STEWART (DAN D.), ET AL. VS. SLUSHER (JOHN C.), ET AL.
Annotate this Case
Download PDF
RENDERED: MAY 20, 2011; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-001297-MR
DAN D. STEWART AND
BETSY STEWART
v.
APPELLANTS
APPEAL FROM KNOX CIRCUIT COURT
HONORABLE GREGORY A. LAY, JUDGE
ACTION NO. 08-CI-00453
JOHN C. SLUSHER AND
JAMES R. GOLDEN
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, DIXON AND STUMBO, JUDGES.
ACREE, JUDGE: Appellants, Dan D. Stewart, Jr. and Betsy Stewart, seek
reversal of the Knox Circuit Court’s order granting summary judgment in favor of
the Appellees, John C. Slusher and James R. Golden, for damages and interest
resulting from the Stewarts’ lease to a third party of mineral interests in land they
previously agreed to convey to Slusher and Golden. The Stewarts also seek
reversal of the circuit court’s denial of their motion for summary judgment to
collect $50,000 from Slusher and Golden allegedly owed as consideration for the
option to purchase the land. We affirm the judgment.
Facts and procedure
On August 2, 2004, the Stewarts entered into a contract with Slusher and
Golden giving them the option of purchasing real property in Knox County. The
option contract “grant[ed] to BUYER [Slusher and Golden] the exclusive option to
purchase all of the former D. D. Stewart property owned by STEWART in the
Kentucky counties [wherein situated] including, without limitation, all of the
property inherited by Stewart from D. D. Stewart as an heir at law or devisee . . . .”
(Real Estate Purchase Option). The option price was $50,000, to be credited
against the agreed upon purchase price of $800,000 or forfeited if the option was
not exercised. Slusher and Golden tendered the option price by check on August 4
or 5, 2004. The option period extended only until November 30, 2004.
Almost immediately, the Stewarts had a change of heart; they decided both
the agreed-upon option price and the purchase price were too low and wanted out
of the option contract. On August 23, 2004, Slusher and Golden filed a declaration
of rights action to enforce the option contract.
The next day, through a real estate agent, the Stewarts returned the $50,000
check. Then they answered the complaint arguing the option contract was invalid
-2-
because they had repudiated it immediately after they signed it and because it
lacked substantial consideration. Eventually, both parties to the declaratory
judgment action filed motions for summary judgment.
On May 22, 2006, before the circuit court ruled on these motions, the
Stewarts leased the mineral rights in the subject property to Chaos Coal, LLC. Part
of the consideration paid by Chaos Coal was an advance royalty payment of
$125,000. Slusher and Golden filed a second lawsuit against the Stewarts, i.e., the
instant action, seeking the $125,000 royalty payment on the ground that selling the
mineral rights constituted a breach of the option agreement.
Returning to the first action, on September 11, 2006, the circuit court
granted summary judgment in favor of Slusher and Golden, declaring the option
contract binding and enforceable, and allowing them 120 days from that date to
exercise the option. Slusher and Golden did exercise the option within that period
of time, but the Stewarts declined to convey the property until they exhausted their
right to appeal the circuit court’s September 11, 2006 order and judgment. The
circuit court entered an order preserving the rights of all parties.
This Court affirmed the circuit court’s September 11, 2006 order and
judgment in the first action in Stewart v. Slusher, No. 2006-CA-001980-MR, 2007
WL 3227567 (Ky. App. November 2, 2007), disc. rev. denied November 19, 2008
(hereafter “Stewart v. Slusher I”). On November 19, 2008, our opinion in Stewart
v. Slusher I became final. On January 10, 2009, in consideration for the payment
at closing of $800,000 and by special warranty deed, the Stewarts finally conveyed
-3-
the subject property to Slusher and Golden, less the mineral rights previously
leased to Chaos Coal. The Stewarts kept the $125,000 royalty advance from Chaos
Coal pending resolution of this second civil action.
Slusher and Golden, in the case sub judice, claimed “they are entitled to
damages in the amount of $125,000 to offset the purchase price by the amount of
value lost owing to the mining activities of the defendants’ lessee.” They filed a
summary judgment motion to that effect. The Stewarts filed a counterclaim and
summary judgment motion to collect the $50,000 payment for the option they had
returned in August 2004.
