COA Decisions - Apr. 14, 2006 (Vol. 2006:18)

Powers was hurt at work in Kentucky, and his WC sent him to a doctor in Missouri for evaluation. Powers was operated on in Kentucky by his treating doctor, and the MO doc eventually saw him again to recommend his recommence work at light duty. When Powers' back still hurt, the WC sent the MO doc CT studies for interpretation, and Powers claimed the doc at some point said further surgery was unnecessary. Powers eventually did undergo another surgery, lost his job, and sued the doctor and his company for malpractice. The doc moved for SJ claiming personal JD was lacking in KY, and the trial court granted his motion. This appeal followed.

The KY long arm statute is found at KRS 454.210. KY has a 3-pronged test to determined whether the exercise of personal JD over a defendant violates due process: (1) whether a defendant purposefully availed himself of the privilege of acting within the forum state or causing a consequence in the forum state; (2) whether the cause of action arises from the alleged in-state activities; and (3) whether connections to the state make JD reasonable. This is a fact-specific determination, and each case involving the issue of a personal JD over a non-resident defendant must be decided on its own facts. The CA found the doc did not conduct business in KY; did not advertise in KY; did not solicit business in KY. "The regular solicitation of business in Kentucky is not exclusively a requirement for the exercise of general JD; it is also necessary when the act that caused the alleged tortious injury did not occur in Kentucky." CAs pointed out that the doc simply did not act in KY. He may have committed an act that had a consequence in KY, but he did not commit that act in KY. Nor were there sufficient minimum contacts as described in KRS 454.210(2)(a)(4) to justify the exercise of personal jurisdiction.

The issue before the COA was whether under Kentucky Revised Statutes (KRS) 403.725(1), a provision of Kentucky’s domestic violence statute, a Kentucky court may issue a protective order against an individual over whom the court does not have personal jurisdiction.

Husband, wife, and child were Oklahoma residents when husband went to visit Las Vegas looking for employment. While husband was away, the wife viewed this as an opportunity to escape domestic violence. Wife and son traveled to Kentucky to stay with a close friend whereupon wife filed a domestic violence petition in Warren Circuit Court.

The court issued on Emergency Protective Order on the same day, granting immediate relief, including restraining husband from any contact or communication with wife, and granting her temporary custody of child.

Husband obtained counsel and filed a Special Entry of Appearance and Motion to Dismiss for Lack of
Jurisdiction, arguing that a Kentucky court could not constitutionally exercise personal jurisdiction over him because he had no contact with the state.

Kentucky has adopted a three-pronged test to determine personal jurisdiction.

The first prong of the test asks whether the defendant purposefully availed himself of the privilege of acting within the forum state or causing a consequence in the forum state.

The second prong considers whether the cause of action arose from the alleged in-state activities.

The third and final prong requires such connections to the state as to make jurisdiction reasonable.

“Each of these three criteria represents a separate requirement, and jurisdiction will lie only where all three are satisfied.” Applying this three-pronged test, COA concluded that Warren Circuit Court did not have personal jurisdiction over husband. He had not purposely availed himself of the opportunity of acting within Kentucky, or causing consequences within Kentucky; the cause of action did not arise from activities in Kentucky; and he did not have any connections to this state that would make jurisdiction reasonable.

Yet the language of KRS 403.725 clearly envisions a court granting a protective order when a victim of domestic abuse has fled to this state.   COA held it must balance the due process rights of the defendant against the interest of the Commonwealth in protecting the victims of domestic violence.

The scope of jurisdiction of a court issuing protective orders under these circumstances is an issue of first impression in Kentucky. In COA's view, the distinction made by New Jersey’s highest court between prohibitory and affirmative orders represents the fairest balance between protecting the due process rights of the nonresident defendant and the state’s clearly-articulated interest in protecting the plaintiff and her
child against domestic violence.

