Opinion
NO. 2012-CA-001739-MR
06-13-2014
BRENDA L. STENGER; T. PROCTOR STENGER; CYNTHIA G. STENGER; AND GARY P. STENGER APPELLANTS v. HOPKINS COUNTY COAL, LLC APPELLEE
BRIEFS FOR APPELLANTS: Daniel N. Thomas Hopkinsville, Kentucky BRIEF FOR APPELLEE: Dana R. Howard P. Douglas Barr Lexington, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM HOPKINS CIRCUIT COURT
HONORABLE JAMES C. BRANTLEY, JUDGE
ACTION NO. 08-CI-00459
OPINION
REVERSING AND REMANDING
BEFORE: DIXON, MOORE AND THOMPSON, JUDGES. THOMPSON, JUDGE: Brenda L. Stenger, T. Proctor Stenger, Cynthia G. Stenger and Gary P. Stenger (collectively the Stengers) appeal from an order of the Hopkins Circuit Court granting summary judgment to Hopkins County Coal, LLC (HCC) in this dispute over the location of an easement. Because the Stengers did not receive ten days' notice of HCC's renewed motion for summary judgment, we reverse and remand.
In 2004-2005, HCC constructed an office building, bathhouse and other facilities on property it owns in Hopkins County for use in connection with the operation of its Elk Creek Mine. At that time, the only access to HCC's property was by Frank Cox Road, a narrow road that ends near the back of HCC's property. HCC desired to construct a more direct route to and from its property and began negotiating with the Stengers for an easement across their property immediately south of HCC's property and situated between it and Frank Cox Road.
The Stengers acquired their property by deed dated August 3, 1979. Referred to as the Cox farm, the property consists of three separate tracts: a 25-acre tract, a 93-acre tract, and a 97-acre tract. Only a .35-acre section of the 97-acre tract is involved in this litigation and, therefore, reference to the .35-acre section refers to that part of the larger tract.
In 2005, the Stengers signed a landowner's statement indicating they would negotiate with HCC to grant a right of access. In 2005 and in the summer of 2006, the location of an easement was discussed among the Stenger brothers and two HCC employees, John Harris and Sam Crawford. HCC identified the 93-acre tract and the .35-acre section upon which it desired to locate the road.
On May 24, 2006, HCC sent a proposal to the Stengers stating the road was to be located as shown on an enclosed map identified in the lower right hand corner as Exhibit A depicting a roadway crossing the 93-acre tract and the .35-acre section of the Stengers' property. At a meeting with Crawford and Harris on May 31, 2006, Gary Stenger asked that the easement be limited to 100 feet in width and the agreement specify only one road would be built. He also requested that the location where the access road intersected with Frank Cox Road be moved to the west and the road be straightened. At some point, a dotted-line was drawn on Exhibit A to indicate the area where Gary Stenger desired the road to be shifted to the west and straightened.
A draft agreement was prepared stating HCC would locate the easement "at the approximate location as shown on Exhibit A...provided, however that, in order to accommodate [the Stengers], [HCC] will attempt to locate the Easement to the West of the locations shown on Exhibit A as far as practicable." On July 5, 2006, Gary Stenger faxed the draft agreement, including Exhibit A with the dotted-line, to the Stengers' attorney, Joe Evans.
On September 5, 2006, Crawford, the Stengers and Evans met to close the transaction. The agreement recites in part:
That for and in consideration of the mutual agreements and covenants herein contained for certain other valuable considerations hereinafter set out, the Grantors do hereby bargain, sell and convey unto Grantee, its successor and assigns, certain easements and rights, as set forth hereinbelow, in connection with the 93 acre tract and the 25 acre tract shown on Exhibit "A" attached hereto (the "Property"), said tracts being a portion of the 396.59 acre tract (the Stenger Tract) acquired by Gary P. Stenger and Thomas Proctor Stenger from John H. Wathen and Genevieve Wathen, his wife, by deed dated August 3, 1979, appearing of record in
Deed Book 408, at Page 195, in the Hopkins County Clerk's Office.
