GENE A. DAUER, DONALD H. DUKE, DAUER, DUKE & ASSOCIATES v. CANADA COAL COMPANY, INC.; ROY CANADA, ADMINISTRATOR AND TRUSTEE OF THE ESTATE OF CLAUDE S. CANADA; ROY CANADA, ADMINISTRATOR AND TRUSTEE OF THE ESTATE OF LEONA P. CANADA; and ROBERT H. PAGE AND MARY GREENHALGH, CO-EXECUTORS OF THE ESTATE OF JACK T. PAGE
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RENDERED: May 7, 1999; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO. 1996-CA-003111-MR
GENE A. DAUER, DONALD H. DUKE,
and RICHARD W. CAREY d/b/a
DAUER, DUKE & ASSOCIATES
v.
APPELLANTS
APPEAL FROM PIKE CIRCUIT COURT
HONORABLE EDDY COLEMAN, JUDGE
ACTION NO. 86-CI-00637
CANADA COAL COMPANY, INC.;
ROY CANADA, ADMINISTRATOR AND
TRUSTEE OF THE ESTATE OF CLAUDE
S. CANADA; ROY CANADA, ADMINISTRATOR
AND TRUSTEE OF THE ESTATE OF LEONA P.
CANADA; and ROBERT H. PAGE AND MARY
GREENHALGH, CO-EXECUTORS OF THE ESTATE
OF JACK T. PAGE
APPELLEES
OPINION
AFFIRMING
**
BEFORE:
**
**
**
GUIDUGLI, JOHNSON, and MILLER, Judges.
MILLER, JUDGE: Gene A. Dauer, Donald H. Duke, and Richard W.
Carey d/b/a Dauer, Duke & Associates (appellants) bring this
appeal from a Ky. R. Civ. Proc. (CR) 54.02 order of the Pike
Circuit Court entered October 14, 1996.
We affirm.
In May 1986, appellants commenced this action in the
Pike Circuit Court to secure a commission for their efforts in
attempting to obtain a buyer for Canada Coal Company, Inc.
(Canada Coal).
Appellants alleged that in 1980, after the death
of Claude Canada, they entered into an oral agreement with Leona
Canada--Claude's widow and controlling shareholder of Canada
Coal.
They alleged that the oral agreement directed them to act
as brokers for Canada Coal.
reduced to writing.
Leona died before the agreement was
(Claude's and Leona's estates are sometimes
referred to as “Canada estates”.)
Appellants further alleged
that after Leona's death, Jack T. Page and K.B. Mims promised
them reasonable compensation to secure a buyer for Canada Coal.
In so doing, Page and Mims were allegedly acting as officers and
directors of Canada Coal and as co-executors of Leona's estate.
Page was also allegedly acting as executor and trustee of
Claude's estate.
Additionally, appellants alleged that Page and
Mims, individually and as agents for Canada Coal and Canada
estates, fraudulently induced them to seek a buyer but never
intended to sell Canada Coal because it was so lucrative for
them.
The complaint was summarily dismissed by the circuit
court in October 1987 for the reason that the appellants were not
licensed as either security brokers or real estate brokers.
56.
CR
The summary judgment was reversed and remanded by this Court
in an unpublished opinion (No. 87-CA-2546-MR) rendered October
20, 1989.
Upon remand, a lengthy trial was conducted that
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resulted in a favorable verdict for appellants on both their
breach of contract and fraud claims.
The jury determined that
appellants were entitled to compensatory damages and punitive
damages.1
The matter proceeded on appeal to this Court a second
An opinion rendered September 2, 1994,2 held (1) that the
time.
trial court should have directed a verdict in the defendants'
favor on the contract claim; (2) that the trial court erred in
allowing the jury to assess punitive damages against Canada Coal
and Canada estates as there was no evidence that these defendants
"authorized or ratified or should have anticipated the conduct"
of Page and Mims; (3) that the trial court utilized an
inappropriate measure of damages on the fraud claim; and (4) that
the probative value, if any, of the evidence casting doubt on the
validity of Claude's will and Leona's will was "far outweighed by
the prejudicial nature of the testimony."