The circuit court granted summary judgment in favor of Slusher and Golden
and awarded them the $125,000 royalty payment plus 8% interest. Additionally,
the circuit court denied the Stewarts’ counterclaim for $50,000. This appeal
followed.
The Stewarts raise three issues on appeal. First, they challenge the
summary judgment in favor of Slusher and Golden and the award of $125,000 for
breach of the special warranty deed. Second, they argue the trial court abused its
discretion by awarding 8% interest on the damages. Finally, they seek reversal of
the judgment denying them recovery of the $50,000 option payment.
Standard of review
Because there are no disputed issues of fact, both the grant of
summary judgment in favor of Slusher and Golden, as well as the denial of
-4-
summary judgment to the Stewarts, are reviewed de novo. See Lewis v. B & R
Corp., 56 S.W.3d 432, 436 (Ky. App. 2001).
Award of $125,000 in damages to Slusher and Golden
The Stewarts present a two-fold challenge to the grant of summary judgment
in favor of Slusher and Golden. Not only do they argue that application of the law
to the undisputed material facts of this case fail to establish their liability to Slusher
and Golden, they also claim the circuit court applied the wrong measure of
damages. We consider each argument in turn.
The Stewarts’ liability
Citing West Kentucky Coal Co. v. Nourse, 320 S.W.2d 311 (Ky. 1959), the
circuit court held that the mineral lease the Stewarts granted to Chaos Coal was,
during the term of the lease, an encumbrance upon the property. Because the term
of the mineral lease extended until four months after the property was conveyed to
Slusher and Golden, the encumbrance was a breach of the special warranty deed at
the time of transfer, and the circuit court so held. We do not disagree with this
analysis.
However, this explanation is not fully satisfactory. We cannot ignore the
fact that if the mineral lease had terminated four months sooner, unencumbered
title would have been conveyed and there would not have been a breach of the
special warranty deed. Nevertheless, Slusher and Golden still would have had a
cause of action based on their complaint, based on the argument they presented for
summary judgment, and based on the uncontroverted facts of the case.
-5-
While agreeing with the circuit court that the Stewarts breached the special
warranty deed, we conclude that they also breached the option contract and
permitted voluntary waste to be committed on the property. In instances where a
circuit court is correct in its ruling as in this case, an appellate court, reviewing
questions of law de novo, can affirm, even though it may cite other legal reasons
than those stated by the trial court. Emberton v. GMRI, Inc., 299 S.W.3d 565, 576
(Ky. 2009).
We begin our analysis by dispossessing the Stewarts of an erroneous
premise upon which several of their arguments are based. While it is true that
Slusher and Golden did not, in a technical sense, exercise the option within the
timeframe established in the option contract itself, the delay was not of Slusher and
Golden’s own choosing. The Stewarts’ unsuccessful attempt to repudiate the
option contract and their resistance to Slusher and Golden’s efforts at judicial
enforcement made exercise of the option impossible until Stewart v. Slusher I
became final in late 2008. To quote the circuit court,
The [Stewarts] argue that [Slusher and Golden] lacked
sufficient interest in the subject property to be entitled to
the sum of $125,000. . . . In refusing the tender of the
consideration for the option, the [Stewarts] deprived
[Slusher and Golden] of their contractual right to exercise
the privilege to purchase the land, thereby also depriving
them of the ability to acquire an interest in the property to
which they would otherwise have been entitled under the
contract.
(Order, entered June 10, 2009, pp. 8-9). Citing 20th Century Coal Co. v. Taylor,
275 S.W.2d 72 (Ky. 1955) (“One party may not successfully accuse the other of
-6-
failure to perform when the former does not permit the performance”), the circuit
court held that the Stewarts “are estopped from later pointing to the fact that
[Slusher and Golden] failed to exercise the option” within the option period set out
in the contract itself. (Order, p. 9). We find no error in this ruling.
