BARONE (FRANK), ET AL. VS. PERKINS (GLEN), ET AL.
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RENDERED: JUNE 20, 2008; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2007-CA-000838-MR
FRANK BARONE AND
CHRISTINE BARONE
v.
APPELLANTS
APPEAL FROM SCOTT CIRCUIT COURT
HONORABLE ROBERT G. JOHNSON, JUDGE
ACTION NO. 06-CI-00767
GLEN PERKINS AND
EDWARD HACKER
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CAPERTON, KELLER, AND WINE, JUDGES.
KELLER, JUDGE: Frank and Christine Barone (the Barones) have appealed from
the Scott Circuit Court’s summary judgment in favor of Glen Perkins and Edward
Hacker, the defendants below, based upon the application of KRS 275.150, which
provides immunity from personal liability for members of a limited liability
company. Having determined that the entry of summary judgment was
appropriate, we affirm.
On December 6, 2006, the Barones filed an unverified complaint
alleging several causes of action against Perkins and Hacker in relation to the
construction of a single-family dwelling located in Georgetown, Kentucky, that
they purchased in February 2005. In the complaint, the Barones alleged that
Perkins and Hacker were members of Glen Perkins Custom Homes, LLC, which
had been administratively dissolved, and that Perkins and Hacker were the builders
of the residence. In that role, Perkins and Hacker oversaw the construction project,
hired subcontractors, and selected all of the materials that were used. The Barones
alleged that Perkins and Hacker breached their implied duty to construct or
remodel the dwelling in a good and workmanlike manner; that their work was in
violation of the Uniform State Building Code; that they breached their duty of
good faith and fair dealing; and that they made fraudulent misrepresentations that
the dwelling was structurally sound.
Perkins and Hacker filed their answer on January 4, 2007, asserting
that they were insulated from liability, that the Barones failed to join a necessary
party, and that they failed to state a cause of action against them for which relief
could be granted. The following month, Perkins and Hacker filed a motion for
summary judgment. In the motion, they asserted that the LLC had been reinstated
retroactively to the date of the administrative dissolution, and that they were
shielded from individual liability based upon their status as members of the LLC.
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Perkins and Hacker also maintained that the actions they took were not as
individuals, but rather were in furtherance of their duties as members of the LLC.
Attached to the motion was Hacker’s affidavit, which detailed the circumstances of
the administrative dissolution and the LLC’s subsequent reinstatement.
As expected, the Barones objected to the motion, arguing that
summary judgment was premature as they had not had the opportunity to complete
any discovery. For this reason, they stated that material issues of fact remained to
be decided, including whether Perkins and Hacker were personally liable for their
actions while employees of the LLC and whether their failure to conform to the
building code was the proximate cause of the damages that were incurred. Nothing
was attached to the Barones’ response. In reply, Perkins and Hacker stated that
they were not employees of the LLC, that they were acting solely as members of
the LLC, that they did not perform any labor or design work for the dwelling, and
that the building passed all inspections. Affidavits from Hacker and Perkins were
attached to support these statements.
