Kentucky Court Report - SCOKY & COAKY

APPEALS - Supersedeas Bond: Lawyers Mutual Insurance Company of Kentucky v. Stewart (COA 11/20/2009)

Lawyers Mutual Insurance Company of Kentucky v. Stewart
2009-CA-000114 11/20/09 2009 WL 3878132
Opinion by Judge Wine; Judge Nickell and Senior Judge Harris concurred.

The Court affirmed an order of the circuit court denying appellant’s motion for enforcement of a supersedeas bond against the surety thereon. The Court held that when there has been an execution of judgment in disregard of a supersedeas bond, it would be unconscionable, unjust and inequitable to enforce it as against the surety.

Arbitration Award, Finality and appealability: Medcom Contracting Services, Inc. v. Shepherdsville Christian Church Disciples of Christ, Inc. (COA 6/26/2009)

Medcom Contracting Services, Inc. v. Shepherdsville Christian Church Disciples of Christ, Inc.
2006-CA-002536 06/26/2009 2009 WL 1811080

Opinion by Judge Taylor; Judges Caperton and Nickell concurred.

The Court affirmed an order of the circuit court denying appellants’ motions for summary judgment on counterclaims seeking confirmation of an arbitration award. The Court first held that the order was final and appealable because it did not merely deny the motions for summary judgment but also dismissed the counterclaims and thus, constituted adjudication on the merits of the counterclaims. The Court then held that the termination of the arbitration for nonpayment of fees did not constitute an arbitration award under KRS 417.120. Because no award was made by the arbitrator, appellee was not obligated to challenge the termination of the proceedings under KRS 417.160. Further, because appellee attempted to get reconsideration of the termination, it accrued no prejudice or res judicata effect legally sufficient to preclude it from filing the action seeking a judicial legal remedy.

Employment - Written notice of a penalization to file appeal with Personnel Board: Commonwealth, Dept. of Revenue, Finance and Administration Cabinet v. McDonald (COA 4/10/2009)

Commonwealth, Dept. of Revenue, Finance and Administration Cabinet v. McDonald
2007-CA-001626
04/10/2009
2009 WL 960765
Opinion by Judge Moore; Judges Clayton and Taylor concurred.

The Court reversed an opinion and order of the circuit court concluding that appellees’ requests for retroactive pay related to their job reclassifications were timely appealed.

The Court held that the Personnel Board and the circuit court improperly interpreted KRS 18A.095(29). The General Assembly enacted a one-year time limit for merit employees who did not receive written notification of a penalization to file an appeal with the Personnel Board and there were no exceptions to the time limits for continuing violations or ongoing penalizations.

The Court further held that that the statute did not require an acknowledgement of the penalization by the appointing authority. Because the appellees failed to appeal the action to the Personnel Board within the time limitation, calculated from the date they were notified that their job assignments were changed but they were not reclassified at a higher pay grade, the appeals to the Board were time barred.

APPEALS - Matter of right and supercedeas bonds: HINES V. CARPENTER (COA 2/27/2009)

Hines v. Carpenter
2006-CA-002173
02/07/2009
2009 WL 275837
Opinion by Judge Nickell; Chief Judge Combs and Senior Judge Graves concurred.

The Court affirmed an order of the circuit court denying appellants’ motion to compel appellee to pay them a lump sum for damages they allegedly incurred when appellee posted a supersedeas bond, which stayed collection of a summary judgment awarded to them for back child support. The Court held that, although appellants had been without the funds awarded them for far too long, § 115 of the Kentucky Constitution allowed appellee one matter-of-right appeal. Although, appellant had perfected more than one appeal in his effort to stall paying back child support, he appealed the supplemental summary judgment only once. Thus, pursuant to KRS 26A.300(1), the motion to compel the payment of damages was statutorily forbidden.

