BETSY WILSON REALTY, INC., ET AL. VS. GREEN (LINDA)
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RENDERED: OCTOBER 23, 2009; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-002122-MR
BETSY WILSON REALTY, INC.;
BETSY WILSON; AND
TONY WILSON
v.
APPELLANTS
APPEAL FROM BOYLE CIRCUIT COURT
HONORABLE DARREN W. PECKLER, JUDGE
ACTION NO. 07-CI-00133
LINDA GREEN
APPELLEE
OPINION
AFFIRMING IN PART,
VACATING IN PART, AND REMANDING
** ** ** ** **
BEFORE: KELLER AND NICKELL, JUDGES; LAMBERT,1 SENIOR JUDGE.
KELLER, JUDGE: This appeal arises out of a dispute over a real estate sales
commission. A jury awarded Linda Green (Green), $30,676.00 in compensatory
and punitive damages. Betsy Wilson (Betsy), Betsy Wilson Realty (Wilson
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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.
Realty), and Tony Wilson (Tony), appeal from the trial court’s judgment in that
amount. On appeal, the appellants argue that the trial court erred by not granting
their motions for summary judgment, for directed verdict, and for judgment
notwithstanding the verdict. The appellants also argue that the jury instructions
were faulty. For the following reasons, we affirm in part, vacate in part, and
remand.
FACTS
In 1998, Green, as agent for Wilson Realty, entered into an “Exclusive
Right to Sell” agreement (the Right to Sell Agreement), with Randall Pyles
(Pyles), d/b/a Boyle Land Development to sell lots in the Colonial Heights
subdivision of Danville, Kentucky. The parties extended the Right to Sell
Agreement a number of times, last doing so to cover the 2006 calendar year.2
While operating under the Right to Sell Agreement, Wilson Realty, as the broker,
received a commission. Wilson Realty then paid a portion of that commission to
Green based on a formula set forth in Wilson Realty’s policy manual.
In October 2006, Pyles and his brother Joe, who was a partner in
Boyle Land Development, met with Betsy and stated that they wanted to sell the
remaining lots at public auction. Because of health problems and other factors, the
brothers indicated that they wanted the auction and all closings to take place by the
end of the year. Betsy referred the brothers to Tony, who is a licensed auctioneer.
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There was some testimony that Pyles may not have signed the final extension of the Right to
Sell Agreement. Pyles testified that he could not remember if he signed that agreement.
However, he testified that the issue was irrelevant to him because he considered Wilson Realty to
be the exclusive broker of the property and acted accordingly.
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Tony met with the brothers, and they entered into an auction agreement (the
Auction Agreement), which provided for payment of a five percent commission to
Wilson Realty from the proceeds of the auction. We note that neither the policy
manual nor the auction agreement provide for payment of any portion of the
commission to the listing agent or to the auctioneer. However, all parties testified
that commissions from public auctions were traditionally split one-third to Tony,
one-third to Wilson Realty, and one-third to the listing agent.
The auction, which Tony admitted was the largest he had ever
undertaken, was scheduled for November 11, 2006. Because Green had a trip
planned for November 14th through November 28th, and would not be available to
work immediately following the auction, Tony advised Green that she would only
be paid one-sixth of any commission, rather than the traditional one-third. Green
testified she believed this was unfair and asked Tony if she could get someone to
cover for her during her vacation and thereby receive the customary one-third.
Tony advised Green that was not acceptable and the conversation ended at that.
Despite her dissatisfaction with the proposed arrangement, Green helped with preauction preparations: making telephone calls, gathering documents, arranging for
mowing and clearing of the property, and passing out fliers.
Less than one week before the auction, Green’s husband told some
friends that Tony and Wilson Realty were cutting Green’s commission. Another
Wilson Realty agent told Betsy that Green’s husband was disparaging the Wilsons
and Wilson Realty. Betsy told Tony who then called Green into the office where
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he berated her for an extended period of time. Ultimately, Tony advised Green
that she would not get a “damn dime” in commission from the auction and Betsy
told Green that she should leave the agency.