This court remanded the matter to the trial court "for
retrial of the fraud claim in conformity with this opinion."
On remand for the second time, the case was docketed
for trial to commence on October 14, 1996.
At the pretrial
conference, the trial court ordered the parties to brief the
issue of Canada Coal's and Canada estates' vicarious liability.
1
The jury returned a joint and several verdict against
Canada Coal, Canada estates, Jack T. Page (Page), and K. B. Mims
(Mims). Mims never perfected an appeal. He is no longer a party
to these proceedings. It appears he is insolvent.
2
Appeal Numbers 92-CA-767-MR, 92-CA-769-MR, and 92-CA-771MR, were consolidated for review. The opinion was designated
"not to be published."
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On the morning the second trial was to start, the trial court
dismissed appellants' claim against Canada Coal and Canada
estates.
CR 56.
It determined that these defendants could not
be vicariously liable for the fraudulent misrepresentation of
their agents as a matter of law because "Page engaged in
fraudulent conduct for his own benefit and not the benefit of his
principals."
Thus, the court held that upon this issue there
existed “no material issue of fact and the Canada Defendants are
entitled to judgment as a matter of law.”3
The trial court made
the order final and appealable pursuant to CR 54.02 and, over the
objections of Page's estate,4 continued the trial pending the
outcome of this appeal.
We initially observe that the Court of Appeals' 1994
opinion reversed and remanded the fraud claim for retrial based
upon inappropriate measure of damages and erroneous admission of
evidence.
Perforce, we are of the opinion that the issue of
fraud, as pertaining to the vicarious liability of Canada Coal
and Canada estates, was to be tried de novo.
Our review shall
proceed accordingly.
The argument that Canada Coal and Canada estates can be
3
We view the trial court's October 14, 1996 Order as Summary
Judgment under Ky. R. Civ. P. 56.
4
Page died on March 4, 1993, while the second appeal was
pending. The action was revived against his estate and the
personal representatives of his estate, the appellees, Robert H.
Page and Mary Greenhalgh.
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held responsible for fraudulent acts of Page is troublesome.5
The essence of appellants' fraud claim is that Page duped them
into seeking a buyer for the coal company, when, in fact, he
never intended that Canada Coal be sold because it would deprive
him of his lucrative position within the business.
Page's
fraudulent conduct would have certainly inured to the detriment
of Canada Coal and of Canada estates.
Considering this set of
facts, we are not convinced that liability can be imposed upon
either Canada Coal or Canada estates.
It may well be that Page
has individual liability for his acts, but such is not an issue
on this appeal.
A principal's liability for his agent's acts is
grounded upon the maxim of respondeat superior.
See Wolford v.
Scott Nickels Bus Company, Ky., 257 S.W.2d 594 (1953).
A
principal is not liable for his agent's tort unless the tort was
committed within the agent's authority.
See Home Insurance
Company v. Cohen, Ky., 357 S.W.2d 674 (1962).
An act is, of
course, within an agent's scope of authority when the act is
naturally incident to the principal's business and does not arise
solely from the agent's personal motive to further his own
interest.
When the agent “steps aside” from the scope of his
principal's business and embarks upon a cause that is not only
for his own benefit but inimical to his principal's interest, his
acts will not bind the principal to a third party.
5
Brooks v.
As Mims is not a party to the present appeal, we shall
review only Page's actions.
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Gray-Von Allmen Sanitary Milk Company, 211 Ky. 462, 277 S.W. 816
(1925).
Based upon the facts as alleged by appellants, we are of
the opinion Page “stepped aside” from the scope of his
employment, thus relieving Canada Coal and Canada estates from
vicarious liability.
Appellants, seemingly aware of the principles of the
law of agency, nevertheless contend that the matter was settled
in the 1994 appeal.
They, of course, cannot claim agency to be
an affirmative defense that must have been asserted under CR 8
and 12.