As we interpret it, the effect of the circuit court’s ruling is that Slusher and
Golden obtained an equitable interest in the property when they filed their
declaratory rights action on August 23, 2004.1 The option contract itself describes
the nature of that equitable interest; Slusher and Golden acquired an equitable
interest in “all of the former D. D. Stewart property owned by [and] including,
without limitation, all of the property inherited by [the] Stewart[s] from
D. D. Stewart as an heir at law or devisee . . . .” We know the Stewarts do not
dispute having inherited the property in fee, including the mineral interests,
because they conveyed those mineral interests to Chaos Coal. Nor do the Stewarts
dispute that Chaos Coal depleted the land of certain minerals that were there when
they executed the option contract, but were gone when they conveyed the property.
The Stewarts could have reserved the mineral interests to themselves by
excepting that portion of their fee simple ownership in mineral rights from the
option contract.
An estate in fee in land carries with it all metals and
minerals thereunder, unless the metals and minerals are
excepted in the conveyance . . . .
1
We do not intend to imply that filing a declaratory judgment action will, in every case, create an
equitable interest in real property; we limit this interpretation to the facts of this case.
-7-
Minerals in place are land. They are subject to
conveyance. . . . The owner of land may convey a
surface estate in fee in it, and reserve to himself an estate
in fee in the minerals, or any particular species of them;
in which case the vendee holds a distinct and separate
estate in the surface or soil, and the vendor holds a
distinct and separate estate in the minerals.
Terteling Bros., Inc. v. Bennett, 287 S.W.2d 607, 608 (Ky. 1956) (internal
quotation marks and citation omitted; emphasis supplied). However, they clearly
failed to reserve those mineral rights.
By granting a mineral lease to Chaos Coal that extended beyond the date
title was conveyed to Slusher and Golden, the Stewarts, as the circuit court held,
did cloud that title, thereby breaching the special warranty deed. But, by allowing
Chaos Coal to actually remove coal, the Stewarts also permitted voluntary waste
with regard to the property, making it impossible to convey at closing what they
promised to convey in the option contract.
“Waste” in its various forms is defined, consistent with Kentucky
jurisprudence, in BLACK’S LAW DICTIONARY, waste (9th ed. 2009). Quoting Peter
Butt, Land Law 114 (2d ed. 1988), BLACK’S gives us this more specific definition of
“Voluntary waste.”
This involves some positive act of injury to the property,
diminishing its value for the person next in succession; it
is a deliberate and active change to the property.
Examples are altering the character of premises by
demolishing internal walls and fittings or opening and
working a mine on the land . . . .
BLACK’S LAW DICTIONARY, waste (9th ed. 2009) (emphasis supplied).
-8-
We conclude that the circuit court was correct to find the Stewarts liable to
Slusher and Golden. In addition to the circuit court’s conclusion that liability was
based on a breach of the special warranty deed, we conclude that the Stewarts were
liable for committing waste on property equitably owned by Slusher and Golden
and breached the option contract by failing to convey the property as described in
the option contract.
Nevertheless, the Stewarts argue that reversal is justified for several reasons.
First, they argue that the eventual conveyance by special warranty deed of the
remainder of the property, or the merger doctrine, prohibited Slusher and Golden
from claiming a right to recover based on the mineral lease. Second, they argue
that the doctrines of res judicata and issue preclusion require reversal. We
disagree.
The fact that the property was conveyed by special warranty deed does not
affect the claim under the option contract. The Stewarts’ position is that the
special warranty deed did convey the very same property described in the option
contract, including the mineral rights. It did not. Some of those rights had already
been conveyed by lease to Chaos Coal. Furthermore, the Stewarts were obligated
to forever warrant and defend that the property they purported to sell was in fact
what was sold. As stated in Kentucky Revised Statutes (KRS) 382.040,
A covenant by a grantor, “that he will warrant specially
the property thereby conveyed,” or words of like import,
or the words “with special warranty,” in any deed, have
the same effect as if the grantor had covenanted that he,
his heirs and personal representatives, would forever
-9-
warrant and defend the property unto the grantee, his
heirs, personal representatives and assigns, against the
claims and demands of the grantor and all persons
claiming by, through, or under him.
