Kentucky Court Report - SCOKY & COAKY

Appeals: Preserving error on appeal (instructions, manifest injustice, as applied to judge issues re unjust enrichment and piercing the corporate veil

The following published decision addresses the failure to preserve error on appeal relative to instructions.  The issues surrounded preserving the error, manifest injustice; within the context of unjust enrichment and piercing the corporate veil. 

KILLIAN V. TUNACAKES PROPERTIES, INC.
COA, PUBLISHED
JAN. 20, 2012

Killian also argues that the trial court erred in allowing a jury instruction on unjust enrichment. Although it is unclear, it appears that Killian is arguing that, by allowing the jury instruction on unjust enrichment, the trial court implicitly pierced the corporate veil, allowing Killian to be held personally liable.

The unjust enrichment jury instruction read as follows: INSTRUCTION NO. 6
Are you satisfied from the evidence that:

a) That SJK, SK Development, LLC and Steven Killian have each benefitted, and have continued to benefit economically by the acquisition of Settlers Trace and that such acquisition would not have been possible unless Tunacakes had agreed to enter into the Consulting Agreement with SJK;
b) That SJK, SK Development, LLC and Steven Killian have each benefitted, and continued to benefit economically by the [sic] purchasing Settlers Trace and that said acquisition would not have been possible unless Tunacakes accepted the Promissory Note from SJK;
c) SJK, SK Development, LLC and Steven Killian, continue to use, possess and/or otherwise enjoy the benefits of an income producing business and property, which would not have been available, but for Tunacakes’ acceptance of the payment terms of the Consulting Agreement and Promissory Note; and
d) To prevent unjust enrichment, SJK, SK Development, LLC and Steven Killian, are jointly and severally liable for full restitution to Tunacakes in amounts now due and owing under the payment terms of the Consulting Agreement and Promissory Note.

Initially, we note that Killian’s brief fails to include a statement on how he preserved this issue for appeal as required by Kentucky Rule of Civil Procedure (CR) 76.12(4)(c)(v). It is not the burden of the Court to search the record to find proof of the Appellants’ claims. See Phelps v. Louisville Water Co., 103 S.W.3d 46, 53 (Ky. 2003). Having carefully reviewed the record, we note that this issue was not preserved for review because Killian did not timely object to the unjust enrichment instruction. Pursuant to CR 51(3), the time to object to jury instructions is prior to the court instructing the jury. As stated in Harris v. Thompson, 497 S.W.2d 422, 431 (Ky. 1973), “if the appellants were not satisfied with any phase or portion of the instructions the time to speak was before they were given to the jury.” Further, “a general objection without specification is insufficient to preserve the [alleged] error.” Burgess v. Taylor, 44 S.W.3d 806, 814 (Ky. App. 2001).

A review of the record reflects that Killian made an objection to the jury instruction on unjust enrichment, but only argued that Tunacakes had not presented sufficient evidence to support a finding of unjust enrichment. Killian did not argue that, by allowing an unjust enrichment instruction, the trial court would be implicitly finding that the corporate veil should be pierced. Although it does appear that Killian raised this issue in his motion to alter, amend or vacate the judgment, an objection to a jury instruction raised for the first time in a post-trial
motion is not timely. Burgess, 44 S.W.3d at 814. Therefore, this issue is not properly preserved for our review.

Because this issue was not properly preserved, our review is confined to manifest injustice. As set forth in Carrs Fork Corp. v. Kodak Min. Co., 809 S.W.2d 699, 701 (Ky. 1991):
Civil Rule 61.02 provides that palpable error which affects the substantial rights of a party may be considered by the reviewing court even though insufficiently raised or preserved for review and appropriate relief may be granted upon a determination that manifest injustice has resulted from the error. In applying this rule, the palpable error must result from action taken by the court rather than an act or omission by the attorneys or litigants.
Further, manifest injustice exists only if the error “so seriously affected the fairness, integrity, or public reputation of the proceeding as to be ‘shocking or jurisprudentially intolerable.’” Commonwealth v. Jones, 283 S.W.3d 665, 668 (Ky. 2009) (quoting Martin v. Commonwealth, 207 S.W.3d 1, 4 (Ky. 2006)). We believe that the jury instruction on unjust enrichment resulted in a manifest injustice.

