JERRY BATSON, EXECUTOR OF THE ESTATE OF MARGARET LOUISE WRIGHT v. CHARLES CLARK, BILL WILCOX, INDIVIDUALLY, and d/b/a DOWNTOWN CARPETS WAREHOUSE
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RENDERED: October 16, 1998; 2:00 p.m.
TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
No.
1997-CA-000535-MR
JERRY BATSON, EXECUTOR OF THE
ESTATE OF MARGARET LOUISE
WRIGHT
APPELLANT
APPEAL FROM WARREN CIRCUIT COURT
HONORABLE THOMAS R. LEWIS, JUDGE
ACTION NO. 96-CI-000363
v.
CHARLES CLARK, BILL WILCOX,
and LEONARD GILBRETH,
INDIVIDUALLY, and d/b/a
DOWNTOWN CARPETS WAREHOUSE
APPELLEES
OPINION
AFFIRMING IN PART,
REVERSING IN PART,
AND REMANDING
* * *
BEFORE:
GARDNER, HUDDLESTON, AND KNOX, JUDGES.
KNOX, JUDGE:
This is an appeal from a judgment of the Warren
Circuit Court holding appellant, Jerry Batson, as Executor of the
Estate of Margaret Louise Wright, liable to appellees Charles
Clark, Bill Wilcox and Leonard Gilbreth, Individually and d/b/a
Downtown Carpets Warehouse, for damages in a total amount of
$22,913.18 arising out of a lease agreement.
On July 1, 1987, John Wright leased a parcel of land
and a building in Bowling Green, Kentucky, to Billy Miller
(Miller) for a period of ten (10) years.
The lease was to run
from July 1, 1987, through June 30, 1997.
$925.00 per month.
Rent was set at
Miller and his business partner, Larry
Gilbreth (Gilbreth), planned to move their carpet business into
the building.
Although Miller and Gilbreth were partners in the
carpet company, the lease was entered into by Miller only, as an
individual, and not in the name of the business.
The lease
agreement contained the following clauses:
SUCCESSORS AND ASSIGNS: This agreement shall
be binding upon and inure to the benefit of
the parties hereto, their heirs,
administrators, executors and assigns.
SUBLETTING: This lease shall not be assigned,
sublet in any manner or respect by the lessee
without the prior written consent of the
Lessor.
John Wright died before Gilbreth and Miller moved their
business onto the property.
dissolved their partnership.
Subsequently, Gilbreth and Miller
Appellees Gilbreth, Charles Clark
(Clark), and Bill Wilcox (Wilcox) formed a partnership called
Downtown Carpets Warehouse (Downtown Carpets) and moved into the
same property which Miller had leased from John Wright.
On
November 11, 1988, by a written “Sublease Agreement,” Miller
assigned all of his rights under the lease to Gilbreth, and
Gilbreth assumed all of Miller’s obligations under the lease for
its entire term through June 30, 1997.
contained the following provisions:
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The sublease agreement
3. The parties to this agreement acknowledge
that this Sublease Agreement is subject to
the written consent of the Lessor, John R.
Wright, now deceased, which consent should be
obtained from his personal representative.
4. This Sublease is for the entire remaining
term of the lease heretofore referred to
between Wright and Miller.
Neither Gilbreth nor his two partners ever obtained
written consent from Margaret Wright, John Wright’s wife and
personal representative, to sublet the property.
However,
testimony during the trial of this matter established that: (1)
Gilbreth personally told Margaret that he was “taking over” the
Miller lease; (2) Margaret visited the premises and witnessed,
first-hand, the operation of Downtown Carpets; (3) Clark’s wife
and Gilbreth’s wife, on separate occasions, had hand-delivered
monthly rental payments to Margaret; and, (4) Margaret accepted
rent payments from appellees, pursuant to the terms of the
original lease, for a period of approximately six (6) years
following her husband’s death.
Margaret Wright died testate on December 17, 1994.
the time of her death, the rent on the premises was current.
At
Appellees believed they would continue to lease the property,
following Margaret’s death, for the remainder of the ten-year
term, i.e., through June 30, 1997.
Appellant, Jerry Batson (Batson), was appointed
executor of Margaret’s estate on January 13, 1995.
During the
course of administering the estate, Batson determined that he
would attempt to sell the subject property.
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He had been
collecting rent from appellees, since Margaret’s death, pursuant
to the terms of the original lease.
Approximately seven (7)
months after being appointed executor, however, Batson sent a
letter to Clark dated August 23, 1995, in which Batson noted his
opinion that the lease was now month-to-month.