KRS 382.040. Chaos Coal could have claimed, and perhaps did claim, through the
Stewarts as lessors, the right to the coal on the property. The Stewarts previously
promised to convey that right to Slusher and Golden. Therefore, this argument
fails.
The argument that the merger doctrine defeats the claim under the option
contract also fails. The merger doctrine generally holds “that all prior statements
and agreements, both written and oral, are merged into the deed . . . .” Borden v.
Litchford, 619 S.W.2d 715, 717 (Ky. App. 1981). However, there are exceptions
including “fraud, mistake, or contractual agreement[s] clearly not intended to be
merged into the deed.” Miller v. Hutson, 281 S.W.3d 791, 795 (Ky. 2009)
(quoting Harrodsburg Indus. Warehousing, Inc. v. MIGS, LLC, 182 S.W.3d 529,
532 (Ky. App. 2005) (citation omitted)). Before the deed was executed, Slusher
and Golden had already filed suit on their claim under the option contract, thereby
preserving it. This is a strong indicator they did not intend their right to enforce
the option contract to be merged into the deed.
If the Stewarts intended to extinguish a claim, already preserved and being
prosecuted, by conveying the property by deed and then claiming the doctrine of
merger to escape liability, they were not successful. This argument would require
that we find a waiver of that preserved claim. A waiver is generally defined as “an
-10-
intentional relinquishment or abandonment of a known right[.]” Moore v.
Commonwealth, 556 S.W.2d 161, 162 (Ky. App. 1977) (citing Barker v. Wingo,
407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972)). There is no evidence that
Slusher and Golden waived the claim they were pursuing simply because they
accepted a deed compelled by Slusher v. Stewart I.
We are also unpersuaded by the Stewarts’ arguments based on the doctrines
of res judicata and issue preclusion. The doctrine of res judicata operates to
preclude repetitious actions. Napier v. Jones, 925 S.W.2d 193 (Ky. App. 1996).
In order to apply res judicata, there must be (1) identity of the parties between the
two actions, (2) identity of the two causes of action, and (3) the prior action must
have been decided on its merits. Id. at 195. Claim preclusion, a subpart of res
judicata, “bars a party from re-litigating a previously adjudicated cause of action
and entirely bars a new lawsuit on the same cause of action.” Yeoman v.
Commonwealth, Health Policy Bd., 983 S.W.2d 459, 465 (Ky. 1998). “In short, the
rule of res judicata does not act as a bar if there are different issues or the
questions of law presented are different.” City of Louisville v. Louisville
Professional Firefighters Ass’n, 813 S.W.2d 804, 806 (Ky. 1991) (quoting
Newman v. Newman, 451 S.W.2d 417, 419 (Ky. 1970)).
The issue in Stewart v. Slusher I was whether the option contract should be
enforced. The issue in the case sub judice was whether the Stewarts breached the
option contract and what is the proper measure of damages. We will acknowledge
that if Stewart v. Slusher I had been resolved in favor of the Stewarts, the issues in
-11-
the case now before us would be precluded. However, that is not the case. The
doctrines of res judicata and issue preclusion are inapplicable.
Finally, our conclusion that the circuit court effectively recognized that
Slusher and Golden had an equitable interest in the property when they filed their
declaratory judgment action on August 23, 2004, makes untenable the Stewarts’
argument regarding the doctrine of equitable conversion. That argument is that
operation of the doctrine cannot relate back prior to the actual exercise of the
option. To the extent the circuit court relied on that doctrine, the Stewarts’
argument is moot and any equitable conversion doctrine analysis begins when
Slusher and Golden acquired the equitable interest in August 2004.
The circuit court correctly found the Stewarts liable to Slusher and Golden.
Award of $125,000 in damages to Slusher and Golden – Measure of Damages
The Stewarts also argue that “the $125,000 Advance Royalty payment has
no relevance to any concept of ‘damage’ recovery[.]” We disagree.