Insofar as the order prohibits dad from breaking the law in Kentucky by approaching his wife or child, it comports with due process. In all other respects, it goes beyond the permissible limits of Kentucky courts’ jurisdiction.

The primary issue in this current appeal is recoupment by the Cabinet for alleged overpayments of Medicaid benefits to EPI’s long-term care facilities. There is a long history of disagreement between the parties spanning nearly three decades

Each year, facilities participating in the Medicaid program are required to submit cost reports to the Cabinet in a timely manner per the Cabinet’s regulations. The time period for recoupment shall not exceed twelve (12) months from the date the overpayment is established, and shall be accomplished within twenty-one (21) months from the end of the provider’s cost reporting period . . . (Emphasis added.) 907 KAR 1:110(1988-1995). The record reflects that the Cabinet did not recoup any funds for cost years 1988 through 1995 within twenty-one months from the end of the provider’s cost reporting period. Therefore, it is now barred from recouping said funds in accordance with its own regulation.

KENTUCKY LEGAL SYSTEMS CORP. V. DUNN
PROPERTY - Lien priorities; judgment liens
2004-CA-002352
PUBLISHED
AFFIRMING (TACKETT)
DATE: Apr. 14, 2006

Kentucky Legal Systems Corporation (KLS) appeals from the judgment finding that its judgment lien against all property owned by the Dunns was inferior to the mortgage held by Community Trust Bank, where the mortgage enabled the purchase of the subject real property.

KLS argued that Kentucky law requires that its first-recorded judgment lien have priority over the Community Trust mortgage, but the COA thought otherwise and affirmed the lower court.

The judgment held by KLS was entered in 1992, and the judgment lien filed and properly recorded in 1998 against all real property owned by Dunn. KLS argues that the bank was on constructive notice of its judgment lien and that it failed to exercise due care before giving Dunn a loan.

Dunn later defaulted on the mortgage and the bank sought foreclosure and a declaration that its mortgage held priority over the judgment lien. The circuit court agreed that the mortgage should be considered a purchase money mortgage in accord with the Restatement (Third) of Property, Mortgages § 7.2. The circuit court adopted the Restatement’s reasoning and held the bank’s mortgage was superior to KLS’s judgment lien.

Community Trust, citing the Restatement (Third) and other treatises, argues that the judgment was correct because without its grant of a loan with a mortgage reserved, the debtor would have no interest in the property at all to which KLS’s judgment lien could attach, and cites many cases in other jurisdictions which follow this rule. With respect to KLS’s argument that Community Trust did not exercise due care in failing to discover its judgment lien, for the reasons stated in the Restatement (Third) COA held that Community Trust, as a purchase money lender, did not need to search for judgment liens, as they should be given first priority over a judgment lien regardless of whether they had notice of any kind of the interest.

Even had Community Trust discovered the lien by exercise of due diligence, it should be granted priority over the judgment creditor’s lien due to its status as a purchase money lender.

HILLTOP BASIC RESOURCES, INC. V. COUNTY OF BOONE, KY
ZONING - Due Process and impartiality
2002-CA-001081
PUBLISHED
AFFIRMING (COMBS)
DATE: Apr. 14, 2006
The Kentucky Supreme Court remanded this case to the court of appeals after reversing the decision of the Court of Appeals that Hilltop Basic Resources, Inc. (“Hilltop”) had been denied due process by the Boone County Fiscal Court (the “Fiscal Court”) because members of the Fiscal Court made statements concerning the case before the case had been presented to them. The Kentucky Supreme Court held that impartiality is more relaxed and informal in administrative contexts. Because there was nothing in the record to indicate that the Fiscal Court did not seriously consider Hilltop’s proposal, it concluded that due process had been afforded and reversed and remanded the case to the court of appeals for consideration of Hilltop’s other arguments. On remand, the Court of Appeals affirmed the judgment of the Circuit Court under the standard announced by the Supreme Court, holding that the Fiscal Court’s denial of Hilltop’s application for a zoning map amendment was adequately supported by the evidence.