Further, Batson
demanded that appellees pay higher rent or, alternatively, vacate
the premises:
You are currently a tenant in a month to month lease covering the
premises located at 1266 U.S. 31W. Bypass. This is formal notice
that effective October 1, 1995, the rent for the premises will be
increased from $950 to $1250 a month. If this rental increase is
acceptable to you, then payment of the new rent amount will be
due on October 1, 1995. If it is not acceptable, then you will
need to vacate the premises by midnight on September 30, 1995.
At the time Clark received this letter, Downtown Carpets was
current in paying its monthly rent.
By way of correspondence dated August 30, 1995, Clark
informed Batson that Downtown Carpets would vacate the premises
by September 30, 1995.
Clark included in his letter a reference
to a storage building which appellees constructed on Margaret’s
property, at their own expense and with Margaret’s approval: “As
I told you on the phone we own the storage building in back of
the property that we paid $10,000.00 for and we will be willing
to sell this to the owners for a price of $4,000.00 if they are
interested.”
Batson responded a few days thereafter by way of
letter, stating his position that the storage building was a
permanent fixture and, therefore, owned by the estate.
Clark
then hired a lawyer, who corresponded with Batson on September
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12, 1995, addressing these points: (1) Batson had produced no
documentation authorizing him to alter the terms of the lease
which set monthly rent at $925 for a 10-year period; and, (2)
Clark had an agreement with Margaret Wright that if Downtown
Carpets ever vacated the premises, he would be obligated to
remove the storage building.
Clark’s lawyer closed the letter by
stating that Downtown Carpets would vacate the premises by
September 30, 1995, but that Clark would honor his agreement with
Margaret, and remove the storage building.
Appellees moved their business into a different
location by September 30th, as they had agreed to do.
However,
having received no authority from Batson to remove the storage
building, they left the building on the property.
Appellees
testified they vacated the premises and left the building there
under protest, with the intent to resolve the matter in court.
Appellees filed a claim against the estate on October 24, 1995,
in Warren District Court.
Batson responded with the following
letter, dated October 30, 1995:
This letter is to acknowledge receipt of the
claim against the Estate of Margaret Wright
filed by your clients, Charles Clark, Bill
Wilcox and Leonard Gilbreth, d/b/a Downtown
Carpets Warehouse. Please be advised that
the claim is being disallowed. I believe the
claim is barred by the applicable statute of
limitations as set out in KRS 396.011.
Please notify your clients of this
disallowance. I am sure you are aware that
KRS 396.055 requires a claimant to commence
an action against the personal representative
not later than 60 days after the mailing of a
notice of disallowance or the claim will be
barred. I am warning you as the attorney for
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the claimants of the impending bar as
required by KRS 396.055. Please pass this
information along to your clients.
On April 3, 1996, five (5) months following the
disallowance notice, appellees filed a complaint in Warren
Circuit Court against Batson, as executor of Margaret’s estate,
alleging breach of their lease and wrongful conversion of their
storage building.
The following month, on May 14, 1996, Batson
sold the subject property, including the storage building for
$125,000.
In June 1996, the estate filed a motion to dismiss the
claims of appellees, arguing that the trial court had no
jurisdiction to entertain the action.
Specifically, Batson
argued that: (1) the initial claims were barred by the statute of
limitations (KRS 396.011); (2) the claims were not correctly
filed (KRS 396.015); and, (3) the time had expired for the filing
of litigation against Margaret’s estate (KRS 396.055).
The trial
court denied the motion to dismiss, and proceeded with a bench
trial.
At the conclusion of trial, the court found that Batson
had breached appellees’ lease and, further, had converted
appellees’ storage building.
The court awarded appellees damages
of $18,389.28 for Batson’s breach of lease and $4,523.90 for
Batson’s conversion of their storage building.
Batson has
appealed that decision.
On appeal, Batson alleges: (1) that appellees’ claims
were barred in the first place by KRS 396.011 and 396.055; (2)
that appellees waived their claim for contract damages when they
voluntarily moved off the premises; (3) that the storage building
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to which appellees claim ownership became a permanent fixture and
a part of the realty, to be sold with the rest of the property;
(4) that appellees failed to prove, by competent evidence, the
fair market value of the storage building; (5) that the trial
court erred in finding that the sublease was valid and effective,
absent any proof of Margaret Wright’s written consent or
knowledge; and (6) that the trial court incorrectly calculated
the damages award.
Statute of Limitations
Batson argues that because appellees did not file their
claim against Margaret Wright’s estate within six (6) months
after Batson’s appointment as executor, their claim was barred in
the first place under KRS 396.011(1), which reads:
All claims against a decedent’s estate which
arose before the death of the decedent,
excluding claims of the United States, the
state of Kentucky and any subdivision
thereof, whether due or to become due,
absolute or contingent, liquidated or
unliquidated, founded on contract, tort, or
other legal basis, if not barred earlier by
other statute of limitations, are barred
against the estate, the personal
representative, and the heirs and devisees of
the decedent, unless presented within six (6)
months after the appointment of the personal
representative, or where no personal
representative has been appointed, within two
(2) years after the decedent’s death.
