PHYLLIS RANIER, Individually Shadowlawn Farm v. KIGER INSURANCE, INC. and KIGER ENTERPRISES, d/b/a KIGER INSURANCE GROUP
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RENDERED:
July 23, 1999; 2:00 p.m.
TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1996-CA-002778-MR
PHYLLIS RANIER, Individually
and as a Partner of
Shadowlawn Farm
v.
APPELLANT
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE MARY C. NOBLE, JUDGE
ACTION NO. 91-CI-000044
KIGER INSURANCE, INC. and
KIGER ENTERPRISES, d/b/a
KIGER INSURANCE GROUP
AND
NO.
APPELLEES
1996-CA-002855-MR
KIGER INSURANCE, INC.
v.
CROSS-APPELLANT
CROSS-APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE MARY C. NOBLE, JUDGE
ACTON NO. 91-CI-000044
PHYLLIS RANIER, Individually
and as Partner of Shadowlawn Farm
OPINION
AFFIRMING IN PART,
REVERSING IN PART, AND REMANDING
* * * * * * * * * * * * * * * * * *
BEFORE:
BUCKINGHAM, COMBS, and McANULTY, Judges.
CROSS-APPELLEE
BUCKINGHAM, JUDGE.
Phyllis Ranier (Phyllis) appeals and Kiger
Insurance, Inc., and Kiger Enterprises d/b/a Kiger Insurance
Group, successor to Kiger-Parks Insurance Group (hereinafter
collectively referred to as Kiger) cross-appeal from a judgment
of the Fayette Circuit Court on Kiger’s claim against Phyllis for
money damages for insurance premiums allegedly owed by her.
We
affirm in part, reverse in part, and remand.
Phyllis and her son, Harry Ranier (Harry), operated a
horse farm as a general partnership under the assumed name of
Shadowlawn Farm.
A certificate of assumed name was filed to that
effect with the Kentucky Secretary of State in November 1981.
In
July 1985, the Raniers filed a statement of withdrawal of an
assumed name with the secretary of state, as Phyllis had
transferred all of her interest in the partnership to Harry.1
Shortly thereafter, Harry filed articles of incorporation of
Shadowlawn Farm, Inc., with the secretary of state.
Phyllis had
no ownership interest in the corporation.
In 1984, prior to the dissolution of the partnership,
Harry purchased mortality insurance on the partnership’s horses
from Kiger.
lapsed.
This policy was renewed in 1985, but subsequently
Harry purchased another policy from Kiger in 1987 which
was renewed on its expiration.
In 1989, the corporation’s horses
were repossessed, after which Harry cancelled all of his
1
This withdrawal of an assumed name form provides that the
general partnership of R & R Enterprises is being withdrawn;
however, this court previously approved the trial court’s finding
that the Shadowlawn Farm partnership ceased to exist on the date
of the filing of the withdrawal of the assumed name form.
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insurance coverage with Kiger.
Prior to that cancellation,
however, Kiger continued to provide policies for Harry despite
the fact that unpaid premiums existed in his account.
In 1991, Kiger filed suit against Harry and Phyllis to
recover its unpaid premiums.
The trial court found that the
partnership ceased to exist in July 1985, meaning that Harry and
Phyllis were liable for insurance premiums owed to Kiger which
were incurred prior to that date.
The trial court further found
Harry to be solely responsible for any premiums owed to Kiger
which were incurred after the partnership’s dissolution.
A
judgment was entered, and both Phyllis and Kiger appealed.
In 1994, this court rendered an opinion holding that
the trial court had correctly found that the partnership had been
dissolved in July 1985 and that Harry and Phyllis were jointly
liable for partnership debts which were incurred prior to that
date.
It is uncontested that the partnership’s debt to Kiger at
the time of dissolution was $45,688.86.
However, noting that
Kiger had maintained Shadowlawn’s account as an open ledger
account and that separate accounts were not created for each
policy, this court agreed with Phyllis that payments on the
account subsequent to the partnership dissolution could be
credited to the partnership debt.
Citing City of Louisa v.
Horton, 263 Ky. 739, 93 S.W.2d 620 (1935), this court stated that
“[i]n the absence of an application by either the debtor or the
creditor, ‘the court will make the application to the payment of
the more [sic] precarious or the older, if both are due.’”
This
court then remanded the case to the trial court to determine if
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payments made on Shadowlawn’s account “after the date of
dissolution exceeded the amount owed by the partnership on the
date of dissolution.”
This court further found that the Raniers had failed to
give Kiger appropriate notice of the dissolution of the
partnership, meaning that Phyllis was also bound by the actions
taken by Harry after she withdrew from the partnership.
