EXECUTIVE BRANCH ETHICS COMMISSION v. DON STEPHENS
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RENDERED: JUNE 16, 2000; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1997-CA-002406-MR
EXECUTIVE BRANCH ETHICS COMMISSION
APPELLANT
ON REMAND FROM KENTUCKY SUPREME COURT
ACTION NO. 99-SC-000690
APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE ROGER CRITTENDEN, JUDGE
ACTION NO. 97-CI-00038
v.
DON STEPHENS
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, EMBERTON AND GUIDUGLI, JUDGES.
GUIDUGLI, JUDGE. The Executive Branch Ethics Commission ("the
Ethics Commission") appeals from an order of the Franklin Circuit
Court granting summary judgment in favor of Don Stephens
("Stephens").
The Circuit Court found in relevant part that the
Ethics Commission lacked jurisdiction to maintain an
administrative ethics complaint against Stephens and that
Stephens was immune from the complaint.
We affirm.
Stephens served as Kentucky Commissioner of Insurance
from November, 1992, until December, 1995.
Pursuant to Kentucky
Revised Statute (KRS) 304.33.200(1), Stephens concurrently served
as liquidator of the estate of Kentucky Central Life Insurance
Company ("KCL").
After resigning as Commissioner (and thus
liquidator of KCL), interim Commissioner Suetta Dickinson
proposed that Stephens serve as deputy liquidator of KCL and a
contract was entered into to that effect.
Upon reviewing the
contract, the Franklin Circuit Court approved the appointment.1
Subsequent to this appointment, the Ethics Commission
instituted an administrative action against Stephens alleging
that Stephens had violated KRS 11A.020(1) by a) improperly using
his influence as a public servant to obtain the private position
of deputy liquidator;
b) improperly using his position as
Commissioner to influence the hiring of himself as deputy
liquidator;
c) improperly using his position as Commissioner to
obtain financial gain for himself by having himself appointed as
deputy liquidator;
and, d) improperly using his position as
Commissioner to secure privileges, advantages, and treatment for
himself by requesting that interim Commissioner Suetta Dickinson
appoint him as deputy liquidator and by agreeing to a contract
for services which was more extensive than provided for by
statute in that the appointment as deputy liquidator would
terminate only upon the termination of the liquidation
1
Stephens alleged in his complaint that Joe Hudson, counsel
for the estate of KCL, drafted a proposed contract prior to
Stephens' resignation as commissioner of insurance, and that
Stephens had no discussions with interim commissioner Suetta
Dickinson regarding the proposed appointment. The Ethics
Commission has maintained that Stephens and Dickinson acted in
concert to bring about the appointment.
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proceedings, in the event of Stephen's death or total disability,
or for cause.2
The matter proceeded at the administrative level, where
Stephens filed a motion to dismiss the charges on several grounds
including lack of jurisdiction.
Stephens also argued that the
Kentucky Insurance Code left him immune from said charges.
On
December 10, 1996, a hearing officer denied Stephens' motion.
On January 14, 1997, and during the pendency of the
administrative process, Stephens filed the instant action in
Franklin Circuit Court seeking declaratory and injunctive relief.
He sought to have the administrative complaint dismissed with
prejudice on the grounds that the Ethics Commission acted outside
the scope of its jurisdiction.
Stephens also sought a
declaratory judgment holding that his conduct in accepting the
appointment as deputy liquidator did not run afoul of KRS Chapter
11A; that KCL was not a "person that contracts or does business
with the state" within the meaning of KRS 11A.040; and, that he
was entitled to immunity under KRS 304.33-115.
On January 31, 1997, the Ethics Commission filed a
motion to dismiss Stephens' action.
Two weeks later, Stephens
filed a motion seeking summary judgment.
On May 6, 1997, the Franklin Circuit Court overruled
the Ethics Commission's motion to dismiss and granted Stephens'
motion seeking summary judgment.
In so doing, the court opined
in relevant part that the Ethics Commission was without
2
Though not addressed by the parties, it appears that the
remedy sought by the Ethics Commission would include Stephens'
removal from his position as deputy liquidator.
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jurisdiction to bring charges against Stephens because KRS
304.33-040 vests exclusive jurisdiction in the Franklin Circuit
Court to hear and adjudicate all matters related to insurer
liquidation.
It further found that Stephens acted with immunity,
and that KCL was not a entity doing business with the state as
defined by KRS Chapter 11A.
This appeal followed.
On June 25, 1999, a panel of this Court dismissed the
Ethics Commission's appeal as untimely.
The Kentucky Supreme
Court then granted discretionary review, and thereafter vacated
the order dismissing the appeal in light of CR 73.02(2) and Ready
v. Jamison, Ky., 705 S.W.2d 479 (1986).
We will now address the
Ethics Commission's appeal as originally briefed.
The Ethics Commission now offers several claims of
error.
It maintains that KRS Chapter 13B requires that there be
a final administrative resolution of the charges before
proceeding to Franklin Circuit Court.
It also argues that the
circuit court had no jurisdiction to rule on Stephens' motion for
summary judgment, and in the alternative that summary judgment
was premature because of the existence genuine issues of material
fact.
