis upon which all remaining issues depend. Bradley argues that

 6 Lovelace should be held vicariously liable for the actions of its employees and

 7 contends that the district court ruled improperly that Lovelace was not liable as a

 8 matter of law. She puts forward a twofold argument. First, she asserts that her

 9 coworkers acted within the course and scope of their employment when they viewed

10 her private medical information. Second, she argues that even if her coworkers were

11 acting outside the course and scope of their employment, Lovelace ratified or

12 condoned their conduct by not taking more decisive disciplinary, preventative, and

13 remedial actions.

14         At the close of Lovelace’s case in chief, the district court entered a directed

15 verdict that Bradley’s coworkers were not acting within the course and scope of their

16 employment and that Lovelace did not ratify their conduct.1 Such verdicts are granted

           1
17          Lovelace denies that its employees accessed Bradley’s records in September
18   of 2004 and points to its internal investigation for support. The district court never
19   reached the issue, assuming as it did, that even if Bradley’s coworkers did access her
20   records in September 2004, they were acting outside of the course and scope of their
21   employment.

                                              14
 1 when “there is no legally sufficient evidentiary basis for a reasonable jury to find in

 2 favor of a party.” Hedicke v. Gunville, 2003-NMCA-032, ¶ 9, 133 N.M. 335, 62 P.3d

 3 1217 (filed 2002). We review a district court’s entry of a directed verdict de novo.

 4 Id.

 5 A.     Course and Scope of Employment

 6        Bradley argues that her coworkers acted in the course and scope of their

 7 employment with Lovelace when they improperly accessed her medical information.

 8 She contends that, at the very least, reasonable minds could differ, and therefore the

 9 issue should have been submitted to the jury. Generally, an employer bears no

10 liability for the intentional torts of an employee. Ocana v. Am. Furniture Co., 2004-

11 NMSC-018, ¶ 29, 135 N.M. 539, 91 P.3d 58. However, an employer may be held

12 liable when its employees commit intentional torts in the course and scope of their

13 employment. Los Ranchitos v. Tierra Grande, Inc., 116 N.M. 222, 226, 861 P.2d 263,

14 267 (Ct. App. 1993). Employees commit intentional torts within the course and scope

15 of their employment when their acts are “naturally incident to the business” for which

16 they were employed and are done “with a view to further the [employer’s] interests.”

17 Id. (internal quotation marks and citation omitted). An employee’s intentional torts

18 are not within the course and scope of employment when they “arise wholly from

19 some external, independent, and personal motive” done “upon his own account.” Id.

                                             15
 1 (emphasis omitted) (internal quotation marks and citation omitted). Committing an

 2 intentional tort on company time, from one’s seat on company premises, does not

 3 necessarily mean the tort was committed within the course and scope of employment.

 4 The question of whether an employee acted within the course and scope of his duties

 5 is usually a question of fact, but when no reasonable trier of fact could differ on the

 6 issue, a district court may grant judgment as a matter of law. Rivera v. N.M. Highway

 7 & Transp. Dep’t, 115 N.M. 562, 564, 855 P.2d 136, 138 (Ct. App. 1993).

 8        In Rivera, the plaintiff sought to impose vicarious liability on his employer, the

 9 New Mexico Highway and Transportation Department. Id. at 563, 855 P.2d at 137.

10 While working on a highway project, the plaintiff and his coworkers took a break

11 while awaiting more materials to finish the job. During this lull in the work, one of

12 the plaintiff’s coworkers threw a container of water at the plaintiff and prompted him

13 to jump out of the way. In so doing, the plaintiff entered the roadway and was struck

14 by a vehicle. Id. The defendant had published rules, prior to the incident, prohibiting

15 such conduct. Id. The district court held that the defendant was not liable because its

16 employee was not acting within the course and scope of his duties; and although the

17 issue at trial was whether the defendant had waived sovereign immunity under the

18 New Mexico Tort Claims Act, we reviewed the case under the more stringent

19 requirements of respondeat superior. Id. at 563-64, 855 P.2d at 137-38. We held that

                                              16
 1 the employee tortfeasor was not acting within the course and scope of his employment

 2 because “the act of throwing water on [the p]laintiff . . . was not done with a view of

 3 furthering the employer’s interest” and arose “from purely personal motives.” Id. at

 4 564, 855 P.2d at 138; Los Ranchitos, 116 N.M. at 226, 861 P.2d at 267; Benham v. All

 5 Seasons Child Care, Inc., 101 N.M. 636, 638, 686 P.2d 978, 980 (Ct. App. 1984).

 6        Bradley introduced no evidence at trial to indicate that her coworkers accessed

 7 her records with the purpose of furthering the interests of Lovelace. Her case in chief

 8 included only evidence that her coworkers accessed her records. Because she

 9 presented no evidence at trial that her coworkers were furthering Lovelace’s interests

10 at the time of the access, no reasonable fact finder could conclude that they were

11 acting within the boundaries of their employment. Accordingly, we affirm the result

12 reached by the district court on the issue of course and scope.

13 B.     Employer Ratification or Assent

14        Bradley contends that even if we hold against her on the issue of course and

15 scope, we should nevertheless hold Lovelace liable because it ratified and condoned

16 the tortious conduct of its employees. Even where an employee acts outside the

17 course and scope of his employment, the employer may still be held liable if it assents

18 to or ratifies the conduct. See Los Ranchitos, 116 N.M. at 226, 861 P.2d at 267. As

19 with course and scope, ratification is generally a matter of factual determination for

                                             17
 1 the jury except where reasonable minds could not differ. N. v. Pub. Serv. Co. of N.M.,

 2 97 N.M. 406, 409, 640 P.2d 512, 515 (Ct. App. 1982).

 3        Bradley argues that Lovelace ratified its employees conduct by failing to

 4 conduct proper employee training prior to the event, by failing to maintain a more

 5 secure computer system, and by failing to adequately discipline the guilty employees

 6 after the event. She introduced evidence, that although Lovelace employees received

 7 training on the impropriety of accessing patient files, Lovelace’s training program was

 8 somewhat less intensive than programs offered by other hospitals. The court also

 9 heard evidence concerning the Lovelace computer system, which was incapable of

10 automatically detecting whether an improper access had occurred. And although

11 Bradley asserts that Lovelace failed to discipline the employees for their conduct, the

12 record clearly indicates that Baca received a written reprimand for accessing Bradley’s

13 file on another occasion and that all other employees who failed to report improper

14 accesses were orally reprimanded.

15        Lovelace argues that it did not ratify the conduct of its employees, and at trial

16 it offered evidence that it had preventative measures in place prior to the event, that

17 its computer system was password protected, that remedial measures were taken after

18 the incident, and that all offending employees were disciplined. All new employees

19 at Lovelace were familiarized with privacy procedures at the time of hiring and were

                                             18
 1 required to sign a statement that they had read the code of conduct, which prohibited

 2 improper access of patient records. Access to the Lovelace computer system was

 3 password protected, and all employees were required to log off when they left their

 4 desk. Also, employees were only given access to those areas of the computer system

 5 required by their individual positions. Upon being notified of Bradley’s complaint,

 6 Lovelace conducted an internal investigation into the matter, and although it was

 7 unable to determine if an improper access occurred in September 2004 it determined

 8 that other improper accesses had otherwise occurred and disciplined those employees

 9 accordingly. After Bradley’s complaint, Lovelace also conducted mandatory privacy

10 training for all 300 employees in its central billing office.

11        Bradley cites no case law to support her position that Lovelace’s acts or failures

12 to act constituted a ratification. We therefore assess only the evidence before the

13 district court and hold that reasonable minds could not differ on whether Lovelace

14 ratified the conduct of its employees. In fact, the evidence presented at trial indicates

15 just the opposite. Both before and after the events which gave rise to this appeal,

16 Lovelace took measures to prevent improper access of patient files, and we hold that

17 the district court properly granted a directed verdict on this issue.

