LADD (MICHAEL) VS. PREMIUM HARDWOODS, INC., ET AL.
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RENDERED: MAY 6, 2011; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2010-CA-000875-MR
MICHAEL LADD
v.
APPELLANT
APPEAL FROM CHRISTIAN CIRCUIT COURT
HONORABLE ANDREW SELF, JUDGE
ACTION NO. 08-CI-00074
PREMIUM HARDWOODS, INC.;
JOHN R. FORBES; MARIE M. FORBES;
BUCKEYE ACRES, LLC AND
CHUCK WALLACE
APPELLEES
OPINION
REVERSING AND REMANDING
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BEFORE: COMBS, THOMPSON, AND VANMETER, JUDGES.
THOMPSON, JUDGE: The sole issue presented is whether a settlement
agreement among Premium Hardwoods, Inc., John and Marie Forbes, and Michael
Ladd is enforceable. The trial court found that the agreement was procured by
fraud and, therefore, unenforceable. Because there was no clear and convincing
evidence of fraud, we reverse and remand the case for entry of an order enforcing
the settlement agreement.
The underlying facts are not in dispute. Michael Ladd is a consulting
forester in Madisonville, Kentucky, who was contacted by the Forbeses to provide
forestry consultation and services relating to the sale of timber located on the
Forbeses’ reality. Ladd and the Forbeses entered into a timber and marketing
agreement pursuant to which the Forbeses’ timber was marked, evaluated, and
offered for bid. The terms of the contract included a clause stating that Ladd
agreed to “save harmless, the Client, from any and all liability” as a result of his
activities executed under the contract. Ultimately, Premium Hardwoods was the
highest bidder resulting in a timber sale contract entered into between it and the
Forbeses.
Premium Hardwoods paid the Forbeses the stated purchase price and
began harvesting the timber. In 2007 and during the harvesting process, Premium
Hardwoods was notified by a representative for Buckeye Acres, LLC, an adjoining
landowner, that timber was cut on property owned by Buckeye Acres.1 As a
consequence, on October 22, 2007, Premium Hardwoods sent a letter to the
Forbeses informing them that Buckeye Acres claimed ownership to a number of
trees purchased by Premium Hardwoods pursuant to its contract with the Forbeses.
Buckeye Acres asserted that it did not receive written notice of the pending cutting
and were entitled to treble damages pursuant to KRS 364.130.2 After Premium
1
Buckeye Acres did not acquire the property until 2007. For clarity, we include its predecessor
in title in the references to Buckeye Acres.
2
KRS 364.130 provides:
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Hardwoods and the Forbeses were unable to resolve their dispute, on January 14,
2008, Premium Hardwoods filed an action against the Forbeses for breach of the
timber contract. The Forbeses filed a third-party complaint against Ladd alleging
that the “hold harmless” clause in the timber and marketing agreement precluded
their liability.
Premium Hardwoods, the Forbeses, and Ladd agreed to mediate their
claims. Although Buckeye Acres had not intervened in the action prior to
(1) Except as provided in subsection (2) of this section, any person who cuts or
saws down, or causes to be cut or sawed down with intent to convert to his own
use timber growing upon the land of another without legal right or without color
of title in himself to the timber or to the land upon which the timber was growing
shall pay to the rightful owner of the timber three (3) times the stumpage value of
the timber and shall pay to the rightful owner of the property three (3) times the
cost of any damages to the property as well as any legal costs incurred by the
owner of the timber.
(2) (a) If a defendant can certify that prior to cutting:
1. A signed statement was obtained from the person whom the defendant believed
to be the owner of all trees scheduled to be cut that:
a. All of the trees to be cut were on his property and that none were on the property
of another; and
b. He has given his permission, in writing, for the trees on his property to be cut;
and
2. Either:
a. A written agreement was made with owners of the land adjacent to the cut that
the trees to be cut were not on their property; or
b. Owners of the land adjacent to the cut were notified in writing, delivered by
certified mail, restricted delivery, and return receipt requested, of the pending cut
and they raised no objection,
the court may render a judgment for no more than the reasonable value of the
timber, actual damages caused to the property, and any legal costs incurred by the
owner of the timber.
(b) With respect to subsection (2)(a)2.b. of this section, if no written objection was
received from the persons notified within seven (7) days from the date of signed
receipt of mail, it shall be presumed, for the purposes of setting penalties only,
that the notified owner had no objection to the proposed cut.
