LEONARD R. JAFFEE v. IVA DAVIS AND CACHE, INC. d/b/a CENTURY 21 GOLD STAR REALTORS
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RENDERED: MAY 2, 2003; 10:00 a.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2001-CA-000817-MR
LEONARD R. JAFFEE
APPELLANT
APPEAL FROM OLDHAM CIRCUIT COURT
HONORABLE DENNIS A. FRITZ, JUDGE
ACTION NO. 97-CI-00236
v.
IVA DAVIS AND CACHE, INC.
d/b/a CENTURY 21 GOLD STAR
REALTORS
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, GUIDUGLI, AND SCHRODER, JUDGES.
SCHRODER, JUDGE.
Appellant, Leonard R. Jaffee (Jaffee), appeals
from an order1 of the Oldham Circuit Court granting summary
judgment in favor of appellees, Iva Davis and Cache, Inc. d/b/a
Century 21 Gold Star Realty (Davis).
1
We affirm.
Jaffee appeals from the individual orders of the circuit court. However, we
conclude that the previous orders are encompassed in the February 21, 2001
order granting summary judgment to Davis.
Jaffee and his wife, Beverly Racine,2 are owners of a
home located at 7412 Shady Creek Lane, Crestwood, Kentucky.
When Jaffee took a teaching position at the University of
Seattle in Tacoma, Washington, the couple decided to lease their
house.
To that end, Jaffee and Racine entered into a management
agreement with Davis on May 3, 1996.
This agreement was drafted
by Jaffee incorporating some terms from a Board of Realtors
form.
Soon after entering into the management agreement, Davis
found a prospect, Brenda Watkins (Watkins), to lease the
premises.
Jaffee claims that he directed Davis to check
Watkins’ employment and to do a financial/credit check to ensure
Watkins could pay the required rent.
Jaffee testified that
Davis confirmed Watkins’ employment at Humana and that Davis
represented that Watkins made enough money to support the lease.
Jaffee also testified that Davis represented that she spoke with
Watkins’ former landlord and was given a positive report.
According to Jaffee’s testimony, he and his wife were aware that
a credit check had not been completed prior to their signing the
lease but they had relied upon the report from the prior
landlord and Davis’ assessment of Watkins’ employment in their
decision to proceed with the lease.
The lease began on June 1,
1996.
2
In the trial court Beverly Racine was also a Plaintiff.
abandoned her claims on appeal.
-2-
However, she has
Eventually Jaffee became unhappy with Davis’
performance and terminated the management agreement by letter on
or about August 20, 1996.
Sometime thereafter Watkins failed to
make timely lease payments and was evicted from the premises.
Jaffee and his wife both testified that upon Watkins’ eviction
they discovered that the property had sustained significant
damage.
Jaffee and Racine filed suit against Watkins in January
of 1997, and were granted a default judgment on August 11, 1997.
Jaffee and Racine initiated a damages claim against Davis and
her Century 21 agency in Oldham Circuit Court on May 27, 1997.
The complaint contained three claims against Davis,
which Jaffee admits are really one – that “Davis bore a
fiduciary duty that she investigate with great care and
diligence any person who sought to lease from Plaintiff, and
such duty made Davis and her firm strictly liable for failing to
investigate Watkins properly and for misrepresenting, to
Plaintiff, Watkins’s [sic] bona fides and qualifications.”
Jaffee prayed for compensatory and punitive damages and attorney
fees.
As elements of compensatory damages Jaffee claimed loss
of professional time, loss of business opportunity, loss of
recreational time, and amounts for emotional distress.
From this point, the procedural history is lengthy and
complicated, spanning four years.
the pertinent proceedings.
-3-
We will attempt to summarize
On September 3, 1998, the circuit court, pursuant to
CR 77.02(2) entered a show cause order as to why the action
should not be dismissed for lack of prosecution, and on
October 15, 1998, the court entered an order dismissing.
Jaffee
subsequently filed a motion to set aside the order dismissing,
claiming that he had not received the notice until October 31,
1998, and that “there had been a great deal of discovery
exchanged between the parties outside the court’s purview.”
The
circuit court set aside the dismissal upon the condition that
the deposition of Iva Davis be taken without undue delay.3
On July 6, 1999, Davis filed a motion for partial
summary judgment on the grounds that Jaffee was not entitled to
recover attorney fees or amounts for loss of business
opportunity or planned recreation as a matter of law.