18 4.     Hearsay Testimony

                                              19
 1        We now consider Bradley’s argument that certain testimony of Lovato was

 2 erroneously excluded as hearsay. Bradley offered Lovato’s testimony to prove that

 3 her medical information was improperly accessed. Lovato would have testified that

 4 Romero told Aragon about Bradley’s file being accessed. Lovelace objected on the

 5 basis that the evidence was hearsay within hearsay], and after an extended exchange

 6 outside the hearing of the jury, the court sustained on that basis. Both Aragon and

 7 Romero denied that they made the statements.

 8        We review the exclusion of evidence at trial for abuse of discretion. Coates v.

 9 Wal-Mart Stores, Inc., 1999-NMSC-013, ¶ 36, 127 N.M. 47, 976 P.2d 999. The party

10 against whom the district court ruled must prove on appeal that the “exclusion of

11 evidence was prejudicial in order to obtain a reversal.” Cumming v. Nielson's, Inc.,

12 108 N.M. 198, 204, 769 P.2d 732, 738 (Ct. App. 1988). We will not hold that a

13 district court abused its discretion “unless we can characterize [its ruling] as clearly

14 untenable or not justified by reason.” State v. Rojo, 1999-NMSC-001, ¶ 41, 126 N.M.

15 438, 971 P.2d 829 (filed 1998) (internal quotation marks and citation omitted).

16        Bradley argues that the district court incorrectly classified Lovato’s testimony

17 as hearsay within hearsay. The hearsay rule does not apply, Bradley contends,

18 because the statements of both Aragon and Romero were those of party opponents and

19 were therefore not hearsay.       In support of her argument, she cites Rule 11-

                                              20
 1 801(D)(2)(d) NMRA and Rule 11-805 NMRA. Rule 11-805 provides that “[h]earsay

 2 included within hearsay is not excluded under the hearsay rule if each part of the

 3 combined statements conforms with an exception to the hearsay rule provided in these

 4 rules.” Rule 11-801(D)(2)(d) provides that statements made by a “party’s agent or

 5 servant concerning a matter within the scope of the agency or employment, made

 6 during the existence of the relationship” qualify as statements by a party opponent,

 7 and therefore, are not hearsay.

 8        The district court found Lovato’s testimony to be hearsay within hearsay, and

 9 we agree. Bradley’s argument would be persuasive if Aragon and Romero had been

10 speaking of “a matter within the scope” of their employment. Id. But they were not

11 discussing such a matter. They were discussing the fact that Bradley’s personal

12 medical information had been improperly accessed. And as we held above in our

13 analysis of respondeat superior, Bradley’s information—assuming it was

14 accessed—was accessed by her coworkers outside the course and scope of their

15 employment. Any discussion of it was likewise outside the course and scope of

16 employment. Thus, we cannot hold that the district court abused its discretion when

17 it excluded the testimony. We affirm.

18 5.     Intentional Infliction of Emotional Distress

                                            21
 1        At the conclusion of Bradley’s case in chief, Lovelace moved for a directed

 2 verdict on her claim for intentional infliction of emotional distress. The district court

 3 granted the motion on the basis that Lovelace’s actions were not “extreme and

 4 outrageous” and therefore failed the elements of the tort. Bradley argues that the

 5 district court’s ruling was improper and that she presented sufficient evidence to

 6 support her claim. We agree with Bradley, insofar as the basis upon which the district

 7 court granted Lovelace’s motion was faulty. Nevertheless, we affirm because the

 8 district court was “right for the wrong reason.” Capco Acquisub, Inc. v. Greka Energy

 9 Corp., 2008-NMCA-153, ¶ 35, 145 N.M. 328, 198 P.3d 354. We review a district

10 court’s entry of a directed verdict do novo. Hedicke, 2003-NMCA-032, ¶ 9.

11           In order to state a claim for intentional infliction of emotional distress, a

12 plaintiff must establish: (1) the extreme and outrageous nature of the defendant’s

13 conduct, (2) that the defendant acted intentionally or with reckless disregard for the

14 plaintiff, (3) that the plaintiff’s mental distress was extreme and severe, and (4) that

15 the plaintiff’s emotional distress was caused by the defendant’s conduct. Trujillo v.

16 N. Rio Arriba Elec. Coop., 2002-NMSC-004, ¶ 25, 131 N.M. 607, 41 P.3d 333 (filed

17 2001). Our caselaw defines extreme and outrageous conduct as conduct that “is so

18 outrageous in character, and so extreme in degree, as to go beyond all possible bounds

19 of decency, and to be regarded as atrocious, and utterly intolerable in a civilized

                                              22
 1 community.” Id. (internal quotation marks and citation omitted). When deciding

 2 whether a claim may go forward under the tort of intentional infliction of emotional

 3 distress, the district “court should determine as a matter of law whether the conduct

 4 at issue reasonably may be regarded as so extreme and outrageous that it will permit

 5 recovery.” Id. ¶ 26 (internal quotation marks and citation omitted). If reasonable

 6 minds could differ on whether the facts meet this standard, the district court should

 7 allow the case to proceed. Id.

 8        In her case in chief, Bradley attempted to establish that the actions of her

 9 coworkers were extreme and outrageous. She then sought to prove that those actions

10 were either done in the course and scope of employment or were ratified by Lovelace.

11 The district court was therefore required to determine, first, whether the employees’

12 conduct was extreme and outrageous, and second, whether Lovelace ratified or

13 condoned it. But at the time it announced its ruling, the district court had done

14 neither. It considered the employees’ alleged outrageous conduct to be of no

15 consequence. The court stated, “looking . . . up [someone’s private medical records]

16 might be [extreme and outrageous], but you didn’t sue the people who looked them

17 up. The question is whether what Lovelace did, if anything, was extreme and

18 outrageous.” The court then went on to analyze Lovelace’s conduct, finding that it

19 was neither extreme nor outrageous. But the court confused its analysis of intentional

                                             23
 1 infliction of emotional distress with the doctrine of respondeat superior, as the

 2 following statement by the court illustrates:

 3        “Well, the intentional infliction of emotional distress, to tell you the
 4        truth, I am inclined to grant [Lovelace’s] motion. The only way you
 5        think that they may have condoned [the behavior of their employees] is
 6        because they didn’t have a tracking system, and I am not prepared to say
 7        that not having a tracking system is extreme and outrageous conduct.”

 8        The record indicates that the district court erroneously analyzed this issue. The

 9 court should have first determined whether Bradley’s evidence was sufficient to

10 support the claim that her coworkers acted outrageously. Next, the court should have

11 turned to the issue of respondeat superior, or failing that, left the issue to be decided

12 later in the trial. Instead, the court refused to consider whether Lovelace’s employees

13 acted outrageously and focused on the actions of Lovelace. The actions of Lovelace,

14 however, were only relevant to the extent they tended to prove Lovelace’s ratification

15 of its employees’ allegedly outrageous acts. It was therefore improper to analyze them

16 under the extreme and outrageous standard.

17        Though the district court analyzed this issue improperly, it’s faulty analysis was

18 cured later when it found that as a matter of law Lovelace was not vicariously liable

19 for the actions of its employees. We may affirm a district court where it is right for

20 the wrong reason, and we do so here. Capco Acquisub, Inc., 2008-NMCA-153, ¶ 35;

21 see Romero v. Prince, 85 N.M. 474, 476, 513 P.2d 717, 719 (Ct. App. 1973).

                                              24
 1 6.     Invasion of Privacy

 2        Finally, we review Bradley’s argument that the district court improperly

 3 dismissed her claim for invasion of privacy as a matter of law. She contends that the

 4 actions of her coworkers constituted a publication of private facts, and as such, the

 5 issue should have been submitted to the jury. We review a district court’s entry of a

 6 directed verdict do novo. Hedicke, 2003-NMCA-032, ¶ 9.

 7        Bradley offered no evidence at trial that Lovelace, itself, published her private

 8 facts. Her theory instead focused on proving the culpability of her coworkers and

 9 imputing it to Lovelace through the doctrine of vicarious liability. Above, we held

10 that the district court correctly found that as a matter of law Lovelace neither ratified

11 nor condoned the conduct of its employees in this case. Likewise, we held that the

12 district court properly found that those employees were not acting in the course and

13 scope of their employment at the time they accessed Bradley’s private information.

14 Based on the evidence presented at trial, vicarious liability would be the only way to

15 sound a valid claim against Lovelace for invasion of privacy. Accordingly, because

16 we hold that Lovelace is not vicariously liable, we affirm the district court’s dismissal

17 of Bradley’s invasion of privacy claim.