First, we note that any jury instruction on unjust enrichment is improper because unjust enrichment is an equitable doctrine, Dodson v. Key, 508 S.W.2d 586 (Ky. 1974), and the application of an equitable doctrine to the facts of a case is a question of law. Daniels v. CDB Bell, LLC, 300 S.W.3d 204, 210 (Ky. App. 2009). Accordingly, the question of whether Killian, SK Development, and SJK Properties were unjustly enriched, if it were an appropriate inquiry, should not have been decided by the jury but by the trial court.

Next, we note that unjust enrichment is not an available remedy to Tunacakes with regard to SK Development and SJK Properties. The doctrine of unjust enrichment “is applicable as a basis of restitution to prevent one person from keeping money or benefits belonging to another.” Haeberle v. St. Paul Fire & Marine Ins., 769 S.W.2d 64, 67 (Ky. App. 1989) (citations omitted). However, when “an express contract is made defining the circumstances under which an obligation may arise with reference to a certain subject matter such contract excludes the possibility of an implied contract concerning the same matter.” Sparks Milling Co. v. Powell, 283 Ky. 669, 672, 143 S.W.2d 75, 76 (1940). Therefore, any recovery must be under the terms of the express contract. Id. In this case, there was a written contract that set forth the obligations of SK Development and SJK Properties to Tunacakes. Thus, unjust enrichment was not an available remedy for Tunacakes as to SK Development and SJK Properties.

Finally, we conclude that unjust enrichment, as used in this case, imposed personal liability on Killian thereby piercing the corporate veil. As noted by this Court in Daniels, 300 S.W.3d at 211, “piercing the corporate veil” is “the judicial act of imposing personal liability on otherwise immune corporate officers, directors, and shareholders for the corporation’s wrongful acts, . . .” (Quoting 18 C.J.S. Corporations § 14 (2008)). “[T]he decision as to whether to pierce the corporate veil is an equitable one to be decided by the trial court and not the jury.” Id. at 213.

Based on the preceding, Killian could not be held personally liable until the trial court determined that the corporate veil could be pierced. Having carefully reviewed the record, we note that the trial court did not make such a finding. Absent such a finding, the unjust enrichment instruction, which allowed the jury to hold Killian personally liable for the liabilities of SK Development and SJK Properties, resulted in a manifest injustice. Accordingly, we remand this case for the trial court to determine whether the corporate veil can be pierced. If the corporate veil cannot be pierced, then a finding that Killian was unjustly enriched would be inappropriate because Killian cannot be held personally liable. If the trial court determines that the corporate veil can be pierced, then there need not be a determination as to whether Killian was unjustly enriched. Killian would be personally and contractually liable for the wrongful acts of SK Development and SJK Properties. As previously noted, because Tunacakes would have contractual remedies, the equitable remedy of unjust enrichment would not apply.

Appeals of Administrative Rulings: Timely filing required (limitation of actions)

 

From Gallien v. Kentucky Board of Medical Licensure, COA, Published, 3/25/2011

In this case, the Order of Suspension was mailed to Appellant on April 25, 2007. However, she did not file her petition for judicial review until August 18, 2008 – nearly 18 months later. This delay is fatal to Appellant’s appeal. Our precedent holds that “[w]here an appeal is filed in the circuit court by grant of a statute, as in this case, the parties must strictly comply with the dictates of that statute.” Spencer County Preservation, Inc. v. Beacon Hill, LLC, 214 S.W.3d 327, 329 (Ky. App. 2007). This is because “[a]n appeal from an administrative decision is a matter of legislative grace and not a right, and thus the failure to strictly follow statutory guidelines for the appeal is fatal.” Id.; see also Bd. of Adjustments of City of Richmond v. Flood, 581 S.W.2d 1, 2 (Ky. 1978); Ky. Unemployment Ins. Comm’n v. Providian Agency Group, Inc., 981 S.W.2d 138, 139-40 (Ky. App. 1998); Taylor v. Duke, 896 S.W.2d 618, 621 (Ky. App. 1995). The circuit court concluded that it lacked jurisdiction to consider Appellant’s petition for judicial review because the petition had not been timely filed within the statutory 30-day period; thus, dismissal was merited. This conclusion was the correct one.

