GARY SHANKS v. STEPHEN E. WALTRIP AND ACCURATE LAND TITLE, INC.
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RENDERED: MARCH 2, 2007; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2005-CA-002508-MR
GARY SHANKS
v.
APPELLANT
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE THOMAS L. CLARK, JUDGE
ACTION NO. 02-CI-04628
STEPHEN E. WALTRIP AND
ACCURATE LAND TITLE, INC.
APPELLEES
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: ACREE, DIXON, AND KELLER, JUDGES.
KELLER, JUDGE: This matter is before the Court on Gary Shanks' appeal of the circuit
court's order denying his motion for a hearing on the issue of attorney's fees and granting
the motion to dismiss filed by Stephen E. Waltrip and Accurate Land Title, Inc.,
(hereinafter “Appellees”). Having determined that Shanks is entitled to a hearing, we
vacate and remand.
The facts in this case are essentially undisputed. On July 3, 2002, Shanks
closed on a piece of real property. Waltrip handled the closing on behalf of Accurate.
Following the closing, and for reasons that are unclear from the record, the Appellees
waited until October 28, 2002, to file the Shanks' deed. In the meantime, on October 18,
2002, Ralph Combs filed a lien on the property in the amount of $72,000. When Shanks
discovered the lien, he filed a legal malpractice claim against Waltrip, Accurate, and
Allstar Loan Company,1 Shanks' mortgage company. While Shanks did not name Combs
as a defendant, the circuit court later joined Combs as a necessary party on motion of the
Appellees.
On March 2, 2004, the Appellees filed motions for default judgment and
adjudication as to the Combs lien, the mortgage, and the title to the property in question.
On that same date, the circuit court entered an order releasing and setting aside the
Combs lien, giving Shanks' mortgage company first priority, and declaring Shanks fee
simple owner of the property.
The Appellees filed a motion to dismiss on September 7, 2005, citing as
grounds Shanks' failure to prosecute the legal malpractice action and the resolution of the
lien issue. Shanks filed a response requesting, in pertinent part, a hearing on the issue of
his entitlement to attorney's fees. The circuit court granted the Appellees' motion to
1
Allstar was not named as a party to this appeal. Allstar was joined as a defendant based on the
mortgage executed by Shanks at closing. On March 2, 2004, the circuit court entered an order
giving Shanks' mortgage holder first priority. Therefore, Allstar has no interest in this litigation
and was not a necessary party to this appeal. See Land v. Salem Bank, 279 Ky. 449, 130 S.W.2d
818 (1939).
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dismiss and denied Shanks' motion for attorney's fees. It is from this order that Shanks
appeals.
In support of his appeal, Shanks states that there are two different
circumstances under which a claimant may obtain attorney's fees from his opponent. The
first is for fees related to the direct action, in this case, the legal malpractice claim.
Shanks concedes that he is not entitled to an award of attorney's fees for having brought
the malpractice claim; therefore, we will not address his entitlement to any such fee.
The second circumstance, and the one Shanks argues is applicable, arises
when a litigant undertakes remedial action during the course of litigation and that
remedial action results in the resolution of the underlying claim. According to Shanks,
his attorney expended time and effort cooperating with the Appellees' attorneys in order
to obtain the release of the Combs lien. Shanks seeks compensation for the fees incurred
by him in order to obtain the release of that lien.
In comments following the hearing on the Appellees' motion to dismiss and
Shanks' motion for a hearing, the circuit court indicated that it was denying Shanks'
motion for a hearing based on the general rule of law in Kentucky that an award of
attorney's fees is not appropriate absent a statutory or contractual provision. The circuit
court did not conduct a hearing regarding Shanks' request for attorney's fees or make any
findings of fact. Therefore, the issue before this Court is one of law and the standard of
review is de novo, requiring no deference to the circuit court. See First Commonwealth
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Bank of Prestonsburg v. West, 55 S.W.3d 829 (Ky.App. 2000), and Hahn v. University of
Louisville, 80 S.W.3d 771 (Ky.App. 2001).