Batson maintains that KRS 396.011(1) required appellees, because
they had a leasehold interest, to assert a claim against
Margaret’s estate regarding their leasehold interest, as well as
a claim regarding their ownership interest in the storage
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building on the property, all within six (6) months of Batson’s
appointment as executor of Margaret’s estate (i.e., by July 13,
1995).
Batson further argues that appellees’ cause of action
against Margaret’s estate is barred by KRS 396.055(1), the
pertinent portion of which reads:
As to claims presented in the manner
described in KRS 396.015 of this Act within
the time limit prescribed in KRS 396.011, the
personal representative may mail a notice to
any claimant stating that the claim has been
allowed or disallowed . . . . Every claim
which is disallowed in whole or in part by
the personal representative is barred so far
as not allowed unless the claimant commences
an action against the personal representative
not later than sixty (60) days after the
mailing of the notice of disallowance or
partial allowance if the notice warns the
claimant of the impending bar.
Batson points out that not only did he disallow appellees’ claim,
but he specifically gave notice to appellees of the 60-day bar
referenced in KRS 396.055(1) by way of letter dated October 30,
1995.
As such, he argues, appellees had only sixty (60) days
from October 30, 1995, within which to file their cause of action
against Batson and the estate.
Appellees, however, did not file
this litigation until April 3, 1996, approximately five (5)
months following Batson’s notice of disallowance.
As such,
Batson argues, this cause of action is barred.
We disagree with Batson’s position.
In fact, we do not
consider appellees’ allegations to be probate-type “claims” at
all, i.e., they arose after the death of the decedent, Margaret,
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and represent obligations created, not by Margaret for any
wrongful conduct she committed, but by the executor himself for
actions he took after Margaret’s death.
In other words,
appellees’ cause of action accrued against the executor of
Margaret’s estate, not against Margaret.
As used in probate
statutes, such as KRS 396.011, which limit the time frame in
which creditors may present their claims against an estate
(“nonclaim” statutes, as they are routinely called), the word
“claim” generally refers to “debts or demands against the
decedent which might have been enforced against him during his
lifetime . . . .”
31 Am. Jur. 2d Executors and Administrators §
603 (1989) (emphasis added).
Margaret took no action during her
lifetime which would have prompted this litigation and, thus,
appellees could not have enforced these claims against Margaret
during her lifetime because they had not yet accrued.
KRS 396.035 states in part that “[n]o action shall be
brought against a personal representative on a claim against
decedent’s estate unless the claimant shall have first presented
his claim [to the personal representative] in the manner
described in KRS 396.015.”
The precursor to this statute, Ky.
St. § 3872, in effect in the late nineteenth and early twentieth
centuries, was very similar, the pertinent part of which stated:
“[N]o action shall be brought or recovery had on any demand . . .
until demand of payment thereof has been made of the personal
representative, accompanied by the required affidavit.”
Kentucky’s case law interpreting this former statute supports our
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conclusion that appellees’ claims were not subject to formal
presentation in the first place.
For example, in Crenshaw v. Duff’s Ex’r, 113 Ky. 912,
69 S.W. 962 (1902), the Crenshaws had executed a promissory note
to Edmund Duff, to whom they made payments until Duff’s death, at
which time they began making payments to Duff’s executor.
Seventeen (17) years after Duff died, the Crenshaws finally
satisfied their debt.
However, the final payment they made to
the executor represented interest which had been charged at a
rate higher than legal interest.
The Crenshaws sued George Duff
in his capacity as executor of Edmund Duff’s estate, seventeen
(17) years after Duff died, to recover their final payment on the
ground that it constituted usury.
The executor moved to dismiss
the action on the basis that the Crenshaws had failed to file a
claim (“demand”) against the estate under § 3872 of the statutes,
quoted above.
The trial court dismissed the Crenshaws’ cause of
action, finding they should have first filed a claim against
Edmund Duff’s estate.
The appellate court, however, disagreed:
[N]o usury was paid in the lifetime of decedent, Edmund Duff, but
it was paid, if any was paid, to the executor, George T. Duff.
The executor having received that to which neither he nor his
testator’s estate was entitled (assuming that the payments were
made as alleged in the petition), the executor was bound to
refund to appellant the excess which constituted the usury. This
demand was against the executor, and not against the estate of
the testator. Therefore it is not of that class of claims
embraced in the provisions of sections 3870-3872, Ky. St. No
demand or verification was necessary.
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Id. at 963 (emphasis added).
See Lucking’s Adm’r v. Gegg, 12
Bush 298 (1876), in which decedent’s surety sued decedent’s
executor for reimbursement of funds the surety paid to satisfy
decedent’s debt.