After a
flurry of motions and delays, the circuit court held a hearing
on the motion on December 10, 1999.
The trial court did not
rule on the motion at the hearing but rather sustained a request
by Davis to reply to the response to the motion.
On January 10,
2000, Davis filed a “Motion to Dismiss or for Summary Judgment
on Count Two and Count Three of the Complaint.”
The basis of
this motion was that the two counts alleged breach of fiduciary
duty and fraud, and that by the terms of the management
agreement, Jaffee had waived those claims.
3
On January 28, 2000,
Although the record reflects that a deposition of Iva Davis was taken, it
was never entered into the record.
-4-
Davis filed an “Amended Notice – Motion - Order” moving the
court to dismiss any claim by Jaffee for emotional distress on
the grounds that “any mental anguish that could have been
suffered by Plaintiffs was not accompanied by physical contact
or injury.”
On March 28, 2000, Davis filed another “Motion to
Dismiss or for Summary Judgment on Counts Two & Three of the
Complaint.”
Before the circuit court ruled on these motions, on
June 7, 2000, Davis filed a “Memorandum in Support of Motion for
Summary Judgment on Count I of the Complaint.”
In support of
the motion, Davis argued Jaffee had not produced some
affirmative evidence that Davis failed to exercise slight care.
Davis also argued that the claim was barred as a matter of law
because of Jaffee’s failure to obtain insurance to protect
Davis, as required by the management agreement.
On June 9,
2000, Davis also filed a motion asking the court to allow her to
file a counterclaim alleging that Jaffee breached the management
agreement by his failure to obtain and maintain the insurance
policy.4
A hearing was held on August 25, 2000.
On August 29,
2000, the circuit court entered “Findings and Order.”
As to
count 1, the court sustained a request by Davis to file a reply
brief to Jaffee’s response to the motion to dismiss count I and
for Jaffee to file a sur reply.
The court withheld rulings
4
This motion was not ruled on. The circuit court indicated that if summary
judgment was granted, there would be no need for the counterclaim.
-5-
pending the filings.
As to counts II and III, the trial court
acknowledged its failure to enter an order granting summary
judgment to Davis.
Finally, on February 6, 2001, the circuit court
entered “Findings and Order/Partial Summary Judgment” as
follows:
2. Summary Judgment Motions: The Court has
previously ruled in regard to several
theories advanced by the Plaintiff that they
are non recoverable under present Kentucky
law. The Court has found that the
Plaintiff’s request for recovery of “loss of
professional time” and “loss of business
opportunity and planned recreation” damages
are not otherwise recoverable.
3. Summary Judgment/Emotional Distress:
The court sustains Defendant’s request for
partial summary judgment as to the exertion
of damages for emotional distress. The
Court finds that the Plaintiff’s request for
emotional distress is not supported by any
accompanying physical contact and/or injury.
The claims for emotional distress under
these circumstances cannot result in a
recovery absent the requisite elements.
4. Gross Negligence: The Court sustains
pending request filed on behalf of the
Defendant through counsel for summary
judgment in regard to Count I. The Court
finds that after extensive discovery the
Plaintiff has failed to advance any
affirmative identifiable evidence of “gross
negligence”. The Court finds that a matter
of law [sic] there is no evidence to show
that the Defendant in this case acted under
the requisite elements necessary to
establish “reckless disregard” to sustain a
theory of gross negligence.
-6-
The circuit court made the additional finding that
“the Plaintiff is an attorney and the document that he relies
upon in advance of his theories of recovery were prepared by him
and set out the requisite standard of gross negligence.”
On
February 21, 2001, the circuit court entered “Corrected Findings
and Order/Summary Judgment.”5
On February 21, 2001, the trial
court entered its final order granting summary judgment on
counts I, II, and III of the complaint.
On March 2, 2001, Jaffee filed a motion to alter,
amend or vacate.
The trial court denied this motion in an order
entered March 15, 2001.
Jaffee filed a timely notice of appeal.
On appeal Jaffee argues that the trial court erred in
1) dismissing counts II and III of the complaint6; 2) dismissing
count I of the complaint7; 3) dismissing the emotional distress
claim; 4) ruling that attorney fees are not recoverable; 5)
ruling that loss of professional time and professional
opportunity are not recoverable; and 6) granting summary
judgment to Davis before discovery was complete.
