June 6, 2008 -  KENTUCKY COURT OF APPEALS DECISIONS (2008:28)

PUBLISHED (COA).

MILES V. COM.
CRIMINAL:  Jury Polling
2006-CA-002150
PUBLISHED: REVERSING
PANEL:  ACREE PRESIDING; DIXON, TAYLOR CONCUR
GALLATIN COUNTY
DATE RENDERED: 6/6/2008

Miles' conviction for DUI reversed because the manner in which the trial court polled the jury did not comply with Kentucky Rule of Criminal Procedure (RCr) 9.88. Polling is “done by the clerk's or court's asking each juror if it is his or her verdict.” It is clear from the videotape that the trial court did not “ask[] each juror” if this was his or her verdict. The court’s method of polling the six jurors took exactly four seconds. None of the jurors responded audibly. It is possible that all six jurors individually responded in a non-verbal way to the court’s four queries. While a non-verbal response to the court’s queries can be sufficient, the response must be to a question specifically posed to that responding juror and to him alone.

Digested by Scott C. Byrd
www.OlginandByrd.com

DILLMAN V. COM
CRIMINAL:   Fifth Amendment; KRE 404(b)
2007-CA-000455
PUBLISHED: AFFIRMING
PANEL: THOMPSON PRESIDING; KELLER, GRAVES CONCUR
PULASKI COUNTY
DATE RENDERED: 6/6/2008

Defendant's Fifth Amendment privilege against self-incrimination was not violated when the TC ordered him to respond to the prosecutor's question while testifying. In this drug trafficking prosecution, Dilman testified that he was merely an uncompensated middleman for a friend. When asked who was the supplier, Dilman invoked the Fifth Amendment. Given that Dillman’s own testimony placed the prosecutor’s question within the scope of relevancy, TC properly ordered him to respond. 

Dillman’s assertion of an entrapment defense was not sufficient to support the introduction of his prior unsworn out-of-court statement. Dillman’s prior statement was made several years prior to the dates he committed the charged offenses. The introduction of the prejudicial prior statement substantially outweighed its probative value. However, CA concluded that Dillman “opened the door” for the introduction of his prior statement, and therefore, affirmed the trial court. Under the circumstances, the Commonwealth did not violate the notice requirement of KRE 404(c). As demonstrated to the trial court, the Commonwealth acted in as prudent a manner as possible under the circumstances. The Commonwealth disclosed the prior statement at the earliest feasible time in which it believed the evidence was relevant. Finally, Defendant was not entitled to a facilitation instruction.

Digested by Scott C. Byrd
www.OlginandByrd.com

NELSON V. TURNER
TORTS:  Dismissal remanded on school personnel's duty to report due to failure to include lower court's reasoning in summary judgment
2007-CA-000489
PUBLISHED: VACATING AND REMANDING
PANEL: CLAYTON PRESIDING; MOORE CONCURS; COMBS CONCURS IN PART, DISSENTS IN PART
FAYETTE COUNTY
DATE RENDERED: 6/6/2008

CA affirms in part and vacates and remands in part entry of SJ against parent regarding claims of negligent supervision and failure to report sexual assault.

Nelson's 5-year-old daughter was in kindergarten at a public elementary school in Fayette County; her teacher was Turner. The child reported to her mother a sexual assault against her by another female kindergarten student during regular school hours. Nelson reported the incident to Turner, who took steps to advise the teaching assistant to keep the children separated; to admonish the other child; to assign the children seats; and to prevent them from attending the restroom at the same time. Turner made no report to local law enforcement officials. That same day, the child reported another assault; the teacher questioned the other child, who admitted the contact. Turner unsuccessfully sought out a school administrator for advice as to how to handle the situation. No report was made to local law enforcement. Nelson spoke to the principal the following day. The principal immediately investigated and believed the contact had occurred "by accident" and did not report the incident to authorities. At the end of that same school day, the child reported another, more extensive, sexual assault against her by the same student, which allegedly occurred in the classroom. Nelson to the child to a hospital for an exam where some small irritation of the vagina was noted. Medical personnel reported the incident to police. The child did not return to school and an internal investigation followed.

Nelson filed suit against KSBIT alleging unfair claims settlement practices; failure to timely respond and complete an investigation; unfair or deceptive acts; and several other claims, including intention infliction of emotional distress. This action was dismissed, but Nelson immediately filed an amended complaint renewing these claims and also alleging failure to supervise and report the abuse against Turner and the Board. Nelson also alleged outrageous conduct. Defendants alleged governmental and qualified official immunity. Turner contended her supervision was a discretionary act and she was not required to report under KRS 620.030.