                                              25
 1 CONCLUSION

 2        We affirm on all issues and hold that the district court: (1) properly granted

 3 summary judgment to Lovelace on Bradley’s claim of prima facie tort; (2) did not

 4 abuse its discretion when it denied Bradley leave to amend her complaint with a claim

 5 for punitive damages; (3) properly held that, as a matter of law, Lovelace was not

 6 vicariously liable for the intentional torts of its employees; (4) did not abuse its

 7 discretion when it refused to allow hearsay within hearsay evidence at trial; (5)

 8 properly dismissed Bradley’s intentional infliction of emotional distress claim; and

 9 (6) properly dismissed Bradley’s invasion of privacy claim.

10        IT IS SO ORDERED.

11
12                                        RODERICK T. KENNEDY, Judge

13 WE CONCUR:

14
15 JAMES J. WECHSLER, Judge

16
17 MICHAEL E. VIGIL, Judge

                                            26


62 F.2d 959 (1933)
In re BRANNON et al.
CITY OF DALLAS et al.
v.
RYAN et al.
No. 6476.
Circuit Court of Appeals, Fifth Circuit.
January 18, 1933.
Rehearing Denied February 20, 1933.
H. P. Kucera, Geo. K. Holland, R. G. Scurry, and Tom C. Clark, all of Dallas, Tex., and R. M. Rowland and R. E. Rouer, both of Ft. Worth, Tex., for appellants.
George Sergeant, of Dallas, Tex., for appellees.
Before BRYAN, FOSTER, and SIBLEY, Circuit Judges.
*960 SIBLEY, Circuit Judge.
Similar questions arising in the distribution of two estates in bankruptcy were dealt with in one judgment in the District Court, and by stipulation are reviewed in one appeal here. In Brannon's estate the trustee has $331.05 arising from the sale of personal property. Claims for wages earned within three months before bankruptcy, totalling $253.13, state and county taxes (1931) $56.42, and taxes of city of Dallas (1928, 1930, 1931) $51.12, and landlord's claim for rent $1,350 have been allowed and for each a lien is claimed under state statutes. In Bayer's estate the trustee has $785.49 arising from the sale of merchandise and fixtures, and there have been allowed claims for wages earned within thirteen weeks before bankruptcy aggregating $624, state and county taxes (1928, 1929, 1930, 1931) $395.08, taxes of city of Dallas (1929, 1930, 1931) $432.60, and a landlord's claim for rent $3,035.19. For these also liens are claimed under state statutes. The referee's ruling affirmed in the District Court was that section 64 of the Bankruptcy Act (11 USCA § 104) fixing priorities in the distribution of an estate in bankruptcy controlled; that the so-called liens for taxes, wages, and rent under the state law were really only priorities under those laws referred to in section 64b (7) as amended in 1926, 11 USCA § 104 (b) (7), and were not liens preserved under section 67 (11 USCA § 107). Accordingly wages were held to be payable first, taxes next, and landlord's claims last. In re Brannon, 53 F.(2d) 401.
We reach a different conclusion. Section 64 gives the rule for paying out the money arising from the bankrupt's property which remains for general distribution after all special liens and incumbrances have been dealt with. City of Tampa v. Com. Bldg. Co. (C. C. A.) 54 F.(2d) 1057; In re Tresslar (D. C.) 20 F.(2d) 663; Polk County v. Burns (C. C. A.) 247 F. 399; Lott v. Salsbury (C. C. A.) 237 F. 191; In re Hosmer (D. C.) 233 F. 318; In re Rauch (D. C.) 226 F. 982. Before a dividend is made to general creditors the section requires payment in full of seven classes of claims, which briefly stated are: (1) Costs of preserving the estate; (2) advanced court costs; (3) cost of administration; (4) costs of litigation over composition; (5) wages earned within three months; (6) taxes; (7) debts to persons having a priority under state or federal law. These seven classes are not secured claims, i.e., such as had before bankruptcy a lien on the property of the bankrupt. The taxes in (6) are such as have no lien, as was the case in City of Richmond v. Bird, 249 U. S. 174, 39 S. Ct. 186, 63 L. Ed. 543, and New Jersey v. Anderson, 203 U. S. 483, 27 S. Ct. 137, 51 L. Ed. 284. The priorities in (7) are such preferences as may on insolvency be given by law to debts due the sovereign, to a debt due by a trustee, or for rent or the like, but unsecured by any previous lien. Typical examples are the priority given debts due the United States on insolvency by Rev. St. § 3466, 31 USCA § 191, excluded from section 64 by Davis v. Pringle, 268 U. S. 315, 45 S. Ct. 549, 69 L. Ed. 974, but put back by the amendment of 1926; and the priority given claims for materials by the Kentucky statute dealt with in Re Bennett (C. C. A.) 153 F. 673. Of the latter it is said in Globe Bank & Trust Co. v. Martin, 236 U. S. at page 302, 35 S. Ct. 377, 382, 59 L. Ed. 583: "Under our system of bankruptcy, and in the administration of assignments under state laws, there are certain persons, such as those furnishing material or labor, that, in certain specified ways, are given preference in the distribution of insolvent estates. It is a statutory lien of that kind with which the court dealt in Re Bennett." On the other hand, where the creditor before the bankruptcy has an established lien on the bankrupt's property which binds it as to third persons and which is not invalidated by the bankruptcy, he does not come under the operation of section 64. He is a secured creditor. Section 1 (23), 11 USCA § 1 (23). He cannot vote in the bankruptcy proceedings, nor have his claim counted in estimating number or amount of claims except for the unsecured balance, if any. Section 56b, 11 USCA § 92 (b). The court may estimate this balance and allow his claim to this extent for voting purposes. Section 57e, 11 USCA § 93 (e). Priority claims are in this respect treated the same way but are carefully distinguished from secured claims. Id. The security held by the secured creditor is to be converted into money or valued by agreement or arbitration or litigation and credited on the secured claim, and the balance, if any, stands for a dividend with other unsecured claims. Section 57a, 11 US CA § 93 (a). Section 67 deals with liens. Subsection (d) expressly preserves "liens given or accepted in good faith and not in contemplation of or in fraud upon the provisions of this title, and for a present consideration, which have been recorded according to law, if record thereof was necessary, * * * to the extent of such present consideration only." These words seem specially applicable to contract liens, and it has sometimes been said that *961 only such are preserved thereby. But most statutory liens are but incidents which the law annexes to a contract. The section expressly invalidates (a) such liens as require record but have not been recorded; (c) those created by certain legal proceedings including attachments begun within four months before bankruptcy; (e) transfers in fraud of creditors made within four months of bankruptcy; (f) levies, judgments, and other liens obtained by legal proceedings within four months of bankruptcy. The section does not in terms either preserve or invalidate liens arising from legal proceedings which are more than four months old at bankruptcy, nor does it mention statutory liens not arising from legal proceedings unless they are to be included under section 67d. The view generally taken is that true liens, however arising, which are not expressly invalidated by the Bankruptcy Act, remain good, and the trustee takes his title under section 70 (11 USCA § 110) subject to them. This was held of a judgment lien more than four months old in Straton v. New, 283 U. S. 318, 51 S. Ct. 465, 75 L. Ed. 1060. And the general lien of a landlord under a Georgia statute, which dates only from the levy of a distress warrant upon particular property, was held not to be destroyed under section 67, although the levy was made within four days before bankruptcy. Henderson v. Mayer, 225 U. S. 631, 32 S. Ct. 699, 56 L. Ed. 1233. So as to a landlord's lien under the Virginia statute in Richmond v. Bird, 249 U. S. 174, 39 S. Ct. 186, 63 L. Ed. 543. Statutory liens annexed to contracts have been generally upheld in bankruptcy where the statutory prerequisites have been complied with. In this circuit alone may be noted the following cases: A seller's lien in Norris v. Trenholm (C. C. A.) 209 F. 827; a Louisiana rent lien in Fudickar v. Glenn (C. C. A.) 237 F. 808; a mechanic's lien in Morgan v. First National Bank (C. C. A.) 145 F. 466, and Eggleston v. Birmingham Purchasing Co. (C. C. A.) 15 F.(2d) 529; a Texas rent lien in Martin v. Orgain (C. C. A.) 174 F. 772, and In re McLaughlin (D. C.) 10 F.(2d) 810; a materialman's lien in Re Oconee Milling Co. (C. C. A.) 109 F. 866, and In re Georgia Handle Co. (C. C. A.) 109 F. 632. A tax lien was upheld in City of Tampa v. Commercial Building Co. (C. C. A.) 54 F. (2d) 1057, and In re Tresslar (D. C.) 20 F.(2d) 663. That lienors do not come within the distribution provisions of section 64 is also plain from the decisions that they do not have to contribute to the costs of the bankruptcy, which are the first items to be paid on a distribution under section 64, unless the lienor has invoked the aid of the court, nor then except as to the direct and necessary expense of preserving and realizing on his security. Gugel v. New Orleans Nat. Bank (C. C. A.) 239 F. 676; In re Williams' Estate (C. C. A.) 156 F. 934; In re Cutler & John (D. C.) 228 F. 771. We therefore think this case must be solved by ascertaining whether the present claimants had liens on the bankrupt's property, and by paying them in the order of their dignity as such.