5
The text of the February 6, 2001, order and the February 21, 2001, order are
identical except for the styling as “partial summary judgment” and “summary
judgment,” which leads us to the conclusion that the trial court realized
that in addressing and granting summary judgment on all three counts, this
was not a partial, but complete summary judgment.
6
Jaffee states in his brief that count II is a claim for “reckless conduct in
. . . breach of fiduciary duty” and count III is a claim for willful
misconduct.
7
Jaffee states in his brief that count I pleads gross negligence, simple
negligence, detrimental reliance, and more.
-7-
When a trial court grants a motion for summary
judgment, the standard of review on appeal is "whether the trial
court correctly found that there were no genuine issues as to
any material fact and that the moving party was entitled to
judgment as a matter of law."
S.W.2d 779, 781 (1996).
Scifres v. Kraft, Ky. App., 916
The trial court must view the evidence
in the light most favorable to the nonmoving party and should
grant summary judgment only if it appears impossible that the
nonmoving party will be able to produce evidence at trial
warranting a judgment in his favor.
Steelvest, Inc. v.
Scansteel Service Center, Inc., Ky., 807 S.W.2d 476, 483 (1991).
The trial court "must examine the evidence, not to decide any
issue of fact, but to discover if a real issue exists." Id. at
480.
Because summary judgment addresses only legal questions
and the existence of disputed material issues of fact, this
court need not defer to the trial court's decision and will
review the issue de novo.
Scifres, 916 S.W.2d at 781.
In support of her motion for summary judgment, Davis
argued that paragraph 4 of the management agreement defined the
standard of care she owed to Jaffee and that any claims of
simple negligence, fraud or willful misconduct were precluded by
the terms of the agreement, in that the agreement waived any
claim but that of gross negligence.
-8-
Jaffee countered that
paragraph 8(b) defined the standard of care as one of
reasonableness.
Paragraph 4 reads as follows:
Owner agrees to hold Agent harmless from any
damages, costs, expenses, claims, or
injuries to person or property by reason of
any cause except Agent’s gross negligence or
wilful [sic] misconduct in, on, or about the
leased premises or elsewhere when Agent is
carrying out this Agreement or acting under
the express or implied directions of Owner.
Paragraph 8 states in pertinent part:
Owner shall pay Agent for Agent’s services
as follows:
(b) For leasing: Agent shall use all
reasonable efforts to keep the premises
rented, and accordingly Agent is authorized
to negotiate rentals for Owner, and all
costs associated with such service shall be
paid by mutual consent from monies supplied
by Owner or from monies obtained from Tenant
according § IV [sic] of the lease.
After a careful review of the management agreement, we
conclude that neither of these sections defines the standard of
care Davis owed to Jaffee.
We first note the well-established rule that a
contract is to be construed more strongly against the preparer.
See Wiggins v. Schubert Realty & Inv. Co., Ky. App., 854 S.W.2d
794, 796 (1993).
While Jaffee points out that part of the
contract was taken from the Board of Realtors form, it is clear
-9-
from his testimony that he primarily drafted the document
because “he did not like” the Board of Realtors form.
Absent an ambiguity in the contract, the parties'
intentions must be discerned from the four corners of the
instrument without resort to extrinsic evidence.
Hoheimer, Ky., 30 S.W.3d 176, 178 (2000).
Hoheimer v.
The primary object in
construing a contract . . . is to effectuate the intentions of
the parties.
Cantrell Supply, Inc. v. Liberty Mut. Ins. Co.,
Ky. App., 94 S.W.3d 381, 384 (2002).
"Any contract or agreement
must be construed as a whole, giving effect to all parts and
every word in it if possible."
705 S.W.2d 916, 919 (1986).
City of Louisa v. Newland, Ky.,
A contract is ambiguous if a
reasonable person would find it susceptible to different or
inconsistent interpretations.
Transport Ins. Co. v. Ford, Ky.
App., 886 S.W.2d 901, 905 (1994).
The fact that one party may
have intended different results, however, is insufficient to
construe a contract at variance with its plain and unambiguous
terms.
Cantrell, 94 S.W.3d at 385.
The interpretation of a
contract, including determining whether a contract is ambiguous,
is a question of law.
First Commonwealth Bank of Prestonsburg
v. West, Ky. App., 55 S.W.3d 829, 835 (2000).