As to Turner's duty to report, CA remands to the TC because, though the court found the duty to report to be discretionary, the opinion did not include the court's reasoning for the CA to review. CA affirms as to the dismissal of the outrage claim. CA cannot affirm the dismissal of bad faith against KSBIT until Turner's liability is established.

Digested by John Hamlet


Digested by John Hamlet

PEOPLES BANK OF NORTHERN KENTUCKY V. CROWE CHIZEK AND CO. LLC
TORTS: PROFESSIONAL NEGLIGENCE: BREACH OF FIDUCIARY DUTY IN ACCOUNTING AND AUDITING SERVICES
2007-CA-001174
PUBLISHED: AFFIRMING PART, REVERSING IN PART, AND REMANDING
PANEL:  WINE PRESIDING; COMBS, ACREE CONCUR
BOONE COUNTY
DATE RENDERED: 6/6/2008

Peoples Bank (PBNK) appeals entry of summary judgment in favor of Crowe Chizek and its employee on PBNK's professional negligence and breach of fiduciary duty claims, which were dismissed by the TC as barred by the statute of limitations and the release clause in the party's contracts. The relevant facts to this action are as follows: PBNK's largest loan customer was real estate developer Erpenbeck whose accounts were supervised by two of the bank's internal officers (Finnan and Menne). The officers and Erpenbeck develop a close relationship and begin vacationing together. The officers then form a business (JAMS) to purchase properties from Erpenbeck at cost only to create fictitous purchase contracts to reflect a much higher price in order to obtain loans (not from PBNK) for the false amount. The excess loan proceeds were then divided between Erpebeck and JAMS, and Erpenbeck would rent the properties from JAMS while the rental payments were then used to pay the mortgages. Three years later, JAMS has received over half a million in excess loan proceeds on almost $4 million in total loans and was financially dependent on Erpenbeck.

This entire time the two JAMS owners remained officers at PBNK, and during this time they hired Crowe to perform tax services for JAMS (all of its accounts being held at PBNK) although the same Crowe partner was also still overseeing the independent auditing and accounting services for PBNK. Some two years later in 2002, one of the JAMS owner and still officer with PBNK informed the Crowe partner overseeing of Erpenbeck's check diversion and check kiting schemes for which the officers had authorized additional loans through PBNK to cover the the overdraft fees. The Crowe partner advised the officer to inform the bank's board of the officers' and JAMS' relationship with Erpenbeck and potential conflict of interest, which was done. PBNK then notified authorities and hired an independent law firm to conduct an investigation of the matter, which led to both officers' resignation. The adverse publicity essentially forced the bank to close and sell its assets at a substantial loss. Both Erpenbeck and the officers were found guilty of numerous bank fraud charges. PBNK then filed suit against Crowe and the partner asserting a number of causes of action for which it sought compensatory and punitive damages. Four years later, Crowe files a number of motions most notably relying on the release in the contracts and the statute of limitations. The TC agreed and granted each of the motions effectively dismissing all claims.

On appeal, the COA began by affirming the TC's dismissal of PBNK's claim for aiding and abetting the two officers in breaching their fiduciary duty, noting that Kentucky law as never recognized a civil cause of action for this type of claim. The court also found no proof that the Crowe or its partner were active, knowing participants in the officers' misconduct. Next, the COA turned to PBNK's argument that the release clauses in Crowe's engagement letters did not bar its claims since they only released Crowe for any opinion it offered attributable to misrepresentations made by PBNK during the audit. Instead, PBNK argued that its claims were based on Crowe having actual knowledge of the officers' misconduct through its work for JAMS, and thus its losses were due to Crowe's independent negligence. The COA agreed, and held that at a minimum PBNK had offered sufficient proof to create a genuine issue of fact on the matter since any evidence of the bank's misrepresentations would be relevant as comparative fault rather than barring the claims altogether.