The wage claimants had an inchoate lien under Rev. St. of Texas 1925, article 5483, but recording within thirty days is by article 5486 made necessary to fix and preserve the lien. It is conceded that this was not done. They therefore have no statutory lien. Peacock v. Morgan, 61 Tex. Civ. App. 193, 128 S. W. 1191; Eads & Co. v. Honeycutt (Tex. Civ. App.) 185 S. W. 1030; Farmers' Elevator Co. v. Advance Thresher Co. (Tex. Civ. App.) 189 S. W. 1018; Security Trust Co. v. Roberts (Tex. Com. App.) 208 S. W. 892. So far as our decision in Re Woulfe & Co., 239 F. 128, is to the contrary it is disapproved.
Landlords by article 5238 have a lien on all property of the tenant on the rented premises for rent due or to become due, and no record or other action is necessary to perfect it for arrears not exceeding six months. Marsalis v. Pitman, 68 Tex. 624, 5 S. W. 404. We see no reason to doubt that in Bayer's estate the landlord has such a lien on the proceeds of the merchandise and fixtures. We cannot tell certainly from the record whether the personal property sold in Brannon's estate was on the rented property or not, but that seems not to be denied.
In ascertaining whether under Texas as law state, county, or city taxes have a lien adhering to the property or a mere priority arising on insolvency, we need to look to the Constitution, the general statutes, and the charter of the city of Dallas, which is a special act of the Legislature. Article 8, § 15, of the Constitution, reads: "The annual assessment made upon landed property shall be a special lien thereon; and all property, both real and personal, belonging to any delinquent taxpayer shall be liable to seizure and sale for the payment of all the taxes and penalties due by such delinquent; and such property may be sold for the payment of the taxes and penalties due by such delinquent, under such regulations as the Legislature may provide."
*962 This section establishes a lien on land for taxes assessed against it. No lien in advance of seizure is provided on personalty, which is left to pass unencumbered from hand to hand. There is, however, nothing in the language to prohibit the Legislature, in providing for the collection of taxes on personalty and as an aid thereto, from establishing tax liens on it. There are a number of statutory provisions for summarily seizing and selling personal property for state and county taxes when delinquent, and some provisions for such action in advance of delinquency when the property is about to be removed from the county or in cases of assignment to creditors or the insolvency or the death of the taxpayer. None of these statutes mention the creation of a lien except articles 7048 and 7269. The former relates to stocks of merchandise only, and provides that, in cases where the owner has rendered them for taxes or owes an occupation tax and then becomes bankrupt or makes an assignment of his merchandise, the tax collector shall at once demand the payment of the taxes, and, if they are not paid, he shall seize and sell enough of the merchandise to pay the taxes, "and said taxes, until paid, shall constitute a prior lien on said merchandise, goods and wares in default of said taxes." We understand that the merchandise may be freely sold in the usual course of business, with no lien for taxes following it. It is only in case of insolvency or assignment, and against the complications then arising that a lien is set up. It is an effort to provide a preference in payment on insolvency, and is a priority under a state law rather than a true lien on property in subjection to which the title of the trustee in bankruptcy vests. Article 7269 relates to all sorts of property, and provides that, where a taxpayer makes an assignment to creditors, or his property is levied on, or he dies and leaves an insolvent estate and his taxes are unpaid, "the amount of such unpaid taxes shall be a first lien upon all such property." The taxes are to be paid by the assignee, sheriff, or administrator, and, if not, the tax collector shall levy on and sell the property in whosesoever hands found. Here again no lien exists until the happening of specified events similar to a bankruptcy. There is no incumbrance superior to the trustee's title, but only a priority of payment on insolvency. Therefore, so far as state and county taxes are concerned, we find no lien securing them within the meaning of the Bankruptcy Act. They stand not as secured debts but as debts having priority under the state laws on insolvency, and would fall under section 64b (7), but since they are also taxes, in that character they fall under section 64b (6).
The city taxes have been better cared for by the statutes. Article 1063 gives the cities the benefit of the general tax laws, but article 1060 goes further, providing: "All taxes shall be a lien upon the property upon which they are assessed." Section 194 of the charter of the city of Dallas is still more liberal, reading: "A lien is hereby created on all property, personal and real, in favor of the City of Dallas for all taxes, ad valorem, occupation or otherwise. Said lien shall exist from January 1st in each year until all the taxes are paid. Such lien shall be prior to all other claims and no gift, sale, assignment or transfer of any kind or judicial writ of any kind can ever defeat such lien." We think a true general lien for all city taxes is given the city of Dallas by the language last quoted, which adheres to the property notwithstanding its transfer and which, requiring no record, is good as a lien in bankruptcy. All property of the taxpayer falls under it, so that it is unnecessary to identify that assessed for the particular tax.
We find the cases in the state courts which have been pressed upon our notice not in conflict with these conclusions touching taxes. Zachary v. City of Uvalde (Tex. Com. App.) 42 S.W. (2d) 417, concerned a city tax on land, as appears from the fuller report of the case in (Tex. Civ. App.) 24 S.W.(2d) 517. The Constitution, as we have seen, fixes a lien on land for its taxes. See, also, Rev. St. art. 7172. The true meaning of the decision is that, without a city ordinance asserting a lien, the statutes referred to in the opinion gave the city taxes a status like that given state and county taxes on land. No special charter provisions were involved. In Texas Employers' Insurance Association v. City of Dallas (Tex. Civ. App.) 5 S.W.(2d) 614, the city's charter lien for taxes on personalty was recognized and enforced. In Cassidy Southwestern Commission Co. v. Duval County (Tex. Com. App.) 3 S.W.(2d) 416, state and county taxes were assessed on 700 steers, 650 of which were sold and the remaining 50 taken over by a mortgagee of them. They were later seized for the taxes due on all 700. The mortgagee paid the taxes due on the 50 steers, but resisted payment of the remainder. The court held that, while the Constitution fixes a lien for taxes on land assessed, none is provided by it or by the statutes relating to state and county taxes as to personal property until seizure except in *963 the special case described in article 7269; and that the mortgagee took the 50 steers clear of the taxes due on the others. In Mission Independent School District v. Armstrong (Tex. Com. App.) 222 S. W. 201, school taxes were assessed for 1912 and 1913 against removable fixtures treated as personal property of an oil company. The property was sold in January, 1914, to Armstrong. The school district had all the rights and powers as to its taxes that are conferred by law on cities. The statutes having to do merely with seizure and sale were said to create no liens, but article 958 touching city taxes (which is now article 1060), in its language "all taxes shall be a lien upon the property upon which they are assessed," did fix a lien from the date of assessment on the property assessed which was held good against the purchaser, Armstrong. City of Fort Worth v. Boulware, 26 Tex. Civ. App. 76, 62 S. W. 928, dealt with a charter lien for city taxes less broad than that of the city of Dallas.
We therefore think that the taxes due the city of Dallas have a first and general lien and must be first satisfied. The landlords have also a valid lien on the proceeds of personalty on the rented premises which comes next. The state and county taxes and wage claimants have no lien, but fall under the priorities established by section 64, the wages earned within three months taking priority over the state and county taxes. The cause is reversed and remanded, with direction to pay out of Brannon's estate $51.12 and accrued interest to the city of Dallas, and the remainder on the lien for rent; and out of Bayer's estate $432.60 with accrued interest to the city of Dallas and the remainder on the lien for rent.