The executor moved for dismissal of the action,
arguing the surety had not filed a claim against the estate prior
to bringing suit, as he was required to do under the statute.
The court disagreed and held that the surety was not required to
file a claim against the estate: “His right of action accrued
against the personal representative, and not against the
deceased, and it is not such a demand as is contemplated by the
37th section of article 2, chapter 39, of the General Statutes
[equivalent to § 3872].”
Id. at 299.
See also Berry v. Graddy,
Adm’r of Belt, 1 Metc. 553, 555 (1859) (“debts created by the
personal representative himself . . . [are not], properly
speaking, demands against the estate of the decedent. . . .”).
Likewise, in Cowles’ Ex’r v. Johnson, 297 Ky. 454, 179
S.W.2d 674 (1944), the plaintiff sued decedent’s executor for
damages resulting from executor’s erroneous calculation of the
tobacco base on land which the executor had sold to plaintiff
after decedent’s death.
The court held that plaintiff was not
required to file a claim against the estate prior to bringing
suit. “[T]he claim was not one against a decedent’s estate but
was a claim against the executor himself . . . .”
Id. at 675.
In the present case, appellees’ claim is against
Margaret’s executor and, as such, we do not believe appellees’
claims are subject to the deadlines set out in KRS 396.011(1) and
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396.055(1).
Further, we do not believe the fact that appellees
actually filed a claim against the estate, later denied by
Batson, is significant.
Based upon the above-cited case law,
appellees’ allegations are not in that class of “claims” which
must be filed against the estate prior to bringing suit.
Thus,
appellees had no obligation to file an initial claim against
Margaret’s estate, despite the fact they did.
Appellees’ cause of action for breach of contract
accrued on, or shortly after, August 23, 1995, the date of
Batson’s letter notifying appellees of the changes in the terms
of the lease.
Appellees filed this litigation on April 3, 1996,
just over six (6) months later.
to have been timely filed.
We believe appellees’ complaint
As for appellees’ request for
declaration of rights concerning ownership of the storage
building, appellees were notified in early September 1995 of
Batson’s position that the building was owned by Margaret’s
estate.
They filed suit six (6) months later.
Again, we believe
appellees’ complaint, as it concerned ownership of the building,
was timely filed.1
We do not believe appellees’ claims were subject to the
deadlines set out in KRS 396.011 and 396.055.
Interestingly,
however, even under Batson’s theory that appellees’ claims were,
in fact, subject to those statutes, appellees’ litigation would
1
Despite the pending litigation, Batson sold the property,
including the storage building, less than six (6) weeks after
appellees filed their litigation asking the court to resolve the
issue of ownership of the building.
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nonetheless have been timely filed.
KRS 396.011(1) encompasses
only those claims “which arose before the death of the decedent.”
Appellees’ claims did not arise until after Margaret’s death,
when her executor refused to honor the lease agreement between
Margaret and appellees.
Thus, appellees had no breach of
contract claim against Margaret during her lifetime regarding the
lease or sublease agreement.
On the contrary, Margaret fully
honored the terms of the agreement for a six-year period.
Further, as concerns the storage building, appellees,
who testified it was their understanding they were to remove the
building when they vacated the premises, had no reason to assert
an ownership interest therein until the executor, Batson, claimed
ownership of the building on behalf of the estate.
Batson did
not change the terms of the lease, nor did he claim an interest
in the storage building, until over seven (7) months after he had
been appointed executor of Margaret’s estate.
Thus, even if
appellees’ claims of breach of contract and conversion had been
subject to the time restrictions set out in KRS 396.011(1),
appellees could not possibly have filed a claim against
Margaret’s estate within six (6) months of Batson’s appointment
as executor.
Thus, it was impossible for appellees to comply
with KRS 396.011, and in the interest of fairness, they should
not be held to it.
KRS 396.055(1) begins with the following language: “As
to claims presented in the manner described in KRS 396.015 of
this Act within the time limit prescribed in KRS 396.011 . . . .”
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Given this language, we believe the claims addressed in KRS
396.055 are those filed pursuant to KRS 396.011, either because
they arose before the decedent’s death and necessarily had to be
filed in accordance with KRS 396.011, or because they were
otherwise filed within six (6) months of the appointment of the
executor.
As we stated earlier, appellees’ claims did not arise
before Margaret’s death, nor were they even capable of being
filed within six (6) months of Batson’s appointment, considering
the cause of action had not yet accrued within that time frame.
Thus, KRS 396.055(1) could not have barred appellees’ claims even
if they had been subject to Chapter 396.
As we have stated, we do not believe appellees’ claims
were subject to KRS 396.011 and 396.055.