Rather, they reason that the law-of-the-case doctrine
prevents this Court from considering the issue of agency in this
appeal.
We disagree.
We do not interpret this Court's 1994
opinion as precluding any defenses that Canada Coal or Canada
estates might make to the fraud claim.
We are well aware of the
law-of-the-case doctrine and the proposition that issues raised
in prior proceedings, as well as issues which could have been
raised through reasonable diligence, are not subject to
reconsideration.
See Schrodt's Ex'r v. Schrodt, 189 Ky. 457, 225
S.W. 151 (1920).
We, however, do not believe Canada Coal and
Canada estates--in its previous appeal--could have reasonably
foreseen the necessity of raising the question of Page's
departure from agency.
This Court's 1994 opinion did not
specifically address whether Page acted outside the scope of his
employment with Canada Coal and Canada estates.
Moreover, there
exists a longstanding exception to the law-of-the-case doctrine-a clearly erroneous decision is not conclusive as to the law of
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the case in a subsequent appeal.
See Folger v. Commonwealth,
Department of Highways, Ky., 350 S.W.2d 703 (1961).
The genesis
of this exception is uncontrovertedly rooted in the fundamental
notion that one should not be bound by an erroneous decision or
judgment.
We perceive this exception as logically enveloping
issues (1) which were never ruled upon in a previous appeal and
(2) which, if not considered in a subsequent appeal, would lead
to a clearly erroneous decision.
absurd result.
Any other view would lead to an
There exists no reasonable cause to treat issues
ruled upon by the court differently from those never ruled upon.
Indeed, an argument can be made that the latter issues should be
more freely reviewed in a subsequent appeal.
As failure to
consider Page's agency would lead to a clearly erroneous
decision, we view as applicable the above exception to the lawof-the-case doctrine.
In sum, we are unaware of a rule of law to support a
claim of vicarious liability based upon Page's conduct.
As
Canada Coal and Canada estates are entitled to judgment as a
matter of law, we are of the opinion the trial court correctly
entered partial summary judgment.
See CR 56; Steelvest, Inc. v.
Scansteel Service Center, Inc., Ky., 807 S.W.2d 476 (1991).
The briefs herein contain many extraneous arguments
concerning circuit court orders made in limine pertaining to
evidentiary matters and the like.
We deem those orders
irrelevant to resolution of this appeal.
They were interlocutory
orders not subject to review.
In any event, the
CR 50.01.
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remaining contentions are moot.
For the foregoing reasons, the judgment of the circuit
court is affirmed.
GUIDUGLI, JUDGE, CONCURS.
JOHNSON, JUDGE, DISSENTS BY SEPARATE OPINION.
JOHNSON, JUDGE, DISSENTING.
Respectfully, I dissent.
I have no
quarrel with the majority’s general discussion of the law as it
relates to the doctrine of respondeat superior.
However, I
believe that the appellees have waived any defense predicated on
the nature of the conduct of their agents, Page and Mims, as
being beyond the scope of their authority and agree with the
appellants that the trial court erred in dismissing Canada Coal
and the Canada estates at this juncture in the litigation.
The theory of fraud advanced by the appellants at the
first trial did not change on remand.
The appellees’ liability
for the alleged fraudulent misrepresentations of Page and Mims
was always predicated on a theory of vicarious liability.
Clearly, any defenses that Canada Coal and the Canada estates had
that would relieve them of liability for the alleged fraud of
their agents should have been raised prior to, or during the
first trial, thereby preserving the issues for review in the
prior appeal.
A review of the record, however, clearly
demonstrates that, as “troublesome” as the issue is for the
majority, neither Canada Coal nor the Canada estates sought
relief in the trial court on this basis, nor did either preserve
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the issue for review in any manner prior to the judgment that
resulted in the second appeal.
Both parties failed to move the
trial court for dismissal, or to seek a directed verdict on the
basis that Page and Mims were acting outside the scope of their
authority.