299 So.2d 863 (1974)
Eva M. POPE, Plaintiff-Appellee,
v.
ST. PAUL FIRE & MARINE INSURANCE COMPANY et al., Defendants-Appellants.
No. 12218.
Court of Appeal of Louisiana, Second Circuit.
February 12, 1974.
On Rehearing July 1, 1974.
Writ Refused September 20, 1974.
*864 Mayer & Smith by Charles L. Mayer, Shreveport, for defendants-appellants.
Dixon & Thomas by Edmund M. Thomas, Shreveport, Dodd, Hirsch, Barker, Avant & Wall by James D. Thomas, II, Baton Rouge, for plaintiff-appellee.
Before AYRES, BOLIN and WILLIAMS, JJ.
WILLIAMS, Judge.
Mrs. Eva M. Pope filed this medical malpractice suit against Dr. E. B. Robinson, Jr., his medical partnership, Robinson and Rayburn, and their public liability insurer, St. Paul Fire & Marine Insurance Company. Following a jury trial a $75,000 verdict was rendered in Mrs. Pope's favor against Dr. Robinson, Robinson and Rayburn, and their insurer. A judgment was signed accordingly. From this judgment a suspensive appeal was perfected by defendants seeking a reversal of the judgment. Plaintiff answered the appeal asking this court to increase the award.
Mrs. Pope had been a patient of Dr. Robinson for some years prior to May 27, 1969 when she consulted him about a lymph node on the back left side of her neck. Dr. Robinson recommended a biopsy of the lymph node. Mrs. Pope was admitted to Bossier General Hospital on May 28, 1969, where Dr. Robinson, removed the lymph node. Pathological study proved the node was nonmalignant.
Immediately following this operation, Mrs. Pope began to complain of pain and weakness in her left shoulder and arm. After several visits to Doctors Robinson and Rayburn, Mrs. Pope was referred to Dr. Don K. Joffrion, an orthopedic surgeon. On July 18, 1969 Dr. Joffrion diagnosed some mild loss of function of the left cervical part of the trapezius muscle. He advised Dr. Robinson possible nerve damage should be considered.
On July 29, 1969 Mrs. Pope consulted Dr. Derald G. Kellett, who stated he found no neurological deficits and felt she was functioning normally. On October 29, 1969 Mrs. Pope consulted Dr. James H. Shipp, neurologist, and on his recommendation Dr. Robinson had Mrs. Pope admitted into the hospital. He performed an extensive exploratory operation assisted by Dr. Heinz K. Faludi, a neurological surgeon. Dr. Robinson said he found no evidence to make him suspicious of any spinal accessory nerve injury.
Mrs. Pope continued to have trouble with her left shoulder and arm, and on August 18, 1970, consulted Dr. Austin W. Gleason, an orthopedic surgeon. Dr. Gleason diagnosed atrophy of the left shoulder muscles and referred her to Dr. E. M. Olmstead of Dallas, Texas, for an electromyogram. Dr. Olmstead determined the spinal accessory nerve serving the trapezius muscle was not functioning properly and was of the opinion the nerve had been damaged either in the original operation or the follow-up surgery. He asserted the nerve was probably entrapped with scarring encroaching on the nerve. This would eventually cause the total and complete degeneration of the nerve.
After receiving Dr. Olmstead's report, Dr. Gleason referred Mrs. Pope to Dr. Lloyd C. Megison on December 8, 1970. Both doctors diagnosed atrophy of the trapezius muscle and found Mrs. Pope was lacking ability to raise her left arm vertically or shrug her left shoulder. At this time these doctors were of the opinion the nerve was injured, but not severed.
*865 Mrs. Pope was sent to see Dr. A. William Dunn, an orthopedic surgeon at Ochsner Foundation Hospital in New Orleans. He examined her on March 26, 1971 and testified he found complete atrophy of the left trapezius muscle causing a rotation of the left scapula or shoulder blade. On April 21, 1971, Dr. Dunn operated on Mrs. Pope's shoulder to determine if the spinal accessory nerve could be located. If so, its ends could be reanastomosed or sewed together to re-establish nerve function and thereby re-establish muscle function. He expressed his inability to find the spinal accessory nerve, either end thereof, and was of the opinion the nerve had either been excised in that segment (about an inch in length between the two muscles) or had been incised (severed) and then had degenerated.
Dr. Dunn explained the reasons for caution by a surgeon performing a biopsy in the area of the spinal accessory nerve and what symptoms should alert the physician to nerve injury. He described Mrs. Pope's symptoms as a classic example thereof, and on November 25, 1972, Dr. Dunn performed a fourth operation on Mrs. Pope's left shoulder. This operation was to stabilize her left shoulder by transplanting a muscle from her left thigh to the left shoulder area. The photographs taken of Mrs. Pope show an incision approximately twelve inches long on her left thigh and an angular incision of comparable length on her left shoulder.
Dr. Robinson frankly stated during the May 28, 1969 operation he made no attempt to identify the spinal accessory nerve although he admitted when one is operating in that area there is a possibility the nerve could be in jeopardy. Dr. Robinson further expressed he knew of no other physician in this area who identifies the spinal accessory nerve in performing a simple lymph node biopsy on the neck. He further stated during the succeeding months of seeing and treating Mrs. Pope he had no reason to believe such nerve injury had occurred.
Mrs. Pope contends, in the operation performed by Dr. Robinson on May 28, 1969, he either severed the spinal accessory nerve or severely damaged it resulting in its complete deterioration.
In Meyer v. St. Paul Mercury Indemnity Company, 225 La. 618, 73 So.2d 781 (1953) our Supreme Court defined the responsibility of a physician treating a patient. The jurisprudential rule stated was:
"A physician, surgeon or dentist, according to the jurisprudence of this court and of the Louisiana Courts of Appeal, is not required to exercise the highest degree of skill and care possible. As a general rule it is his duty to exercise the degree of skill ordinarily employed, under similar circumstances, by the members of his profession in good standing in the same community or locality, and to use reasonable care and diligence, along with his best judgment, in the application of his skill to the case.. . ." [73 So.2d 781, 782]
Dr. Robinson described Mrs. Pope's original operation as a simple nodal biopsy and the second as an extensive and exploratory operation to determine the nature of a mass in her neck. Although Dr. Robinson denied injuring Mrs. Pope's spinal accessory nerve, such an injury did occur.
Fourteen physicians testified during the trial. All of these men were eminently qualified in their respective fields. We have stated in general the treatment, opinion and method of diagnosis of the doctors who treated Mrs. Pope. We will briefly summarize the pertinent expert medical testimony in the record.
Dr. Richard P. Bland, an ear, nose and throat specialist of Shreveport, was called as a witness by Mrs. Pope. He had treated her for irritation of the throat. In his practice he performed lymph node biopsies. In his opinion, except for a superficial node in the skin, in performing a lymph node biopsy in the area of the spinal accessory nerve, it was good medical practice in *866 the community to locate and identify this nerve to prevent damage to it.
Dr. Austin W. Gleason, an orthopedic surgeon, Dr. Lloyd C. Megison, a neurosurgeon, and Dr. Don K. Joffrion, an orthopedic surgeon, all of Shreveport, testified substantially the same as Dr. Bland.
Dr. A. William Dunn agreed with Dr. Bland. He reasoned the same standards would be applicable in Shreveport as in New Orleans.
Dr. James H. Eddy, a surgeon of Shreveport, was called on behalf of defendants, and stated in his opinion in performing a simple nodal biopsy it would be gross error and not customary practice to search out and identify the spinal accessory nerve. In such a biopsy it would seem totally incorrect to dissect out a nerve, such as the spinal accessory, because on any given node the surgeon's distance from it varies. He testified:
"It is more sensible to expose the node carefully, keep the field dry, watch what you are doing, and take the node out."
Dr. Derald G. Kellett, a general and thoracic surgeon of Shreveport, substantially agreed with Dr. Eddy.
The conclusions of the medical experts make it abundantly clear, in a lymph node biopsy as Mrs. Pope had, the physician must use special care and caution to avoid damage to the spinal accessory nerve. None of the surgeons who testified had unintentionally severed or damaged such a nerve in this procedure.
The jury exercised its discretion by returning a verdict in favor of Mrs. Pope. The jury was convinced by a preponderance of evidence and found as a fact Dr. Robinson did not in his treatment of Mrs. Pope exercise the degree of skill ordinarily employed under similar circumstances by members of his professional specialty in good standing in the community. We find the evidence sufficient to support this verdict.
Defendants have also taken exception to the charge to the jury by the trial judge which reads:
"In order for a physician to be liable for malpractice, the plaintiff bears a burden of proving that he failed to exercise the care and skill ordinarily exerted by capable physicians and surgeons in the community under the same circumstances applying the latest scientific knowledge in his treatment of the patient."
There is no merit in defendants' contention. Such an identical charge was approved in Johns v. Gauthier, 266 So.2d 504, (La.App. 4th Cir. 1972, writ refused).
Defendants further contend the award by the jury was an abuse of its much discretion. Mrs. Pope, 41 years of age, was self-employed as a hair stylist operating her own beauty shop. She is a widow, dependent on her work for support, and had gross annual earnings in 1968 of $5,317.37. Since 1969 she has undergone four operations. There is evidence the spinal accessory nerve is a motor nerve which alone does not result in pain. However, Mrs. Pope lost the ability to perform the functions of her profession because she could not raise her left arm above 45 degrees from her body. Color photographs graphically reveal the cosmetic effect of the long scars left by the operation on her left shoulder and left thigh. Her ability to take part in sporting activities was materially reduced and Dr. Dunn enumerated some of the conditions she must accept as a result of her injury. These are weakness in elevation of her left arm, pain in holding the arm away from her side, aching in her left shoulder from normal activity, permanent repetitive pain and her household and other activities materially reduced. He opined she had a 20% permanent physical impairment and loss of physical function of her left upper extremity.
Mrs. Pope seeks an increase in the jury award. We find no evidence the jury abused its discretion in reaching its verdict and award. In Walker et al. v. Champion et *867 al., 288 So.2d 44 (1973) the Supreme Court of Louisiana stated:
"In the assessment of damages under this rule, as well as in cases of offenses, quasi offenses, and quasi contracts, much discretion must be left to the judge or jury, . . . ." [LSA-C.C. Art. 1934(3)]
The judgment of the trial court is affirmed.
Defendants-appellants are assessed with all costs of this appeal.
Affirmed.

