STANDARDS OF REVIEW: Of a Decision to deny writ of prohibition

Arnett v. Hutchens,  COA, NPO, 6/29/2012

The proper standard of review of a decision to deny a writ of prohibition“depends on the class, or category, of writ case.” Grange Mut. Ins. Co. v. Trude, 151 S.W.3d 803, 810 (Ky. 2004). De novo review is generally the proper standard where the lower court is alleged to be acting outside its jurisdiction, because jurisdiction is generally only a question of law. Id. Thus, we review the denial of the writ de novo, giving no deference to the judgment below. Id.

“The writ of prohibition is extraordinary in nature, and the courts of this Commonwealth have always been cautious and conservative both in entertaining petitions for and in granting such relief.” Appalachian Reg’l Healthcare, Inc. v. Coleman, 239 S.W.3d 49, 52 (Ky. 2007) (internal quotation omitted). As set forth in Hoskins v. Maricle, 150 S.W.3d 1, 10 (Ky. 2004):

A writ of prohibition may be granted upon a showing that (1) the lower court is proceeding or is about to proceed outside of its jurisdiction and there is no remedy through an application to an intermediate court; or (2) that the lower court is acting or is about to act erroneously, although within its jurisdiction, and there exists no adequate remedy by appeal or otherwise and great injustice and irreparable injury will result if the petition is not granted. (Emphasis in original). Richard is challenging the jurisdiction of the district court and argues that it did not have subject matter jurisdiction to enter the October 2009 orders.

We note that the purpose of a writ of prohibition is to prevent an action in the lower court from taking place. In this case, there are no allegations that the district court “is proceeding or is about to proceed outside of its jurisdiction . . . .” Hoskins, 150 S.W.3d at 10 (emphasis added). The actions Richard complains of have already taken place. Specifically, the district court entered two orders that required Richard to repay the loan and removed him as guardian. There appears to be no dispute that Richard complied and repaid the loan. Therefore, there is nothing to prohibit in this case. Accordingly, a writ of prohibition was not the appropriate remedy in this case.

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. 

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.

Equity: Unclean hands doctrine

Don't see too much of the old equitable doctrines or defenses.  This popped up in a contract case.  Defense did not work, but thought I would share it with y'all.

From Gilbert v. Bowling Green Marine, COA, NPO, 3/25/2011

Gilbert argues that Payne was not entitled to equitable relief under the
"unclean hands" doctrine because he did not timely make all of the payments called for in the agreed judgment. "The unclean hands doctrine is a rule of equity that forecloses relief to a party who has engaged in fraudulent, illegal, or unconscionable conduct but does not operate so as to 'repel all sinners from courts of equity.'" Suter v. Mazyck, 226 S.W.3d 837, 843 (Ky. App. 2007) (citing Dunscombe v. Amfot Oil Co., 201 Ky. 290, 256 S.W. 427, 429 (1923)). Payne's failure to make timely payments amounted to a breach of contract. It did not amount to fraudulent, illegal, or unconscionable conduct; therefore, the unclean hands doctrine has no application to this case.


CIVIL (INJUNCTION): The Courier-Journal, Inc.; Lexington Herald-Leader Co.; & Associated Press v. Leonard Lawson; Commonwealth of Kentucky (SC 3/18/2010)

The Courier-Journal, Inc.; Lexington Herald-Leader Co.; & Associated Press v. Leonard Lawson; Commonwealth of Kentucky
2009-SC-000756-I March 18, 2010 Opinion by Chief Justice Minton. All sitting; all concur.

Movants filed for CR 65.07 relief in the Court of Appeals from a temporary injunction issued by the circuit court which forbade the release of a proffer of evidence made by Respondent Lawson in 1983. The Supreme Court held that the Office of the Attorney General—as custodian of the record sought—was an indispensable party to the action, and must be named as a party by the Movants. The Court declined to reach the merits of the dispute and affirmed the dismissal of the petition by the Court of Appeals.