The auction took place and the property sold for a total of $920,300.
Betsy testified that Wilson Realty incurred a total of $16,705.32 in expenses,
which was taken out of the commission prior to distribution of the remainder to
Wilson Realty and Tony. Those expenses included a fee to Century 21 and
payment to Betsy’s daughter for her work putting together pre-auction packets and
assisting with post-auction closings. Green did not receive any portion of the
commission or any remuneration related to the auction.
On March 7, 2007, Green filed a complaint alleging that the
appellants, by entering into the Auction Agreement, breached the Right to Sell
Agreement; that the appellants breached the Auction Agreement; that the
appellants interfered with the contractual relationship between Green and Pyles;
that Green relied to her detriment on the appellants’ misrepresentations that she
would receive one-third of the commission from the auction; that the appellants
converted Green’s share of the commission; and that Betsy breached her fiduciary
duty to obtain and pay a commission to Green. In addition to compensatory
damages, Green asked for punitive damages.
On July 17, 2007, the appellants filed a motion for summary judgment
arguing that the Right to Sell and Auction Agreements were between Pyles and
Betsy, Tony, or Wilson Realty, not Green. The appellants argued that any claims
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arising under any contract theories were not viable and that, because Green did not
have a written contract with anyone regarding entitlement to commissions, her
contract claims were barred by the Statute of Frauds. Finally, the appellants
argued that Wilson Realty and Betsy owed no fiduciary duty to Green and that they
could not convert a commission to which Green was not entitled. Finding that
issues of material fact existed as to all counts of the complaint, the court denied the
appellants’ motion.
The parties tried this matter to a jury on August 28 and 29, 2008.
After Green presented her case, the appellants moved for a directed verdict,
making essentially the same arguments they made in their motion for summary
judgment. The court found that, once the agency entered into the Right to Sell
Agreement with Pyles, Green had an expectation of payment that flowed from that
Agreement. Because Green was an independent contractor working through
Wilson Realty, she also had an expectation of payment based on that contractual
relationship. As to interference with a contract, the court stated that the issue was
whether Tony’s decision to alter prior practice and reduce Green’s share of the
auction commission interfered with her reasonable expectation of payment equal to
one-third of that commission. Furthermore, the court stated that once Tony
indicated he was reducing the amount payable to Green, Green had a reasonable
expectation of receipt of at least that amount and Tony’s unilateral decision to pay
nothing interfered with that contract. The court also indicated that, if the jury
found that Green was entitled to a commission, then the retention of Green’s
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commission by the appellants would amount to conversion. Finally, the court
stated that evidence would support a finding that Wilson Realty and Betsy stood in
a fiduciary relationship vis à vis Green with regard to payment of commissions.
Following the presentation of proof, the jury returned a verdict for
Green on all counts awarding compensatory damages of $15,338.39 and punitive
damages of $15,338.39. The appellants timely filed a motion for judgment
notwithstanding the verdict arguing, in large part, what they previously argued in
their motions for summary judgment and for directed verdict. Additionally, the
appellants argued that fraud, unjust enrichment, and breach of fiduciary duty
instructions should not have been submitted to the jury. The court overruled the
appellants’ motion and this appeal followed.
Distilled to their essence, the appellants’ arguments revolve around
three basic issues: (1) whether Green had any contractual entitlement to a
commission; (2) whether Wilson Realty and/or Betsy owed Green any fiduciary
duty; and (3) whether the court’s jury instructions were fatally flawed. We will
address each issue and their attendant sub-issues in turn, setting forth additional
facts as necessary.
STANDARD OF REVIEW
Because we apply different standards of review to the various issues
raised by the appellants, we will set forth those standards as we address each issue.
ANALYSIS
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As noted above, the primary issue raised by the appellants, from
which the majority of sub-issues flow, is: whether Green had a contract in writing
that entitled her to receive a real estate commission. We disagree with the
appellants’ arguments on that issue and hold that Green had a contract sufficient to
support her claim.