The measure of damages for breach of contract is “that sum which
will put the injured party into the same position he would have been in had the
contract been performed.” Hogan v. Long, 922 S.W.2d 368, 371 (Ky. 1995)
(quoting Perkins Motors, Inc. v. Autotruck Federal Credit Union, 607 S.W.2d 429,
430 (Ky. App. 1980)). “Damages for breach of an option to purchase land are
determined by the same rule as that applied in an action for breach of the contract
for the sale of land itself.” 77 Am.Jur.2d, Vendor and Purchaser § 553. Typically,
when less property is conveyed than was promised, the measure of damages is the
-12-
difference in the value of the property with and without the shortage. See Kramer
v. Mobley, 309 Ky. 143, 216 S.W.2d 930, 933 (1949). While that measure is
routinely applied when the shortage is measured in acreage, see, e.g., Evergreen
Land Co. v. Gatti, 554 S.W.2d 862, 864-66 (Ky. App. 1977), we have not found a
Kentucky case in which this measure of damages was applied under these or
similar circumstances.
Additionally, neither party to this appeal has cited a Kentucky case that
addresses the measure of damages under such circumstances even though our
General Assembly certainly recognizes a cause of action in favor of a vendee when
a vendor permits waste to be committed on the property to be conveyed. KRS
381.3802 (“If a vendor or tenant of land commits any waste thereon, after he has
sold his interest in it, but while he remains in possession, he shall be liable to the
party injured for damages.”). Without citing this statute or its predecessor, ancient
Kentucky opinions indicate that the legal principle encompassed by the statute has
been a part of our common law for a long time. See, e.g., Marsh v. Current, 6
B.Mon. 493, 493-94, 496, 1846 WL 3166, *1-*2 (Ky. 1846); and Durrett v.
Simpson’s Representatives, 3 T.B.Mon. 517, 521, 1826 WL 1338, *4-*5 (Ky.
1826);3 see also, Berry v. Walker, 9 B.Mon. 464, 1849 WL 3483 (Ky. 1849)
2
Our research reveals that neither KRS 381.380 nor its predecessor statute, Kentucky Statutes §
2331 (which can be traced back earlier than 1798), has ever been cited in any Kentucky decision
or any opinion rendered by a federal court.
3
Marsh can be summarized by the following excerpt: “In 1845, Current commenced this action
on the case, against Marsh, alleging in his declaration the commission by him, of various acts of
waste and destruction upon the land [not specified in the opinion] which he had sold and
conveyed to the plaintiff, and while the same was in the possession of the defendant, and
subsequent to the contract of sale and exchange, and before the delivery of the possession thereof
and the conveyance to the plaintiff. . . . [T]he only inquiry is, whether the plaintiff was entitled
-13-
(vendor “committing waste, by cutting and selling the timber” between the
acquisition by vendee of equitable interest in property and actual conveyance).
This approach – treating a vendor’s conduct similar to that engaged in by the
Stewarts as committing waste – is among a variety of alternative approaches taken
by courts in other jurisdictions where “purchasers, in addition to having been
awarded damages in actions premised upon waste, have prevailed in fraud and
trespass actions as well as breach of contract cases.” Annotation, Measure of
damages where vendor, after execution of contract of sale but before conveyance
of property, removes part of property contracted for, 97 A.L.R.3d 1220 § 2[a]
(1980 & 2011 Supp.) (footnotes omitted). Notably, many of the cases discussed in
the annotation cited recognized the problem of simply measuring damages by the
difference in the fair market value of what was purchased and what was conveyed.
An early, and perhaps still the best, description of the problem can be found in
Worrall v. Munn, 8 Sickels 185, 53 N.Y. 185, 1873 WL 12143 (N.Y. 1873).
to relief in this form of action. . . . [Once the plaintiff-vendee’s] title [wa]s perfected . . . there
[wa]s no longer any doubt or uncertainty, whether he will be or [wa]s injured by the waste
committed. The injury is already sustained and we see no reason why the defendant, the wrong
doer, should not be held responsible for it, and in this form of action. Although it might not have
been the only remedy, it very clearly appears to us to be an appropriate one, and we should not
hesitate to sustain it, unless controlled by some arbitrary rule of law, of which we are not aware.”