The general rule of law in Kentucky is that “attorney's fees are not
allowable as costs in absence of statute or contract expressly providing therefore.”
Batson v. Clark, 980 S.W.2d 566, 577 (Ky.App. 1998), citing Kentucky State Bank v. AG
Services, Inc., 663 S.W.2d 754, 755 (Ky.App. 1984). However, as noted by this Court in
Batson, that general rule “does not . . . 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.” Batson at 577, citing Kentucky State Bank at 755. One factor for the
Court to consider in determining whether to award attorney's fees is whether the actions
of the party seeking fees “affected any benefit” to the party opposing the award of such
fees. Kentucky State Bank, at 755. Another factor that the Court must consider is
whether, as in Batson, the actions of the party assessed attorney's fees constituted bad
faith.
Shanks argues before this Court, and argued before the circuit court, that he
did provide a benefit to the Appellees by cooperating with them in obtaining a release of
the lien. However, because the circuit court did not conduct a hearing on that issue,
neither the circuit court nor this Court can determine whether Shanks took any part in
obtaining a release of the lien. Furthermore, this Court cannot determine whether the
actions of the Appellees rose to the level that would justify an award of attorney's fees as
set forth in Batson. Therefore, we must vacate the circuit court's order and remand this
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matter, with directions that the circuit court hold the requested hearing. In doing so, we
make no ruling on the appropriateness of attorney's fees, nor are we instructing the circuit
court to make such a finding. This Court is merely ordering the circuit court to hold the
hearing requested by Shanks. Following that hearing, the circuit court shall make
findings of fact sufficient to support either a denial or an award of attorney's fees to
Shanks based on his claim that he provided assistance to the Appellees in obtaining a
release of the Combs lien or that the actions of the Appellees rose to the level set forth in
Batson.
For the foregoing reasons, the order of the circuit court denying Shanks'
request for a hearing on the issue of attorney's fees and dismissing Shanks' claim is
vacated and this matter is remanded to the circuit court for further proceedings in
accordance with this opinion.
DIXON, JUDGE, CONCURS.
ACREE, JUDGE, DISSENTS AND FILES SEPARATE OPINION.
ACREE, JUDGE, DISSENTING: I respectfully dissent from the opinion of
the majority. In proper circumstances, it is true, a trial court may rely on its equitable
powers to award attorney fees even in the absence of statutory authority or contractual
obligation. However, I do not interpret Batson v. Clark, 980 S.W.2d 566 (Ky.App. 1998)
as requiring the trial court to conduct an evidentiary hearing, prior to exercising its
equitable powers, in order to determine either that Shanks “affected any benefit” to
Appellees or that Appellees' actions constituted bad faith.
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Read together, Batson (the “bad faith” element case) and Kentucky State
Bank v. AG Services, Inc., 663 S.W.2d 754 (Ky.App. 1984) (the “affected any benefit”
case) cannot mean that both these elements must be present in order to justify an award of
attorney fees. In Batson, Clark did not affect any benefit to Batson; in Kentucky State
Bank, there was no bad faith.2 Furthermore, because Batson affirmed the award of
attorney fees in the absence of the “affected any benefit” element, we must strongly
discount the suggestion in Kentucky State Bank that affecting a benefit to the other party
is “an indispensable element” of an award of attorney fees based on equitable authority.
Our reading of Batson and Kentucky State Bank, as well as Dorman v.
Baumlisberger, 271 Ky. 806, 113 S.W.2d 432 (Ky. 1938)(cited in Kentucky State Bank),
should tell us that there are no set elements requiring an equitable award of attorney fees.
“Although attorney's fees may be awarded in equity, these awards are 'largely within the
discretion of the court' and are dependent upon 'the facts and circumstances of each
particular case.'” Flag Drilling Co., Inc. v. Erco, Inc., 156 S.W.2d 762, 766 (Ky.App.