A. Existence of a Contract
We begin our analysis by examining whether Green had an exclusive
right to sell contract. The interpretation and legal effect of a contract is a matter of
law. Bank One, Pikeville v. Commonwealth of Kentucky, Natural Resources and
Environmental Protection Cabinet, 901 S.W.2d 52, 55 (Ky. App. 1995), and
Morganfield Nat’l Bank v. Damien Elder & Sons, 836 S.W.2d 893, 895 (Ky.
1992). Construction and interpretation of a contract, including questions regarding
ambiguity, are questions of law to be decided by the court. First Commonwealth
Bank of Prestonsburg v. West, 55 S.W.3d 829, 835 (Ky. App. 2000).
With the preceding in mind, we note that a contract, to be enforceable,
need not necessarily be in writing. A contract can be implied in fact if there is
evidence of facts and circumstances from which a meeting of the minds concerning
mutual promises may be deduced. Perkins v. Daugherty, 722 S.W.2d 907, 909
(Ky. App. 1987); see also Rider v. Combs, 256 S.W.2d 749, 750 (Ky. 1953).
However, based on KRS 371.010(8) (the statute of frauds) a “contract for any
commission or compensation for the sale or lease of any real estate or for assisting
another in the sale or lease of any real estate” must be in writing to be enforceable
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against “a party to be charged therewith.” We will first address whether Green had
a contract, then we will address whether that contract was required to be in writing.
The appellants first argue that Green, as a real estate agent, could only
enter into a Right to Sell Agreement on behalf of her broker, Betsy and/or Wilson
Realty. She could not enter into a sales contract in her own right. The appellants
point to the definitions of a real estate agent and broker in the Kentucky Revised
Statutes (KRS) as supporting this argument. They cite to no specific statutory
provisions prohibiting Green from entering into such an agreement although the
statutes certainly imply that is the case. That being said, we note that KRS
324.121(1) provides that a principal broker, such as Wilson Realty:
may designate one (1) or more affiliated licensees to act
as agent for a seller . . . to the exclusion of all other
licensees affiliated with the principal broker . . . . The
designation procedure shall be made in writing and
communicated to all licensees affiliated with the
principal broker. . . . The designated agent shall inform
and obtain the consent of the seller . . . to the designation.
The principal broker shall not designate himself or
herself as a designated agent.
The uncontested evidence is that Green entered into and signed the
Right to Sell Agreement on behalf of Wilson Realty. She placed her name on page
one of the Agreement as the “listing broker” because that is how Wilson Realty
kept track of who the listing agents were. Pyles was aware that Green would be
the listing agent and that Wilson Realty would be the listing broker, as evidenced
by his signature on the Right to Sell Agreement. The Wilson Realty policy manual
provided for compensation of agents based on their status as listing agent and/or
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selling agent. Throughout the nearly nine years the Right to Sell Agreement was in
effect, Green received payment based on her status as listing agent for each of
Pyles’s lots that sold. She received these payments regardless of what, if any,
actions she took to forward a sale and there was no evidence that any other Wilson
Realty agent received similar payments.
Contrary to the appellants’ arguments, Green’s contract was not with
Pyles, but with Wilson Realty. Furthermore, the contract was not for a
“commission” but, as set forth in the policy manual, for “Salesman’s
Compensation . . . based on collected sales commission only.” The fact that
Green’s compensation was calculated as a percentage of the commission collected
by Wilson Realty does not alter the fact that the payment due her was
compensation from Wilson Realty for obtaining the listing, not a commission.
Additional evidence that the payment due to Green was not a commission can be
found in the policy manual’s prohibition against agents taking any legal action to
recover commissions owed. The preceding evidence establishes that Green had a
contract with Wilson Realty as exclusive listing agent and was entitled to
compensation accordingly. Therefore, the trial court correctly denied the
appellants’ dispositive motions on this issue and the jury’s decision on this issue
was supported by the evidence.