ON REHEARING
Before AYRES, BOLIN, PRICE, HALL and WILLIAMS, JJ.
BOLIN, Judge.
A rehearing was granted in this case in order that it might be considered by the Court en banc. After a painstaking review of the record and the excellent and forceful briefs of counsel for all litigants, we conclude our original decree was correct. In our original opinion we correctly stated the legal duty a physician owes to his patient as set forth in Meyer v. St. Paul Mercury Indemnity Company, 225 La. 618, 73 So.2d 781 (1953):
"A physician, surgeon or dentist, according to the jurisprudence of this court and of the Louisiana Courts of Appeal, is not required to exercise the highest degree of skill and care possible. As a general rule it is his duty to exercise the degree of skill ordinarily employed, under similar circumstances, by the members of his profession in good standing in the same community or locality, and to use reasonable care and diligence, along with his best judgment, in the application of his skill to the case. . . ."
Appellants contend the trial judge erred in giving the following charge to the jury:
"In order for a physician to be liable for malpractice, the plaintiff bears a burden of proving that he failed to exercise the care and skill ordinarily exerted by capable physicians and surgeons in the community under the same circumstances applying the latest scientific knowledge in his treatment of the patient."

The thrust of this contention is leveled at the italicized portion of the foregoing charge. While persuasive arguments could be advanced both as to the correctness of this charge as well as to the incorrectness thereof, we do not find it necessary to resolve this question. Assuming the italicized portion of the charge was improper, we hold it was not harmful error. There is no contention Dr. Robinson's fault was in any way related to his failure to apply "the latest scientific knowledge in his treatment of the patient". We find the trial judge's charge to the jury when taken as a whole was not prejudicial to defendants.
Much has also been said by counsel for defendants about the many alleged errors and incorrect statements contained in our original opinion. We must concede this was an extremely tedious, complicated malpractice trial. By its very nature it must have taxed the minds of the jurors who initially listened to the witnesses and decided the case. Likewise we, as judges of this court, who sit as reviewers of the law and the facts, being trained in the law and not in medicine, have had a most difficult task in sifting through the record to determine whether the evidence is sufficient to support the jury verdict. However, this is our constitutional duty and we must and have performed it.
Without attempting to restate, clarify or correct any of the facts as outlined in our original opinion, we hold the jury had sufficient evidence to find Dr. Robinson, in the performance of a lymph node biopsy and the follow-up operative procedures in connection therewith, either severed a spinal accessory nerve or injured the nerve causing it to degenerate. This action by the physician constituted fault under Louisiana *868 Civil Code Article 2315 as interpreted by our case law, especially Meyer v. St. Paul Indemnity Company, supra.
The judgment of the lower court is affirmed at appellants' cost.
HALL, J., concurs in the decree.
PRICE, J., dissents and reserves the right to assign written reasons.
PRICE, Judge (dissenting):
I must respectfully dissent from the majority opinion in this case.
Dr. Robinson testified, and was corroborated by Dr. Rayburn, that the procedure on May 28, 1969, was to remove a free moving, small encapsulated lymph node for a pathological biopsy. The vast preponderance of the medical testimony by Drs. Bland, Kellett, Eddy, Rayburn and Robinson show Dr. Robinson performed this surgery by the method usually followed by surgeons in the local community. The medical evidence was made somewhat confusing by the continued reference by plaintiff to a medical treatise in questioning of several of the physicians which describes a more radical operative procedure for removing tubercular cervical lymph nodes involving a neck dissection. This evidence was irrelevant to this case.
Dr. Bland, on whose testimony the majority relies to set a standard for this procedure in the local community, acknowledged the distinction between the two procedures and in effect agreed the method followed by Dr. Robinson was one generally used by surgeons in this area.
Dr. James Eddy, a general surgeon who had performed hundreds of the identical surgical procedure involved herein, testified why the spinal accessory nerve is not first identified as contended by plaintiff as follows:
"Q. Now doctor, in connection with the performance of a lymph node biopsy, is it customary or is it practice to search out and identify the spinal accessory nerve?
"A. In a simple nodal biopsy, it is not only not common, I think it would be grossly in error to so do, it would entail a very expensive incision and very extensive amount of searching around or it might even be more apt to leave the damage than to simply cut down over the node, carefully remove the node. We don't cut things blindly. That is, we don't get a little pool of blood down in the hole and go grasping at things because this could lead to trouble.
We carefully identify the structures as we go along and we are conscious of the fact that there are structures in the neck that we don't want to damage and we watch for them as we go along but in a simple node biopsy, it would seem to be totally incorrect to dissect out a nerve like the spinal accessory because you might be quite some distance from it on any given node or you might be close to it. It is more sensible to expose the node carefully, keep the field dry, watch what you are doing, and take the node out."
The second phase of plaintiff's allegation of negligence relates to an alleged failure of Dr. Robinson to properly diagnose the cause of plaintiff's continued complaints of pain in her shoulder area beginning after the first surgery. It should be obvious that if the six or more specialists who evaluated plaintiff after the surgery with full knowledge of her medical history did not find sufficient symptoms to cause them to make such a diagnosis, how can it logically or reasonably be said Dr. Robinson was at fault in not having done so?
The evidence shows without question Dr. Robinson possesses the required qualifications to have performed the operative procedure *869 and treatment of plaintiff. He is properly licensed to practice medicine in the State of Louisiana, is a Diplomate of the American Board of Surgery, a member of the American College of Surgery, and is an associate professor of surgery at L.S.U. Medical School in Shreveport.
The evidence offered by plaintiff in this case has not fulfilled the burden required of her under the principles set forth in Meyer v. St. Paul Indemnity Co., 225 La. 618, 732 So.2d 781 (1953) and the judgment appealed should be reversed.