Marsh, 6 B.Mon. at 493-94, 496, 1846 WL 3166 at *1-*2. In Durrett, the vendor, between the
time vendee acquired an equitable interest in the property and the time title was transferred,
removed a system of pipes previously installed to bring running water from a spring to the
improvements on the property. The Court said, “If waste be committed, between the contract
and the time for making the conveyance and delivering possession, by vendor or his tenants,
vendor must tender compensation with the possession and deed, otherwise vendee may refuse
them. . . . Here the injury must be held to arise, indirectly at least, from the act of the vender,
and he ought not, therefore, to be permitted to compel the vendee to bear the loss.” Durrett, 3
T.B.Mon. at 521, 1826 WL 1338 at *4-*5.
-14-
Faced with circumstances similar to those presented here, New York’s
highest court in Worrall initially considered that
the deterioration in the value of the land would be an
appropriate method of fixing the amount of the injury. In
some cases it would be the only way in which
compensation for waste could be given[. For example,
i]f the soil, having no value separated from the land, was
stripped from it, so as to render it [the land] unproductive
and unfit for the use to which it was applied, the
diminished value of the land would be the only adequate
measure of compensation.
Worrall, 53 N.Y. at 190, 1873 WL 12143 at *3. Then, the court reconsidered.
What if the reverse situation is presented to a court as, in fact, it was presented in
Worrall? What if the vendor stripped land of a resource that, unlike the soil
considered in the first example, was valuable in and of itself, but the removal of
which made little difference in the land’s value?
Cutting a few trees on a timber tract, or taking a few
hundred tons of coal from a mine, might not diminish the
market value of the tract, or of the mine, and yet the
value of the wood or coal, severed from the soil, might be
considerable. The wrong-doer would, in the cases
instanced, be held to pay the value of the wood and coal,
and he could not shield himself by showing that the
property from which it was taken was, as a whole, worth
as much as it was before.
Id.
For this reason, the New York court concluded that “the diminished value of
the land is not the exclusive measure of relief for an injury in the nature of waste
committed by” the vendor between the time the vendee acquires an equitable
interest in the property and the time the property is actually conveyed. Id. In a
-15-
proper case, “a vendee will also be entitled to recover the value of the materials
removed.” Annotation, 97 A.L.R.3d 1220 at § 3[a] (citing Worrall); see also,
Rock v. Belmar Contracting Co., 141 Misc. 242, 252 N.Y.S. 463, 465 (N.Y. Sup.
1930) (“the value of the thing separated from the realty is the measure of damages
where it has a value after removal and the land has sustained no material injury
because of the removal”). The case before us is such a case.4 We believe the
reasoning is sound and the remedy consistent with our jurisprudence. See
Merriwether v. Bell, 22 Ky.L.Rptr. 844, 58 S.W. 987, 988 (1900) (conversion
action in which defendant mistakenly removed sand from lot adjacent to his own;
“measure of damages is not the damage to the lot by the excavation, or what it
would cost to fill it up, but the value of the sand converted”).
In their complaint, Slusher and Golden sought as damages “the sum of
$125,000.00 plus any additional amounts realized by the [ Stewarts.]” (Emphasis
supplied). However, the circuit court awarded only “the principal amount of
$125,000, plus prejudgment interest[.]” Because Slusher and Golden did not file a
cross-appeal to protect their right to seek more than was awarded, they are limited
4
See also May v. Muroff, 483 So.2d 772, 772 (Fla. App. 4 Dist. 1986)(“seller improperly sold
fill from the land in question to a third party for $240,000. The purchaser claims that $240,000.
We agree he should be entitled to it”). Also, at least one jurisdiction has determined that “This
reasoning [expressed in Worrall] does not depend for its soundness on the holding of a property
interest, as distinguished from a contractual interest, by the plaintiffs. Nor is it punitive; it
merely deprives the defendant of a profit wrongfully made, a profit which the plaintiff was
entitled to make.” Laurin v. DeCarolis Const. Co., Inc., 372 Mass. 688, 363 N.E.2d 675, 678-79
(Mass. 1977). Similarly, applying the same reasoning, a federal court said, “It makes no
difference in this case whether that instrument was an option or a contract of sale. In either
event, it was the duty of plaintiff to maintain the property in its then condition. He had no right
to commit waste by stripping the land of timber upon it. Upon the exercise of an option the
rights of the parties relate back to its date.” McCarroll v. Newsham, 278 F. 4, 7 (5th Cir. 1922).