The appellants also argue that Green was not entitled to any
commission based on the Auction Agreement because she was not a party to that
Agreement. We agree that Green was not a party to the Auction Agreement and
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that she, therefore, did not have any right to a commission pursuant to that
Agreement. However, that is not to say that Green did not have a contract that
entitled her to compensation. The parties do not dispute that, prior to this auction,
listing agents received one-third of any auction related commission received by
Wilson Realty, after the deduction of expenses. The appellants characterized this
payment at trial as representing largesse on the part of Wilson Realty and/or as
compensation to a listing agent for work performed pre and post auction. They
argued at trial and herein that the policy manual did not cover auctions and that the
provision for compensation to listing agents in that manual did not apply.
A review of the policy manual reveals that it sets “forth the basic rules
and general guides to be followed in the day-to-day operation of” Wilson Realty &
Auction Co. The manual is silent regarding auctions and, notably, the portion of
the manual discussing compensation for listing agents does not exclude
commissions received from auctions. A reasonable interpretation of the manual, in
conjunction with the practice of Wilson Realty, is that a listing agent is entitled to
compensation equal to one-third of the commission Wilson Realty receives from
an auction. Furthermore, even if the policy manual did not create an obligation to
pay Green one-third of the Wilson Realty’s commission from the auction, Tony’s
statement to Green that she would be paid one-sixth of the commission obligated
Wilson Realty to pay Green. Therefore, the trial court correctly denied the
appellants’ dispositive motions regarding the Auction Agreement, and the jury’s
decision on this issue was supported by the evidence.
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Based on the preceding determination that Green’s entitlement to
payment flowed from her relationship with Wilson Realty, not her relationship
with Pyles, the appellants’ statute of frauds argument is without merit. The statute
of frauds is a defense that can be asserted by the one to be charged under an
alleged contract. In this instance, the one to be charged under the Right to Sell
Agreement was Pyles and the defense of the statute of frauds was personal to him.
Niagara Fire Ins. Co. v. Layne, 162 Ky. 665, 172 S.W. 1090, 1094 (1915).
Certainly, Pyles could have asserted the statute of frauds as a defense if Green had
attempted to collect a commission from him. However, that is not what Green did.
She sought to collect compensation from Wilson Realty. That compensation,
while calculated based on the commission Wilson Realty received, was not a
commission. Therefore, Wilson Realty was not entitled to assert the statute of
frauds as a defense, and the trial court correctly denied the appellants’ dispositive
motions on this issue.
In summary, Green had, at a minimum, an implied-in-fact contract to
act as exclusive listing agent for the property in question. Additionally, Green had
an implied-in-fact contract entitling her to receive at least one-sixth of the
commission Wilson Realty received from the auction proceeds. We next address
the contract related sub-issues raised by the appellants.
1. Unjust Enrichment
The appellants argue that, absent a written contract, Green cannot
assert a claim for unjust enrichment. In support of their position, the appellants
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cite to Louisville Trust Co. v. Monsky, 444 S.W.2d 120 (Ky. 1969). In Monsky, the
Court held that, absent a signed agreement sufficient to satisfy the statute of frauds,
a real estate broker cannot recover a commission from a seller in quantum meruit.
Id. at 121-22. Monsky is neither dispositive nor persuasive because Green is not a
broker, and she did not attempt to recover a commission from Pyles. She merely
attempted to recover compensation that was due her from Wilson Realty, her
broker. Thus, we are not persuaded by the appellants’ argument and find no error
in the court’s denial of the appellants’ dispositive motions on this issue.
2. Intentional/Fraudulent Misrepresentation
As with their unjust enrichment argument, the appellants argue that,
based on the statute of frauds, Green could not rely on oral representations made
by Tony or Betsy to support her claim to a commission. Because we have
previously determined that Green was not seeking a commission, there was no
need for a written contract. Therefore, the appellants’ reliance on the preceding
argument is misplaced.
Although it does not arise from their contract arguments, the
appellants also argue that Green’s claim of intentional/fraudulent misrepresentation
was not supported by the evidence. We agree. Green’s intentional/fraudulent
misrepresentation claim arose from her allegations that the appellants falsely
promised to pay her one-third of the commission from the auction and that she
relied on that promise to her detriment.