To the contrary, counsel, who represented both the
Canada estates and Page at the first trial, sought a directed
verdict on behalf of Page in his individual capacity and argued
that the evidence established that everything Page did was either
in his capacity as an officer of the corporation, or as executor
of the Canada estates.6
Page’s and the Canada estates’ joint
counsel, as well as counsel for Mims, argued that there was no
evidence that Page and Mims did anything in their individual
capacities that would constitute fraud.
Further, after these
motions were made, counsel for Canada Coal told the trial court
that he desired to adopt all the arguments made by counsel for
Page and Mims.
At trial, there was an obvious attempt to protect
Page and Mims in their individual capacities.
I can only assume
that this trial strategy resulted in a conscious decision on the
part of trial counsel not to argue, as they did after the second
6
Canada Coal and the Canada estates are no longer
represented by the attorneys who represented them during the
first trial. Page was, as stated above, represented at the first
trial in his individual capacity and in his capacity as
administrator and trustee for the Canada estates by the same
attorney. Likewise, Mims was represented at the first trial in
both capacities by a single attorney. After the jury returned a
verdict in favor of the appellants at the first trial, the Canada
estates obtained new and separate counsel to represent them in
the appeal.
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appeal, that Page and Mims were acting outside the scope of their
authority as officers and directors of Canada Coal and as coexecutors of the Canada estates.
Accordingly, I believe the appellants are correct that
this issue is governed by the law-of-the-case doctrine which
provides that a final appellate court decision, “whether right or
wrong, is the law of the case and is conclusive of the questions
therein resolved.
It is binding upon the parties, the trial
court, and the [appellate courts].”
S.W.2d 817, 818 (1961).
Martin v. Frasure, Ky., 352
The doctrine incorporates the doctrine
of res judicata which prevents relitigation of issues that “could
have been introduced in support of the contention of the parties
on the first appeal.”
Hutchings v. Louisville Trust Company,
Ky., 276 S.W.2d 461, 466 (1954).
See also Burkett v. Board of
Education of Pulaski County, Ky. App., 558 S.W.2d 626, 628
(1977).
“[I]ssues which, if sustained, call for dismissal, are
taken as decided and rejected when the case has been reversed and
remanded on the first appeal.”
Board of Trustees of the
University of Kentucky v. Hayse, Ky., 782 S.W.2d 609, 614 (1989).
Further, I fail to see any basis for the majority’s
observation that Canada Coal and the Canada estates could not
“have reasonably foreseen the necessity of raising the question
of Page’s departure from agency in its previous appeal.”
The
failure of Canada Coal and the Canada estates at the first trial
to raise the issue of whether or not they should be vicariously
liable for the misrepresentation of Page and Mims was obviously
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the result of their attorney’s trial strategy, or it could
possibly have been the result of a conflict in interest on the
part of their legal representatives at the first trial.7
In any
event, an examination of the pre-hearing statements filed in the
prior appeal reveals that after the multi-million dollar judgment
was rendered, the appellees finally decided to raise the issue.8
However, as they had not preserved the issue for consideration,
they were denied any relief by this Court on that basis.
The
September 1994 Opinion by this Court specifically states:
7
See note 1 infra.
8
For example, the Canada estates included the following
issue in their pre-hearing statement:
2. Whether, given the evidence presented
by the Appellees at trial concerning the
activities of the former Executors and
Trustees of the estates, Appellants Page and
Mims, the trial court erred in submitting to
the jury any claims against the Estates.
Likewise, in its pre-hearing statement, Canada Coal listed the
following issue:
33. Whether Jury Instruction No. 2 (on
the promissory fraud claim) is so clearly
erroneous and contrary to law as to
constitute reversible error in the grounds
that it directs the jury to find for the
Appellees against the Appellant Canada Coal
Company if it finds that “the Defendants Jack
Page and Bernie Mims”, not the Appellant,
made the intentional misrepresentations set
forth therein, thereby directing the jury to
assess liability against the Appellant for
the intentional torts of others and not on
account of its own actions or
misrepresentations.