The circuit court entered its Findings of Fact, Conclusions of Law and
Summary Judgment on March 26, 2007. After summarizing the relevant facts and
applicable law, the circuit court concluded as follows:
CONCLUSIONS OF LAW
1. That Glen Perkins Custom Homes, LLC has
been duly reinstated as a validly existing limited liability
company which is active and in good standing under the
laws of the Commonwealth of Kentucky and that
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reinstatement has retroactive effect as if the
administrative dissolution had never occurred;
2. That although the summary judgment process
should not be invoked as a substitute for trial, if the
record reveals that no genuine issue of material fact
exists and a party stands entitled to judgment as a matter
of law, summary judgment is proper;
3. That all of the acts of the Defendants that are
complained of herein were taken as either a member of
Glen Perkins Custom Homes, LLC or as a member of a
limited liability company that is a member of Glen
Perkins Custom Homes, LLC and not as individuals and
all of the acts complained of by the Plaintiffs were taken
at a time when Glen Perkins Custom Homes, LLC was
active and in good standing under the laws of the
Commonwealth of Kentucky;
4. That neither of the Defendants performed any
work on the actual construction of the LVL beam in the
home at 114 Kingston Drive, Georgetown, Kentucky,
either as employees of Glen Perkins Custom Homes,
LLC or otherwise;
5. That neither of the Defendants performed any
work on the design of the LVL beam in the home at 114
Kingston Drive, Georgetown, Kentucky, either as
employees of Glen Perkins Custom Homes, LLC or
otherwise;
6. That this Court has no evidence of any building
code violation noticed or cited by the applicable building
inspector;
7. That neither of the Defendants is the person that
violated KRS 198B.130(1) with respect to the alleged
building code violation involving the LVL beam in the
home at 114 Kingston Drive, Georgetown, Kentucky,
and KRS 502.060 has no applicability to the case at bar
to hold the Defendants civilly liable as individuals;
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8. That Plaintiffs will not be able to produce
evidence at trial to show that either of the Defendants
actually performed the work resulting in the alleged
defect and building code violation in the construction of
the home at 114 Kingston Drive, Georgetown, Kentucky;
9. That KRS 275.150(1) insulates members of
limited liability companies from any liability of the
company whether arising in contract, tort or otherwise
and unlike KRS 271B.6-220(2), contains no language
which exempts any acts of the members as individuals;
10. That the Plaintiff’s [sic] claims against the
individual Defendants sound in contract and tort and
therefore, fall within the purview of KRS 275.150(1);
11. That the record reveals no genuine issues of
material fact with respect to the liability of the
Defendants as individuals to the Plaintiffs;
12. That the Plaintiffs have voluntarily failed to
join other proper parties to this litigation;[1] and,
13. That the Defendants stand entitled to judgment
as a matter of law.
This appeal followed.
On appeal, the Barones continue to argue that summary judgment was
prematurely entered, as they had not had the opportunity to conduct any discovery.
In addition, the Barones contend that the circuit court misinterpreted KRS
275.150(1), specifically in concluding that the statute provided an absolute shield
from liability.
STANDARD OF REVIEW
In its Findings of Fact, the circuit court found that the Barones chose not to join as parties the
LLC or any of its independent contractors who worked on the construction of the home.
1
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We shall first set forth the two-part standard of review applicable in
summary judgment appeals, which is well settled in the Commonwealth:
The standard of review on appeal when a trial
court grants a motion for summary judgment 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.” The trial
court must view the evidence in the light most favorable
to the nonmoving party, and summary judgment should
be granted only if it appears impossible that the
nonmoving party will be able to produce evidence at trial
warranting a judgment in his favor. The moving party
bears the initial burden of showing that no genuine issue
of material fact exists, and then the burden shifts to the
party opposing summary judgment to present “at least
some affirmative evidence showing that there is a
genuine issue of material fact for trial.” The trial court
“must examine the evidence, not to decide any issue of
fact, but to discover if a real issue exists.” While the
Court in Steelvest[, Inc. v. Scansteel Service Center, Inc.,
807 S.W.2d 476, 480 (Ky. 1991),] used the word
“impossible” in describing the strict standard for
summary judgment, the Supreme Court later stated that
that word was “used in a practical sense, not in an
absolute sense.” Because summary judgment involves
only legal questions and the existence of any disputed
material issues of fact, an appellate court need not defer
to the trial court’s decision and will review the issue de
novo. (citations in footnotes omitted)
Lewis v. B & R Corporation, 56 S.W.3d 432, 436 (Ky. App. 2001).
ANALYSIS
1. Whether Summary Judgment was Prematurely Entered
“Provided litigants are given an opportunity to present evidence which
reveals the existence of disputed material facts, and upon the trial court’s
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determination that there are no such disputed facts, summary judgment is
appropriate.” Hoke v. Cullinan, 914 S.W.2d 335, 337 (Ky. 1995).