Paragraph 3 of the management agreement reads:
Agent shall be held strictly accountable for
any and all receipts and expenditures
related to management of the lease and
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maintenance of the leased premises but shall
not be liable to Owner for any other matter
except the gross negligence or wilful
misconduct of Agent or Agent’s employees.
(emphasis ours.)
We believe this provision is clear on its face that
Jaffee intended a gross negligence and willful misconduct
standard for “any other matter” except for the accounting for
receipts and expenditures and maintenance of the leased
premises.
Jaffee clearly had in his power to include a standard
of care lesser than that of gross negligence or willful
misconduct but chose not to do so.
He also had the power to
include a provision directly relating to Davis’ duties in
verifying the suitability of tenants and a separate standard of
care to be used as to those duties.
Again, he chose not to do
so, but rather chose the standard of care of gross negligence or
willful misconduct as to “any other matter.”
In granting summary judgment to Davis, the circuit
court obviously accepted Davis’ interpretation of the contract
that Jaffee waived all claims except for those of gross
negligence.
The circuit court did not expressly state upon
which provision of the contract it relied for its determination.
However, we conclude that Paragraph 3 defines Davis’ duty.
Having determined that by the express terms of the
contract the standard of care owed to Jaffee by Davis was one of
gross negligence or willful misconduct, we must next address
-11-
whether this precluded a claim by Jaffee for breach of fiduciary
duty or fraud.
It is our opinion that the contract, by its
terms, does not preclude such claims.
First, Kentucky law is
clear that contractual relations between a real estate broker
and his principal impose an obligation of mutual good faith and
fair dealing.
838 (1932).
Odem Realty Co. v. Dyer, 242 Ky. 58, 45 S.W.2d
This fiduciary duty is imposed by law, not by the
terms of the contract.
Although Davis was acting as a leasing
agent as opposed to a seller of the property, we see no reason
that the same rule should not apply.
Second, by the very terms
of the contract, Davis was liable for willful misconduct.
Willful misconduct is defined as “Conduct which is committed
with an intentional or reckless disregard for the safety of
others or with an intentional disregard of a duty necessary to
the safety of another’s property.”
(6th ed. 1990).
Black’s Law Dictionary 1600
Willful misconduct, by definition, encompasses
fraud and misrepresentation as intentional conduct.
We are of
the opinion that it is illogical to conclude that by setting a
standard of gross negligence, one is consenting to fraud and
misrepresentation.
If, as Jaffee contends, Davis intentionally
disregarded a necessary duty or committed a fraud, which
resulted in damages, Jaffee could maintain a claim against her.
Having determined that Jaffee could maintain claims
against Davis for gross negligence, breach of fiduciary duty,
-12-
fraud or willful misconduct, the issue is really one of whether
Jaffee produced some evidence in the record to support his
claims.
In order for a party to avoid summary judgment, at
least some affirmative evidence demonstrating that there is a
genuine issue of material fact must be produced.
Johnson, Ky., 841 S.W.2d 169, 171 (1992).
Hubble v.
It is our opinion
that summary judgment was proper in the case sub judice in that
there is no evidence in the record to support any of Jaffee’s
claims.
In order to avoid summary judgment on his gross
negligence claim, Jaffee was required to produce evidence of a
conscious and voluntary act or omission likely to result in
grave injury when in the face of clear and present danger of
which Davis was aware.
Sparks v. Re/Max Allstar Realty, Ky.
App., 55 S.W.3d 343, 348 (2000).
In order to maintain a claim
for fraud, Jaffee was required to produce some evidence of a
material representation, falsity, scienter, or recklessness,
intention, reliance, deception, and injury.
State Bank, Ky., 410 S.W.2d 717, 720 (1966).
Scott v. Farmers
Where the proven
facts or circumstances merely show inferences, conjecture, or
suspicion, or such as to leave reasonably prudent minds in
doubt, it must be regarded as a failure of proof to establish
fraud.
Goerter v. Shapiro, 254 Ky. 701, 72 S.W.2d 444 (1934).
To prove willful misconduct, Jaffee was required to present
-13-
evidence that Davis intentionally, or with reckless disregard
for the safety of his property, failed in some duty.
To
maintain a claim for breach of fiduciary duty, Jaffee was
required to produce evidence that Davis failed to disclose some
information known to her.
See Smith v. General Motors Corp.,
Ky. App., 979 S.W.2d 127 (1998).
Jaffee has simply failed to
produce any evidence to support any of these claims.