 

 

Std. of Review: By appellate court of arbitration award

An appeal of an order confirming or denying confirmation of an
arbitration award is specifically provided for in KRS 417.220. The circuit court’s judgment confirming the respective arbitration awards made in favor of both Dr. Jacob and Bluegrass in this case did not include any fact finding by the circuit court. The judgment states the following:
1.    That both parties[’] motion to confirm the Arbitrator’s Award is granted;
2.    That this Court further reaffirms its previous finding that the dispute between the parties arose from a contractual agreement which the parties had agreed to arbitrate;
3.    That all other issues involving the scope of arbitration, the issues to be arbitrated and the parties bound by the arbitration were properly addressed by the Arbitrator;
4.    That the Arbitrator’s opinion was supported by substantial evidence;
5.    That this Court hereby confirms the Arbitrator’s Clarified Award and pursuant to KRS 417.170 issues a Judgment in accordance with the Arbitrator’s Award and Clarified Award;
6.    That this Judgment is final and appealable and there is no just cause for delay;
7.    That this Judgment shall bear interest at the rate of 12% per annum until paid;
8.    That [Dr.] Jacob’s objection to confirmation is overruled; and
9.    That [Dr.] Jacob’s counterclaim is dismissed.
Thus, our review on appeal for errors below is limited to questions of law which are reviewed de novo. Fischer v. MBNA America Bank, N.A., 248 S.W.3d 567 (Ky.App. 2007). Accordingly, we are not bound to defer to the circuit court’s application of legal principles or law, including applicable contract law, in determining whether an arbitration agreement existed in this case. Conseco Fin. Serv. Corp. v. Wilder, 47 S.W.3d 335 (Ky.App. 2001).

JACOB (ROBERT A.)
VS.
DRIPCHAK (PHILIP O.), ET AL.
OPINION AND ORDER AFFIRMING IN PART, REVERSING IN PART, AND REMANDING WITH DIRECTIONS
TAYLOR (PRESIDING JUDGE)
COMBS (CONCURS) AND NICKELL (CONCURS)
2008-CA-001157-MR
TO BE PUBLISHED
JEFFERSON
COA 1/21/2011

CIVIL: Thomas Weird v. Eric Emberton (SC 3/18/2010)

Thomas Weird v. Eric Emberton
2008-SC-000372-DG March 18, 2010 Opinion of the Court; all concur. Justice Abramson not sitting.

On May 3, 2007, Weird tried to file his notice of appeal of judgment at the Jefferson Circuit Court’s office. However, the office closed early that day in observance of the annual Kentucky Derby Festival Parade. The Court of Appeals dismissed the appeal as untimely. The Supreme Court reversed, holding KRS 446.330 allows for an extra day when “the public office in which a document is to be filed is actually and legally closed.” The Court further held that advance notice of the early closure and the fact that Weird could have filed the notice of appeal at the district criminal traffic desk across the street did not deprive him of the additional day granted by the statute.

TORTS (duties, appeals): Higginbotham v. Keeneland Association (COA 1/29/2010)

Higginbotham v. Keeneland Association
2009-CA-000301 01/29/2010 2010 WL 323287

Opinion by Judge Lambert; Judge Wine and Senior Judge Harris concurred. The Court affirmed a summary judgment entered in favor of appellee on appellants’ claims related to a motor vehicle accident. A passenger was killed and a passenger was injured when the driver improperly reacted to a flat tire, lost control of her vehicle, and a struck a vehicle owned by appellee’s employee who had parked the vehicle on the shoulder to activate temporary signs directing traffic into Keeneland racetrack. The Court held that the trial court properly granted summary judgment in favor of the employer. The Court first declined to review appellants’ argument or supporting documentation that the employee’s parking on the shoulder constituted negligence per se because the argument was not raised before the trial court and the documents, which were not part of the record on appeal, were improperly attached as an appendix to the brief. The Court then held that the employee did not owe appellants a duty to refrain from parking on the shoulder of the road. The particular harm was not foreseeable as no reasonable person could have foreseen the injuries sustained or that the driver would lose control to the extent that she could not bring her vehicle to a complete stop utilizing the portions of the shoulder available. KRS 189.450(3) did not impose a duty of care because the statute was inapplicable to the road where the accident occurred, nor did KRS 189.290(1) because the employee was not operating the vehicle at the time of the accident. The employee did not have a common law duty, as there was no authority for the proposition that the shoulder was reserved exclusively for emergency purposes. Public policy considerations also supported the finding that the employee did not have a duty to refrain from parking on the road, as he acted within the guidelines of the encroachment permit. The Court finally held that the trial court properly found that the employee’s actions were not the proximate cause of the collision, when it was undisputed that the driver lost control of her vehicle when she improperly reacted to a flat tire. Further, the evidence established that the vehicle was out of control, traveling at a high rate of speed, and would have collided with whatever was in its path - either the temporary sign, the steep earth berm or both.

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