Opinion
NO. 2013-CA-000640-MR
01-23-2015
CHAS COAL, LLC, A KENTUCKY LIMITED LIABILITY COMPANY; THE BROE GROUP, AN UNINCORPORATED ASSOCIATION OF INDIVIDUALS AND COMPANIES; BROE, LLC, F/K/A BROE GROWTH CAPITAL, LLC, A DENVER LIMITED LIABILITY COMPANY; AND BGC, LLC APPELLANTS v. CAROL JEAN COLLINS APPELLEE
BRIEF FOR APPELLANTS: Marshall R. Hixson John W. Pollom Lexington, Kentucky BRIEF FOR APPELLEE: Stanton L. Cave Lexington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM CLAY CIRCUIT COURT
HONORABLE OSCAR G. HOUSE, JUDGE
ACTION NO. 11-CI-00402
OPINION
REVERSING AND REMANDING
BEFORE: JONES, KRAMER AND MAZE, JUDGES. MAZE, JUDGE: Chas Coal, LLC, The Broe Group, Broe, LLC, and BGC, LLC (collectively, "the Appellants") appeal from a judgment of the Clay Circuit Court granting summary judgment and awarding damages on claims brought by Carol Jean Collins. While most of the claims of error asserted by the Appellants are not properly preserved for review, we must agree that summary judgment was premature because Collins had not clearly shown she was entitled to judgment as a matter of law. As such, under existing Kentucky law, we are required to reverse and remand for additional proceedings.
This matter concerns tax liabilities incurred by Chas Coal, LLC, a Kentucky limited liability company. Prior to 2004, Charles Collins, former husband of Carol Jean Collins, was an owner of membership units of Chas Coal. In 2004, Chas Coal filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code. In December 2004, the Bankruptcy court approved a reorganization plan for Chas Coal. Under the terms of the plan and accompanying agreements, Charles Collins sold all of his membership interests in Chas Coal to Broe Growth Capital, LLC, a Colorado limited liability company. Broe Growth (which subsequently became known as Broe, LLC) and Chas Coal are managed by The Broe Group, an unincorporated association of affiliated companies headquartered in Denver, Colorado. By separate agreement, Broe agreed to pay all tax liabilities of Chas Coal, assume all the outstanding tax obligations of Chas Coal, and hold harmless Charles Collins from any and all tax obligations of Chas Coal.
In her complaint, Collins alleges that Broe failed to pay the tax obligations of Chas Coal for 2001 through 2004. During those years, Collins filed joint tax returns with her husband Charles Collins. As a result of Broe's failure to pay the liabilities of Chas Coal, Collins alleges that her income tax refunds for the years 2008 through 2010 were seized by the Internal Revenue Service (IRS) to pay those tax obligations. Including interest and penalties, the amount seized from Collins's refunds totaled $66,795.
On December 1, 2011, Collins filed this action, naming as defendants Chas Coal, The Broe Group, and Broe, LLC. She sought to recover the value of her seized tax refunds as a third-party beneficiary to the agreement between Charles Collins and Broe. Chas Coal was served with the complaint through its registered agent for service of process. The trial court appointed a warning order attorney to effect service on the Broe defendants. However, the return receipt was refused and returned unclaimed.
Nevertheless, the Appellants filed a joint answer to the complaint on December 28, 2011. They generally denied the allegations in the complaint and asserted a number of affirmative defenses, but without specificity. Shortly thereafter, Collins filed a motion for judgment on the pleadings, Kentucky Rule of Civil Procedure (CR) 12.03, or in the alternative a motion for summary judgment, CR 56.01. She maintained that the Appellants were jointly and severally liable for the unpaid taxes. In response, the Appellants asserted that summary judgment was premature due to the disputed issues of material fact.
On June 12, 2012, the trial court entered an order granting Collins's motion for summary judgment. The court held that Collins's tax refunds were seized to pay the obligations of Chas Coal, and that Chas Coal was unjustly enriched as a result of these seizures. Consequently, the court entered a judgment for Collins in the amount of $66,795, plus interest, costs, expenses, and attorney fees. The judgment reflects that it was prepared and tendered by Collins's counsel at the request of the trial court.