However, we have made
this statutory analysis for the purpose of establishing that even
when viewing this case from Batson’s position that these statutes
apply to appellees’ claims, those claims, in any event, would not
have been barred by either KRS 396.011 or 396.055.
They would
have been timely filed pursuant to KRS 396.205 (“limitation on
actions not otherwise barred”), the pertinent portion of which is
set out below:
No cause of action on any claim not otherwise
barred by the provisions of KRS 396.011 and
subsection (1) of KRS 396.055, or any other
applicable statute of limitations, shall be
brought against the personal representative
or against any distributee after the
expiration of two (2) years from the date of
the order of discharge of the personal
representative.
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Thus, given the facts of this case, we are persuaded that
appellees’ litigation was not untimely filed, even when the facts
are analyzed under Batson’s own theory.
Waiver of Right to Claim Breach
Batson maintains that appellees should have remained on
the property and forced him to file an eviction proceeding,
notwithstanding his ultimatum to appellees that they pay higher
rent or otherwise vacate.
He argues that because appellees
“voluntarily” vacated the premises, they waived any right they
may have had to claim damages resulting from Batson’s breach of
the lease.
We disagree.
Charles Clark testified that the move would be
expensive and that appellees did not want to move, particularly
when Downtown Carpets had just begun to show a profit after
several years in business.
Additionally, he testified, the
location of the business was important, having been established
for eight (8) years.
Further, Clark testified that he and his
partners expressed their interest in purchasing the property and
remaining there permanently; Batson, however, did not respond to
their inquiries.
Bill Wilcox testified that he and his partners,
Clark and Gilbreth, discussed Batson’s letter demanding more rent
and decided to vacate within Batson’s time frame.
They could not
afford the higher rent, and preferred to handle the problem,
especially the issue concerning ownership of the storage
building, through the court system.
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Leonard Gilbreth testified
that he and his partners vacated the premises under protest, with
the intent to resolve the matter in court.
Given appellees’ testimony, it is questionable whether
appellees “voluntarily” vacated the premises.
Nonetheless,
appellees left under protest, having fully stated their position
to Batson.
They chose to petition the court for assistance, as
was their prerogative.
In doing so, they did not waive their
claim to damages for breach of contract.
Further, we do not
believe that remaining on the property would have served any
purpose other than to postpone an unavoidable lawsuit, by one or
the other of the parties.
We adopt the reasoning of the trial
court:
Walton, counsel for Wright’s estate, argues
that the partners’ claim for breach of
contract cannot be enforced due to the fact
that the partnership vacated the premises.
He contends that its vacating the premises is
a waiver of the alleged breach and that the
partnership should have forced an eviction
proceeding. The Court finds this argument
lacks merit. Such a requirement would do
nothing more than postpone the inevitable,
which is a lawsuit, such as this, claiming
breach of contract.
Character of the Storage Building
The trial court found the storage building, commonly
known as a “pole barn,” to be a trade fixture which appellees had
the right to remove.
Batson argues that the pole barn was
permanently attached to the pre-existing building and, as such,
was a permanent fixture to be sold with the property.
The
evidence before the trial court, however, does not support
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Batson’s argument.
Having reviewed the videotape of this matter,
we adopt the trial court’s summary of the evidence:
In 1993, [Margaret] Wright gave her oral
approval for the partnership to build a pole
barn/warehouse on the back of her property.
However, Wright insisted on the following two
requirements: (1) the partners were to take
the addition with them when they no longer
leased the property, and (2) in the event
that Wright’s property tax increased, the
partners were to pay the increase.
Wilcox contacted Dale Williams about
constructing the building and Baldock’s, Inc.
about the materials needed for constructing
the building. The partners chose the pole
barn type of building because it would be
easy to take down and take with them when
they eventually moved. The only damage left
behind would be the holes in the asphalt
where the poles had been placed. The cost of
relocating the pole barn would be
approximately $3,000.00 to $5,000.00.
The total cost of constructing the pole
barn was approximately $8,523.90. Wright
contributed no money to the erecting of the
pole barn.
The construction of the pole barn
consisted of ten poles, metal sheets, trusses
and a roof. The poles were placed two feet
in the ground into one square foot of poured
concrete. The pole barn had no footer, no
flooring and no foundation. The existing
building’s gas and electrical supply had to
be tapped into in order to supply such to the
pole barn. A breezeway was built from the
existing building to the pole barn. The
breezeway was connected to the pole barn and
the existing building with two by fours and
metal screws.
The pole barn was used by the partners
to store carpet that could not be housed
inside the existing building. The breezeway
served as a covered walkway so that customers
could be brought back to the pole barn to
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examine carpets without being exposed to the
elements.
