COA 2010 Minutes for January 14, 2011 (Nos. 28 – 56)

29. EMPLOYMENT LAW – STATE GOVERNMENT
FINANCE AND ADMINISTRATION CABINET, ET AL.
VS.
WADE (WANDA FAYE), ET AL.
OPINION AFFIRMING
DIXON (PRESIDING JUDGE)
WINE (CONCURS) AND HENRY (SENIOR STATUS JUDGE)(CONCURS)
2008-CA-001822-MR
TO BE PUBLISHED
FRANKLIN

DIXON, JUDGE: The Finance and Administration Cabinet appeals from an order of the Franklin Circuit Court affirming two opinions rendered by the Kentucky Personnel Board in favor of Wanda Faye Wade, an employee of the Cabinet. We affirm.

The Franklin Circuit Court upheld the Board’s finding that Wade did not waive her right to a pre-termination hearing and that the Cabinet acted improperly by terminating her employment without a hearing. As to the second appeal by the Cabinet, regarding Wade’s reinstatement, the court upheld the Board’s finding that the Cabinet acted without authority by reinstating and then terminating Wade’s employment in January 2006. Finally, the court also upheld the Board’s decision regarding Wade’s back pay.

On appeal, the Cabinet raises the same arguments as it did before the Board and the circuit court.

As noted by the Board, “The essential requirements of due process . . . are notice and an opportunity to respond.” Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 546, 105 S. Ct. 1487, 84 L. Ed. 2d 494 (1985). The Board cited D. H. Overmyer Co., Inc., of Ohio v. Frick Co., 405 U.S. 174, 185-86, 92 S. Ct. 775, 31 L. Ed. 2d 124 (1972), in concluding that waiver of the right to a pre- termination hearing must “be voluntary, knowing, and intelligently made.” The Board further stated that the Cabinet could “not presume acquiescence in the loss of fundamental rights.” Ohio Bell Tel. Co. v. Public Utilities Commission of Ohio, 301 U.S. 292, 307, 57 S. Ct. 724, 81 L. Ed. 1093 (1937).
Although the Cabinet disputes the judgment of the Board regarding the credibility of the evidence, there is substantial evidence to support the Board’s finding that Wade did not waive her right to a pre-termination hearing. While the Cabinet characterizes Wade’s attempt at postponing the hearing as improper, the Cabinet was without authority to dispense with the “minimal requirement” of a hearing in the interest of “convenience or expediency, or because of a natural desire to be rid of harassing delay[.]” Id. at 305. We are mindful that the pre- termination hearing “need not be elaborate” to satisfy due process. Loudermill, 470 U.S. at 545. However, in the case at bar, the Cabinet’s action deprived Wade of a fundamental right, “[t]he opportunity to present reasons, either in person or in writing, why proposed action should not be taken . . . .” Id. at 546. After careful review, we conclude that substantial evidence supported the Board’s findings, and the Board correctly applied the law.

31.  TORT, AGENCY, LIBILITY FOR ACTIONS BASED UPON SPECIAL RELATIONSHIP
EDWARDS (RONALD)
VS.
HENSLEY (JARRED), ET AL.
OPINION REVERSING AND REMANDING
BUCKINGHAM (SENIOR STATUS JUDGE)(PRESIDING JUDGE)
CAPERTON (CONCURS IN PART, DISSENTS IN PART, AND FILES SEPARATE OPINION) AND CLAYTON (CONCURS)
2008-CA-002348-MR
TO BE PUBLISHED
MEADE

BUCKINGHAM, SENIOR JUDGE: Ronald Edwards appeals from a Meade Circuit Court judgment against him and in favor of Jordan Gruver in excess of $1 million following a jury trial. Finding error, we reverse and remand for a new trial.

Jordan Gruver was assaulted by multiple assailants at the Meade County Fair in July 2006. The assailants were Jarred Hensley, Andrew Watkins, Josh Cowles, and Matthew Roberts. All were members of the Imperial Klans of America (IKA). Hensley and Roberts were visiting from Ohio. Edwards, who lived in Hopkins County, Kentucky, was the head of the IKA.

Gruver settled his claims against Watkins and Cowles prior to trial, and he dropped IKA as a defendant in the case. Gruver pursued his claims against Hensley and Edwards in a jury trial that was held in November 2008. The jury in the case returned a verdict in favor of Gruver in excess of $2.5 million. Of that amount, over $1.5 million was in compensatory damages against Hensley and Edwards, with Edwards being found to be responsible for 20% of the amount, and $1 million in punitive damages for which Edwards was solely responsible. Edwards appealed from the final judgment.