Thus,
this court reversed the trial court’s determination that Phyllis
was not liable for post-dissolution debts owed to Kiger.2
However, this court ordered the trial court to make a finding as
to whether Phyllis’s liability for post-dissolution debts owed to
Kiger was limited to partnership assets by virtue of Kentucky
Revised Statute (KRS) 362.320.
In March 1996, the trial court issued a lengthy order
on remand.
It found that Phyllis should not be entitled to
credit for post-dissolution payments made to Kiger by Harry as
“it is plainly unfair for Phyllis to escape payment of her just
partnership debts by applying monies paid by Harry Ranier
individually, and after the date of dissolution of the
partnership.”
The trial court’s order does not contain an
explicit finding as to whether the amount of post-dissolution
payments made to Kiger by Harry exceeded the partnership’s debt
to Kiger at the time of dissolution, although the trial court was
directed to do so by this court’s opinion.
The trial court
further held that, although Phyllis was liable for post-
2
The post-dissolution debts owed by Shadowlawn to Kiger
amounted to approximately $117,000.
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dissolution debts, her obligation for those debts was limited to
partnership assets by virtue of KRS 362.320.
Phyllis filed a motion to alter, amend or vacate the
trial court’s March 1996 order pursuant to Kentucky Rule of Civil
Procedure (CR) 59.
In its order denying Phyllis’s motion, the
trial court stated that it alone had the responsibility to make
findings of fact concerning whether post-dissolution payments
made by Harry should be credited to the partnership’s Kiger debts
or to the corporation’s Kiger debts.
The trial court further
stated that “[t]he Court of Appeals should not expect this Court
to follow its findings of fact whether erroneous or not.”
Citing
Anspacher v. Utterback’s Adm’r, 252 Ky. 666, 68 S.W.2d 15 (1934),
the trial court determined that its refusal to credit postdissolution payments to Phyllis was within its discretion.
Phyllis then filed the direct appeal sub judice in
which she asserts that she was entitled to credit for the postdissolution payments.
Kiger filed the cross-appeal sub judice in
which it argues that the trial court erroneously found that
Phyllis’s liability for post-dissolution debts was limited to
partnership funds.
DIRECT APPEAL
Phyllis’s direct appeal concerns whether she is liable
for the partnership debt to Kiger or whether she should receive
credit for payments made by Harry after the dissolution of the
partnership.
It is uncontested that the partnership debt to
Kiger at the time of dissolution was $45,688.86 and that over
$48,000 in cash was transferred from the partnership’s checking
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account to the corporation upon the dissolution of the
partnership.
Furthermore, it is uncontested that the post-
dissolution payments made to Kiger were in excess of $64,000.3
In the first appeal, this court relied primarily upon the
“doctrine of applied payments” as set forth in Anspacher, supra,
which provides in relevant part as follows:
It is the generally accepted rule that,
where neither the debtor nor the creditor has
applied the payment to either one of two
debts, owing by the first to the latter, and
it becomes necessary for a court of justice
to direct on what debt the payment shall be
applied . . . , the court will make the
application to the payment of the most
precarious or the oldest, if both debts be
due. . . . As a criterion when applying the
doctrine of “applied payments,” the court
should exercise a sound discretion, according
to its notions of justice on equitable
principles, so as to effectuate justice,
according to the extrinsic equity of the
case.
Id. at 252 Ky. 678.
After citing Anspacher, this court rejected
Kiger’s argument that it applied the payments in question to
policies currently in effect rather than past-due premiums on
expired policies and held that “Kiger’s bookmaking procedures
indicate that the opposite was done.”
This court then directed
the trial court to determine whether the payments made on the
3
In this court’s first opinion, we instructed the trial
court “to determine from the evidence whether the credits
received and applied to the account after the date of dissolution
exceeded the amount owed by the partnership on the date of
dissolution.” Although the trial court failed to make this
determination and enter a finding, it appears uncontested that
the post-dissolution payments were in excess of $64,000. In
fact, in pleadings filed before the trial court, Kiger stated
that it “agrees that the payments received and applied to the
account after the date of dissolution exceed the amount owed by
the partnership on the date of dissolution . . . . “
-6-
account after the partnership dissolution exceeded the
partnership debt at the time of dissolution.
On remand, the trial court recognized the applicability
of Anspacher; however, it focused on the language in Anspacher
which allows courts to use their discretion to “effectuate
justice, according to the extrinsic equity of the case.”
Anspacher, supra at 252 Ky. 678. The trial court opined that it
would be unfair to allow Phyllis to obtain a credit for postdissolution payments made by Harry and also opined that Kiger had
construed the payments in question to be made on current
policies.