By way of affidavit and supporting documentation attached to the
summary judgment motion and reply, Perkins and Hacker established several
factual bases in support of their argument that summary judgment was appropriate.
However, as pointed out by the circuit court, the Barones did not submit any
evidence by way of affidavit or otherwise to: 1) contradict the sworn statements of
Perkins and Hacker that they were not employed by the LLC, but were members of
it; 2) contradict their sworn statements about representations they made, or did not
make, about the structural integrity of the dwelling; 3) establish the existence of a
building code violation or citation; or 4) establish that Perkins or Hacker
performed any of the work or designed the allegedly defective structure.
Accordingly, the Barones did nothing to contradict the evidence Perkins and
Hacker submitted to support their motion for summary judgment. The Barones
cannot now maintain that material issues of disputed fact exist, when they failed in
their burden to put forth affirmative evidence to combat the evidence submitted by
Perkins and Hacker. Merely stating that disputed facts exist, without including at
least some affirmative evidence to support that statement, is not enough to meet
that burden.
Therefore, we hold that the circuit court did not prematurely enter a
summary judgment and properly held that no disputed issues of fact existed.
2. Interpretation of KRS 275.150
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In KRS 275.150, the Legislature provided for immunity from personal
liability in limited liability companies. KRS 275.150(1) reads, in pertinent part, as
follows:
[N]o member . . . of a limited liability company . . . shall
be personally liable by reason of being a member . . . of
the limited liability company . . . for a debt, obligation, or
liability of the limited liability company, whether arising
in contract, tort, or otherwise. The status of a person as a
member . . . of a limited liability company . . . shall not
subject the person to personal liability for the acts or
omission, including any negligence, wrongful act, or
actionable misconduct, of any other member . . . of the
limited liability company.
The Barones contend that the above statute does not confer absolute
immunity upon members of LLCs for their individual wrongful acts, but speaks
only of liability in terms of the actions of the LLC. Perkins and Hacker, on the
other hand, assert that an LLC cannot act except through its representatives, and
that, based upon the undisputed facts, any acts they took were on behalf of the LLC
and were not tortious.
We agree with Perkins and Hacker that KRS 275.150 acts to shield
them from liability under the circumstances of this case. The Barones did not
submit any affirmative evidence to counter the affidavits attached to Perkins and
Hacker’s pleadings, which they had the opportunity to do when they filed their
response to the summary judgment motion. As the circuit court ultimately found,
neither Perkins nor Hacker engaged in any tortious conduct. Furthermore, at all
times they were acting in their capacities as members of the LLC. We note that the
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Barones did not opt to name the LLC as a defendant or even move to amend their
complaint to name the LLC once its license was reinstated. Because Perkins and
Hacker were acting in their capacities as members of the LLC, they are entitled to
the immunity provided by KRS 275.150.
To briefly address the Barones’ public policy argument, we agree with
Perkins and Hacker that it is the Legislature’s duty to declare public policy:
Clearly the establishment of public policy is not within
the authority of the courts. Section 27 of the Kentucky
Constitution provides that the powers of government be
divided into three distinct units: Executive, Legislative
and Judicial. The establishment of public policy is
granted to the legislature alone. It is beyond the power of
a court to vitiate an act of the legislature on the grounds
that public policy promulgated therein is contrary to what
the court considers to be in the public interest. It is the
prerogative of the legislature to declare that acts
constitute a violation of public policy.
Com., ex rel. Cowan v. Wilkinson, 828 S.W.2d 610, 614 (Ky. 1992). Therefore, we
decline the Barones’ offer to create a public policy exception to the immunity
granted by the legislature to LLCs and their members.
For the foregoing reasons, the summary judgment of the Scott Circuit
Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEES:
R. Grant Stephens
Lexington, Kentucky
Steven F. Vicroy
Lexington, Kentucky
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