Gruver’s claim against Edwards was that Edwards was reckless in selecting and supervising his recruiters and that he encouraged their violence.

Edwards, who represented himself at trial but who is now represented by an attorney, raises three allegations of error at the trial level. We agree with Edwards as to one of his allegations of error; thus, we reverse and remand for a new trial.

The Court in Carneyhan stated that there are two distinct types of claims based upon a defendant’s special relationship with the person causing the harm: the negligent failure to warn and the negligent failure to control. Id. at 850- 51. In both Carneyhan and this case, “the alleged tortfeasor’s ability to control the person causing the harm assumes primary importance.” Id. at 851 (citation omitted). The Court further stated, “[m]oreover, the defendant’s ability to control the person who caused the harm must be real and not fictional and, if exercised, would meaningfully reduce the risk of the harm that actually occurred.” Id. Also,

Not only must the control be “real,” but it also must be related in some manner to the harm caused by the person under control, such that its exercise would restrict the person’s ability to cause harm. Absent such control, there is no special relationship giving rise to a duty of reasonable care.
Id. at 853.

Whether there was a special relationship between a national fraternal organization and one of its local chapters was a question of first impression in Kentucky in the Carneyhan case. Id. at 850.    Likewise, we have been unable to find any authority where Kentucky courts have addressed whether there is a special relationship between the head of an unincorporated association, such as the IKA, and its members so as to create in the association head an affirmative duty of supervision and control over the activities of the members. The Restatement (Second) of Torts § 319 (1965) states that

One who takes charge of a third person whom he knows or should know to be likely to cause bodily harm to others if not controlled is under a duty to exercise reasonable care to control the third person to prevent him from doing such harm.

We know of no case in this state that has specifically adopted this portion of the Restatement, although the Court in Carneyhan mentioned it. Id. at 850.
We conclude that such a special relationship did not exist in this case. Edwards was the head of the association and the assailants were members. Although the members were encouraged to recruit new members, we cannot see where Edwards had any ability to control their activities in this regard. See Carneyhan at 851.

Edwards did not command or direct the assailants to assault Gruver or anyone else. He did not direct the assailants to go to the Meade County Fair, and he had no knowledge that they had done so. The fact that some of the assailants may have also attempted to recruit members for the IKA while at the fair is of no consequence.

45. SETTLEMENTS AND RELEASES,  MORTGAGOR AND THIRD PARTY TORT FEASOR RELEASE IMPACT ON PROPERTY INSURED
GRAFTON (MICHAEL J.), ET AL.
VS.
SHIELDS MINI MARKETS, INC.
OPINION REVERSING AND REMANDING
LAMBERT (SENIOR STATUS JUDGE) (PRESIDING JUDGE)
CAPERTON (CONCURS) AND WINE (CONCURS)
2009-CA-001862-MR
TO BE PUBLISHED
NELSON

LAMBERT, SENIOR JUDGE: Michael J. Grafton and Werner Enterprises, Inc. (Appellants) appeal from the Nelson Circuit Court’s entry of summary judgment in favor of Shields Mini Markets, Inc. (Appellee) as to Appellee’s property-damage claim against Appellants. At issue is whether a non-fraudulent property-damage settlement between a mortgagor of real property and a third-party tortfeasor bars a mortgagee from recovering damages in a subsequent property-damage claim against that same tortfeasor. For reasons that follow, we hold that it does. Therefore, the judgment of the circuit court must be reversed and this cause remanded for entry of judgment in favor of Appellants.

There is no existing Kentucky authority on point as to the respective rights of a mortgagor and a mortgagee to the proceeds of a property-damage settlement paid by a third-party tortfeasor for damages to real property securing an unpaid debt. Thus, this is a case of first impression, and this Court must determine if a non-fraudulent property-damage settlement between a third-party tortfeasor and a mortgagor of real property bars the mortgagee from a subsequent property- damage recovery against that same tortfeasor.

At the time the Masons settled their property-damage claim with Appellants, Appellee’s foreclosure action against the Masons had not been resolved. The Masons were still the owners of the property, and even though apparently in default on their mortgage, they were entitled to settle their property- damage claim with Appellants. As such, the question becomes whether Appellee was precluded from seeking its own claim for damages against Appellants because of this settlement.