The law of the case doctrine essentially holds that a
final decision of an appellate court is determinative of an
issue, whether that decision is right or wrong, and a lower court
is bound by the higher court’s decision.
See e.g., Williamson v.
Commonwealth, Ky., 767 S.W.2d 323, 325 (1989); Taylor v. Mills,
Ky., 320 S.W.2d 111, 112 (1958).
On remand, the trial court
specifically held that the payments made by Harry to Kiger
subsequent to the partnership dissolution should not be credited
to the partnership debts.
The trial court further maintained
that Anspacher gave it discretion in determining whether to
credit the subsequent payments to the partnership debts and held
that to do so “would be indeed to punish Kiger for the good deed
of exercising sound business discretion in an attempt to help
Harry Ranier stay afloat in the horse industry.”
While we
understand the trial court’s position, we conclude that the first
opinion of this court directed that the subsequent payments be
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credited to the partnership debts and that that opinion is now
the law of the case.
In short, we reverse and remand with
instructions to the trial court to enter a judgment which
reflects a credit to Phyllis for post-dissolution payments made
on the account.
CROSS-APPEAL
Kiger’s cross-appeal relates to the trial court’s
determination that Phyllis has no liability to Kiger for postdissolution debts.
In the first appeal, this court found that
Harry’s actions bound Phyllis for post-dissolution debts owed to
Kiger by virtue of KRS 362.320(1)4 due to the Raniers’ failure to
give Kiger actual notice of the dissolution of the partnership as
envisioned by KRS 362.160(2).
This court then remanded the case
to the trial court and ordered it to determine whether Phyllis’s
status as a partner in Shadowlawn was known to Kiger when it
extended credit to Harry prior to the dissolution of the
partnership.
4
This court further held that if the trial court
KRS 362.320(1) provides in relevant part that:
(1) After dissolution a partner can bind the
partnership . . .:
. . . .
(b)
By any transaction which would bind the
partnership if dissolution had not taken
place, provided the other party to the
transaction:
(I)
Had extended credit to the partnership
prior to dissolution and had no
knowledge or notice of the dissolution
. . . .
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found that Phyllis’s status as a partner was unknown to Kiger and
that she was so inactive in partnership affairs that the
partnership’s business reputation was not due to her connection
with it, “her liability to Kiger shall be satisfied solely out of
partnership assets.
owed Kiger.”
Otherwise she is liable for the entire debt
See KRS 362.320(2).5
The trial court specifically found that Phyllis met the
requirements of KRS 362.320(2)(a) in that “[t]he evidence is
undisputed that Kiger did not know that Phyllis Ranier was a
partner as such with Harry Ranier when it extended credit on
Shadowlawn Farm’s account.”
It is undisputed that Kiger
representatives testified they were unaware of Phyllis’s
partnership status when they were extending credit to the
partnership, but Kiger argues that it had constructive notice of
her status by virtue of the filing of the certificate of assumed
name.
KRS 362.320(2) makes no mention of constructive notice
being sufficient to constitute knowledge, and Kiger cites no
authority to support its position.
5
The trial court’s finding
KRS 362.320(2) states that
[t]he liability of a partner under paragraph (b)
of subsection (1) shall be satisfied out of
partnership assets alone when such partner had
been prior to dissolution:
(a)
Unknown as a partner to the person with whom
the contract is made; and
(b)
So far unknown and inactive in partnership
affairs that the business reputation of the
partnership could not be said to have been in
any degree due to his connection with it.
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that Kiger had no knowledge of Phyllis’s status as a partner is
not clearly erroneous and will not be set aside. CR 52.01.
The other question to be resolved is whether Phyllis
can meet the requirements of KRS 362.320(2)(b).
Kiger argues
that the testimony at trial was that Phyllis’s status as a
partner in Shadowlawn Farm was “common knowledge.”
There was
evidence, however, that Phyllis was an inactive partner in
Shadowlawn Farm.
The trial court held that “[t]he evidence taken
as a whole indicates that Phyllis Ranier was so far unknown and
inactive in partnership affairs that the business reputation of
the partnership could not be said to have been in any degree due
to her connection with it.”
We determine that the trial court’s
finding in this regard was not clearly erroneous and should not
be set aside.
CR 52.01.
The judgment of the Fayette Circuit Court is affirmed
in part and is reversed in part and remanded for further
proceedings consistent with this opinion.
ALL CONCUR.
BRIEFS FOR APPELLANT/CROSSAPPELLEE:
BRIEFS FOR APPELLEES/CROSSAPPELLANT:
Tom H. Pierce
Amanda Foley Naish
Versailles, KY
Linda Gosnell
Lexington, KY
Charles G. Wylie
Lexington, KY
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