-16-
to that amount and cannot recover any other royalty payments the Stewarts may
have received while they were the title owners of the property.
We conclude that the $125,000 advance royalty payment would not have
exceeded the value of the coal removed. Therefore, under these circumstances, the
award of the $125,000 advance royalty was a proper measure of damages.
Award of prejudgment interest
The Stewarts’ challenge to the award of prejudgment interest warrants
little discussion. The trial court awarded Slusher and Golden 8% interest on the
$125,000 award. The trial court properly looked to Nucor Corp. v. General Elec.
Co., 812 S.W.2d 136 (Ky. 1991), and 3D Enterprises Contracting Corp. v.
Louisville and Jefferson County Metropolitan Sewer Dist., 174 S.W.3d 440 (Ky.
2005) for the tests to determine if the damages were liquidated and determined that
they were.
“The longstanding rule in this state is that prejudgment interest is awarded as
a matter of right on a liquidated demand, and is a matter within the discretion of
the trial court or jury on unliquidated demands.” 3D, 174 S.W.3d at 450. We need
not consider whether the circuit court correctly determined that the demand was
liquidated. If it was liquidated, the circuit court had no discretion and properly
awarded interest at the statutory rate of 8%. KRS 360.010. If the demand was
unliquidated, making the award of prejudgment interest a matter of discretion with
the circuit court, we conclude that, in this case, awarding interest at the maximum
permissible rate was not an abuse of discretion. As the court noted, the Stewarts
-17-
intentionally created a defect in title “after two years of litigation in the initial
declaratory action, and recorded [that defect in the form of a mineral lease] just
two months prior to the judicial determination of the [option] contract’s
enforceability.” Allowing the Stewarts to retain any portion of the royalty
payment, including the value of its use, would result in a windfall to them.
We note that the circuit court’s order and summary judgment does not state
when prejudgment interest began to accrue. Slusher and Golden requested in their
motion that they receive “interest from May 22, 2006, when the [Stewarts]
received the funds.” Because this date is after the date marking Slusher and
Golden’s acquisition of their equitable interest in the coal, that date is the correct
one on which prejudgment interest began to accrue.
The Stewarts’ counterclaim for $50,000
Finally, the circuit court found, and the record supports the finding, that
Slusher and Golden paid the entire purchase price of $800,000 at the closing.
Therefore, the circuit court did not err in finding against the Stewarts on their
counterclaim for an additional $50,000. The Stewarts’ argument is simply that the
$50,000 given as consideration for the option contract should not apply toward the
purchase price of the property, because the option was not exercised before
midnight on November 30, 2004.
Having already concluded that the Stewarts thwarted any effort by Slusher
and Golden to exercise the option, we can find no merit in this argument. “[I]t is
the general principle of law that he who prevents a thing from being performed
-18-
should not avail himself of the nonperformance he has occasioned[.]” Bryant v.
Jones, 255 Ky. 606, 75 S.W.2d 34, 38 (1934). The Stewarts breached the option
contract; awarding them an additional $50,000 would be allowing them to profit
from their own wrongdoing. For that reason, we find no error in the circuit court’s
denial of the Stewarts’ claim.
Conclusion
Our de novo review of these summary judgments causes us to conclude that
the Knox Circuit Court correctly ruled that there were no genuine issues of
material fact and properly awarded judgment as a matter of law in favor of Slusher
and Golden on their claim for damages in the amount of $125,000 with
prejudgment interest thereon at 8%. We also conclude that the Knox Circuit Court
correctly found no genuine issues of material fact and properly ruled that the
Stewarts are not entitled to recover the option price beyond that already paid as
part of the purchase price.
For all of the foregoing reasons, the judgment of the Knox Circuit
Court is affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANTS:
BRIEF FOR APPELLEES:
Katherine K. Yunker
John B. Park
Lexington, Kentucky
Darrell L. Saunders
Corbin, Kentucky
-19-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