Accordingly, we hold that a non-fraudulent property-damage settlement or recovery by a mortgagor from a third-party tortfeasor bars a subsequent recovery by a mortgagee against that same tortfeasor for that same act of property damage. Only one cause of action – and one recovery – arises from such an act. Furthermore, when the mortgagor receives the recovery or settlement proceeds, he must hold it in trust for the mortgagee to the extent of his or her outstanding debt. This is sufficient protection for the mortgagee’s security interest in the mortgaged property. Because of our holding, we are compelled to conclude that the circuit court erred by granting summary judgment to Appellee. Consequently, that decision is reversed and this matter remanded for entry of judgment in favor of Appellants as to all issues.

47. UNJUST ENRICHMENT
JAVIER STEEL CORPORATION
VS.
CENTRAL BRIDGE COMPANY, LLC.
OPINION AFFIRMING
ACREE (PRESIDING JUDGE)
HENRY (SENIOR STATUS JUDGE) (CONCURS) AND ISAAC (SENIOR STATUS JUDGE)(CONCURS)
2009-CA-002124-MR
TO BE PUBLISHED
JEFFERSON

ACREE, JUDGE:    The appellant, Javier Steel Corporation (Javier), appeals from the judgment of the Jefferson Circuit Court which found Javier was unjustly enriched when appellee, Central Bridge Company, LLC (CBC), overpaid Javier; Javier was ordered to reimburse $402,423.26 to CBC. We affirm.

CBC presented sufficient evidence to support the circuit court’s judgment that Javier was overpaid, and there is no ground upon which the judgment from which the appeal has been taken could be reversed. Accordingly, the judgment of the Jefferson Circuit Court is affirmed.

50.  REVIEW OF MODIFICATION OF CHILD SUPPORT NOT PROPERLY PRESERVED FOR APPEAL, PALPABLE ERROR, MANIFEST INJUSTICE STANDARD
HUDSON (NOW STANBERY) (LAURA)
VS.
HUDSON (DONALD)
OPINION AFFIRMING
ACREE (PRESIDING JUDGE)
HENRY (CONCURS) AND ISAAC (DISSENTS AND FILES SEPARATE OPINION)
2009-CA-002392-ME
TO BE PUBLISHED
JEFFERSON

ACREE, JUDGE: Laura Hudson (Mother) appeals the December 1, 2009 order of the Jefferson Family Court increasing the monthly child support obligation of Donald Hudson (Father) from $210.00 to $396.72. We affirm. 

The family court was persuaded that the monthly Social Security benefits to Child should be considered an independent source of income, and determined that paying the full $817, as Mother sought, would constitute a windfall to Child. The family court concluded that deviation from the standard child support obligation was appropriate because of the monthly Social Security payment to the Child and deducted the benefit from the base amount of the parties’ child support obligation. The court then apportioned the remaining base amount between Mother and Father according to their respective incomes. According to this calculation, Father was required to pay 87% of $456, or $396.72, per month.

At this point, we believe it appropriate to note that subsequent to the entry of the family court’s order in this case, the Kentucky Supreme Court reached the opposite result in a case with facts virtually indistinguishable from those before us. In Artrip v. Noe, 311 S.W.3d 229 (Ky. 2010), the Supreme Court determined that the parent who is not the disabled parent through whom the child is receiving Social Security benefits is not entitled to a credit against child support payments. Artrip, 311 S.W.3d at 232-33.

Artrip still had not been rendered when Mother filed her initial brief. Mother’s sole argument in that brief is that the family court’s “error may stem from subtracting the child’s Social Security Benefits.” While Mother was obviously unable to cite Artrip, she also failed to cite any other legal authority in support of that particular argument. However, Artrip was rendered two months before Mother’s reply brief was due, and it became final more than a month before her reply brief was due.3    Unfortunately, Mother filed no reply brief.

A more significant factor affects our review of this case however. Mother failed to comply with CR 76.12(4)(c)(v)4 which requires her to direct this Court’s attention to the place in the record where she preserved the error she now claims. Based on our review of the record, she appears not to have preserved the error.

In fact, Father responds that Mother waived the right to protest the deduction of the Social Security benefit from the base amount by conceding at the hearing that such benefits did constitute independent income to Child. He further argues that, even if the error had not been waived, but instead had been argued and preserved, the family court’s decision still should be affirmed because it was not an abuse of the court’s discretion.

