KENNETH R. HAUSWALD, M.D.; APPEALS v. RODERICK J. TOMPKINS, JR., M.D.; MARY LEGENZA, M.D.; GARY L. BARKER, M.D.; and WENDELL L. BAILEY, M.D.
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RENDERED: APRIL 6, 2007; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2005-CA-000125-MR
AND
NO. 2005-CA-002413-MR
KENNETH R. HAUSWALD, M.D.;
and JAMES R. STATEN, M.D.
v.
APPELLANTS
APPEALS FROM BOYD CIRCUIT COURT
HONORABLE C. DAVID HAGERMAN, JUDGE
ACTION NO. 02-CI-01190
RODERICK J. TOMPKINS, JR., M.D.;
MARY LEGENZA, M.D.; GARY L.
BARKER, M.D.; and WENDELL L.
BAILEY, M.D.
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: COMBS, CHIEF JUDGE; DIXON AND VANMETER, JUDGES.
VANMETER, JUDGE: Drs. Kenneth R. Hauswald and James R. Staten appeal from the
judgment of the Boyd Circuit Court adjudicating the dissolution of their real estate
partnership with Drs. Roderick J. Tompkins, Mary Legenza, Gary L. Barker, and
Wendell L. Bailey. For the reasons hereafter stated, we affirm.
In 2001, the six medical doctors, all of whom were involved in the practice
of general surgery in Ashland, executed a Revised Partnership Agreement (Agreement).
This partnership owned the real estate from which the doctors conducted their medical
practice, which was set up through a separate corporate entity know as “Surgical
Associates of Ashland, P.S.C.” At the end of December 2001, Hauswald and Staten
withdrew from both the corporation and the partnership. Paragraph 12 of the Agreement
expressly provided that upon a partner's withdrawal, “the remaining partners shall have
the right either to purchase said partner's interest in the partnership business, allow the
partnership to purchase said partner's interest in the partnership business, or to terminate
and liquidate the partnership business.” If the remaining partners elected to purchase, the
withdrawing partners were entitled to receive fair market value for their respective shares
of the partnership's assets, with payment for the shares being received in two
installments, the first within 90 days after value was determined and the second one year
after the first payment. The Agreement provided a mechanism for the use of appraisers if
the parties were unable to agree on value. As to the liquidation option, the Agreement
provided that if the remaining partners elected not to purchase the withdrawing partners'
interests, “the partners shall proceed with reasonable promptness to sell the property
owned by the partnership and to liquidate the business of the partnership.”
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The record is clear that initially, the remaining doctors intended to purchase
the interests of Hauswald and Staten. Two events occurred, however, that caused
Tompkins, Legenza and Barker to reconsider this option. First, on February 1, 2002,
Bailey told Tompkins, Legenza and Barker that, effective May 1, he would be leaving the
Ashland area for personal reasons. Second and as the trial court found in its November
30, 2004, order, “[t]he [remaining doctors] began, but never completed, the process of
obtaining appraisals for the purposes of a buyout. The amounts of the appraisals
demonstrated to the [remaining doctors] that there was no sense in completing the
process since the buyout would be financially unwise.” As a result, Tompkins, Legenza,
Barker and Bailey decided to sell the partnership's property and to liquidate the business
of the partnership. Hauswald and Staten objected to this change of course, taking the
position that once the remaining doctors decided to purchase the interests of the
withdrawing partners, they were precluded from the option of sale and liquidation.
Meanwhile, the remaining doctors formed a new medical practice,
Northeastern Kentucky Surgeons, P.S.C., which from January to October 2002 leased the
property from the partnership. During that period, monthly lease payments were
sufficient to meet the mortgage payments, taxes and other operating expenses of the
property. However, after Northeastern moved its practice to another location, the
property became vacant. As a result the remaining doctors agreed to contribute to the
operating expenses of the partnership, which were approximately $5,000 per month. As
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Hauswald and Staten were requested but refused to contribute, the remaining doctors
each paid one-fourth of the expenses until the property was ultimately sold in May 2005.
In November 2002, Hauswald and Staten filed this action seeking a judicial
determination requiring the remaining doctors to purchase their interests. The remaining
doctors filed an answer and counterclaim asserting their right to proceed with sale and
liquidation. The trial court, in response to various motions, ordered both that the property
be listed for sale and that a third appraisal be performed.