In response, Stephens maintains that the circuit court
had jurisdiction to decide the legal issues presented in this
case; that when an administrative agency acts without subject
matter jurisdiction, the courts have authority to act without the
exhaustion of administrative remedies; that the code of ethics
does not prohibit a former public servant from serving as an
officer of the court in a judicial proceeding; and, that he is
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entitled to both statutory and common law immunity from the
charges brought by the Ethics Commission.
We have closely studied the record, the law, and the
arguments of counsel, and cannot conclude that the Franklin
Circuit Court committed reversible error in entering summary
judgment in favor of Stephens.
On the question of whether
Stephens was required to exhaust the administrative process
before proceeding in circuit court, we believe that the circuit
court properly found that a claim of improper jurisdiction is
justiciable during the pendency of the administrative process.
See generally, Goodwin v. City of Louisville, Ky., 215 S.W.2d 557
(1948) (stating at p.559 that " . . . direct judicial relief is
held available without exhaustion of administrative remedies
where . . . the complaint raises an issue of jurisdiction as a
mere legal question . . . .").
This concept is related to the
general principle that jurisdictional issues may be raised at any
time, even de novo on appeal.
Commonwealth Health Corporation v.
Croslin, Ky., 920 S.W.2d 46 (1996); Duncan v. O'Nan, Ky., 451
S.W.2d 626 (1970).
Since a finding of proper jurisdiction is a
prerequisite to any judicial or quasi-judicial (i.e.,
administrative) action, we believe that it was proper for the
Franklin Circuit Court to hear the issue prior to the resolution
of the charges against Stephens before the Ethics Commission.
Having determined that it was proper for the circuit
court to address the issue of jurisdiction, the next question is
whether the court reached the proper result.
We believe it did.
As both the circuit court and Stephens have noted, the
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legislature has vested the Franklin Circuit Court with exclusive
jurisdiction in delinquency proceedings.
KRS 304.33-040(3)(a)
provides:
The court shall have exclusive
jurisdiction to entertain, hear, or determine
all matters in any way relating to any
delinquency proceeding under this subtitle,
including, but not limited to, all disputes
involving purported assets of the insurer.
(Emphasis added).
Similarly, KRS 304.33-190(2)provides:
Upon the issuance of an order directing
the commissioner to liquidate a domestic
insurer, the court shall have exclusive
jurisdiction over all matters relating to the
liquidation, including, but not limited to,
the proper scope and application of the
provisions of this subtitle to the
liquidation as well as all interpretation and
enforceability of all contracts of insurance
to which the insurer is a party. (Emphasis
added).
See also, Kentucky Central Life Insurance Company v. Stephens,
Ky., 897 S.W.2d 583 (1995), holding in relevant part that the
circuit court is afforded broad discretion as to supervision of
proceedings under Insurers Rehabilitation and Liquidation Law.
It is worth noting that Stephens' appointment as deputy
liquidator was itself an action of the Franklin Circuit Court,
and Stephens' service in that capacity was service to the court
rather than service to the estate of KCL.
Stephens makes a
compelling argument in this regard in noting that a
receiver/liquidator serves at the pleasure of the court and on
behalf of the court.
S.W.2d 423 (1992);
Rosenbalm v. Commercial Bank, Ky. App., 838
Moren v. Ohio Valley First Marine Insurance
Company's Receiver, Ky., 6 S.W.2d 1091 (1928).
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In seeking to
remove Stephens as deputy liquidator, the Ethics Commission is,
in effect, attempting to overrule the circuit court's appointment
of Stephens.
We believe this course of conduct runs afoul of
both the statutory law and case law.
In sum, we must conclude
that the circuit court's exercise of jurisdiction was proper, and
we find no error in its conclusion that the jurisdiction of the
Franklin Circuit Court on this matter supersedes that of the
Ethics Commission.
The Ethics Commission next argues that if the Franklin
Circuit Court had jurisdiction to rule on the motion for summary
judgment, the motion was improperly granted because there are
unresolved genuine issues of material fact.
In support of this
argument, they maintain that Stephens was a public official
subject to the requirements of KRS Chapter 11A, that KCL was an
entity which did business with the Commonwealth, and that the
immunity provisions of the Insurance Code apply only to acts or
omissions done during the course of the delinquency proceedings.
We are not persuaded by this argument for at least two
reason.
First, we regard the arguments presented by the Ethics
Commission as questions of law rather than issues of fact.
The
interpretation of KRS Chapter 11A and the relevant provisions of
the Insurance Code clearly are issues of law reserved for the
trial court.
More important, it is uncontroverted that the
Ethics Commission did not respond to Stephen's motion for summary
judgment, instead waiting to attack the judgment via a postjudgment motion to vacate, alter, or amend.
When the movant
establishes that there is no genuine issue of material fact and
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that he entitled to a judgment as a matter of law, the burden
shifts to the non-movant to produce evidence of an issue of fact
that would warrant a trial.
See generally, CR 56;
Continental
Casualty Company v. Belnap Hardware & Manufacturing Company, Ky.,
281 S.W.2d 914 (1955).
The burden shifted to The Ethics
Commission, and it did not offer proof of a genuine issue of
material fact.
The record indicates that the Ethics Commission
tendered the administrative record only after entry of the
summary judgment.
This offer of proof was found to be untimely,
and accordingly the summary judgment was properly entered.
For the foregoing reasons, we affirm the summary
judgment of the Franklin Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Donna G. Dutton
Frankfort, KY
Phillip J. Shepherd
Frankfort, KY
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