SHIRLEY RISEN v. JAMES MEDICAL EQUIPMENT, LTD.
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RENDERED:
NOVEMBER 9, 2001; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2000-CA-001368-MR
SHIRLEY RISEN
APPELLANT
APPEAL FROM TAYLOR CIRCUIT COURT
HONORABLE DOUGHLAS M. GEORGE, JUDGE
ACTION NO. 96-CI-00129
v.
JAMES MEDICAL EQUIPMENT, LTD.
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
JOHNSON, KNOPF AND MILLER, JUDGES.
JOHNSON, JUDGE:
Shirley Risen has appealed from a final judgment
of the Taylor Circuit Court entered on May 2, 2000, which ruled
that she was not entitled damages on her claims for breach of
contract and constructive discharge.
Having concluded that the
trial court’s findings of fact are supported by substantial
evidence, we affirm.
James Medical Equipment, Ltd. (JME) is a Kentucky
corporation engaged in the business of providing home health care
equipment.
Its founder, Donald James, incorporated the company
in 1990 and actively managed it until 1995.
On June 30, 1992,
Shirley Risen entered into a contractual relationship with JME to
perform accounting services.
Just one year later, Risen signed a
second contract with JME, which superseded the first contract.
The second contract named Risen president of JME.
This
relationship existed until January of 1994, when Risen resigned
her position due to what she claimed to be an intolerable work
environment created by Donald James.
However, apparently
satisfied that work conditions had improved, Risen returned to
her position in March of 1994.
On April 3, 1995, Risen signed
yet a third contract with JME, which named her chief operating
officer.
In a separate contract also dated April 3, 1995, JME
granted Risen the option to purchase the assets of JME.
The
option was never fully exercised.
As Shirley Risen’s influence over JME increased, Donald
James began to relinquish formal control of the company by
setting up an irrevocable trust to receive his ownership
interests.1
Since its inception, the Donald James Irrevocable
Trust has had three different trustees.
The first was Shirley
Risen, who relinquished control to take on a bigger role with the
company, the second was Maria Fernandez, the attorney who
apparently drafted the initial trust agreement, and the third was
Thomas James, the nephew of Donald James.
1
Apparently, Donald James’s ownership interest in JME was
placed in an irrevocable trust to enable him to avoid a conflict
of interest under the Federal Medicare/Medicaid regulations.
-2-
The Donald James Irrevocable Trust had little practical
effect until April 3, 1995, when Donald James transferred his
stock ownership in JME into the trust.
Up to that point, Donald
James had personally retained his stock ownership in JME and had
worked alongside Risen in the day-to-day management of JME.
From
the record, it is clear that during this period of time there was
significant conflict between Risen and Donald James.
Animosity
between the two continued even after Donald James had transferred
his stock interests into the trust and Risen had assumed the
position of chief operating officer.
Risen described the work
environment that Donald James created as “intolerable and
abusive.”
Risen further alleged that “Mr. James belittled [her]
and his conduct often caused [her] to become physically sick.”
Apparently, a major source of the ongoing conflict
between Risen and James involved the payment of notes held by
other corporations under James’s control.
Risen claims that
James ordered that those notes be given priority over all other
claims against JME except taxes and payroll.
Risen argues that
this practice financially strapped the corporation and made it
difficult for JME to continue its daily operations.
Risen
alleges that if the notes went unpaid, James would become
verbally abusive toward her, creating an intolerable work
environment.
By contrast, James claims that the source of tension
between the two developed as a result of Risen’s financial
mismanagement of the company.
James alleges that between June of
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1995 and February of 1996, Risen wrote 128 bad checks on behalf
of JME that were unpaid due to insufficient funds.
James points
out that during roughly the same time period, 66 checks, which
did not bounce, were drawn on the corporation and paid out to
either Risen or her husband.
The antagonistic relationship between Risen and James
continued.
On April 1, 1996, Thomas James, the trustee of the
Donald James Irrevocable Trust, appointed Donald James as
chairman, secretary and treasurer of JME, and directed him “to
immediately assume control of all Corporation business[.]”