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In order to succeed in her claim for intentional/fraudulent
misrepresentation, Green was required to prove that: (1) the appellants made a
material representation that they knew to be false or that they made recklessly in
order to induce Green to take some action; (2) Green then took action in reliance
on the representation; and (3) Green suffered injury. Yeager v. McLellan, 177
S.W.3d 807, 809-10 (Ky. 2005). Green put before the jury evidence that the
appellants, through their past actions and the policy manual, represented to her that
she would receive one-third of the auction proceeds. Green also put before the jury
evidence that Tony represented to her that, because she was going on vacation, she
would only be paid one-sixth of the auction proceeds. Green testified that she then
took actions to promote the auction and to assist with preparing for the auction but
received none of the proceeds. However, Green failed to put on any evidence
indicating that, when the appellants made the representations regarding payment
from the auction proceeds, they did so recklessly or falsely. In fact, the evidence
establishes that, until Green’s husband disparaged Tony, Betsy, and Wilson Realty,
the appellants intended to pay Green compensation of at least half the regular rate.
Because Green did not prove that the appellants’ statements about compensation
were false when made or recklessly made, the trial court should have granted
appellants’ motion for a directed verdict on that issue. Furthermore, because there
was no evidence to support Green’s claim of intentional/fraudulent
misrepresentation, the court erred when it instructed the jury on that issue.
3. Conversion
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Green alleged that appellants, by retaining all of the commission from
the auction, converted that portion of the commission due to her. The appellants
argue that Green had no written agreement entitling her to a commission; therefore,
the appellants could not have converted any portion of the commission. As we
have held that Green was not paid a commission, a written contract was not
necessary, and appellants’ argument is not persuasive. Therefore, we discern no
error in the trial court’s denial of the appellants’ dispositive motions on this issue
or in the jury’s decision.
We next address whether the appellants had a fiduciary duty to Green.
B. Fiduciary Duty
[B]ecause the circumstances which may create a
fiduciary relationship are so varied, it is extremely
difficult, if not impossible, to formulate a comprehensive
definition of it that would fully and adequately embrace
all cases. Nevertheless, as a general rule, we can
conclude that such a relationship is one founded on trust
or confidence reposed by one person in the integrity and
fidelity of another and which also necessarily involves an
undertaking in which a duty is created in one person to
act primarily for another's benefit in matters connected
with such undertaking.
Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 485 (Ky. 1991).
Green alleged, and the jury found, that Betsy had a fiduciary duty to
collect commissions and distribute the proceeds from those commissions to her
agents. Green further alleged that Betsy breached that duty by retaining the
portion of the commission she owed to Green. The appellants argue that, because
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there was no contract between them and Green, they had no duty to Green. We
disagree.
As we held above, Green had, at a minimum, an implied contract as
exclusive listing agent with Wilson Realty and Betsy that entitled her to one-third
of the commission from the auction. She also had an explicit contract to receive at
least one-sixth of the commission from the auction. At trial, Betsy testified that, as
broker, she was the only person entitled to receive a commission. The policy
manual provides that only Wilson Realty, not individual agents, may sue to recover
commissions. Because Betsy, when she collects commissions, acts not only for
herself and Wilson Realty but also on behalf of her agents, she has a duty to act
with integrity and fidelity. Based on the preceding, we hold that Betsy and Wilson
Realty had a fiduciary duty to Green. We discern no error in the trial court’s denial
of the appellants’ dispositive motions regarding this issue. Furthermore, we hold
that the evidence was sufficient to support the jury’s finding that Betsy and/or
Wilson Realty breached that duty when she refused to compensate Green pursuant
to either the implied-in-fact contract or the explicit contract.
C. Jury Instructions
Alleged errors regarding jury instructions are questions of law and
must be examined using a de novo standard of review. Hamilton v. CSX
Transportation, Inc., 208 S.W.3d 272, 275 (Ky. App. 2006). When examining jury
instructions for error, we must read the instructions as a whole. Bills v.
