Ky. Decisions: Court of Appeals Published for Dec. 9, 2005

MINUTES for December 9, 2005

PUBLISHED DECISIONS OF KENTUCKY COURT OF APPEALS FOR Dec. 9, 2005

UPS CAPITAL BUSINESS CREDIT V. C.R. CABLE CONSTRUCTION
BUSINESS LAW - Marshalling assets
2004-CA-002062
Published 
AFFIRMING IN PART, REVERSING IN PART AND REMANDING
DYCHE
Date: 12/09/2005

This appeal addressed the equitable doctrine of marshalling assets, and held in the absence the principle of marshaling assets is not applicable to a case where one of the funds is the property of a surety of the common debtor. As a result, a creditor cannot be compelled to satisfy its debt from the sureties of a debtor before resorting to a fund or collateral security on which the creditor has a lien.

BLACK LETTER LAW a' la JUDGE DYCHE:

The doctrine of marshaling assets is an ancient rule of equity. The doctrine requires that “where two or more creditors seek satisfaction out of the assets of their common debtor, and one of them can resort to two funds where another has recourse to only one of the funds, the former creditor may be required to seek satisfaction out of the funds which the latter creditor cannot reach, before resorting to the other fund.” Bartley v. Pikeville Nat. Bank & Trust Co., 532 S.W.2d 446, 448 (Ky. 1975). By this method of distribution both creditors may be paid or both funds will be exhausted. Id.

However, “it is well settled that a creditor who has a claim against two debtors, one a principal and the other a surety, cannot be compelled by another creditor of the principal debtor to exhaust his remedy against the surety before proceeding against the principal.” Gaines v. Hill, 147 Ky. 445, 144 S.W. 92, 94 (1912)(citations omitted). The rationale for this rule has been explained as follows:

A surety is not a “fund” or “security” in the sense in which those terms are used in connection with the principle of marshaling so as to permit or require a senior creditor to look first to the surety for satisfaction of its claim.

Where a fund is held by a surety or guarantor, marshaling is barred because the debtor does not hold the funds which are in the hands of the surety or guarantor and, therefore, are not assets subject to marshaling.

SMITH V. COM.
CRIMINAL - Suppression Hearings; Expert Testimony
2004-CA-000826
Published 
AFFIRMING
SCHRODER, J.
Date: 12/09/2005

CA affirmed Smith's convictions for Second-Degree Assault and Second-Degree Manslaughter and her underlying sentence of 15 years.  At trial, the Commonwealth presented evidence that Smith was driving a vehicle under the influence of Methadone and Promethazine and struck another car head-on after crossing the centerline.  The other driver was killed and his child-passenger was seriously injured.  Smith was hospitalized after the accident.  The investigating officer obtained her written consent for blood and urine tests.  Smith later filed a pretrial motion to suppress the test results which showed that she had concentrations of both Methadone and Promethazine in her system.  The trial judge denied the motion and also overruled Smith's motion in limine to preclude the Commonwealth from introducing an expert opinion about whether Smith should have been driving while under the influence of Methadone.  A pathologist with pharmacological training was permitted to testify for the Commonwealth at Trial that Methadone users often take Promethazine to heighten the effects of the Methadone.  Such effects basically include drowsiness, slurred speech, and decreased motor skills.  On appeal, CA held that the motion to suppress was properly denied because substantial evidence supported the trial court's finding that Smith voluntarily agreed to give blood and urine samples.  It further held that the opinions of the Commonwealth's expert were properly admitted under Daubert v. Merrill Dow Pharmaceuticals, 509 US 579 (1993) and Stringer v. Commonwealth, 956 S.W.2d 883 (Ky. 1997).   

 

WRIGHT V. WRIGHT & FRALEY V. FRALEY
FAMILY LAW - DVO and EPO
2005-CA-000540
Published 
VACATING AND REMANDING
GUIDUGLI, J.
Date: 12/09/2005

Consolidated actions in which Mr. Wright (Floyd Family Court) appeals from a 3-year domestic violence order (DVO) and Ms. Fraley (Lee Circuit Court) appeals from the dismissal of her emergency protective order (EPO). Both appellants claim they were denied a full hearing. CA agrees with both appellants, vacates and remands.

In the Wright case, instead of a DVO hearing, the judge heard oral arguments from the parties' counsel and entered a DVO based upon an alleged 911 call and the involvement of law enforcement in a domestic dispute. In the Fraley case, the EPO movant testified that the alleged perpetrator had not been violent, nor had he threatened her on the occasion in question. She testified that the alleged perpetrator had been physically violent toward her 8 years earlier, but the judge dismissed the petition, stating that the court would not go back 8 years for proof to support the petition.

CA holds that due process requires that each party be given a meaningful opportunity to be heard. In the Wright case, the court asked no questions of either party and impermissibly relied upon extrajudicial evidence in entering the DVO. In the Fraley case, the movant's counsel was not given a full opportunity to develop evidence of the prior violent incident.

STORM V. MULLINS
FAMILY LAW - Custody and Adoption
2005-CA-000647
Published 
AFFIRMING
GUIDUGLI
Date: 12/09/2005

Affirmed trial court's denial of collateral attack on adoption because motion to vacate under CR 60.02 was filed too late - outside the one-year period provided by KRS 199.540(2).

REVENUE CABINET V. BACOCK AND WILCOX CO.
REVENUE AND TAXATION -  Business Capital Tax
2004-CA-001692
Published 
AFFIRMING IN PART, REVERSING IN PART AND REMANDING
PAISLEY, J.
Date: 12/09/2005

This is a narrow, revenue and tax law case coming out of the Franklin Circuit Court addressing an appeal by the Dept of Revenue that it did not have enough information to determine whether all or part of a “Reserve for Product Liability” account held by the Babcock and Wilcox Company (B&W) is “surplus” and therefore taxable “capital” pursuant to Kentucky Revised Statutes (KRS) 136.070.  COA held the circuit court correctly ruled that B&W preserved for review the question of whether that portion of the Reserve Account corresponding to the Insurance Recovery Account should be included in capital for purposes of the corporation license tax. Furthermore, although the KBTA found that the issue had not been preserved, it based its entire ruling on the determination that the Reserve Account was a liability account that should be included in capital as surplus.

KAPLAN V. PUCKETT
TORTS - Legal Negligence
2004-CA-001750
Published 
AFFIRMING
TACKET
Date: 12/09/2005

COA did not apply the Daubert rule on expert evidence in a legal negligence claim as the performance of legal counsel was not something that could be easily quantified.  Affirmed trial court.

STOCKTON V. FRENCH
WORKERS COMP -  ALJ Fact Finding Authority
2004-CA-002637
Published 
AFFIRMING
VANMETER
Date: 12/09/2005

Affirmed dismissal of claim entirely, and as the WCB noted “ALJ is free to disregard even unrebutted medical testimony so long as she sets out a reasonable basis for doing so. Cf. Mengel v. Hawaiian Tropic Northwest & Central Distributors, Inc., Ky.App., 618 S.W.2d 184 (1981).”

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