COA dismissed appeal from circuit court order on appeal of district court probate matter based on law of the case even though COA believed circuit court erred. Circuit court appellate decision is final, and COA prohibited from reviewing any potential errors due to application of the law of the case doctrine.

COA found no basis for tampering with circuit court judge's decision to set aside the jury verdict.

This case was a boundary dispute. The appellant lost one issue regarding expert testimony, and also claimed trial court erred in denying motion for new trial. However, an accusation of perjury must be supported by an allegation that the defendant knew that his or her statement was false when the statement was made. Here, Hurt’s motion for a new trial contained no such allegation. Instead, it relied on the post trial affidavits of nonparties and a surface usage agreement between the Youngs and a coal company.

The COA affirmed jury verdict awarding claimant damages for wrongful termination in retaliation for making a workers compensation claim. In affirming, it addressed the elements of a prima facia case.

Reversed and remanded for reinstatement of personnel board's final after COA found reclassification was not required and thus upholding personnel board.

AKIN V. HART
FAMILY LAW - Setting aside property settlement (subsequently obtained bonus)
2004-CA-002632
NOT PUBLISHED
AFFIRMING (MINTON)
DATE: Apr. 14, 2006

CA found Marital Settlement Agreement should not be set aside on the basis that Husband’s bonus was an undisclosed asset because Husband received $510,000 bonus three days after MSA was entered. Bonus was not an undisclosed asset, as evidence indicated that Husband had historically received bonuses; Wife was aware of those bonuses; Wife’s attorneys were aware of Husband’s tax returns and history of receiving bonuses; and Husband did not know the precise amount or timing of the bonus when he signed the settlement agreement.

Husband’s failure to disclose marital aspect of stock on financial disclosure form also did not require MSA to be set aside. CA found that TC denied the motion to set aside by erroneously requiring a showing of actual fraud, but that the result would have been the same. “Fraud, deceit, mental instability or the like, are not required to obtain invalidation of a separation agreement.” Rather, all that is required is “a showing of fundamental unfairness as determined after considering the economic circumstances of the parties and any other relevant evidence.” KRS 403.180(2) . Thus, whether Husband’s actions were actually fraudulent was irrelevant. Though Husband erred and acted dishonorably when he failed to disclose a marital aspect of the stock, Wife knew of Husband’s misrepresentation and did not rely to her detriment upon that misrepresentation. Thus, CA held that TC did not clearly err by finding that the settlement agreement was not unconscionable, especially in light of the fact that the settlement agreement provided for Wife to receive $875,000 in cash within four years.

COM. V. ARLINGHAUS
FAMILY LAW - Child support (reduction)
2005-CA-000404
NOT PUBLISHED
AFFIRMING (MINTON)
DATE: Apr. 14, 2006

CA affirmed TC’s order reducing Dad’s child support, finding that, contrary to Mom’s arguments, TC included all sources of income in its child support calculation and that Dad was not voluntarily underemployed. Mom believed that TC failed to include Dad’s disability payments and income from rental properties. CA referenced mathematical calculations which included a computation to include disability payments, noted that Dad suffered a loss from his real estate properties and so had no income from this source to include, and quoted TC order’s recital that it considered Dad’s income from all sources in calculating child support. Finally, evidence existed to support TC’s finding that Dad’s change of occupation and concomitant decrease in income were done in good faith, so he was not voluntarily underemployed.

This appeal addressed the valuation of partnership property determination by the trial commissioner which was adopted by the family court judge in a divorce.

In its consideration of a Commissioner’s report, a trial court “may adopt the report, or may modify it, or may reject it in whole or in part, or may receive further evidence, or may recommit it with instructions.” “[T]he clear language of the rule allows the trial judge complete discretion as to the use of a commissioner’s report.”