Although Risen was explicitly retained as chief operating officer
of JME, Donald James informed her that she would now be directly
accountable to him in his capacity as chairman.
Risen claims
that she eventually found these new working conditions to be
unsatisfactory and, in a letter dated May 14, 1996, informed
Donald James that because she had been forced out of her position
by “intolerable working conditions” she did not intend to return
to work.
On May 2, 1996, JME, through its chairman, Donald
Jones, initiated a lawsuit in the Taylor Circuit Court seeking
injunctive relief against Risen.
The complaint requested access
to JME’s business premises and records, and sought a restraining
order against Risen to prevent the destruction of business
information and records.
After the filing of the initial action,
James has twice amended his complaint.
In its final form, the
complaint sought injunctive relief to enjoin Risen from competing
-4-
with JME, damages for breach of contract, damages for breach of
fiduciary duty, damages for breach of professional duty, damages
for professional negligence, damages for conversion, and damages
for tortious interference with JME’s business relations.
Risen’s husband, Bradley Risen, was added as a defendant.
Shirley
In
Shirley Risen’s counterclaim she requested damages for personal
property expropriated by JME, damages for unsatisfied debts owed
to her and her husband by JME, damages for breach of contract,
and damages for constructive discharge.
Following a bench trial on August 12 and 13, 1999, the
Taylor Circuit Court entered a final judgment on May 2, 2000.
While denying JME relief on the bulk of its claims concerning
Risen’s alleged negligence and mismanagement, the trial court
awarded JME $3,000.00 for equipment that Risen had failed to
return and $1,500.00 for lost profits due to one instance of
Risen’s breaching her covenant not to compete.
As to Risen’s
counterclaims, the judgment awarded $1,000.00 for unpaid
accounting services, $1,000.00 for a computer that she did not
recover from JME, and $2,500.00 for various debts and expenses
owed to Risen’s husband, Bradley.2
The trial court denied Risen
any relief on her main allegations of breach of contract and
constructive discharge.
It was from those denials that Risen
filed this appeal.3
2
Bradley Risen assigned all of his claims to Shirley Risen.
3
Shortly after the judgment had been entered by the Taylor
Circuit Court, Risen filed a motion pursuant to Kentucky Rules of
(continued...)
-5-
On appeal, Risen argues that the denial of her
counterclaims for breach of contract and constructive discharge
was “clearly erroneous and manifestly against the weight of the
evidence.”
In other words, Risen claims that there was not
substantial evidence of record to support the trial court’s
findings of fact that were relied upon in denying her claims.
Since this case was tried before the court without a
jury, its factual findings “shall not be set aside unless clearly
erroneous, and due regard shall be given to the opportunity of
the trial court to judge the credibility of the witnesses.”4
A
factual finding is not clearly erroneous if it is supported by
substantial evidence.5
Substantial evidence is evidence of
3
(...continued)
Civil Procedure (CR) 52.04 to have the trial court make more
specific findings of fact. Before the trial court could rule on
the motion, Risen filed this appeal. The trial court then denied
the motion. JME argues that Risen’s appeal is procedurally
flawed. JME claims “she failed to properly bring the deficient
findings of fact to the Court’s attention and allow the Court
adequate time to respond. Mrs. Risen did not properly preserve
the error because she deprived the Court of its jurisdiction
before it could decide that more specific findings of fact may be
appropriate.” However, in her reply brief, Risen makes it clear
that she is not appealing the denial of her CR 52.04 motion, but
rather she is only appealing the issue of the sufficiency of the
evidence to support the trial court’s findings of fact in the
judgment of May 2, 2000. She states: “When Mrs. Risen filed her
notice of appeal her motion for specific findings of fact became
a nullity and Mrs. Risen is only appealing from the insufficiency
of the evidence that supports the trial court’s ruling that she
is not entitled to be paid under her claim for wrongful discharge
because she was not cooperative with Don James.”