As recited in the proposed agreement, the agreement further defines the easement as "100 feet in width" and "located at the approximate location as showing on exhibit A attached hereto provided, however, that in order to accommodate [the Stengers], [HCC] will attempt to locate the Easement to the West of the location shown on Exhibit A as far as practicable." The agreement further obligates HCC to construct a road within the easement "to meet or exceed the minimum requirements for construction of a subdivision road in Hopkins County, Kentucky as of the date of construction." The Stengers retained the right to use the property in any manner that does not interfere with HCC's use of the easement. The agreement has a term of twenty years and, upon termination, HCC must transfer all rights and ownership in the roadway to the Stengers. As consideration, the agreement provides HCC will pay the Stengers $12,000 per year for the first fifteen years and $24,000 per year for each year thereafter. The only reference in the agreement to the .35-acre section is the depiction of the easement crossing over that tract in Exhibit A. The Stengers signed the agreement and a short-form memorandum of agreement for recording purposes.
Despite the reference to Exhibit A, it was not attached to the agreement until after it was signed. It is a point of factual contention among the parties whether it was understood Exhibit A did not reflect the actual location of the easement.
Proctor Stenger testified Exhibit A was attached just as the closing was about to end when Crawford said: "We need a map. I have this one. If it's all right we'll just use this. It doesn't mean anything." Proctor testified that Crawford told him the Stengers would be contacted when the road was flagged to determine the final location prior to construction.
Gary Stenger had a similar recollection and testified in his deposition as follows:
Q. So you say Mr. Crawford was in the room, had this particular map in his hand and said he needed to attach it to the agreement?Gary testified he did not look at Exhibit A when attached and Crawford stated it "really didn't mean anything." Gary also testified he was told several times by Crawford that engineers would meet with the Stengers on site and agree as to where the actual easement would commence and end.
A. Yes.
Q. So at the time you signed the agreement, your testimony is that there was no Exhibit A attached to it?
A. Yes, sir.
Q. And did Mr. Crawford then attach Exhibit A to the Agreement.
A. Yes, he did.
Crawford acknowledged when he attached Exhibit A to the agreement he knew the Stengers wanted the easement in a location different than shown in Exhibit A. Crawford further testified that after the closing, he telephoned Kendall Barret, his supervisor and in-house counsel for the parent entity to HCC, and informed her that the narrative of the agreement did not include the .35-acre section. Barret opined HCC had their rights by virtue of the attached Exhibit A. Crawford acknowledged that all parties agreed at the closing that the easement as depicted on Exhibit A would be changed and Exhibit A was "a proposed agreement map."
After the closing, HCC mailed copies of the agreement and memorandum to the Stengers. On September 18, 2006, a check payable to the Stengers in the amount of $12,000 was issued by HCC and cashed by the Stengers. On November 15, 2006, the Stengers signed a road permit letter acknowledging a road would be constructed on their property pursuant to the agreement.
After the agreement was signed, the Stengers believed the agreement did not grant HCC the right to use the .35-acre section because it was not specified in the narrative of the agreement. Nevertheless, Gary Stenger went to HCC's office for the purpose of telling HCC to locate the road on the .35-section so that in his words "[HCC] would have to negotiate for the other ninety seven acres."
In April 2007, after the road was substantially constructed, the Stengers asserted the agreement did not grant HCC rights to use the .35-acre section. HCC disagreed and, with no action taken by the Stengers to prevent its use of the road, HCC issued a check that was cashed by the Stengers as the second annual $12,000 payment pursuant to the parties' agreement.
On January 8, 2008, the Stengers sent a "Notice of Trespass" to HCC demanding HCC immediately stop using the .35-acre section. On February 8, 2008, the Stengers' counsel sent another letter demanding HCC stop using the .35- acre section and declaring HCC in default of the agreement and demanded within 60 days, HCC do the following: (1) relocate the road to exit the northeast corner of the 93-acre tract; (2) ensure that the road meets the requirements in the Hopkins Road specification; and (3) prepare a subdivision plat for approval by the Joint Hopkins County Planning Commission.