         T~EATToRNEY                GENEEZAL
                      OF   TEXAS

                    November 16, 1965

Ron, Robert 9. Calvert             Opinion No. C-547
Comptrollerof Public Accounts
Austin, Texas                      Re: Whether there la pre-exlet-
                                       lng law.far the,~TexaeDepart-
                                       ment of Mental Health 6cMental
                                       Retardation to make an lnte+-
                                       agency contract between the
                                       San Anton10 State Hospital
                                       and the San An$onlo Indepen-
Dear Mr. Calvertr                      dent School DlBtrlct.
         Yourletter requesting an opinion of'this office reads
as followa:
         'I am submlttlngfor your inspection and
    advice, 'acopy of:an interagency contraat drawn
    and a proved under~the provisions of Article
    4413 732) T.C.S. There le.also~lncludeds;letter
    oplnlon dated Septembcy 30, 1953, addressed to
    the.J%onorableW. L. ,Pennlngtonof Texas Techno-
    logical Colle e,;ln which your office holds
    that Artlola fh13 (32) T.C.S:does not apply
    to school dlatrlcte and your opinion lie.V-1333
    deal- with the subJeot of paying for services
    rendered by the San Marcos Independent School
    District to the.SouthwestTexas State College.
           wP1ease adqlse if there Is pre-exlstlng
    law f’or the Texas Department of ?4ent&lHealth
    and Wental Retardation to make an interagency
    aontract   between the &in Antonio State Hospital
    and the San Antanlo Independent School Dlstrlotl
         "If JA find that authority does exist,
    please advise If the contraat as drawn and
    whlch~oalls ior payment out of the Qdneral
    Revenue Fund of this State, would violate the
    provisions of Section 33~or Article 16 of the
    Constitutionof this State?"

                             -2628-
Hon. Robert S. Calvert, page 2 (C-547)

          The contract In question as drawn by the San Antonio
State Hospital and the San Antonio Independent School District
Is not a proper Interagency contract. Independent School Districts
are not state agencies within the provisions of Section 5, Article
4413 (32), Vernon's Civil Statutes. Atty.Gen.Op. V-1333,
         Article 3175, Vernon's Civil Statutes, provides In
part:
         "Each superlntend.entshall: 1. Receive
    and discharge patients and pupils, superintend
    repairs and Improvements and see that all moneys
    Intrusted to hlmnare judiciously and economically
    expended. . . .
          Article 3176, Vernon's civil Statutes, provides In
part as follows:
          "The Superintendent shall be the admlnls-
     tratlve head of the Institution to which he Is
     appointed. He shall have the following powers:
          "1.   . . .
          "2. Where not otherwise provided by law,
     to appoint the subordinate officers, teachers,
     attendants, and other,,employes,and to fix
     their salaries, . . .
          The above quoted statutes provld~esufficient basis
for contractual powers exercised by the Superintendent of the
San Antonio State Hospital. Article 3175 vests discretion for
expenditure of hospital money by each superintendent. Article
3176 enables each superintendent to appoint teachers for ln-
mates as well as subordinate officers, attendants, and other
employees.
          Article 3174b, Vernon's Civil Statutes, Section 2,
provides In part:
          11
           . . .Effective September 1, 1949, the
     control and management of, and all rights,
     privileges, powers, and duties Incident thereto
         .whlch sre now vested In and exercised by
     the State Board of Control shall be transferred
     to, vested In, and exercised by the Board for
     Texas State Hospitals and Special Schools. Pro-
     vided, however, that the Board of Control shall

                             -2629-
Hon. Robert 8. Calvert, page 3 (C&547)

     oontliitie
              tp handie purchases for &uch'bBtib~;
     tlM8 '@akhe~~&amemanner as they db foi.&the+
     State-ageimles."
          &tlcle~693, Vernon18 Civil StatWeB, provides In
part:
          "*he Board of Control shall have poker:
          ti
           . . .
          '17. It shall exercise a careM   supe?Vi-
     slon tiverthe general operations of such in-
     stittitl&nsand control the expenditures,and
     dll'ectthe mkuner In which their tietieinie
                                              shall
     be disbtised,"
          Under the provisions of Article 693 &hd kirticle3174b,
the BoaFd tiiHospitals and Special SchoSls IS vetit@ $@th power
to dire& i&d cGntP?l expendituresdohtr&cted by thiii Superintendent
of the Sti Ahtonlo Stkte Ho$pltal.
          Lto,@estl.onIs presented here atito the:potii%bf the
SaYlAntadio -dependent School District to &%er %ntb thk con-
tract In quetitibn.
           Even though no interagendy dtiqtract  is pr&Mak.he+e
rilthintireprci&slsns bf Article 4413 ,(3$!) J .it is tic bpitilon
that the coiiizackual powers granted to the San AntotiloState
Hospital and the Board for TtMas'State Hospitals and Speaial
School@ f’or appointment of teacheliswithin the p~ovldlo~s of
Articles 3175, ~3176 and 3174b siresuffleleht authorization
for the contract here ln question. + banttiactfor the San
Antonio Independeiit School District to ihriildhtiret&?hers
to the.,~m Aiit&lo,StateHospital ln return fbr bne ThoUSand
Ninety-SIX irndOO/lCO Doll&r8 ($1,096.00) annually 16 a valid
exercise of the .contracttialpower of both parties.
           In answer to your second questlonj It is &or opinion
that the dciht~aetIn question Is not contr&y $o~the prohlblUo;n
of Artidle  XVI< Shtioh  33 of the Texab C&&li%iticin4 Attorney
Qeneral's Opinion Ho. V-1333.

                      SUMMARY
          A aent~act for the San Antonio Independent
     Sc~hoolMst~lct to furnish two teachers fop the

                             -2630-
.

    Hon. Robert S. Calvert, page 4 (C-547)

         San Antonio State ~Hospltalln return for One:
         Thousapd Ninety-Six and.OO/lOO'Dollars($l,Cg6.GC)
         annually~lsauthorizedby the provisions of Articles
         3175, 3176, and 317&b, Vernon's Civil Statutes,
         and -1snot prohibited by Section 33 of'Article XVI
         of the Texas Constitution.
                                 Very truly yours,
                                 WAGGONER CARR
                                 Attorney ffeneral

                                    Gordon Houser
                                    Assistant
    Gmilkt-    _.
    APPROVED:
    OPINION COMMITPEE
    -W. 0. Shultz, ChalIlllSB
    Malcolm Quick
    James Strock
    John Hanks
    Tom Routt
    APPROVEDFORTHEiATTC=        GENERAL
    BY: T. B. Wright

                                 -2631-


AccessDeniedAccess Denied62638914CB6634F5Vnyemxn/jK3UqH0Fteh4io2QF/6s6iiGoSDeUp589QmgeezUy/84uj9wS1rB6a7Q