The trial court analyzed the character of the building
under Tarter v. Turpin, Ky., 291 S.W.2d 547 (1956), and noted the
three factors that must be examined when determining whether an
article is a fixture:
First, annexation to realty, either actual or
constructive; second, adaptation or
application to the use or purpose that the
part of the realty to which it is connected
is appropriated; and, third, the intention of
the parties to make the article a permanent
accession to the freehold with title to the
article in the one owning the freehold.
Id. at 548. (Citation omitted).
The Tarter court emphasized that
the key factor is the intention of the parties.
Id. (citing
American Rolling Mill Co. v. Carol Mining, 282 Ky. 64, 137 S.W.2d
725 (1940)).
Further, “as between landlord and tenant[,] the
greatest latitude and indulgence is given to the claim that
fixtures attached to the realty by the tenant remain personal
property.”
Warren Post No. 23, Am. Legion v. Jones, 302 Ky. 861,
196 S.W.2d 726, 729 (1946) (citations omitted).
The trial court relied upon Bank of Shelbyville v.
Hartford, 268 Ky. 135, 104 S.W.2d 217 (1937) for its analysis as
to whether appellees’ storage building was a trade fixture,
defined as “an article annexed by the lessee to the real estate
to aid him in carrying on his trade or business on the
premises[,]” which may be removed at the end of a tenant’s term.
Id. at 219 (citations omitted).
The court found the present case
to be factually similar to Bank of Shelbyville, in which it was
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determined that a number of bowling alleys, seats, and other
equipment were trade fixtures.
We agree with the trial court and
adopt its well-stated conclusions of law:
Applying the rationale of Hartford to
the case at hand, it appears that the pole
barn in this case is also a trade fixture.
The evidence produced at trial indicated that
the pole barn was attached to the property by
drilling approximately ten holes in the
pavement at the rear of the building. The
holes were filled with concrete with the
poles being placed therein. No foundation or
footers were used in annexing the pole barn
to the property. The evidence further
indicated that the breezeway was connected to
both the existing building and the pole barn
by means of a two by four and metal screws.
As was the case in Hartford, the damage
caused to the property upon removal of the
pole barn would be minimal at best.
Moreover, the pole barn could not be
considered any part of the property because,
as stated in Hartford, it was not necessary
to the enjoyment of the existing building on
the part of Wright to have a pole barn
attached to the rear of the property.
As to the intention of the parties, all
three partners testified that Wright agreed
to the erection of the pole barn, that she
demanded that they take it with them when
they left and that they chose to build the
pole barn rather than some other type of
building due to its ease of being
transported. Batson, on the other hand,
admits that Wright granted the partners
permission to build a temporary building at
the rear of the property. He testified that
she was concerned as to whether the pole barn
being constructed was temporary or permanent.
The intention of the parties from the outset
was that the pole barn be temporary and
portable.
The issue then becomes whether, in fact,
the pole barn was temporary. Having already
examined the nature of the pole barn itself,
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the Court concludes that the pole barn was a
temporary building. As a result, the pole
barn is hereby deemed to have been a trade
fixture, removable by the partners upon their
vacancy.
Fair Market Value of the Storage Building
The trial court found that Batson wrongfully converted
appellees’ storage building when he sold Margaret Wright’s
property, including the building.
From the exhibits submitted by
appellees, the trial court determined that appellees’ cost of
constructing the storage building in 1993 was $8,523.90.
To
arrive at appellees’ damages, the court subtracted $4,000.00 from
the total cost of construction, the amount appellees would have
paid, according to their testimony, to relocate the building had
they been permitted to remove it.
The court awarded total
damages of $4,523.90 for wrongful conversion.
Batson argues that
appellees failed to prove the fair market value of the storage
building and, thus, damages were improperly awarded.
Appellees maintain they introduced sufficient evidence
of the building’s fair market value by way of their testimony
that they offered to sell Batson the storage building for $4,000.
They argue that, given their experiences in real estate over a
period of many years, this testimony constitutes credible proof
of the building’s fair market value, i.e., it is proof of the
price for which a willing seller would sell the building and a
willing buyer would purchase it.
Recovery for conversion of personal property is
determined by proof of the fair market value of the property
-20-
converted at the time of conversion.
Nolin Prod. Credit Ass’n v.
Canmer Deposit Bank, Ky. App., 726 S.W.2d 693, 704 (1987)
(citation omitted).
See also Amlung v. Bankers Bond Co., Ky.
App., 411 S.W.2d 689 (1967) which states:
The traditional measure of damages for
the conversion or destruction of personal
property is the fair market value of the
property at the time and place of the loss,
with interest, in the discretion of the jury,
from the time of the conversion. Sanders v.
Vance, 23 Ky. (7 T.B.Mon.) 209, 213, 18
Am.Dec. 167 (1828); Lane v. Rowland, 295 Ky.