After receipt of the February letter, HCC filed a complaint for declaration of rights asking the court declare: (1) the agreement grants HCC a valid easement on the 93-acre tract and .35-acre section; (2) HCC has not trespassed on the Stengers' property, (3) HCC had not breached its obligations under the agreement; and (4) the Stengers are not entitled to terminate the agreement. The Stengers filed six counterclaims including requests for declarations that the agreement is invalid and unenforceable. The Stengers also requested a declaration that the agreement is void in contravention of Kentucky Revised Statutes 100.277(3). They also alleged trespass and requested a declaration that the agreement has terminated because HCC failed to cure the breaches alleged in the February letter. The final counterclaim alleged fraud.
During the course of the litigation, the Stengers and HCC filed motions for summary judgment. The trial court denied all motions for summary judgment based on the existence of material issues of fact. With a trial date set for August 28, 2012, on August 1, 2012, the trial court held a pretrial conference and determined there were numerous questions of law to be resolved. A pretrial hearing was scheduled for August 21, 2012.
When the hearing commenced, the Stengers' counsel noted to the trial court that no motions for summary judgment were pending and it was his understanding the purpose of the hearing was to determine if any legal issues could be resolved, including whether the contract was ambiguous, and any evidentiary issues. The trial court agreed that was the purpose of the hearing and added it would be appropriate to resolve any other issues.
Without comment on the subject matter of the hearing, counsel for HCC proceeded to engage in a lengthy recitation of the facts and respond to the court's questions. The Stengers' counsel was permitted to respond to HCC's version of the facts and was questioned by the court. After approximately one-half hour of factual arguments by counsel and questioning by the trial court concerning the content of depositions, the Stengers' counsel realized the pretrial hearing to discuss legal issues had become a hearing concerning factual issues, which he had not anticipated and had not prepared to argue. Therefore, he requested permission to have deposition summaries faxed from his office to the courthouse. After some delay and without the entire summaries having been faxed, the hearing continued. During the hearing, the parties discussed deposition testimony produced prior to their initial motions for summary judgment and deposition testimony given after their initial motions, including extensive reliance by both parties on the deposition of Evans.
At the end of the hearing, HCC moved for summary judgment. The Stengers' counsel voiced his objection by advising there was no notice given that HCC was requesting the trial court to review its previous denial of summary judgment to HCC. Counsel reminded the court there were no motions for summary judgment pending.
After approximately three hours of the parties' recitation of the facts, the trial court asked to discuss the issue of summary judgment in chambers. The in-chambers discussion was not recorded. However, the parties agree that at this point, the trial court ruled summary judgment was granted to HCC on all issues and instructed its counsel to prepare a judgment. HCC's counsel prepared and sent a 26-page proposed judgment to the trial court and the Stengers filed objections. Two weeks later, the trial court entered the judgment as proposed by HCC.
In the judgment, it was determined the agreement and memorandum unambiguously describes the easement location by reference to Exhibit A and, because the agreement grants HCC an easement, the Stengers' trespass claim fails as a matter of law. The trial court rejected the Stengers' claim that the agreement constituted a prohibited sale or transfer of a subdivision lot. The trial court also found there was no material issue of fact concerning the Stengers' allegations of fraud and breach of contract and dismissed those claims. This appeal followed.
Our standard of review as to cases where a summary judgment has been granted is "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996). It is to be cautiously applied and not used as a substitute for trial. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 483 (Ky. 1991). The trial court "must examine the evidence, not to decide any issue of fact, but to discover if a real issue exists." Id. at 480. Indeed, "trial judges are to refrain from weighing evidence at the summary judgment stage[.]" Welch v. American Publishing Co. of Kentucky, 3 S.W.3d 724, 730 (Ky. 1999). "Even though a trial court may believe the party opposing the motion may not succeed at trial, it should not render a summary judgment if there is any issue of material fact." Steelvest, Inc., 807 S.W.2d at 480.
We concede our confusion regarding the precise purpose of the hearing in the context of the lengthy factual arguments presented by the parties. If, as counsel and the trial court suggested, the primary purpose was to determine whether the contract was unambiguous, extrinsic evidence was prohibited. It is well known that "[a]bsent an ambiguity in the contract, the parties' intentions must be discerned from the four corners of the instrument without resort to extrinsic evidence." Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky.App. 2002). Id. Here, contrary to the rule, the trial court heard extrinsic evidence to determine whether the contract is ambiguous. We caution that extrinsic evidence is admissible only after the court determines a contract is ambiguous or silent on a vital matter. Any disputes concerning the extrinsic evidence are factual issues and subject to resolution by the fact-finder. Id. Regardless of the initial purpose of the pretrial hearing, it is now clear that it was, in reality, a hearing on HCC's last-hour motion for summary judgment, without proper notice to the Stengers.