TORTS : Goodman v. Goldberg & Simpson, P.S.C. (COA 10/16/2009)

Goodman v. Goldberg & Simpson, P.S.C.
2008-CA-000921 10/16/09 2009 WL 3321024 Rehearing Pending
Opinion by Senior Judge Harris; Judges Acree and Lambert concurred.

The Court affirmed a summary judgment granted in favor of lawyers (including appellant’s brother) and a law firm and dismissed appellant’s tort claims against them related to the distribution of assets from two estates. The Court held that the trial court correctly concluded that there were no genuine issues of material fact. First, even if appellant’s brother made alleged representations as to the division of their father’s estate, appellant provided no evidence that he relied upon the representations to his detriment other than to state that he would have initiated criminal proceedings against the father. The court next held that there was no evidence of a contract between appellant and the father so that his claim of intentional interference with contract must fail. The Court next held that the father did not owe appellant a fiduciary duty as an intended beneficiary of the mother’s estate so that his claim for aiding and abetting breach of fiduciary duty failed as a matter of law. The Court next held that there was no concrete evidence to establish that the brother committed any wrongdoing against appellant and it was the father’s prerogative to dispose of his estate as he saw fit. Therefore, the claim for the tort of outrage must fail. The Court next held that because there was no attorney-client relationship between the brothers, the claim of legal malpractice must fail. The Court next held that there was no evidence that the law firm or the attorney who drafted the father’s will had any knowledge of any purported agreement as to the distribution of assets and moreover, they owed a fiduciary duty to the father and therefore, the claim for breach of fiduciary duty and malpractice as to them must fail. The Court next held that the law firm did not owe a duty to appellant as an intended third-party beneficiary of the father’s will. The Court finally held that the trial court did not prematurely enter summary judgment. Appellees moved for summary judgment after two years after which the trial court allowed another six months of discovery, the record was voluminous, appellant had the opportunity to and did supplement the record, and appellant did not specify what significant information he was not able to obtain through discovery.

UNDERINSURED MOTORIST BENEFITS – UIM, advances, estoppel/waiver of coverage: Bryant v. Hopkins (COA 10/9/2009)

Bryant v. Hopkins
2008-CA-002099 10/09/09 2009 WL 3231220 DR Pending
Opinion by Judge Lambert; Senior Judge Henry concurred; Judge Stumbo dissented by separate opinion.

The Court affirmed an order of the circuit court granting summary judgment and dismissing appellant’s complaint against the appellee insurer for underinsured motorist (UIM) benefits. The Court held that the trial court did not err in ruling that the insurer was not estopped from denying liability for UIM insurance benefits. The insurer’s election to protect its subrogation rights under Coots v. Allstate Insurance Company, 853 S.W.2d 895 (Ky. 1993), and KRS 304.39-320 by advancing payment, did not create a presumption or acknowledgement that the UIM insurance carrier had admitted coverage to the injured party beyond the amount advanced under its policy or that it waived any defense of non-coverage in any subsequent litigation. Simply discussing the claim prior to the initiation of litigation did not imply or create a reasonable presumption that the claim was accepted or admitted. Further, once the trial court permitted the insurer to amend its answer, the existence of an admission upon the record was essentially extinguished. Finally, the contract of insurance could not be created or enlarged by estoppel or waiver. Since appellant was not entitled to UIM benefits in the first place, estoppel was not available to provide benefits.

CIVIL PROCEDURE – Statute of Limitations (SOL) tolled by conduct of defendant: Tim Emberton v. GMRI Inc. (d/b/a Red Lobster Restaurant #349), et al. (SC 10/29/2009)

Tim Emberton v. GMRI Inc. (d/b/a Red Lobster Restaurant #349), et al.
2007-SC-000443-DG October 29, 2009
2008-SC-000109-DG October 29, 2009
Opinion by Justice Scott; all sitting.