868, 175 S.W.2d 1000, 1002 (1943). “Where
property is destroyed, or is converted, so
that the title either is, or is regarded as,
out of the former owner, damages are the
pecuniary representative of the property, and
take its place. The plaintiff has lost or
abandoned his claim to the property; his
claim against the defendant is for an
equivalent sum of money. In this point, a
conversion very nearly resembles a sale.” 1
Sedgwick on Damages 630, § 317 (9th ed.,
1912). “In an action for the conversion of
personal property, the measure of damages is
the value of the property at the time of the
conversion, with interest.” Id., Vol. 2, p.
950, § 493.
Id. at 693 (emphasis in original).
The trial court calculated damages based upon the cost
to construct the storage building in 1993, rather than its fair
market value in 1995, the year in which the building was
converted.
We believe the court erred in doing so.
Further, we
do not believe appellees introduced evidence sufficient to
establish the building’s fair market value.
We do not believe
their testimony of the price for which they would have sold the
building is sufficient.
While there may have been a willing
-21-
seller in the matter, Batson did not respond to appellees’ offer
and, thus, there was no willing buyer.
Given the trial court’s
erroneous calculation of damages, and in light of appellees’
failure to prove the fair market value of the storage building,
we reverse the trial court’s award of damages for conversion.
Validity of Sublease
The original ten-year lease in this case was executed
by John Wright, the property owner, and Bill Miller, appellee
Gilbreth’s original partner.
Gilbreth testified that he began
making rent payments shortly after the lease was executed.
John
Wright died soon thereafter and, not having been instructed to do
otherwise, Gilbreth made all required rent payments to Margaret,
Wright’s wife and personal representative.
Gilbreth and Miller
then dissolved their partnership, and Gilbreth, Clark, and Wilcox
formed a partnership under the name of Downtown Carpets.
Gilbreth and Miller entered into an agreement whereby Gilbreth
subleased the property from Miller.
The sublease agreement
included the parties’ acknowledgment that it was subject to
Margaret’s written consent.
Appellees admitted they did not
obtain Margaret’s written consent, but testified that she was
fully aware of Miller’s having left the partnership and
Gilbreth’s having “taken over the lease.”
She accepted
appellees’ rent payments for six (6) years prior to her death.
Batson testified that Margaret, nonetheless, considered appellees
to have a month-to-month lease.
-22-
The trial court found that Margaret, through her
conduct over the course of several years, waived her right to
terminate the original lease.
The court held that the sublease
was effective and that Margaret had an obligation to honor the
terms of the original lease.
The court reasoned as follows:
When a lease requires by its own terms
that the lessee obtain written consent from
the lessor before subleasing or assigning his
interest in the property, the lessee’s
failure to obtain such consent does not
automatically terminate the lease; but
instead constitutes a ground for forfeiture
which can be exercised at the option of the
lessor. Setzer’s Steel Systems v. Chenault
Development Corp., Ky., 725 S.W.2d 22, 24
(1987); Venters v. Reynolds, Ky., 354 S.W.2d
521, 524 (1961).
An exception to this general rule,
however, has been carved out by Kentucky
courts. This exception provides that when
the lessor has accepted rent from the
sublessee with knowledge that a sublease
occurred, then the lessor waives his right to
forfeiture and must honor the underlying
lease agreement. Id.
The facts of this case fall within the
above mentioned exception. There is no
dispute and it is a well settled fact that
Wright and her estate accepted rent from the
sublessees for a period of almost seven
years. The remaining issue is whether
Margaret Wright had knowledge of the sublease
when she accepted the rent. There is no
direct evidence that Wright was aware of the
sublease. There was, however, testimony that
Wright considered the partners’ tenancy, in
contradiction of the plain terms of the
original lease, to be month to month. The
Court finds that Wright could not contend
such unless she was aware that a sublease had
taken place. The Court concludes that Wright
waived her right to terminate the original
lease and that the sublease was effective.
-23-
Batson maintains that Setzer’s Steel Systems and
Venters require appellees to prove that Margaret had actual
knowledge of the sublease.
Batson argues the evidence before the
trial court does not support the conclusion that Margaret had
knowledge that the sublease entered into by Miller and Gilbreth
existed. Consequently, Batson contends, the court erroneously
held the sublease to be effective.
We disagree.
Testimony from the partners established that Margaret
received $925 per month in rent over a period of approximately
six (6) years, a total of nearly $67,000.
Many of the rental
payments were delivered to her personally by the spouses of
Wilcox and Clark, and Margaret collected some payments at the
premises itself, where she could observe the operation and those
individuals involved in it.
Further, Gilbreth testified he told
Margaret that he was “taking over the lease” and that Miller was
leaving.
We believe the evidence supports the conclusion that
Margaret had “knowledge,” whether actual or constructive, of the
sublease arrangement entered into by Miller and Gilbreth, and we
believe that is all that is required under Setzer’s Steel Systems
and Venters.