4
CR 52.01. See also Lawson v. Loid, Ky., 896 S.W.2d 1, 3
(1995); and A & A Mechanical, Inc. v. Thermal Equipment Sales,
Inc., Ky.App., 998 S.W.2d 505, 509 (1999)
5
Owens-Corning Fiberglas Corp. v. Golightly, Ky., 976 S.W.2d
(continued...)
-6-
substance and relevant consequence sufficient to induce
conviction in the mind of a reasonable person.6
“It is within
the province of the fact-finder to determine the credibility of
witnesses and the weight to be given the evidence.”7
Thus,
absent clear error, this Court cannot set aside the factual
findings of the trial court.
The legal standard by which Risen must prove
constructive discharge is not so well established.8
Nonetheless,
in Kentucky, as in the majority of jurisdictions, it appears that
the commonly accepted standard for constructive discharge is
“whether, based upon objective criteria, the conditions created
by the employer’s action are so intolerable that a reasonable
person would feel compelled to resign.”9
Thus, in order to
prevail on her constructive discharge claim, Risen was required
to prove by a preponderance of the evidence that the working
conditions at JME were so intolerable that a reasonable person
5
(...continued)
409, 414 (1998); Uninsured Employers’ Fund v. Garland, Ky., 805
S.W.2d 116, 117 (1991); Faulkner Drilling Co., Inc. v. Gross,
Ky.App., 943 S.W.2d 634, 638 (1997).
6
Golightly, 976 S.W.2d at 414; Janakakis-Kostun v.
Janakakis, Ky.App., 6 S.W.3d 843, 852 (1999)(citing Kentucky
State Racing Commission v. Fuller, Ky., 481 S.W.2d 298, 308
(1972)).
7
Garland, 805 S.W.2d at 118.
8
Commonwealth of Kentucky, Tourism Cabinet, Dept. of Parks
v. Stosberg, Ky.App., 948 S.W.2d 425, 427 (1997).
9
Id. (citing Darnell v. Campbell County Fiscal Court, 731
F.Supp. 1309 (E.D.Ky. 1990); and Humana, Inc. v. Fairchild,
Ky.App., 603 S.W.2d 918 (1980)).
-7-
would feel compelled to resign.
The factual finding of whether Risen was constructively
discharged from JME, and thus whether her contract was wrongfully
breached, was a matter squarely within the province of the trial
court.
In its May 2, 2000, judgment, the Taylor Circuit Court
found that “[b]ecause of the non-cooperation between ... Shirley
Risen and Donald James, and because both were at fault, [Risen]
is not entitled to be paid under the contract for her claim of
wrongful discharge [from] the employment contract. [Risen] has
failed to meet her burden of proof on this issue in her
counterclaim.”
In other words, the trial court determined as a
factual matter that based upon objective criteria Risen had
failed to prove that work conditions at JME were so intolerable
as to compel a reasonable person to resign.
Clearly, dramatically conflicting evidence was
presented in this case.
If Risen’s claims of abusive conduct
were believed, it would be reasonable to conclude that Risen was
constructively discharged and her contract breached.
On the
other hand, if James’s claims of financial mismanagement were
believed, one could reasonably conclude that Risen’s actions
deserved appropriate criticism and she was not constructively
discharged.
Our responsibility is not to retry the case from the
record but to review the record to determine whether it contains
substantial evidence to support the trial court’s findings of
fact.
After hearing all of the conflicting testimony and judging
the credibility of the witnesses, the Taylor Circuit Court found
-8-
that both Risen and James were at fault for the state of affairs
giving rise to this litigation.
Since the record contains
substantial evidence of Risen’s continual financial mismanagement
which supports the trial court’s findings that Risen was at least
partially at fault for the problems between her and James; and
accordingly, this factual finding cannot be set aside.
For the foregoing reasons, the judgment of the Taylor
Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
David A. Nunery
Brian E. Bennett
Campbellsville, Kentucky
Melissa M. Bauer
William J. Walsh
Louisville, Kentucky
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