The Appellants then filed a motion to alter, amend, or vacate the judgment pursuant to CR 59.05. They argued that Broe Growth Capital was not properly named or served as a defendant. They further argued that summary judgment was premature due to genuine issues of material fact. Finally, they asserted that Charles Collins had executed a contract on July 27, 2010, which released them from their obligations to pay the taxes owed by Chas Coal.
In an order entered on March 20, 2013, the trial court denied the motion. The court noted that the Appellants had not sought discovery prior to entry of the summary judgment, nor had they responded with opposing affidavits or exhibits contesting entry of summary judgment. The court also pointed out that Collins was not a signatory to the release executed by Charles Collins. The trial court amended the judgment to add BGC, LLC, which the Appellants represented to be the current name of Broe, LLC and Broe Growth Capital, LLC. This appeal followed.
As an initial matter, we note that the Appellants' brief raises a number of issues which are not properly preserved for review. CR 76.12 (4)(c)(v) requires that the Appellants' brief include "a statement with reference to the record showing whether the issue was properly preserved for review and, if so, in what manner." "Compliance with this rule permits a meaningful and efficient review by directing the reviewing court to ... where in the record the preceding court had an opportunity to correct its own error before the reviewing court considers the error itself." Hallis v. Hallis, 328 S.W.3d 694, 696-97 (Ky. App. 2010). "Our options when an appellate advocate fails to abide by the rules are: (1) to ignore the deficiency and proceed with the review; (2) to strike the brief or its offending portions, CR 76.12(8)(a); or (3) to review the issues raised in the brief for manifest injustice only[.]" Id. at 696. See also Briggs v. Kreutztrager, 433 S.W.3d 355, 361 (Ky. App. 2014).
We must also point out that most of these issues were raised for the first time in the Appellants' post-judgment motion. A party cannot invoke CR 59.05 to raise arguments or to introduce evidence that should have been presented during the proceedings before the entry of judgment. Rumpel v. Rumpel, 438 S.W.3d 354, 365-66 (Ky. 2014), citing Gullion v. Gullion, 163 S.W.3d 888, 893 (Ky. 2005). Given the lack of adequate preservation, we will briefly review these issues for manifest injustice.
The Appellants first assert that Collins's counsel engaged in ex parte contact with the trial court prior to entry of summary judgment. In support of this, they point to the tendered summary judgment which the trial court entered. However, we find no indication that the Appellants ever raised any objection to the alleged contact while before the trial court. Indeed, we find no affidavit or other evidence in the record supporting an inference that there was improper ex parte contact. At most, the trial court simply delegated the clerical task of drafting a proposed judgment, which was permitted under Bingham v. Bingham, 628 S.W.2d 628, 629 (Ky. 1982). In the absence of any supporting evidence, we will not dignify the Appellants' unsupported allegations of misconduct with further discussion.
Second, the Appellants assert that the trial court improperly granted summary judgment against parties who had not been served. The complaint identifies "The Broe Group" as an unincorporated association of individuals and companies. The Appellants contend that such an entity is not subject to service of process or capable of being sued. The Appellants also complain that the complaint improperly named Broe, LLC, f/k/a Broe Growth Capital, LLC, which is now known as BGC, LLC.
However, we find no indication that the Broe defendants objected to service of process or personal jurisdiction prior to entry of summary judgment. All three Appellants filed a joint answer which did not challenge the sufficiency of service or the capacity of any particular defendant. Consequently, we deem the issue to have been waived. CR 9.01. For similar reasons, the Appellants are precluded from relying on the purported release executed by Charles Collins because they failed to plead it timely in the answer or raise it on a motion to dismiss. CR 8.03
The sole question properly presented on appeal is whether Carol was entitled to summary judgment as a matter of law. "The proper function of summary judgment is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor." Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56.03. The record must be viewed in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor. Steelvest, 807 S.W.2d at 480. The trial court must examine the evidence, not to decide any issue of fact, but to discover if a real issue exists. Id.