Administrative appeals and exhaustion of remedies applied in dismissal of appeal: BLUEGRASS AUTOMOTIVE, INC. V. KENTUCKY UNEMPLOYMENT INSURANCE COMM. (COA 10/3/2008)

BLUEGRASS AUTOMOTIVE, INC. V. KENTUCKY UNEMPLOYMENT INSURANCE COMM.
EMPLOYMENT:  Administrative Appeals, exhaustion of remedies
2007-CA-001526
PUBLISHED: AFFIRMING
PANEL:  DIXON PRESIDING; COMBS, LAMBERT, JAMES CONCUR
FRANKLIN COUNT
DATE RENDERED: 10/3/2008

In 2002, Bluegrass acquired the assets of Tom Payette Jaguar, Inc. In August 2006, Bluegrass contacted the Kentucky Unemployment Insurance Commission (“the Commission”) to inquire about a transfer of the unemployment insurance reserve account of Tom Payette Jaguar.

On January 8, 2007, Bluegrass appealed the assessment to the Commission. The following day, Bluegrass filed a complaint against the Commission in Franklin Circuit Court appealing the assessment and contending the Commission acted outside of its statutory power. 

On January 12, 2007, the Commission filed a motion to dismiss the complaint, arguing the court did not have jurisdiction because Bluegrass failed to exhaust its administrative remedies pursuant to Kentucky Revised Statutes (KRS) 341.430 and KRS 341.450.  The circuit court dismissed the complaint and amended complaint and this appeal followed.

There is no appeal to the courts from an action of an administrative agency as a matter of right. When grace to appeal is granted by statute, a strict compliance with its terms is required. Where the conditions for the exercise of power by a court are not met, the judicial power is not lawfully invoked. That is to say, that the court lacks jurisdiction or has no right to decide the controversy

Pursuant to KRS 341.450 and KRS 341.460, after the Commission renders a decision and all administrative remedies have been exhausted, an aggrieved employer may seek judicial review by filing a complaint against the Commission in Franklin Circuit Court within twenty days of the decision.

In the case at bar, it is evident that Bluegrass failed to follow the statutory mandate. Bluegrass filed its circuit court complaint against the Commission before the Commission had rendered a decision. 

Digested by Michael Stevens

Law of case doctrine not limit remand of earlier decision under facts of the case: MKJ v. BOURBON COUNTY BOARD OF EDUCATION (COA 8/29/2008)

MKJ v. BOURBON COUNTY BOARD OF EDUCATION
APPEALS:  Law of case doctrine not applied to the facts of case in remand permitting issues not addressed on appeal to be prosecuted against school board       
2007-CA-000832
PUBLISHED: REVERSING AND REMANDING
PANEL: BUCKINGHAM PRESIDING; CAPTERTON, STUMBO CONCUR
BOURBON CIRCUIT COURT;
DATE RENDERED: 8/29/2008
      
BUCKINGHAM, Senior Judge.
Please note the procedural history of this appeal as it came up first on an appeal of a board of education expulsion of a student which was then remanded by the COA, and upon the remand the student sought to raise issues that the board and the circuit court thought were limited by the earlier remand or already addressed by the law of the case doctrine.  The COA held in THIS appeal that neither was the case.

M.K.J. was expelled as a student from Bourbon County High School by the Bourbon County Board of Education in May 2002. In August 2002 he filed an action in Circuit Court seeking to have the expulsion set aside and seeking damages for violation of 42 U.S.C. § 1983, 20 U.S.C. § 1402 et seq. , 707 KAR 1, and Article 2 of the Kentucky Constitution.  When the circuit court denied M.K.J.'s motion to have the expulsion set aside, he appealed to the COA, and a previous panel rendered an opinion that determined the Board's action was arbitrary, reversed the circuit court's decision, and remanded the case to that court with directions to remand the matter to the Board to vacate its decision expelling M.K.J. See M.K.J. v. Bourbon County Board of Education (2003-CA-000352-MR).
      
Upon the remand,  M.K.J. sought to pursue the remaining causes of action in the circuit       court which denied him that right, holding that the COA had limited the circuit court's jurisdiction to remanding the matter to the Bourbon County Board of Education. This second appeal by M.K.J. followed. The COA this second time concluded the circuit court erred and therefore we reversed and remanded.
      
As a background note to this second appeal, the incident that led to this litigation occurred while M.K.J. was a student at Bourbon County High School when the school received a bomb threat which led school administrators to send for explosive-detection dogs. One of the dogs brought by the canine handlers was trained to detect contraband substances. This dog indicated that such substances might be present in M.KJ.'s car, which was parked in the school parking lot.  A search of the car found contraband, the student was suspended and eventually the school board conducted a hearing ruled to expel the       student.  Suit was then filed by the student.

