PRESLEY (KEN), ET AL. VS. EDUCATION CABINET , ET AL.

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RENDERED: OCTOBER 16, 2009; 10:00 A.M. NOT TO BE PUBLISHED Commonwealth of Kentucky Court of Appeals NO. 2008-CA-001989-MR KEN PRESLEY, INDIVIDUALLY; KENTUCKY LAUNDRY EQUIPMENT SERVICES, INC. v. APPELLANTS APPEAL FROM FRANKLIN CIRCUIT COURT HONORABLE THOMAS D. WINGATE, JUDGE ACTION NO. 07-CI-01157 COMMONWEALTH OF KENTUCKY; EDUCATION CABINET; KENTUCKY OFFICE FOR THE BLIND; KENTUCKY BUSINESS ENTERPRISES; KENTUCKY DEPARTMENT FOR WORKFORCE INVESTMENT; CAROLE MORRIS (D/B/A MORRIS VENDING) APPELLEES OPINION AFFIRMING ** ** ** ** ** BEFORE: KELLER AND NICKELL, JUDGES; LAMBERT,1 SENIOR JUDGE. KELLER, JUDGE: This appeal is before us as a matter of right following an order of dismissal of appellant’s suit by the Franklin Circuit Court. Ken Presley d/b/a Kentucky Laundry Equipment (hereinafter Presley), sued the Education Cabinet (KEC), the Kentucky Office for the Blind (KOB), Kentucky Business Enterprises (KBE), the Kentucky Department for Workforce Investment(KDWI),2 and Carole Morris, d/b/a Morris Vending (Morris), under contract and tort theories alleging primarily fraud and breach of contract. The trial court dismissed the suit, finding that no privity existed between Presley and the Commonwealth and that any surviving tort claims must be brought before the Board of Claims. We affirm the trial court for the reasons set forth below. FACTS The Randolph-Sheppard Act, 20 U.S.C.A. 101 et seq., was, among other things, designed to provide employment opportunities for persons with visual impairments. The KOB under the KEC has overall responsibility for numerous employment programs for blind persons. Within the KOB, the KBE directly administered these programs. One such employment program for visually impaired individuals is operating vending machine services at state and federal facilities. The Commonwealth contracted with the Federal Prison at McCreary 1 Senior Judge Joseph E. Lambert sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580. 2 The aforementioned state agencies will be collectively referred to herein as “the Commonwealth”, unless specifically delineated. -2- County (Prison) for visually impaired licensed vendors to provide laundry and other vending services. The Commonwealth then subcontracted with Morris. On September 8, 2004, Morris entered into an agreement, assigning all of her rights and obligations to perform laundry services for the Prison to Presley. The contract stated in pertinent part: This AGREEMENT is entered into this 8 [sic] day of September 2004 by and between Ken Presley, Kentucky Laundry Equipment, Somerset KY. [sic] (KLE) and KBE Vendor Carole Morris, Morris Vending (MV), USP McCreary County. WHEREAS, KLE and MV intend that MV shall assign to KLE all its privileges and responsibilities for the laundry services under the Randolph-Sheppard Permit (PERMIT) with the Commonwealth of Kentucky, Education Cabinet, DWI, OFB, KBE, USP McCreary to KLE and, ... NOW, THEREFORE, in consideration of the foregoing premises . . . 1. USP McCreary agrees to pay MV a monthly commission equal to 5% of gross receipts from laundry revenue. 2. USP McCreary agrees to pay KLE 80% of gross receipts from laundry revenue. 3. This assignment shall remain in full force and effect for 5 years, or so long as MV has laundry rights or agreement to service laundry machines. It is agreed by the parties that the Commonwealth was paid five percent of Morris’s five percent pursuant to 782 Kentucky Administrative -3- Regulation (KAR) 1:010 § 9(13), and 20 U.S.C.A. § 107a(a)(1).3 The Commonwealth received $313.41 from the Presley arrangement. The contract was signed by Ken Presley for Presley, and by Carol Morris for Morris4. The document was also signed as a witness, by Jack B. Kennedy (Kennedy), who was employed as a business enterprises coordinator for the Kentucky Department for the Blind. Thereafter, Presley operated the laundry services until July 1, 2006, when the Prison terminated the contract. In July 2007, Presley filed suit against the Commonwealth and Morris claiming that Presley was fraudulently induced to contract based upon Presley’s belief that he was warranted a five (5) year contract. Presley argued that he had reasonably relied on the promise of the Commonwealth’s agent that he would have a minimum of five years in order to make the venture profitable. Presley also argued to the trial court that there had been misrepresentation and nondisclosure of key terms of the contract, specifically that the contract could be cancelled at any time regardless of the reason pursuant to the Randolph-Sheppard Act. The Commonwealth and Morris moved the trial court to dismiss the action and the trial court did so, finding that, as to the contract claims, there was a lack of privity between the Commonwealth and Presley. Additionally, the trial court ruled that the Board of Claims has exclusive jurisdiction over tort claims 3 The five percent the Commonwealth receives from each blind vendor’s gross receipts pays for new vending equipment for the vendors in the Randolph-Sheppard program. 4 Carol Morris testified in her deposition that her husband had used a stamp for her signature on the document and that she otherwise had no knowledge of the contract until she was served with the complaint. -4- against the Commonwealth, due to sovereign immunity. Finally, the court dismissed Morris due to the fact that in pleadings and oral argument, Presley had conceded that Morris was blameless in the matter. The trial court also found that: [T]he expressed terms of the Defendant Morris’ Agreement with the Defendant Commonwealth unambiguously provided that Defendant Morris did not have any right to bind or obligate the Defendant Commonwealth in any way or manner whatsoever. The Court finds that Defendant Morris, in her dealings with the Plaintiffs, was not and had not been an agent for the Commonwealth. Presley then timely filed notice of intent to appeal.5 STANDARD OF REVIEW When ruling on the motion to dismiss, the trial court considered the various