Although a party is permitted to move for a summary judgment at any time, a trial court should not take up a summary judgment motion prematurely, but only after the opposing party has been given ample opportunity to complete discovery. Blankenship v. Collier, 302 S.W.3d 665, 668 (Ky. 2010) citing Pendleton Bros. Vending, Inc. v. Commonwealth Finance and Admin. Cabinet, 758 S.W.2d 24, 29 (Ky. 1988). On the other hand, a party opposing a properly supported summary judgment motion cannot defeat it without presenting at least some affirmative evidence showing that there is a genuine issue of material fact for trial. Steelvest, 807 S.W.2d at 481. Since a summary judgment involves no fact- finding, this Court's review is de novo, in the sense that we owe no deference to the conclusions of the trial court. Scrifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996).
As previously noted, most of the Appellants' defenses were either waived or not sufficiently pled. Furthermore, the Appellants' response to the motion for summary judgment simply made conclusory allegations that there were genuine issues of material fact. The Appellants did not submit opposing affidavits or exhibits in response to the motion for summary judgment, nor did they ever seek any particular discovery. However, the question remains whether Collins established that she was entitled to judgment as a matter of law.
The complaint and summary judgment motion set out all of the relevant documents and evidence. As part of the bankruptcy reorganization, Broe purchased all of the equity of Chas Coal. The Confirmation Order and accompanying agreement required Broe to assume all outstanding tax liabilities of Chas Coal, and to indemnify and hold harmless Charles Collins from those liabilities. However, Chas Coal still has outstanding tax obligations from the years 2001-2004. None of these facts are seriously in dispute.
In her complaint and summary judgment motion, Carol alleges that several tax refunds due to her were seized by the IRS to pay these outstanding obligations of Chas Coal. The accompanying documentation demonstrates that the IRS seized tax refunds payable to the account of Charles and Carol Collins, and applied those refunds to taxes owed for the tax year ending December 2003. We must conclude that genuine issues of material fact exist concerning these matters.
In particular, Collins does not point to documentation which clearly establishes that these refunds were applied to taxes owed by Chas Coal. She asserts that the income from Chas Coal passed through to Charles and was reported as their income on their joint tax returns. As a result, she maintains that subsequent refunds due to them as individuals were subject to seizure to pay the tax liens against Chas Coal. She also points to a 2010 email from counsel for Chas Coal which acknowledged that $20,000 from Charles Collins's 2008 tax refund had been applied toward the outstanding tax liability.
Unfortunately, the record does not clearly establish these crucial facts beyond dispute. There is no expert testimony in the record showing that the refunds due to Charles and Carol Collins were subject to seizure for payment of the pre-2004 tax obligations owed by Chas Coal. The documentation from the IRS does not clearly show that the refunds were applied toward these tax obligations. The email which purports to acknowledge the application is not authenticated, nor is there any indication that it would qualify as an admission by a party. Finally, even if the email was authenticated, it does not fully account for all of the refunds that Collins claims were seized.
Furthermore, there are significant questions remaining whether Collins was entitled to judgment as a matter of law. In her complaint, Collins asserted that she was entitled to recover as a third-party beneficiary of the agreement between Charles Collins, Broe and Chas Coal. But in the judgment, the trial court awarded damages based upon unjust enrichment. Where recovery is provided under the terms of an express contract, an unjust-enrichment claim will generally not be allowed. Sparks Milling Co. v. Powell, 283 Ky. 669, 143 S.W.2d 75, 76 (1940). While we cannot say at this point that it would be impossible for Collins to recover under an unjust-enrichment theory, we also cannot say that she has clearly established her right to recover under that theory as a matter of law. Finally, we find no basis in the record to justify the additional award of interest, attorney fees and costs. Therefore, we must conclude that the trial court granted summary judgment prematurely.
Accordingly, the judgment of the Clay Circuit Court is reversed, and this matter is remanded for additional proceedings on the merits of the claim.
ALL CONCUR. BRIEF FOR APPELLANTS: Marshall R. Hixson
John W. Pollom
Lexington, Kentucky
BRIEF FOR APPELLEE: Stanton L. Cave
Lexington, Kentucky