The question on this second appeal was the propriety of the circuit court's order limiting the issues upon remand.  The COA concluded that although this court made no specific mention of M.K.J.'s due process claims in its earlier opinion, it clearly did not affirm any dismissal of those claims by the circuit court. In fact, this court plainly stated that it found it unnecessary to address M.K.J.'s appeal as it related to those claims because it had determined that the expulsion was arbitrary; The implication that the claims were alive is clear.
   
The COA then addressed the school board's "law of the case" argument by stating that "To the extent the law of the case doctrine may otherwise be applicable, the exception to the rule should be applied       here. . . .  Where the law of the case rule is applicable, it has sufficient flexibility to permit the appellate court to admit and correct an error made in the previous decision where substantial injustice might otherwise result and the former decision is clearly and palpably erroneous. )citations omitted here)."
      
Under these circumstances, the COA held the claims are viable and that the circuit court erred in not allowing M.K.J. to proceed in the prosecution of the claims. To the extent this Court's prior opinion may have been deficient in that it failed to reverse the circuit court's dismissal of the due process claims,      the COA then applied the aforementioned exception to the law of the case doctrine such that wherein the circuit court held it had no jurisdiction to act on M.K.J.'s remaining claims after remand from this      court is reversed, and this case is remanded for the purpose of allowing M.K.J. to pursue those claims.              

Digested by Michael Stevens

   

Issue mooted on appeal: THE MEDICAL VISION GROUP, PSC V. HON. TIMOTHY N. PHILPOT (SC 8/21/2008)

THE MEDICAL VISION GROUP, PSC V. HON. TIMOTHY N. PHILPOT
CIVIL:  Issue was mooted pending appeal and thus no actual case or controversy; COA engaged in improper fact-finding       
      2008-SC-000017-MR.pdf
      PUBLISHED: DISMISSING AS MOOT
      OPINION BY ABRAMSON; VENTERS NOT SITTING
      FAYETTE COUNTY
      DATE RENDERED: 8/21/2008
      
This appeal involved two business asking the  Kentucky Court of Appeals for a writ prohibiting circuit court judge from appointing a receiver to oversee both business entities and from asserting external judicial control over the businesses' accounts and assets.        

The Supreme Court addressed two issues.  Although it eventually ruled that the issue of the writ was      now moot and there was no case or controversy before it, it first noted that the Court of Appeals in deny the writ from the circuit court had engaged in improper fact finding.
      
The businesses sought the writ because the businesses were in receivership, and the COA denied the writ of prohibition in four sentences finding that since the "petitioners fall under the `alter ego' rule," the trial court had jurisdiction over the corporations and could appoint a receiver to manage them.

The Court of Appeals denied the writ, finding that because the businesses are alter-ego corporations of Dr. Jitander Dudee, the trial court had jurisdiction over MVG's business assets and could direct that they be used to pay the doctor's personal marital debts.

However, even in a writ case the COA is prohibited from infringing upon the trial court's fact-finding role and stated the trial court made no  mention of the "alter ego" theory in its 40 page opinion, but       rather the trial court referenced the testimony involving Dr. Dudee's co-mingling of his corporate assets only in the context of assigning a monetary value to the two business as part of the doctor's marital estate. Thus, the Court of Appeals engaged in improper fact-finding when it determined that MVG and Schatzie were Dr. Dudee's alter-ego .

Turning to the issue of mootness, unless there is "an actual case or controversy," the appellate court has no jurisdiction to hear an issue and is prohibited from producing mere advisory opinions. Commonwealth v. Hughes , 873 S.W.2d 828, 829 (Ky. 1994); Ky. Const. § 110.
      
Because the trial court has discharged the receiver of the two businesses, Dr. Dudee is now in sole control of MVG. With Dr. Dudee again in control of MVG, this Court would not be able to grant meaningful relief to either party  and granting the writ would be futile because the receiver no longer exists and the trial court is not imposing any judicial control over Dr. Dudee's business entities and denying the writ would be meaningless because again, the trial court has already discharged the receiver.
      