On November 9, 2004, Tompkins, Bailey, Legenza and Barker filed a
motion for partial summary judgment on the basis that the matter before the trial court
was “solely one of interpretation and application of the parties' partnership contract,”
specifically whether the remaining partners were required to buy Hauswald's and Staten's
interests, or whether they could sell and liquidate. The motion was noticed to be heard on
November 19. In response, Hauswald and Staten offered two primary objections: that ten
days' notice had not been provided as required by CR1 56.03, and that discovery had not
been completed, as the depositions of Tompkins, Bailey, Legenza and Barker had not
been transcribed,2 and the depositions of Hauswald and Staten had not been taken.
After a November 23 hearing the trial court ruled, as a matter of law, that
the partnership agreement gave the remaining doctors the option either to purchase the
withdrawing doctors' shares, or to dissolve the partnership and liquidate its assets. The
1
Kentucky Rules of Civil Procedure.
2
These four depositions which are a part of the record on appeal, contain date stamps indicating
that they were filed in the Boyd Circuit Court on November 15, 2004 (depositions of Tompkins
and Bailey) and November 17, 2004 (depositions of Barker and Legenza).
-4-
trial court expressly provided that the order was interlocutory. After Hauswald and
Staten filed a motion to alter, amend or vacate, the trial court amended the order to
provide that it was final and appealable. Appeal No. 2005-CA-00125-MR followed.
However, over Hauswald and Staten's continuing objection, the court permitted the case
to proceed with regard to Tompkins, Bailey, Legenza and Barker's counterclaim
concerning their right to proceed with a sale and liquidation.
In early 2005, Tompkins, Bailey, Legenza and Barker contracted on behalf
of the partnership to sell the property. Net sale proceeds of approximately $100,000 were
paid to the Boyd Circuit Court Clerk to be held pending a court order. At a final hearing
on September 1, 2005, the court heard testimony from Hauswald and Staten, from David
Legenza3 who served as the partnership's office manager after Hauswald and Staten
withdrew, and from a number of bookkeepers and accountants. John Baldock, C.P.A.,
testified that since Hauswald and Staten had not made any contributions to the operating
expenses of the property after October 2002, they had negative capital accounts in the
partnership of approximately $10,000 each, whereas Tompkins, Bailey, Legenza and
Barker each had positive capital accounts of approximately $30,000. Following the
hearing, the trial court ordered Hauswald and Staten to pay the amounts of their negative
accounts to Tompkins, Bailey, Legenza and Barker, to be divided equally among those
four partners, and additionally ordered the court clerk to pay the amount held by the clerk
equally to Tompkins, Bailey, Legenza and Barker. The end result of these payments was
3
David Legenza is Dr. Legenza's husband.
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that each doctor ended with a capital account in the partnership of approximately $0.4
Appeal No. 2005-CA-002413-MR followed. The two appeals were subsequently
consolidated.
On appeal, Hauswald and Staten argue that the motion for partial summary
judgment was improperly granted in that less than ten days notice was given, discovery
had not yet been completed, and the trial court failed to consider the depositions of
Tompkins, Bailey, Legenza and Barker. We disagree.
As to the timing of the notice of hearing of the motion for partial summary
judgment, under CR 56.03 a motion is required “to be served at least 10 days before the
time fixed for the hearing.” In this case, even if the notice was technically deficient, the
trial court did not hear the motion until November 23, which was actually 14 days after
the motion was tendered. The trial court did not err in hearing the motion on that day.
Next, Hauswald and Staten argue that the trial court granted partial
summary judgment “without acknowledging that [it] failed to consider the depositions
noticed and transcripts taken.” While we are not sure exactly what Hauswald and Staten
are arguing, their argument appears to be that the trial court failed to take into
consideration the depositions of Tompkins, Bailey, Legenza and Barker, which were filed
in the record, as well as the fact that their own depositions had yet to be taken. We
disagree. First, while the depositions of Tompkins, Bailey, Legenza and Barker had not
4
By making payments to the other partners, Hauswald and Staten increased the amount of their
negative capital accounts to $0. By receiving those payments of approximately $20,000 (i.e.,
approximately $10,000 from each Hauswald and Staten), plus approximately $100,000 from the
circuit court clerk, Tompkins, Bailey, Legenza and Barker each had their capital accounts of
approximately $120,000 (i.e., $30,000 each) reduced to $0.