The COA then addresses PBNK's argument that the one-year statute of limitations applicable to professional negligence and breach of fiduciary duty claims (KRS 413.245) had not expired by the time suit was filed. The court goes through a fairly detailed analysis of the two different limitations periods contained in this statute, the date of occurrence (accrual rule) and date of discovery (common law discovery rule). Crowe argued that the discovery rule applied to bar the claims since PBNK knew or should have known of the misconduct long before one year prior to suit being filed while PBNK argues that the limitations was tolled during the period of Crowe's continuous representation of the bank. The COA, in reliance on the Supreme Court's recent decision in Queensway v. Cotton & Allen, 237 S.W.3d 141 (Ky. 2007), noted that the discovery limitations period cannot begin to run until the accrual period begins (when negligence and resulting damages have both occurred). The court held that while the alleged negligence in this case occurred with the completion and delivery if each annual audit report, the damage from the officers' breach of fiduciary duty did not become fixed and non-speculative until April 2002 when the Crowe partner compelled the officers to disclose the relationship with Erpenbeck to the bank board. The complaint filed in late March 2003 was therefore timely.

Turning to PBNK's punitive damages claim, the COA ultimately determines that the bank had offered enough evidence to create a jury issue. The court acknowledged PBNK's argument that Crowe should have discovered the conflict of interest during its auditing work for JAMS, and that Crowe's failure to discover and disclose the wrongdoing amounted to concealment causing damage to the bank independent of those due to the wrongful acts themselves. While the COA held that Crowe did not intend to give assistance in the officers' misconduct, the court found that PBNK had met its burden of offering sufficient proof of gross negligence to withstand a motion for summary judgment.

In conclusion, the COA ruled in favor of PBNK as follows: summary judgment was not appropriate on its professional negligence and breach of fiduciary duty claims as neither barred by the statute of limitations or the releases in the contracts between the parties; and these contracts did not bar PBNK's damage claims arising from Crowe's negligence prior to the auditing period covered by the contracts. But, the COA found summary judgment was appropriate on PBNK's aiding and abetting claim, and the bank's alleged damages arising from Erpenbeck's conversion of checks not payable to him (since the check diversion scheme was not a foreseeable consequence of Crowe's alleged negligence and Erpenbeck's criminal conduct as well as bank's own negligence in cashing the checks were superseding causes of the injury).


Digested By Chad Kessinger 
Schiller Osbourn Barnes & Maloney

ROTHWELL V. SINGLETON
WILLS AND ESTATES:  Testamentary capacity and res judicata
2007-CA-001348
PUBLISHED:  REVERSING AND REMANDING
PANEL:  THOMPSON PRESIDING; KELLER, GRAVES CONCUR
LINCOLN COUNTY
DATE RENDERED: 6/6/2008

This published Court of Appeals will contest case involves the usual issues of capacity and undue influence. What makes this one of some interest is the fact that it involved a Will dated December 12, 1999 and that, in an earlier action, a jury was asked to consider a will dated December 28, 1999. The jury determined and the court held that the decedent had capacity on December 28th but that will was void because it was the result of undue influence. The question before the court in the case at bar was whether the determination of capacity as of December 28th was res judicata as to the question of capacity on December 12th of the same year. The trial court held that it was, but the Court of Appeals reversed and held that the only issue at hand was capacity as of December 12. The Court of Appeals indicated that “[on remand, the appellant will have an onerous burden.” The Court did not indicate whether the will’s proponent would be able to inform the about the testator’s capacity on December 28th.

Digested by Jim Worthington

PROPES V. COM
CRIMINAL:  Jail Time Credit
2007-CA-001440
PUBLISHED: THOMPSON PRESIDING; CAPERTON, LAMBERT CONCUR
MONROE COUNTY
DATE RENDERED: 6/6/2008

CA affirmed TC's order denying Propes' motion for additional jail time credit for the 352 days he served prior to pleading guilty to Assault 2nd. Propes accepted and signed a plea agreement which specifically provided that he was waiving any jail time credit accumulated prior to accepting the Commonwealth’s plea offer. While Propes contends he was illegally sentenced, the Commonwealth agreed to amend his first-degree assault charge, a Class B felony with a maximum term of twenty years, to second-degree assault, and to dismiss his first-degree wanton endangerment charge. Therefore, we conclude that Propes’ guilty plea waived the operation of KRS 532.120(3). Furthermore, because the waiver of the statute does not constitute a constitutional waiver, there is no constitutional prohibition against presuming that Probes’ waiver was valid.