Therefore, the question of whether the trial court had jurisdiction to appoint a receiver to oversee the two business is moot and this Court does not have jurisdiction to consider it.

Editor's Note:  A family court appeal to the Court of Appeals involving the doctor's divorce in this       matter was dismissed as moot on Aug. 8, 2008 regarding the receivership.  See 2007-CA-1331.       

COA: No decision on line.

Briefs:
      
Appellant's    Brief

Appellee's  Brief    

Appellant's Reply Brief 

Digested by Michael Stevens

Appeals: Divestment of jurisdiction pending appeal: YOUNG v. RICHARDSON (COA 7/25/2008)

YOUNG V. RICHARDSON
APPEALS:  Divestment of jurisdiction pending appeal
2006-CA-002441
PUBLISHED: REVERSING AND REMANDING
PANEL: HENRY PRESIDING; STUMBO, TAYLOR CONCUR
MARION COUNTY
DATE RENDERED: 7/25/2008; 10/2/2008

Very complicated case that boils down to one basic principle: two courts can't exercise jurisdiction over the same issue at the same time.  The underlying action concerns the propriety of a transfer of assets from two inter vivos trusts established in 1991 by the app'ant Julianne Young's (Young) parents, Sam & Julia May.  Julie & her sisters were beneficiaries of the trusts.  In '99, Sam created Buena Vista LLC (BV), and he transferred a brockerage account from Julia May's trust and two farm titles to the LLC.  Five days later, he transferred his entire interest in BV to his three daughters equally, apparently for tax purposes.  The ensuing dispute concerned only the tax consequences of the transfers & whether any of the assets would be subject to trust restrictions.

In '01, Young tried to transfer the brokerage account to her mom's trust.  Her sisters filed a dec action against her in Marion CC, and BV was joined as a 3rd party D.  On April 11, 2003, the trial court entered partial summary judgment in favor of Young; the sisters (or their heirs) and BV appealed, consolidated their appeals to the CA, and the CA upheld the trial court on May 6, 2005.  The app'ants timely filed a petition for rehearing on June 6, 2005.

Here's where it gets more complex.  On July 7, the parties met and signed a mediation memo in which they agreed to enter into a settlement agreement.  That agreement contained a binding arbitration clause.

On August 9, 2005, after the CAs denied the petition for rehearing, one sister filed a motion for DR with the Supremes; the Supremes held the motion in abeyance three times at the sister's request, until September 7, 2006, when it entered an order denying any further abatement of the case.

On December 7, 2005, the app'ants filed a petition in Marion CC for relief from the April 11, 2003 judgment under the auspices of CR 60.03 and 60.02(f).  A week later on December 15, the parties signed an order which apparently represented an attempt to resolve all outstanding issues in the three actions in which a motion for DR was pending before the Supremes.  The trial court entered the order that same day, and it contained language directing the parties to arbitrate the issues outstanding.

On January 17, 2006, Young moved the trial court to abate the proceedings in the CR 60.03 and 60.02(f) action and moved for an extension of time to file a responsive pleading until further order of the court and pending the decision of the arbitrator as agreed by the parties in the December 15 order.  The trial court denied same, ordered a briefing schedule, and the parties briefed the action.

On June 1, 2006, the trial court entered an order noting that the parties were seeking relief via CR 60.02(f) & 60.03 from the 4/11/03 partial SJ order.  It also mentioned the June 15 and December 15 memos from the parties re: arbitration and granted Young's motion to abate the action pending arbitration.  It ordered the parties to arbitrate.  They did so on September 15, 2006, and on the 26th of that month, the arbitrators presented a proposed order to vacate the 4/11/03 order.

On September 26, 2006, the TC entered an order vacating the 4/11/03 order on the grounds that the parties had agreed to the proper resolution of the matter; the Court had power to grant equitable relief under CR 60; and the intention of Sam in transfering the assets was clear.   Young eventually filed a notice of appeal to this case on November 22, 2006.

This is important: on November 15, 2006, the Supremes entered an order denying DR of the CAs May 6, 2005 opinion affirming the 4/11/03 order.  Young argues on appeal that the TC had no subject matter jurisdiction (JD) to enter the September 27, 2006 order granting CR 60 relief because the motion for DR of the CA's opinion affirming the 2003 judgment was then pending before the Supremes.