First, in an effort to explain why there is no
evidence in the record to support his claims, Jaffee contends
that the trial court “sua sponte and autocratically” granted
summary judgment to Davis prior to the completion of discovery.
We find this argument completely without merit.
First, summary
judgment was granted based upon motions by Davis for summary
judgment, not sua sponte, as argued by Jaffee.
hardly argue this was “unfair surprise.”
Jaffee can
Second, this case was
in the circuit court for nearly four years before summary
judgment was granted.
Jaffee’s protestations to the contrary,
the record establishes that the circuit court was extremely
patient, even setting aside its order dismissing and ordering
that Jaffee take the deposition of Davis more than a year after
the Complaint was filed.
Even so, Jaffee failed to file the
deposition.
Jaffee argues that affidavits by Watkins’ previous
landlord and her husband would show that Davis never interviewed
-14-
the prior landlord.
Other than Jaffee’s claims that the
landlord and her husband would support his argument, Jaffee
failed to place any evidence in the record.
He claims that one
of his many previous attorneys lost or misplaced the affidavits.
However, Jaffee failed to produce any evidence that the
affidavits ever existed.
Jaffee testified that Davis told him
she called the previous landlord and spoke with him about
Watkins.
As it turned out, it was his wife that signed the
lease with Watkins.
However, Jaffee offers no evidence that the
husband told Davis he was not the landlord and did not have the
authority to speak as to Watkins’ suitability as a tenant.
On
the contrary, the record reflects that the individual on the
phone stated that he knew of no problems with Watkins.
Even on
appeal, all Jaffee offers is that “suppose” the landlord or her
husband said or did this or that.
Jaffee also contends that Davis failed to properly
check Watkins’ financial credit and resources.
Jaffee’s
testimony was as follows:
I insisted that Iva Davis run a credit check
of Brenda Watkins which included a check of
Watkins’ employment, whether she was
employed where she said, for how long and
whether she made enough money to support the
lease and that she checked Brenda Watkins’
bank account, some statements, the balance
and that she also run a standard credit
check through a credit reporting agency.
-15-
Jaffee testified to a subsequent conversation with
Davis as follows:
Now, about the employment check she said
that Watkins was working, where Watkins said
she was working and that she had been
working there some good time and that she
was earning enough money to support the
lease.
However, when questioned about the credit and other financial
checks, Jaffee admitted that he and his wife knew that Davis had
not completed a financial check on Watkins but chose not to wait
for this information, relying on Davis’ conversation with the
landlord.
Jaffee and his wife, by their own admission, were in
a hurry to enter into the lease and thus relieved Davis of any
further investigation into Watkins’ financial situation.
Jaffee
cannot now argue that he and his wife relied upon any
information regarding Watkins’ financial position.
The record
establishes that Davis verified that Watkins was employed by
Humana.
Jaffee claims that Davis should have recognized that
Watkins’ salary could not support the rent they were asking.
Jaffee presented Humana payroll records to support this claim.
However, even if we believed that these records show Watkins’
salary at the time of lease, which we do not, this is no
indication of what Davis could or should have known from those
records.
Jaffee claims that he spoke to his new leasing agent
about the proper steps to be followed by a leasing agent in
-16-
checking out a potential tenant.
no evidence to that effect.
However, again, he proffered
There is absolutely no evidence in
the record to show that Davis knew or should have known Watkins
was unable to meet the financial obligations of the lease or
would be an unsuitable tenant.
Although there is evidence that
Davis took an application from Watkins, that application is not
in the record, nor is there any evidence to show that Davis
should have been on alert as to Watkins’ financial situation or
that she knew and intentionally withheld that information.
While we sympathize with Jaffee’s plight and acknowledge that
Watkins turned out to be a nightmare tenant, Jaffee has simply
failed to adduce any evidence that would make Davis liable under
any of his proffered theories.
Because Jaffee failed to place any evidence in the
record that Davis was grossly negligent, breached a fiduciary
duty to him, or took any action that could be construed as fraud
or willful misconduct, we are of the opinion that summary
judgment was proper.
Because we conclude that summary judgment was proper
we need not address Jaffee’s claims for amounts for emotional
distress, attorney’s fees or loss of professional time.
ALL CONCUR.
-17-
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Leonard R. Jaffee, pro se
Oak Grove, Oregon
Ilam E. Smith
Louisville, Kentucky
-18-
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