Emberton sued GMRI after he contracted the hepatitis A virus at one of its Red Lobster restaurants. Following trial, the jury awarded Emberton $8666 in medical expenses, plus $225,000 for pain and suffering. The Court of Appeals reversed on the grounds that Emberton’s suit was barred by the one-year statute of limitations. The Court of Appeals ruled Emberton “failed to investigate the source of his illness when reasonable diligence could have revealed the likely tortfeasor within the statutory period.” The Supreme Court reversed and reinstated the jury’s award, holding that the statute of limitations on Emberton’s claim was tolled under KRS 413.190(2) since GMRI, through its district manager, engaged in conduct that was “intentionally deceptive and designed to prevent public disclosure of [the GMRI employee’s] infection though the health department, the restaurant’s employees and its patrons.” The Court rejected GMRI’s challenge to the constitutionality of KRS 360.040—which establishes Kentucky’s post-judgment interest rate. The Court also ruled against GMRI’s appeals of evidentiary issues, the pain and suffering award and its claim of an inconsistent verdict at trial.

Chief Justice Minton and Justice Abramson concurred in result only.

PROPERTY – Prescriptive easement, injunction: Little v. Hall (COA 9/25/2009)

Little v. Hall
2008-CA-001702 9/25/09 2009 WL 304764

Opinion by Judge VanMeter; Chief Judge Combs and Senior Judge Lambert concurred. The Court affirmed an order of the circuit court granting permanent injunctive relief barring appellants from obstructing a road across their property.

The Court held that after remand from the Court of Appeals, the trial court did not err in finding that appellees used the road under a claim of right and acquired a prescriptive easement across the property. Appellants offered no affirmative evidence to meet their burden of proving that appellees used the road by permission rather than under a claim of right and appellees satisfied the “very slight evidence” standard by producing evidence that they continued using the road in a manner consistent with a belief that they were entitled to do so indefinitely.

WRITS – Lack of subject matter jurisdiction in writ filed over property distribution and estate matter: William Goldstein, Executor v. Judge Timothy J. Feeley & Ruby Joann Young-Layer (Real Party in Interest) (SC 8/27/2009)

William Goldstein, Executor v. Judge Timothy J. Feeley & Ruby Joann Young-Layer (Real Party in Interest)
2008-SC-000597-MR August 27, 2009
Opinion by Justice Venters. All sitting; all concur.

Before the circuit court could rule on the property division in dissolution action, the exhusband passed away. The circuit court substituted the estate as party to the dissolution and entered a restraining order prohibiting transfer of marital assets. The executor filed for a writ of prohibition and mandamus, arguing the trial court lacked personal jurisdiction. The Court of Appeals denied the writ. On appeal, the executor argued that a writ was proper since the trial court was proceeding outside its jurisdiction, which he contended was a proper basis for the issuance of a writ. The executor asserted he had not been properly served with process, therefore the circuit court lacked personal jurisdiction over him.

The Court affirmed the Court of Appeal’s denial of the writ, holding the “lack of jurisdiction” in writ cases as referred to in Hoskins means a lack of subject matter jurisdiction —not personal jurisdiction. Furthermore, the Court held that the exhusband’s death “did not divest the circuit court of jurisdiction over the marital property, nor did it eliminate the necessity of equitably dividing the marital property.”

Criminal Law – determining if getting proper psychiatric treatment following guilty plea but mentally ill, mandamus: Breeden v. Commonwealth (COA 7/17/2009)

Breeden v. Commonwealth
2008-CA-000243 07/17/2009 2009 WL 2059424

Opinion by Judge Stumbo; Judges Keller and VanMeter concurred.

The Court affirmed an order of the circuit court denying appellant’s motion for a hearing to determine if he was receiving proper psychiatric treatment in accordance with his plea of guilty but mentally ill. The Court held that while KRS 504.150 required appellant to be provided with necessary psychiatric treatment, his motion for post-conviction relief was not proper. Rather, the appropriate remedy was a complaint for a writ of mandamus to the Department of Corrections to enforce the statute.