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been filed at the time the motion for partial summary judgment was filed, they were filed
in the record nearly a week prior to the court's hearing or the motion. The four
depositions are not voluminous, as they are comprised of a total of 250 double-spaced
pages, and Hauswald and Staten make no showing that the trial court did not, in fact, read
the depositions. Second, although Hauswald and Staten complain that discovery had not
been completed as their depositions had not been taken, they offered no affidavit or other
evidence that any factual issue existed with respect to the interpretation of the partnership
agreement. See Hubble v. Johnson, 841 S.W.2d 169, 171 (Ky. 1992) (once movant
presents to the trial court proper support to show that a genuine issue of material fact does
not exist, opponent must present affirmative evidence to show the existence of a genuine
issue of material fact).
The issue in this case, as framed by Tompkins, Bailey, Legenza and Barker,
was whether the partnership agreement permitted the alternative methods of
compensating withdrawing partners. It hardly needs citation that “[t]he construction as
well as the meaning and legal effect of a written instrument, however compiled, is a
matter of law for the court.” Morganfield Nat'l Bank v. Damien Elder & Sons, 836
S.W.2d 893, 895 (Ky. 1992). Since the court here was presented with an issue of law,
Hauswald and Staten were required to demonstrate to the court that a genuine issue of
material fact existed in order to defeat Tompkins, Bailey, Legenza and Barker's summary
judgment motion. As they failed to do so, the trial court properly granted summary
judgment.
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Finally, Hauswald and Staten argue that the trial court erred in continuing
to exercise jurisdiction after it made its initial partial summary judgment final and after
Hauswald and Staten filed their first notice of appeal on January 18, 2005. Specifically,
they complain about the fact that the trial court considered Tompkins, Bailey, Legenza
and Barker's motion for clarification, filed on December 21, 2004, and then continued to
adjudicate the remaining controversy after the appeal from the partial summary judgment
was filed.
We note that in an action involving more than one claim, or in an action
involving multiple parties, “the court may grant a final judgment upon one or more but
less than all of the claims or parties only upon a determination that there is no just reason
for delay.” CR 54.02. However, a recitation of finality does not necessarily make an
order or judgment appealable. Francis v. Crounse Corp., 98 S.W.3d 62, 65 (Ky.App.
2002). To be appealable, “there must be a final adjudication upon one or more of the
claims in litigation. The judgment must conclusively determine the rights of the parties in
regard to that particular phase of the proceeding.” Id.
At its essence, this matter concerns the dissolution of a real estate
partnership. In the trial court's December 1, 2004 order, it initially, and correctly, noted
that the judgment was interlocutory. Only in response to Hauswald and Staten's motion
to alter, amend or vacate did the trial court append finality language. However, at that
point the property had not been sold, and the action remained one seeking dissolution of
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the partnership and the allocation to all the partners of their respective shares.5 In fact, in
its December 1 order, the trial court expressly stated that “[i]n light of the fact that the
Defendants have a pending counterclaim for dissolution of the partnership, IT IS
HEREBY ORDERED that this action will remain on the docket for further disposition of
any issues related thereto.” Although the trial court had adopted the interpretation of the
Agreement urged by Tompkins, Bailey, Legenza and Barker, it had not, through its
orders and judgments, “conclusively determine[d] the rights of the parties[.]” Francis, 98
S.W.3d at 65. Thus, Hauswald's and Staten's initial appeal, filed January 18, 2005, was
from a nonfinal order. It follows that the trial court did not lose jurisdiction over the
remaining claims, and that it properly proceeded to adjudicate those claims.
The Boyd Circuit Court's judgment is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEES:
David O. Welch
Ashland, Kentucky
Gordon J. Dill
Ashland, Kentucky
5
A review of the trial court's Final Order and Judgment, entered November 16, 2005, clearly
demonstrates the numerous issues which still had not been resolved by the trial court in
December 2004: whether Tompkins, Bailey, Legenza and Barker had authority to sell and
convey the property without Hauswald's and Staten's consent; whether Hauswald and Staten
were obligated to contribute to the monthly expenses of the partnership after their withdrawal in
December 2001; whether Tompkins and Bailey were entitled to a one-sixth interest due to their
period of participation in the partnership; whether certain attorney and accounting fees were
properly chargeable to the expenses of liquidating the partnership; and, whether goodwill was
properly expensed or amortized.
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