contracts and other documents. We must, therefore, treat the motion as one for summary judgment. Waddle v. Galen of Kentucky, Inc., 131 S.W.3d 361, 364 (Ky. App. 2004); Kentucky Rules of Civil Procedure (CR) 12.02. “The standard of review on appeal of a summary judgment 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); CR 56.03. “Because summary judgments involve no fact finding, this Court reviews them de novo, in the sense that we owe 5 We have considered the Appellee’s argument regarding the timeliness of the Appellant’s brief and hold that it is without merit. -5- no deference to the conclusions of the trial court.” Blevins v. Moran, 12 S.W.3d 698, 700 (Ky. App. 2000). ANALYSIS Presley argues that the court erred in finding a lack of privity between the parties. Presley puts forth a number of reasons as to why privity existed, despite the fact that the written agreement in no way binds the Commonwealth: (1) the Commonwealth benefited from the contract; (2) the original contract was between the Commonwealth and the prison; (3) Commonwealth employees, including Kennedy, did all of the negotiations for the contract, including the commission received by the Commonwealth; (4) various letters were written by Commonwealth employees indicating that the Commonwealth was, in fact, a party to the agreement; (5) a letter was written by the Federal Bureau of Prisons which stated that the Prison entered into an agreement with the KOB and KBE to supply vending and laundry machines; (6) in answers to interrogatories, the Commonwealth acknowledges that Carol Morris was “appointed as manager” and was responsible for payment of the set aside to the Commonwealth; and (7) the permit was issued by the prison to KBE. “Privity of contract” is “[t]he relationship between parties to a contract, allowing them to sue each other but preventing a third party from doing so.” Thus, “[o]rdinarily, the obligations arising out of a contract are due only to those with whom it is made; a contract cannot be enforced by a person who is not a party to it or in privity with it, except under a real party in interest statute or, under certain circumstances, by a third-party beneficiary.” Consequently, “[a]s a general rule, -6- whenever a wrong is founded upon a breach of contract, the plaintiff suing in respect thereof must be a party or privy to the contract, and none but a party to a contract has the right to recover damages for its breach against any of the parties thereto.” Presnell Const. Managers, Inc. v. EH Const., LLC, 134 S.W.3d 575, 579 (Ky. 2004). (Internal citations omitted). In the contract at issue, Morris assigned all of her privileges and responsibilities as permit holder under the Randolph-Sheppard Act to Presley. Thus, the Commonwealth’s obligations to Morris, as the grantor of the permit, were assigned to Presley and any duty or condition thereof was all that was assigned and no more. The Commonwealth was not a party to the contract between Morris and Presley any more than the Prison was a party to that contract. The Commonwealth and the Prison were also, by law, entitled to place conditions on the performance of the contract. This does not make either entity a party to the contract between Morris and Presley. Both the Commonwealth and the Prison obtained a benefit from the contract between Morris and Presley and theoretically could have sued to enforce the contract as third party beneficiaries. The reverse, however, is not true. The contract between Morris and Presley assumed that certain conditions would be met prior to the performance of the contract. One such condition, the agreement between the Prison and the Commonwealth, delegated to the Commonwealth the power to license and permit MV to provide the service to the Prison. Morris, in turn, subcontracted with Presley to perform the service. -7- Once the Prison decided to terminate the service, Morris could not continue as the licensee under the Randolph-Sheppard Act in that facility. It follows then that as Morris’s rights were extinguished by the Prison, so, therefore, were Presley’s assigned rights pursuant to his contract with Morris. “If the obligor's duty is conditional on the personal cooperation of the original obligee or another person, an assignee's right is subject to the same condition.” Restatement (Second) of Contracts § 334 (1981). “The court cannot read words into the contract which it does not contain.” Goff v. Blackburn, 221 Ky. 550, 299 S.W. 164, 165 (1927). The language of the permit given Morris by the Commonwealth, or the agreement between Morris and Presley, in no way promotes Morris to the status of an agent of the Commonwealth, with the ability to bind the Commonwealth contractually. Nor does the language of the contract bind the Prison, despite its mention of the payment of commission by the Prison to Morris. This is because neither the Prison, nor the Commonwealth, were parties to the contract in question. The letters written by both federal and state employees referencing the contract do not change the terms of the contract between Morris and Presley. Kennedy’s involvement in the negotiations do not make him or the Commonwealth a party to the contract. Kennedy’s signature as witness to the contract is evidence of exactly that, that he witnessed the agreement, and not evidence of privity. Further, it must be noted that Presley has not provided to us any authority to the contrary. As we are upholding the trial court’s findings as to the -8- absence of a contract, we decline to engage in any discussion of sovereign immunity. Suffice it to say that any tort claims must be, pursuant to Kentucky Revised Statute (KRS) 44.070, brought to the Board of Claims and the trial court correctly found that it had no jurisdiction in such a matter. We hold that the Franklin Circuit Court did not err in its judgment of this matter and therefore affirm its order dismissing the above-entitled action. ALL CONCUR. BRIEF FOR APPELLANT: BRIEF FOR APPELLEE: Joe L. Travis Somerset, Kentucky Patrick B. Shirley Frankfort, Kentucky -9-

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