Because it potentially terminates the litigation, an opposing party must be given notice of a summary judgment motion. Kentucky Rules of Civil Procedure (CR) 56.03 provides that a "motion shall be served at least 10 days before the time fixed for the hearing." The notice requirement safeguards against parties ambushing each other with last minute motions for summary disposition. Rexing v. Doug Evans Auto Sales, Inc., 703 S.W.2d 491, 494 (Ky.App. 1986). The fundamental purpose of notice is to provide a party with a meaningful opportunity to present a defense to any legal or factual claim of the moving party. "The 10-day lead time provided before hearing a summary judgment motion may not be lightly disregarded." Perkins v. Hausladen, 828 S.W.2d 652, 656 (Ky. 1992) (quoting Kentucky Practice by Bertelsman and Philipps, 4th ed. Civil Rule 56.03, Comment 3). In Perkins, the Court did not decide whether automatic reversal is appropriate if summary judgment is granted in violation of the CR 56.03 notice requirement. However, it indicated that it would be an unusual case where there was not some degree of prejudice caused by a premature summary judgment hearing. Id. at 656-657.
Despite its mandatory directive, the notice provision of CR 56.03 is susceptible to waiver. Equitable Coal Sales, Inc. v. Duncan Machinery Movers, Inc., 649 S.W.2d 415, 416 (Ky.App. 1983). However, HCC's argument that the Stengers waived any objection to consideration of their summary judgment motion is refuted by the record. After HCC made its oral motion for summary judgment, the Stengers' counsel clearly stated a summary judgment motion required notice.
HCC points out a trial court may properly reconsider a previous denial of a motion summary judgment and grant summary judgment. Davidson v. Castner-Knott Dry Goods Co., Inc., 202 S.W.3d 597, 602 (Ky.App. 2006). However, as evidenced by the repeated references to deposition testimony taken after the initial denials of summary judgment, HCC's motion was not simply a renewal of a previously filed motion to which the Stengers were provided notice of and the opportunity to respond in a reasonable and meaningful way. If the trial court had merely reconsidered HCC's previously filed summary judgment motion based on the same law and facts presented in that motion, it is conceivable that the Stengers would not have been prejudiced by the lack of notice: That is not the situation.
The Stengers' counsel attended the pretrial hearing prepared to argue legal issues in preparation of a trial scheduled to commence the following week, not to oppose a summary judgment motion. All agreed there were no motions for summary judgment pending at that time and the purpose of the conference was to review questions of law to determine if there was an ambiguity in the agreement and any evidentiary issues. Most telling, both parties relied on deposition testimony taken after the trial court's initial denial of summary judgment.
We have not overlooked that the trial court adopted verbatim a 26-page memorandum opinion prepared by HCC's counsel that the Stengers argue "goes well beyond what was actually decided off-record by the trial judge." Necessarily, this Court is not privy to discussions among counsel and the trial judge and the court's rulings are not in the recorded proceedings. Although, in granting a summary judgment, we are not willing to say the verbatim adoption of a judgment prepared by counsel is reversible error, trial courts must be cautious to carefully scrutinize such a possibly one-sided argumentative type judgment for any errors in the stated law or in the undisputed facts.
We are mindful this case was filed in 2008, providing ample time for discovery. Quite possibly, the Stengers' defenses and claims may not survive a properly filed motion for summary judgment with proper notice to the Stengers. However, the prospect of the Stengers' success is not a basis for disregarding the notice provisions of CR 56.03.
Accordingly, we reverse the summary judgment and remand to the trial court for further proceedings.
ALL CONCUR. BRIEFS FOR APPELLANTS: Daniel N. Thomas
Hopkinsville, Kentucky
BRIEF FOR APPELLEE: Dana R. Howard
P. Douglas Barr
Lexington, Kentucky