Ordinarily, this Court will review a family court’s decision to modify a child support order or to deviate from the child support guidelines and determine whether the family court’s decision was an abuse of discretion. Goldsmith v. Bennett-Goldsmith, 227 S.W.3d 459, 461 (Ky. App. 2007); Brown v. Brown, 952 S.W.2d 707, 708 (Ky. App. 1997). If Mother had preserved the error, if Mother had complied with CR 76.12(4)(c)(v), and if that standard of review applied, her argument would be persuasive. As we indicated, however, a different standard applies either when the error is not sufficiently preserved, CR 61.02,5 or when the appellant fails to comply with CR 76.12(4)(c)(v), Elwell v. Stone, 799 S.W.2d 46, 48 (Ky. App. 1990), both of which occurred here.

However, given the oddly-timed circumstances of this appeal relative to the rendering of Artrip v. Noe, and despite Mother’s failure to request review under CR 61.02, we have nonetheless decided to apply the manifest injustice standard of review. Applying that standard, the record does not make manifest to us that it was an injustice to increase Father’s legal obligation of child support for his sixteen- year-old son from $210 per month to $396.72 per month but no more. The testimonial and documentary evidence here gives this Court the clear impression that whatever differences may remain between them, Mother and Father have in common a deep and abiding love of their Child; Father appears willing and able to provide more than his legal obligation; and nothing manifest in the record indicates that Child will suffer an injustice or want as a result of the family court’s order. We simply find no manifest injustice here.
The family court’s order is affirmed.

ISAAC, SENIOR JUDGE, DISSENTING: Respectfully, I dissent. I agree with the majority that the manifest injustice standard of review be applied, but I would reverse and remand for the trial court to recalculate its findings in light of the Artrip decision of the Kentucky Supreme Court. Regardless of Appellant’s failure to cite this case, this Court is nevertheless aware of it and should apply its clear dictates.

51.  CRIMINAL.  SEARCH AND SEIZURE
COMMONWEALTH OF KENTUCKY
VS.
SANDERS (MARY)
OPINION AFFIRMING
COMBS (PRESIDING JUDGE)
CLAYTON (CONCURS) AND WINE (CONCURS)
2009-CA-002398-MR
TO BE PUBLISHED
KENTON

COMBS, JUDGE: The Commonwealth of Kentucky appeals an order of the Kenton Circuit Court granting Mary Sanders’s motion to suppress evidence. After our review, we affirm.

The Court concluded that “stopping and demanding identification from an individual without any specific basis for believing he is involved in criminal activity” is not permitted by the Fourth Amendment. “When such a stop is not based on objective criteria, the risk of arbitrary and abusive police practices exceeds tolerable limits.” Id. at 52, 2641.
We are persuaded that the case before us falls squarely under Brown. The Commonwealth recites several reasons to justify Officer Bradbury’s decision to approach Sanders. Nonetheless, we cannot conclude that they rise to the level of any reasonable suspicion that Sanders was involved in criminal activity by the mere act of walking on a street. In this case, most of the factors offered by the Commonwealth occurred after Officer Bradley detained Sanders. The Supreme Court has clearly mandated that reasonable suspicion must be determined before the stop occurs and not be justified in a boot-strap fashion of rationalization by hindsight.

TORTS, INSURANCE, PROCEDURE CASES

39. CIVIL. PERSONAL JURISDICTION. MINIMUM CONTACTS. JUSTICIABILITY (RIPENESS); VENUE. FORUM NON CONVENIENS
AMERICAN TRADE ALLIANCE, INC.
VS.
SOUTHERN CROSS TRADING, INC.
OPINION AFFIRMING
NICKELL (CONCURS) AND LAMBERT (CONCURS)
2009-CA-001353-MR
NOT TO BE PUBLISHED
BARREN

ATA presents three allegations of error. First, ATA contends the trial court erred in concluding sufficient minimum contacts existed to exercise personal jurisdiction. Next, it contends the Barren Circuit Court was the improper venue for resolution of the matter. Finally, ATA argues the trial court erred in granting summary judgment to Southern Cross as genuine issues of material fact existed and the record was not ripe for adjudication. After a careful review of the briefs, the record and the law, we affirm.