With certain narrow exceptions, the law in KY is that the circuit court is divested of JD over a case when a notice of appeal is filed.  CR 60.04 states that if a CR 60.02 or 60.03 motion is commenced while an appeal is pending from the original judgment and prior to the time an opinion is rendered by the appellate court, the party commencing such action shall promptly move the appellate court to abate the appeal until a final order is entered therein.  When the TC has entered such a final order, the party who moved for abatement shall promptly file with the clerk of the appellate court a certified copy thereof.  Remember from law school that lack of JD, save for that of the person, cannot be waived and JD cannot be conferred by consent or agreement.  Thus, the Marion CC was without authority to enter any orders, except to grant or deny the CR 60.02-60.03 motion, from the time the notice of appeal was filed August 29, 2003 until the CA's opinion became final upon the Supremes' denial of DR on November 15, 2006.  This would include the 12/15/05 order.

The Supremes held the TC exceeded the bounds of its authority in entering the agreed order, because not only was its substance unrelated to the grounds raised in the CR 60.02-03 motion, it directly concerned matters involved in the pending appeal.  It also held that though the TC retained narrow JD to rule on the CR 60.02-03 motion, in this case the TC's decision, rather than being responsive to the grounds raised in the motion, was based on the existence and terms of the invalid December 15, 2005 order.  The Supremes reviewed the TC's reasoning in its September 27, 2006 order and found its grounds for ruling did not satisfy the requirements of CR 60.03 or CR 60.02(f).  It noted that the gravamen of the order rested on the TC's equitable powers.  It finally noted that while there was no indication that the TC intended anything other than the equitable resolution of the case, its decision was not supported by sound legal principles.  Reversed and remanded.

Cherry Henault Guarnier

Appeal of restraining order dismissed since not avenue of relief: KENTUCKY HIGH SCHOOL ATHLETIC ASSOCIATION V. EDWARDS (SC 6/19/2008)

KENTUCKY HIGH SCHOOL ATHLETIC ASSOCIATION V. EDWARDS
APPEALS:  Interlocutory appeal not avenue of relief for restraining order, appeal dismissed by SC
2007-SC-000927-I.pdf
PUBLISHED: SUPPORTING DISMISSAL
OPINION BY NOBLE
BARREN COUNTY
DATE RENDERED: 6/19/2008;  FINAL 7/20/08

Bo Edwards was a student-athlete at Barren County HS from his ninth to eleventh grades. In May 2007 the HS administration found he had violated the school's alcohol policy and declared him ineligible for athletics the following school year. He enrolled at Glasgow HS in June 2007 and requested that the KHSAA declare him eligible under the bona-fide-change-in-address exception to the KHSAA Bylaws Transfer Rule. The KHSAA denied the request; two hearings were held in 2007, and the Hearing Officer eventually recommended affirming the denial, finding that the residence exception was not available where the student left the sending school under penalty which would have resulted in their [sic] ineligibility at the sending school. The KHSAA adopted the Hearing Officer's recommendation and declared him ineligible to play the 07-08 school year.

Bo then filed a verified complaint with the Barren CC seeking judicial review of the decision; he also filed an ex parte motion for a temporary injunction barring enforcement of the decision. The Barren CC granted this ex parte motion in a document styled "Findings of Fact, Conclusions of Law and Temporary Injunction" entered 10/26/07.

On 11/13/07 the KHSAA filed a motion for interlocutory relief with the CAs under CR 65.07; the CAs denied the motion, finding that the KHSAA failed to show the CC's findings were clearly erroneous or failed to balance the parties' equities. The KHSAA then filed a motion for interlocutory relief with the Supremes under CR 65.09, arguing it was entitled to relief because of the "special difficulties" presented by student athlete eligibility cases and because the CC abused its discretion.