Commonwealth, 851 S.W.2d 466, 471 (Ky. 1993).
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No party may assign as error the giving or the failure to
give an instruction unless he has fairly and adequately
presented his position by an offered instruction or by
motion, or unless he makes objection before the court
instructs the jury, stating specifically the matter to which
he objects and the ground or grounds of his objection.
Kentucky Rules of Civil Procedure (CR) Rule 51.
Appellants argue three errors with regard to the court’s jury
instructions. First, appellants argue that the court erred when it failed to instruct
the jury to subtract expenses associated with the auction before determining
damages. The appellants note Betsy testified that, pursuant to the Auction
Agreement, Wilson Realty assumed certain expenses related to the auction.
Wilson Realty then deducted those expenses from the commission it received
before paying itself or Tony. Based on a total sales amount of $920,300.00, the
commission earned was $46,015.00. Betsy testified that Wilson Realty incurred
expenses in the amount of $16,705.32, leaving $29,309.68 for distribution. The
jury instructions stated that the jurors should “determine from the evidence, and
award to the Plaintiff, a sum of money that will fairly and reasonably compensate
the Plaintiff for damages resulting from your findings, not to exceed the sum of
one-third (1/3) of the commission of the auction.” This instruction does not parrot
the damage instructions offered by the appellants. However, the instructions
offered by the appellants measured damages as an amount “not to exceed 1/3 of the
Commission earned from the auction contract.” None of the appellants’ proffered
damage instructions indicated that the jurors should first deduct expenses before
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calculating damages, although counsel argued as much to the jury. The appellants’
failure to offer an instruction regarding deduction of expenses and failure to object
to the instructions as submitted to the jury forecloses them from raising that issue
on appeal.
Second, the appellants argue that the court improperly answered three
questions the jurors asked about the damages instruction during deliberations. The
first question was whether they were required to put a dollar amount in their
finding of damages. The second was what amount of commission they were
required to use in determining damages. The third was whether they could
consider $33,309.68 as commission rather than $29,308.68. As to the first
question, the court advised the jurors that they were required to put a dollar amount
in their finding of damages, if they believed that damages were due. As to the
second and third questions, the court stated that the jurors could determine what
amount of damages was the correct amount. Neither counsel objected to the
court’s answers to the jury, and the jury awarded $15,338.33, which is one-third of
the total amount of commission. Because counsel for the appellants did not object
to the court’s responses to the juror’s questions, that issue is not preserved for our
review, and we will not address it further.
Third, the appellants argue that there was no evidence of fraud;
therefore, the issue of punitive damages should not have been presented to the jury.
The mere fact that an act is intentional or reckless does not justify punitive
damages absent a finding that the defendant's conduct amounted to fraud,
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oppression, malice, or gross negligence. Banks v. Fritsch, 39 S.W.3d 474, 480
(Ky. App. 2001). Because we have held that there was no fraudulent
misrepresentation and Green did not assert a negligence claim, her entitlement to
punitive damages must rest on oppression or malice.
The trial court appropriately defined oppression and malice in its jury
instructions, but also included the definition of fraud. Therefore, it is unclear
whether the jurors awarded punitive damages based on their finding of fraud or
because they believed the appellants acted oppressively or with malice. Because
we have determined that the issue of fraud should not have been submitted to the
jury, the instructions on punitive damages and the jury’s findings on that issue are
faulty. Therefore, we remand this matter to the trial court with instructions that, if
a new trial is held, the jury should not consider fraud and fraud should not be
included in any punitive damage instructions.
CONCLUSION
In summary, the trial court erred when it submitted the issue of
intentional/fraudulent misrepresentation to the jury. Furthermore, the trial court
erred when it included fraud as a basis for an award of punitive damages. We
discern no other errors. Based on the preceding, the punitive damage portion of
the judgment is vacated and this matter is remanded for additional proceedings
consistent with this opinion.
ALL CONCUR.
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BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Jeffrey C. Rager
Lexington, Kentucky
William R. Erwin
Danville, Kentucky
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