This statute “authorizes Kentucky courts to reach to the full constitutional limits of due process in entertaining jurisdiction over non-resident defendants.” Shore Tire, 651 S.W.2d at 473 (citing Poyner v. Erma Werke GMBH, 618 F.2d 1186 (6th Cir. 1980)). “A single transaction has been held sufficient tO invoke jurisdiction where the plaintiff-purchaser is a resident of the forum state and the defendant-seller is a non-resident.” Id. (citing McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957)).
Here, ATA clearly contracted to do business in the Commonwealth when it accepted the order from Southern Cross and agreed to ship the goods here. The active promotion of the sales of its products to Kentucky residents indicates the intent to invoke the benefits and protections of this jurisdiction and constitutes the “transaction of any business” in this state. Thus, the requirements of KRS 454.210(2)(a)(1) and (2) were sufficiently satisfied to permit the Barren Circuit Court to exercise jurisdiction over ATA.
Further, this was not an isolated transaction between these parties, as evidenced by their past conduct and series of dealings, each of which involved orders for substantial amounts of product.

econd, ATA contends Barren Circuit Court was an improper venue for this action and alleges the trial court erred in failing to so find and in declining to dismiss the case. We disagree.
Before the trial court, ATA argued the doctrine of forum non conveniens required dismissal. That doctrine permits a court properly vested with jurisdiction and venue nevertheless to decline the exercise of its jurisdiction where an alternative forum exists and where the private interests of the parties or the public interests of the tribunal would be better served by proceeding in the alternative forum.
Stipp v. St. Charles, 291 S.W.3d 720, 725 (Ky. App. 2009) (citing Beaven v. McAnulty, 980 S.W.2d 284, 285 (Ky. 1998) (superseded by statute on other grounds)). “In general, venue derives from a statutory mandate as to which county or counties is the proper place for a claim to be heard. Forum non conveniens presupposes proper venue . . . .” Dollar General Stores, Ltd.v. Smith, 237 S.W.3d 162, 166 (Ky. 2007). Plaintiffs make the choice as to the forum in which to bring their actions and that choice “’should rarely be disturbed.’” Stipp, 291 S.W.3d at 726 (quoting Gulf Oil Co. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947)). We will uphold a trial court’s decision on whether to disturb that decision absent an abuse of discretion. Id.

 ATA has failed to grasp that “[w]ith enactment of KRS 452.105, the General Assembly made it clear that venue should be transferred in a proper case, and that the action should not be dismissed.” Dollar General, 237 S.W.3d at 167. The same rule applies with equal force in cases where a trial court determines there is a more convenient forum for the prosecution of an action. Id. Our review of the record reveals ATA produced no evidence that another forum would be more convenient than Barren Circuit Court for the prosecution of this action. Further, in arguing forum non conveniens, ATA has implicitly admitted that venue was proper in Barren Circuit Court. Id. at 166. Thus, we cannot say the trial court abused its discretion in refusing to disturb Southern Cross’s choice of venue. Even had ATA produced sufficient evidence to warrant a finding of a more convenient forum, our statutes make it abundantly clear that transfer rather than dismissal would have been the proper remedy. There was no error.

ATA has failed to grasp that “[w]ith enactment of KRS 452.105, the General Assembly made it clear that venue should be transferred in a proper case, and that the action should not be dismissed.” Dollar General, 237 S.W.3d at 167. The same rule applies with equal force in cases where a trial court determines there is a more convenient forum for the prosecution of an action. Id. Our review of the record reveals ATA produced no evidence that another forum would be more convenient than Barren Circuit Court for the prosecution of this action. Further, in arguing forum non conveniens, ATA has implicitly admitted that venue was proper in Barren Circuit Court. Id. at 166. Thus, we cannot say the trial court abused its discretion in refusing to disturb Southern Cross’s choice of venue. Even had ATA produced sufficient evidence to warrant a finding of a more convenient forum, our statutes make it abundantly clear that transfer rather than dismissal would have been the proper remedy. There was no error.

49.  TORTS. DUTY TO PREVENT HARM FROM INTERVENING THIRD PARTY CRIMINAL ACTS.
ISON (JOHN M.)
VS.
BROWN BROS. CADILLAC CHEVROLET, INC., ET AL.
OPINION AFFIRMING
ACREE (PRESIDING JUDGE)
HENRY (CONCURS) AND ISAAC (CONCURS)
2009-CA-002345-MR
NOT TO BE PUBLISHED
JEFFERSON

CREE, JUDGE: The appellant, John Ison, appeals an order of the Jefferson Circuit Court granting summary judgment in favor of the appellee, Brown Brothers Cadillac Chevrolet, Incorporated (Brown Brothers). Ison asserts that the circuit court improperly granted summary judgment because Brown Brothers owed him a duty to prevent the intervening criminal acts of third persons and there was no superseding cause. Further, Ison argues that even if Brown Brothers did not owe him a duty to prevent intervening criminal acts, it voluntarily undertook a duty to provide security on its premises and could be liable for the negligent performance of this assumed duty. We disagree. Because Brown Brothers did not owe a duty to Ison, summary judgment was appropriate and we affirm.