136 N.J. Super. 461 (1975)
346 A.2d 624
STEVLEE FACTORS, INC., A CORPORATION, PLAINTIFF,
v.
THE STATE OF NEW JERSEY, UNITED STATES FIDELITY AND GUARANTY COMPANY, AND RELIANCE INSURANCE COMPANY, DEFENDANTS.
Superior Court of New Jersey, Chancery Division.
Decided October 10, 1975.
*462 Mr. Barnett Berr, attorney for plaintiff.
Mr. William F. Hyland, Attorney General of New Jersey (Mr. Edward Schwartz, Deputy Attorney General, appearing).
Mr. Dennis J. Drasco, attorney for defendant Reliance Insurance Company (Messrs. Lum, Biunno & Tompkins, attorneys).
Mr. Richard R. Width, Jr., attorney for defendant United States Fidelity and Guaranty Company (Messrs. Lindabury, McCormick & Estabrook, attorneys).
CIOLINO, J.S.C.
The question presented in this matter appears to be one of first impression and reaches the court on the return date of an order to show cause and cross-motions for summary judgment. The issue is whether the interest created by the filing of a security agreement and financing statement in accordance with the Uniform Commercial Code by the assignee of the accounts receivable of a general contractor is superior to the rights of sureties on performance and/or labor and material bonds, which sureties *463 have undertaken or guaranteed completion of the work of a defaulting contractor.
The facts, as distilled from the pleadings, affidavits and statements of counsel made on the record, are undisputed. On March 13, 1973 Dean Electric Co., Inc. (Dean) entered into an arrangement with plaintiff for the factoring of all of its accounts receivable and contract rights in conjunction therewith. At the same time Dean executed and delivered a security agreement and financing statement which were duly filed on March 19, 1973 in the office of the Secretary of State of New Jersey, as required by the Uniform Commercial Code. Pursuant to the provisions of the security agreement, plaintiff advanced to Dean hundreds of thousands of dollars. As of April 1, 1975 there remained due and unpaid to plaintiff the aggregate sum of $600,092.06 representing unpaid advances made in accordance with the aforesaid agreement. At various times between 1972 and 1974 defendant State of New Jersey awarded contracts to Dean for electrical work on State projects pursuant to the public bidding laws. As required by statute, Dean filed with the State a series of surety bonds to secure the payment of materialmen and laborers and to insure the performance of its various contracts. Two of the aforemenioned jobs were bonded by defendant Reliance Insurance Co. (Reliance) and the remainder were bonded by defendant United States Fidelity and Guaranty Company (U.S.F. & G.) In accordance with the contract terms, the State paid out 90% of the monies earned on monthly billings, withholding the balance as per its agreement that the same would be paid upon the completion and acceptance of each job. The aggregate amount of monies still retained by the State on these jobs is $94,878.
The bonds of Reliance predate the filing of the financing agreement, while those of U.S.F. & G. are subsequent thereto. In conjunction with the issuance of the several bonds, each surety procured an assignment from Dean of all *464 monies due or to become due under the respective jobs each had bonded. Defendant bonding companies never filed financing statements with the Secretary of State of New Jersey.
On April 4, 1975 Dean made an assignment for the benefit of creditors of its entire estate, ceased performance of its work and did breach and default under the terms and conditions of the security agreement with plaintiff. Plaintiff made demand upon the State on April 1, 1975 for all monies due and owing from the State to Dean. Of the 13 contracts awarded to Dean, six were totally completed as of April 4, 1975. The remaining seven contracts were uncompleted, and the Division of Building and Construction of the State declared Dean to be in default by reason of the breach resulting from this assignment. The Division notified codefendant sureties to complete the work under the terms of the performance and payment bonds. As an alternative, the notice advised that the State would complete the contracts and back-charge the costs thereof to the sureties. Thereafter, agreements were reached whereby the sureties undertook to complete three projects and to have the remaining four completed by other electrical contractors. In all seven cases the State agreed to apply all unpaid contract balances and retainages in its hands to the completion of the work, and the sureties agreed to contribute the difference between such balances and the total costs of completion. As a result, no monies will remain in the hands of the State.
Plaintiff contends that it, and not defendant State, the codefendant sureties or the completing contractors or suppliers, is entitled to all monies deducted and retained by the State out of the various approved billings submitted by Dean for payment for work, labor and materials furnished prior to default. Plaintiff relies upon the fact that neither surety filed a financing statement pursuant to the Uniform *465 Commercial Code and concludes that defendants have thus failed to qualify as secured creditors under the Code.
Defendant sureties contend that the right to retainage of a surety who completes performance of a public construction contract is superior to the right of an assignee of the contractor notwithstanding the filing by the assignee of the executed security agreement and financing statement.
There being no questions of fact, the issue presented is ripe for disposition by way of summary judgment. R. 4:46-2.
Although there appears to be no New Jersey case which deals with the question raised by this litigation, other jurisdictions have spoken to related problems. In the leading case of Pearlman v. Reliance Ins. Co., 371 U.S. 132, 83 S.Ct. 232, 9 L.Ed. 2d 190 (1962), a dispute arose between the trustees in bankruptcy of a Government contractor and the payment bond surety. The Government had withheld in excess of $87,000 which would have been due the contractor had he paid labor and material claimants. In sustaining the surety's right to the fund and in concluding that the fund was not an asset of the bankrupt's estate, the Supreme Court held that the Government had the right to use the retained fund to pay labor and material claims; that labor and material claimants had a right to be paid out of the fund; that the contractor would have been entitled to the fund had he paid labor and materialmen, and that the surety having paid them became subrogated to the fund. The court further observed:
Traditionally sureties compelled to pay debts for their principals have been demed entitled to reimbursement even without a contractual promise such as the surety had here. And probably there are few doctrines better established than that a surety who pays the debt of another is entitled to all the rights of the person he paid to enforce his right to be reimbursed. This rule [is] widely applied in this country and generally known as the right of subrogation ... [at pp. 136-137, 83 S.Ct. at p. 235.]
*466 In Memphis and L.R.R. Co. v. Dow, 120 U.S. 287, 301-302, 7 S.Ct. 482, 30 L.Ed. 595 (1887), the court stated;
The right of subrogation is not founded on contract. It is creature of equity; it is enforced solely for the purpose of accomplishing the ends of substantial justice; and is independent of any contractual relations between the parties. [120 U.S. at 301-302, 7 S.Ct. at 489]
The doctrine of subrogation has received wide application by the courts of this State and is referred to as a right highly favored in law. Standard Accident Ins. Co. v. Pellecchia, 15 N.J. 162 (1954). A. & B. Auto Stores of Jones St., Inc. v. Newark, 59 N.J. 5 (1971). The sureties' right to the fund rests upon the application of this doctrine. Since the sureties stand in the place of those whose claims they have paid, the funds must be paid to the sureties just as the funds would have gone in the absence of a bond, to the labor and materialmen rather than to the general creditors. Jacobs v. Northeastern Corp., 416 Pa. 417, 206 A.2d 49 (Sup. Ct. 1965). National Shawmut Bank of Boston v. New Amsterdam Cas. Co., Inc., 290 F. Supp. 664 (D. Mass. 1968), aff'd 411 F.2d 843 (1 Cir.1969). It is undisputed that sureties in the instant case filed no financing statements as defined by the Uniform Commercial Code. The issue then presented is whether they were required to do so. I am of the opinion that they were not.
In Jacobs, supra, the receiver of a defaulting contractor for the construction of a state building resisted the petitions of the sureties for distribution to them of funds due under the contract and counterclaimed for retainage on the ground that the sureties had not filed financing statements as required by the Code. There the court held:
None of the purposes or objectives of the Code's filing requirements would be served by holding that a subrogation to the contract balance now due is an assertion of a "security interest" and therefore subject to the filing provisions of Article 9. The contract balance withheld would never have become due and payable to Northeastern *467 (or its receiver or creditors) as long as Northeastern defaulted on its obligation to pay labor and materialmen. Payment of the retained balance became due and available only upon the performance by the sureties of Northeastern's obligation. It is clear that all labor and materials claims must be fully discharged before there is entitlement to the full contract payment. In all respects, the results so far as Northeastern and its creditors are concerned is precisely the same whether the surety satisfied the unpaid laborers and materialmen, or whether the Commonwealth directly pays the claimants out of the retained funds. Surely, the creditors of Northeastern are not adversely effected because the sureties were called upon to, and did, perform their undertaking to pay labor and material claims.
It seems exceedingly clear that in the present suretyship situation, filing is not needed to prevent deceiving or misleading the creditors about the state of the contractor's available assets. * * *
Of basic importance is the general rule of Section 9-102(2) that Article 9 "applies to security interests created by contract." Rights of subrogation, although growing out of a contractual setting and oftimes articulated by the contract, do not depend for their existence on a grant in the contract, but are created by law to avoid injustice. Therefore, subrogation rights are not "security interests" within the meaning of Article 9. The surety's rights of subrogation, having been created by operation of law, are not the usual type of consentual security interests contemplated by the code. [at 428-429]
It is the determination of this court that the Uniform Commercial Code does not impair the surety's equitable right of subrogation. I can find no case which holds that the Code, as enacted, does away with the equitable doctrine of subrogation. "Unless displaced by the particular provisions of this chapter, the principles of law and equity * * * shall supplement its provisions." N.J.S.A. 12A:1-103. I find, further, that the codefendant sureties are subrogated to the claims of the State and/or claims for labor and materials. Their right to the funds retained by the State is thus superior to the claim of plaintiff.
Summary judgment dismissing plaintiff's order to show cause as to the issue herein addressed, is to be entered on behalf of defendants.