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

APPEALS:  Divestment of jurisdiction pending appeal
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

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