The sublease was effective under the holding of
Venters:
The subleasing of a portion of the lot
without the consent of the lessor constituted
a ground of forfeiture at the option of the
lessor. The acceptance of rent from the
lessees with knowledge that the sublease
covenant had been violated, as the lessor
here must have known, was, in effect, a
waiver of her right to insist on a forfeiture
or cancellation of the lease.
-24-
Venters, 354 S.W.2d at 524.
(Citation omitted).
Calculation of Damages for Breach of Lease
In support of their claim for damages resulting from
Batson’s breach of their lease, appellees submitted a list of
relocation and remodeling expenses they incurred in moving from
the subject premises to a new business location.
Included in the
list were these costs: (1) purchase and installation of a sign
with the address of their new location; (2) construction of ramp
entrances required for disabled persons; (3) purchase and
installation of carpet; (4) utility payments and rent at both the
old location and the new one during the month of September 1995;
(5) moving costs; and, (6) attorney fees of $400.
The trial
court found that appellees had incurred relocation expenses and
attorney’s fees in a total amount of $18,389.28, and awarded
appellees damages resulting from Batson’s breach of the lease
agreement in that amount.
Batson argues that appellees are limited to damages for
wrongful eviction, which include the actual or rental value of
the unexpired term less the rent reserved, cost of moving, actual
expenses reasonably incurred, and loss of profits.
He maintains
the only competent evidence of damages offered by appellees was
the proof of their moving expenses totaling $1,079.21.
Appellees, however, maintain they are entitled to damages based
upon their expectation interests, e.g., that sum of money which
would put them in the same position in which they would have been
had Batson performed the contract.
-25-
They argue that but for
Batson’s wrongful eviction, they would not have incurred moving
and relocation expenses.
proof of damages.
Thus, they claim, they submitted valid
Further, they argue that attorney’s fees are
appropriate under the circumstances, given the evidence of bad
faith on Batson’s part.
We agree with appellees’ position.
They were entitled
to be placed in the same position in which they would have been
had they not been forced from the property.
In the case of a breach of contract, the
goal of compensation is not the mere
restoration to a former position, as in tort,
but the awarding of a sum which is the
equivalent of performance of the bargain the attempt to place the plaintiff in the
position he would be in if the contract had
been fulfilled.
SEG Employees Credit Union v. Scott, Ky. App., 554 S.W.2d 402,
406 (1977) (citation omitted).
We believe appellees are entitled
to the damages awarded by the trial court.
As for the award of
attorney’s fees in the amount of $399.50, Batson is correct that
“attorney’s fees are not allowable as costs in absence of statute
or contract expressly providing therefore.”
Kentucky State Bank
v. AG Services, Inc., Ky. App., 663 S.W.2d 754, 755 (1984)
(citations omitted).
However, we further stated in Kentucky
State Bank, “this rule does not, we believe, abolish the
equitable rule that an award of counsel fees is within the
discretion of the court depending on the circumstances of each
particular case.”
Id.
(Citation omitted).
-26-
In the present case,
the trial court, in its discretion, found that attorney fees were
appropriate, and we will not disturb that finding.
Conclusion
For the foregoing reasons, we affirm these rulings made
by the trial court: (1) appellees’ litigation was not untimely
filed; (2) appellees did not waive their claim for breach of
contract damages when they moved off the premises; (3) the
storage building was a trade fixture which appellees were
entitled to take with them when they moved off the premises; (4)
the sublease entered into by Gilbreth and Miller was valid and
effective; and, (5) appellees are entitled to an award of damages
for breach of contract in the amount of $18,389.28.
However, we
reverse the trial court’s award of damages for conversion, and
remand with instructions to enter an order consistent with this
opinion.
GARDNER, JUDGE, CONCURS.
HUDDLESTON, JUDGE, CONCURS IN PART AND DISSENTS IN
PART.
HUDDLESTON, JUDGE, CONCURRING IN PART AND DISSENTING IN
PART.
I respectfully dissent from that portion of the Court’s
opinion that reverses the award to the Appellees of the fair
market value of the storage building.
There was proof that the
storage building was constructed in 1993 at a cost of $8,523.90.
The trial court subtracted $4,000.00 from that amount, the sum
that the Appellees acknowledge they would have paid to relocate
the building had they been permitted to remove it.
-27-
The trial
court then awarded damages of $4,523.90 for wrongful conversion.
I believe that this evidence was sufficient to fix the value of
the building when it was converted by the Appellant some two
years later.
I would, therefore, affirm the trial court on this
issue.
I concur in the balance of the Court’s opinion.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEES:
D. Bailey Walton
Bowling Green, Kentucky
Mike Reynolds
Linda B. Thomas
Bowling Green, Kentucky
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