2005) quoting Dorman, 113 S.W.2d at 433.
Additionally, as the majority notes, the trial court did have the opportunity
to hear Shanks' argument that his attorney “affected a[] benefit” to Appellees, and that he
was thereby entitled to an award of attorney fees on equitable grounds. The court simply
ruled against him. I believe the trial court was justified in doing so inasmuch as the
malpractice action was dismissed with prejudice. Shanks did not appeal that dismissal.
2
In fact, neither was any party found to have “affected any benefit” to another party.
Consequently, attorney fees were denied. Kentucky State Bank, 663 S.W.2d at 755.
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The expungement of the $72,000 lien, therefore, inured only to Shanks' benefit at that
point, and not to Appellees.
True, the trial court could have fashioned a clearer order. The order could
have specifically indicated the court's consideration and rejection of Shanks' argument
that his attorney “affected a[] benefit” to Appellees. I consider this a minor failing if a
failing at all. Yet it appears to be my point of departure from the majority. I prefer to
read the order broadly as doing just that. The order is a global solution to all the matters
before the trial court at that time. Included in the order is its decision declining to
exercise its equitable powers. The majority, seeing no such specific ruling and preferring
one, has chosen to compel the trial court to grant Shanks' request for a hearing on this
issue. My fear is that, hereafter, every case in which attorney fees are not authorized by
statute or contract will include a demand for a hearing to address equitable grounds for
such awards.
From the appellate perspective, there is also an important distinction
between the case before us and Batson, Kentucky State Bank, Dorman, and both cases
relied upon by Shanks.3 Each of the cases cited was an appellate review of an award of
attorney fees based on the trial court's exercise of its equitable authority. What we have
before us is the opposite circumstance. Here, we have the denial of attorney fees despite
Shanks' urging that the trial court exercise that same equitable authority.
3
Nilson-Newey & Co. v. Ballou, 839 F.2d 1171 (6th Cir. 1988) and Indiana National Life
Insurance Co. v. Butler, 186 Ky. 81, 215 S.W. 949 (Ky. 1919).
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The common element in all the cited cases is that they are reviews of the
exercise of the trial court's discretion. “‘Discretion’ of court is a liberty or privilege
allowed to a judge, within the confines of right and justice, to decide and act in
accordance with what is fair, equitable, and wholesome, as determined by the peculiar
circumstances of the case . . . .” Kuprion v. Fitzgerald, 888 S.W.2d 679, 684 (Ky.
1994)(citations omitted). “Abuse of discretion in relation to the exercise of judicial
power implies arbitrary action or capricious disposition under the circumstances, at least
an unreasonable and unfair decision.” Id.
While the majority sees the standard of review as de novo, I disagree. We
are not reviewing the trial court's application of law, but the application of its discretion.
When this Court reviews a trial court's exercise of discretion, we will not reverse unless
that exercise is arbitrary or capricious or is otherwise abused. See, e.g., Fortney v.
Mahan, 302 S.W.2d 842, 843 (Ky. 1957)(Discretion under CR 60.02); Scruggs v.
Commonwealth, 566 S.W.2d 405, 410 (Ky. 1978)(Discretion to exclude jurors);
Goodyear Tire and Rubber Co. v. Thompson, 11 S.W.3d 575, 577 (Ky. 2000)(Discretion
in evidentiary rulings); Lexington Herald-Leader Co., inc. v. Meigs, 660 S.W.2d 658, 665
(Ky. 1983)(Discretion to deny press access to trial). Because I see no abuse of discretion
in the trial court's disposition of this case, I would affirm the trial court.
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BRIEFS FOR APPELLEE:
BRIEF FOR APPELLEES:
Bobby G. Wombles
Lexington, Kentucky
Matthew D. Ellison
Guy R. Colson
Tiffany L. Phillips
Lexington, Kentucky
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