Though neither party argued the issue, the Supremes noted that it is required, sua sponte, to address jurisdiction if necessary. The Supremes reviewed the proceedings below and found that temporary injunctions may only be granted with notice and a hearing. Here, the motion was styled a TI, but it was "ex parte," and provided neither notice nor hearing to the KHSAA. The CC's order, then was NOT a TI, and instead must be deemed a restraining order. See Common Cause of Ky. v. Commonwealth, 143 S.W.3d 634 (Ky., 2004)(holding that substance and form of order made it a restraining order, despite movant's claim that it amended its motion to argue for a TI). The Supremes point out that there is a difference between an Restraining Order and a Temporary Injunction, and the distinction is important, becuase there is no right to appeal or seek interlocutory relief from an Restraining Order, unlike a Temporary Injunction. Instead, the remedy for an Restraining Order is a motion for the trial court to dissolve the Restraining Order, which has the effect of automatically ending the Restraining Order unless the other side has also moved for a Temporary Injunction. See CR 65.03(5).

Because the Civil Rules make no provision for appeals from Restraining Orders, the Supremes held they could not address the merits of KHSAA's claim at this time. It therefore vacated the CAs decision and dismissed the KHSAA's CR 65.09 motion.

By Cherry Guarnieri, ed.

Although district court does not have appellate jurisdiction over local code enforcement, it can do a de novo review of the record but not de novo trial: HIGHVIEW MANOR ASSOCIATION LLC V. LOUISVILLE METRO HEALTH DEPT. (COA 6/13/2008)

HIGHVIEW MANOR ASSOCIATION LLC V. LOUISVILLE METRO HEALTH DEPT.
GOVERNMENT:  Review of municipal code and enforcement (bingo halls)
2007-CA-000233
PUBLISHED: REVERSING IN PART, VACATING IN PART, AND REMANDING
PANEL:  KELLER PRESIDING; CLAYTON, MOORE CONCUR
JEFFERSON COUNTY
DATE: 6/13/2008

COA accepted discretionary review in this matter to determine the scope of a district court's authority to review a decision of a local code enforcement pursuant to KRS 65.8831.

The underlying matter involves citations and fines imposed against bingo hall owners by the Louisville-Jefferson County Metro Government's Code Enforcement Board for violations of the Smoke Free Law, Louisville Metro Ordinance No. 123-2005.   The facilities argued that they were exempt from application of the Smoke Free Law, as they leased their premises to charitable organizations that conducted bingo games as authorized by KRS 238.500, et seq., and thus were private organizations.

In response, the Health Department argued that the private organization exception did not apply, as there was no evidence that the facilities were not open to the general public, and that the district court was limited to a review of the record created before the code enforcement.

In its Findings and Order on April 26, 2006, the district court found that a conflict existed in the statutes regarding its jurisdiction: KRS 24A.010 provides that it does not have appellate jurisdiction, while KRS 65.8831 provides that in an appeal of a decision of the code enforcement board, the district court is limited to a review of the record the board created.

The district court determined that it had original jurisdiction of the matter.  The district court further determined that the facilities were exempt from enforcement of the Smoke Free Law and that the charitable organizations that rented the bingo halls were exempt.

COA presumed the General Assembly (and, in turn, the Louisville Metro Government) was aware that the district court had no appellate jurisdiction pursuant to KRS 24A.010(3) when it enacted KRS 65.8831, which limited the district court to a review of the record created before the code enforcement board.  The district court is not permitted to conduct a de novo trial, but instead is merely permitted to review only that evidence and testimony introduced before the code enforcement board.  The district court may not take additional evidence, but must confine itself to the board's record. It is incumbent upon the code enforcement board to ensure that its record is sufficient to provide for meaningful review.

Because it does not have appellate jurisdiction, the district court may conduct a de novo review of that evidence and is not confined to a determination as to whether the board's decision was arbitrary.

Therefore, the circuit court erred when it held that the district court could only review the board's action for arbitrariness.

Accordingly, COA reversed the circuit court's holding in this regard and remanded this matter to the circuit court to address the merits of the district court's decision, which must be supported by the board's record.

On remand, the circuit court shall first determine whether the district court properly concluded that the organizations operating the bingo games were private organizations. If so, then the circuit court must next determine whether the district court properly applied the private organization exemption to the owners of the respective facilities.

For the foregoing reasons, the Jefferson Circuit Court's Opinion and Order is hereby reversed in part and vacated in part, and this matter is remanded to the circuit court for further proceedings consistent with this opinion.

By Michael Stevens