Here, the trial court exercised its discretion by accepting the commissioner's recommendation in its entirety. Pursuant to CR 52.01, “[t]he findings of a commissioner, to the extent that the court adopts them, shall be considered the findings of the court.”

When the appellate record does not include evidence presented, the appellate court must presume that the missing evidence supported the judgment of the trial court. COA noted in its review of the division of the partnership equipment is the same. The parties provided conflicting testimony as to whether any of the partnership equipment had been divided and whether certain pieces of equipment were actually partnership property rather than owned by one of the parties individually. “Determination of the rights of the parties is complicated because no formal written partnership agreement was entered into.”

Stacey K. Blake (mom) appeals from an opinion and order adopting the recommendations of the Domestic Relations Commissioner that awarded the parties joint custody of their minor daughter with the father, Ronald E. Blake (dad), being the primary custodian and the child living primarily with her father. COA affirmed.

Mom contended dad’s objections to her relocating to California amounted to a custody modification and KRS 403.340 and Fenwick are applicable.

Dad argued the circuit court was not modifying custody but actually determining custody after having set aside the separate agreement relative to custody. Dad had filed a timely motion for the court to reconsider the previously entered decree as to the custody issue thus preventing the decree from becoming final. Although the court’s order of September 30, 2003, denied his motion to alter, amend or
vacate (CR 59.05) it did not dispose of his alternate motion for a new trial (CR 59.01) on the custody, support and timesharing
issues. Instead that motion was referred back to the DRC “for an evidentiary hearing to determine if there are sufficient grounds to change the Decree with respect to custody mat[t]ers[.]” See Gullion v. Gullion, 163 S.W.3d 888 (Ky. 2005).

Both the DRC’s recommendations and the circuit court’s opinion and order clearly reference that they were addressing this as an initial custody determination under KRS 403.270.

COA believed this was the proper legal standard to be applied in this matter and further review of the DRC’s recommendations indicates that the DRC considered the relevant nine factors in determining custody pursuant to KRS 403.270(2). The DRC report specifically found the parties equal parents in all aspects except as to mom's mental health.

In reviewing the DRC’s recommendations, the circuit court adopted the finding that mom’s actions raised legitimate concerns about her suitability as the primary custodian. In that these findings were based upon substantial evidence found in the record they will not be disturbed on appeal.

HOSKINS V. THE HUNTINGTON NATIONAL BANK
PROPERTY - Leased Car
2004-CA-002431
NOT PUBLISHED
AFFIRMING (TACKETT)
DATE: Apr. 14, 2006

This appeal involved a leased Mercedes where the the lessor (buyer) claimed the lessee was an agent of the bank and told her she would owe nothing at the end of the lease. However, the lease provided that Hoskins would be liable for the difference if the car sold below it's residual. She turned the car in, and after auction and other expenses she owed over $15,000. The bank that financed the leasing wanted its money.

The lessor claimed fraud etc. against the car lot lessee and that they were the agents for the bank. The bank denied, and moved for summary judgment which was granted in its favor. This appeal ensued. COA affirmed the SJ and noted the appellant had offered no evidence of any agency relationship.

Under Kentucky law, “[i]f one fences and takes possession of a neighbor's land, the only way that the neighbor can stop the running of the statute of limitations is by retaking possession or instituting suit within the statutory period. Mere words will not be sufficient.” So David Jett’s statement to the Pruitts that he intended to move the fence had no legal effect on the Pruitts’ adverse possession claim.

The ALJ dismissed the claim as being barred by the statute of limitations, finding that the claimant became aware of bilateral elbow tendonitis in 1997. The Board reversed because there was no support in the record for the finding that the claimant became aware of a right elbow problem at that time, although the left elbow injury was treated at that time, and remanded for further findings. The COA affirmed, noting despite arguments of the Defendant that neither the Board nor the Court of Appeals can make a finding of fact as to when the injury became manifest, and so a remand to the ALJ was required.