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A number of other issues have been raised
by the appellants. Some of these have not
been preserved for our review, while we deem
it unnecessary to consider others which have
been preserved either because the result we
have reached renders them moot, such as the
pre-judgment interest claim, or the alleged
errors are unlikely to recur on retrial.
Thus, contrary to the position of the majority, Canada Coal and
the Canada estates did raise the issue in the prior appeal, and
the issue was rejected by the prior Opinion of this Court due to
lack of preservation.
For this reason, I cannot agree with the
majority’s conclusion that this Court, in its prior Opinion,
contemplated that Canada Coal and the Canada estates would be
entitled to raise issues on remand that they could have, and
should have, raised in the first trial.
Clearly, any absurdity
in requiring the appellees to be liable for their agent’s conduct
is the result of how the appellees practiced the case during the
initial fifteen-day trial, and this Court’s imposition of the
well-settled principle that errors must be preserved in order to
be considered on review.
See Skaggs v. Assad, by and through
Assad, Ky., 712 S.W.2d 947 (1986).
Thus, the trial court had no
more authority to relieve these parties from their failure to
timely raise this issue and properly preserve the issue for this
Court’s consideration in the appeal from the first trial, than
this Court would have in a subsequent appeal.
Commonwealth v.
Schaefer, Ky., 639 S.W.2d 776 (1982).
Finally, I believe the majority has erred in its
reliance on Folger v. Commonwealth, supra, a case in which the
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Court declined to apply the law-of-the-case doctrine after a “reexamination” of its first Opinion “convinced” it that it was
wrong.
Folger “recognize[s] there should be some flexibility in
applying the [law of the case] rule in order for an appellate
court to correct a palpable error in the first opinion.”
Inman
v. Inman, Ky., 648 S.W.2d 847, 852 (1982) (Stephenson,
dissenting).
As our Supreme Court recently reiterated, “[t]here
are few exceptions to the law of the case doctrine.”
Commonwealth, Ky., 975 S.W.2d 901, 904 (1998).
Wilson v.
In my opinion,
the exception to the law of the case doctrine carved out in
Folger is designed to correct errors made by the Court in a
previous appeal, not error or omissions made by the parties or
their attorneys.
It is my belief that this Court’s Opinion of
September 1994 does not contain a palpable error and in fact
would have been erroneous if it had relieved the principals of
liability on remand for grounds that were not timely raised in
the trial court and thus not preserved for appellate review.
See
Kesler v. Shehan, Ky., 934 S.W.2d 254, 256 (1996) (“The Court of
Appeals could not review an issue which was not raised in the
trial court or decided by the trial judge.”).
Accordingly, I would reverse the order of the Pike
Circuit Court and remand for a new trial to include the Canada
estates and Canada Coal as parties.
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEE, CANADA
COAL CO., INC. and ROY CANADA,
ADM’R AND TRUSTEE OF
THE CANADA ESTATES:
Hon. John Burrus
Hon. Stephen M. O’Brien, III
Lexington, KY
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ORAL ARGUMENT FOR APPELLANTS:
Hon. James R. Cox
Louisville, KY
Hon. Stephen M. O’Brien, III
Lexington, KY
Hon. William G. Francis
Prestonsburg, KY
BRIEF FOR APPELLEE, ROBERT H.
PAGE AND MARY GREENHALGH, COEXECUTORS OF THE ESTATE OF
JACK T. PAGE:
Hon. Lawrence R. Webster
Pikeville, KY
ORAL ARGUMENT FOR APPELLEE,
CANADA COAL CO., INC. and ROY
CANADA, ADM’R AND TRUSTEE
OF THE CANADA ESTATES:
Hon. James R. Cox
Louisville, KY
ORAL ARGUMENT FOR APPELLEE,
ROBERT H. PAGE AND MARY
GREENHALGH, CO-EXECUTORS OF
THE ESTATE OF JACK T. PAGE:
Hon. Lawrence R. Webster
Pikeville, KY
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