Digested by Scott C. Byrd
www.OlginandByrd.com


NOT PUBLISHED (COA)

MCCRACKER V. COM.
2006-CA-002286
NOT PUBLISHED: 81
DATE RENDERED: 6/6/2008

RICKARD V. COM
2006-CA-002474
NOT PUBLISHED: 117
DATE RENDERED: 6/6/2008

WEST V. COM
2006-CA-002488
NOT PUBLISHED: 94
DATE RENDERED: 6/6/2008

SMITH V. COM
2007-CA-000143
NOT PUBLISHED: 76
DATE RENDERED: 6/6/2008

SMITH V. UNGER
REAL PROPERTY:  Ignorance of property line
2007-CA-000318
NOT PUBLISHED: 154
DATE RENDERED: 6/6/2008

DANIELS V. COM
2007-CA-000470
NOT PUBLISHED: 67
DATE RENDERED: 6/6/2008

JENKINS V. JENKINS
SETTLEMENTS:  Actual authority of attorney and hearing with findings of fact
2007-CA-000739
NOT PUBLISHED: 90
DATE RENDERED: 6/6/2008

In Clark v. Burden, 917 S.W.2d 574 (Ky. 1996), the Kentucky Supreme Court remanded to the trial court for a hearing to determine if a client had given his attorney authority to settle his case. “[I]n the event of a dispute as to whether the client has given settlement authority, the trial court shall summarily decide the facts.” Id.at 577.

In the case at bar, the trial court had no hearing and, more significantly, made no findings of fact about the validity of the settlement agreement, the authority granted to counsel prior to their discharge and whether, if there was an authorized agreement, the settlement document accurately reflected the agreement.

“If the court finds that such authority was given, the settlement should be enforced. Even if the trial court finds that no such authority was given, if it should also find that appellees were substantially and adversely affected by their reliance upon the purported settlement, enforcement would be appropriate. On failure to find one or the other of the circumstances set forth hereinabove, the court should determine that no settlement came into existence.”


For the reasons set forth herein, the matter is remanded to the Morgan Circuit Court for proceedings consistent with this opinion.

WASHABAUGH V. CURTSINGER
2007-CA-000811
NOT PUBLISHED: 78
DATE RENDERED: 6/6/2008

MORRIS V. MOTLEY
2007-CA-000881
NOT PUBLISHED: 98
DATE RENDERED: 6/6/2008

MORRIS V. MOTLEY
2007-CA-000882
NOT PUBLISHED: 88
DATE RENDERED: 6/6/2008

YOUNG V. COM
2007-CA-000934
NOT PUBLISHED: 97
DATE RENDERED: 6/6/2008

BRADY V. STRATTON
FAMILY LAW:  Paternity, testing, and late 60.02 motion to set aside
2007-CA-001062
NOT PUBLISHED: 96
DATE RENDERED: 6/6/2008

WILSON V. WILSON
FAMILY LAW:  Bankruptcy declarations and valuation of property in divorce
2007-CA-001089
NOT PUBLISHED: 81
DATE RENDERED: 6/6/2008

WILSON V. COM
2007-CA-001161
NOT PUBLISHED: 113
DATE RENDERED: 6/6/2008

STANFORD HEALTH & REHABILITATION CENTER V. BROCK
ARBITRATION
2007-CA-001703
NOT PUBLISHED: 92
DATE RENDERED: 6/6/2008

Under KRS 417.060, a person may seek a judicial order to compel arbitration upon a showing that a valid arbitration agreement exists and that the opposing party refuses to arbitrate. If the opposing party challenges the existence of a valid arbitration agreement, the circuit court “shall proceed summarily to the determination of the issue so raised.” KRS 417.060(1).

In this case, the circuit court made no factual findings nor can we determine whether the circuit court’s ruling was based upon the application of contract law or other legal principles which might justify a de novo review by this Court

Under the circumstances presented in this case, and in reliance upon Conseco, we believe the circuit court is bound by the provisions of Kentucky Rules of Civil Procedure (CR) 52.01, which mandates that a court set forth specific findings of fact and separate conclusions of law in its order or judgment.

We believe the circuit court erred by failing to make any findings of fact and conclusions of law in its July 25, 2007, order denying arbitration.2 See Brown v. Shelton, 156 S.W.3d 319 (Ky.App. 2004). 

And, we remind the circuit court that it speaks only through written orders entered upon the official record. See Midland Guardian Acceptance Corp. of Cincinnati, Ohio v. Britt, 439 S.W.2d 313 (Ky. 1968); Com. v. Wilson, 132 S.W.2d 522, 280 Ky. 61 (1939). 

As such, any findings of fact and conclusions of law made orally by the circuit court at an evidentiary hearing cannot be considered by this Court on appeal unless specifically incorporated into a written and properly entered order.

NEW V. NEW
FAMILY LAW
2007-CA-001839
NOT PUBLISHED: 79
DATE RENDERED: 6/6/2008

 

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