(3) This section shall not be construed as repealing any of the provisions of KRS
514.030 of the Kentucky Revised Statutes and any penalties provided by this
chapter shall be considered as additional thereto.
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mediation, counsel for Premium Hardwoods received an email correspondence
from Buckeye Acres’ counsel advising of its claims for trespass and wrongful
cutting of timber and its claim for treble damages. Also prior to mediation and
apparently in response to Buckeye Acres’ possible claim against it, Premium
Hardwoods requested from Ladd copies of the KRS 364.130 notices sent to
adjoining landowners. Ladd complied and provided copies of all notice letters.
A mediation was held on January 26, 2009, that was attended by
representatives of Premium Hardwoods, the Forbeses, Ladd and their respective
legal counsel. Ladd’s counsel filed a mediation settlement outlining the issues,
including copies of the KRS 364.130 notice letters sent to adjoining landowners.
The mediation resulted in a settlement among the parties and a written
settlement agreement was executed by the parties. A mediator’s report was filed
wherein the mediator reported that the parties and counsel attended the mediation,
participated in good faith, and reached a full settlement agreement.
Under the terms of the agreement, the Forbeses agreed to pay
Premium Hardwoods $33,500 and Ladd agreed to pay $20,000. In anticipation of
a possible claim by Buckeye Acres, the agreement also provided that Premium
Hardwoods agreed to indemnify Ladd and the Forbeses from any claims asserted
against them by Buckeye Acres. In accordance with the terms of the agreement,
Ladd’s counsel prepared a settlement agreement and full release. However,
Premium Hardwoods did not execute the agreement after Buckeye Acres filed a
motion to intervene as a third-party plaintiff. Thereafter, Ladd filed a motion to
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enforce the settlement agreement and to dismiss the third-party complaint with
prejudice.
The basis for Premium Hardwood’s refusal to comply with the
parties’ written settlement agreement is Ladd’s counsel’s statement at mediation
that prior to the cutting of the timber, KRS 364.130 notice letters had been sent to
adjoining landowners and the parties’ acknowledgment that treble damages were
not an issue. Premium Hardwoods contends that the statements of Ladd or his
counsel constituted fraud because no notice was actually received by Buckeye
Acres.
Findings of fact will “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.” Kentucky Rules of Civil Procedure (CR) 52.01. In
our review of this case, we adhere to the appropriate standard but are compelled to
reverse the circuit court’s order.
Kentucky recognizes the amicable resolution of disputes and settlement
agreements.
In the administration of justice and the prompt dispatch of business,
courts must and do act upon the statements of counsel and upon the
stipulations of parties to pending causes. Where the parties have
voluntarily entered into a stipulation, which appears fair and
reasonable for the compromise and settlement of the issues of a
pending cause, and where the stipulation is spread upon the record
with the consent and approval of the court, as here, the parties are
bound thereby and the court may, thereafter, properly proceed to
dispose of the case upon the basis of the pleadings, the stipulation and
admitted facts.
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Calloway v. Calloway, 707 S.W.2d 789, 791 (Ky.App. 1986)(quoting Peirick v.
Peirick, 641 S.W.2d 195 (Mo.App. 1982). However, a settlement agreement is
subject to the court’s scrutiny and will not be enforced when procured by fraud or a
material misrepresentation: It is a contract subject to the rules of contract
interpretation. Humana, Inc. v. Blose, 247 S.W.3d 892 (Ky. 2008).
Fraudulent misrepresentation as alleged by Premium Hardwoods requires
proof by clear and convincing evidence of six elements: “(1) that the declarant
made a material misrepresentation to the plaintiff; (2) that this representation was
false; (3) that the declarant knew the representation was false or made it recklessly;
(4) that the declarant induced the plaintiff to act upon the misrepresentation; (5)
that the plaintiff relied upon the misrepresentation; and (6) that the
misrepresentation caused injury to the plaintiff.” Flegles, Inc. v Truserv Corp.,
289 S.W.3d 544, 549 (Ky. 2009).
The plaintiff’s reliance must be reasonable. If the true facts can be readily
ascertained, the plaintiff must use ordinary prudence and care to ascertain those
facts. As stated by past jurists:
The general rule applicable to cases of this kind is that, if no
confidential relations exist between the parties, and if the facts
misrepresented or concealed are not peculiarly within the knowledge
of the party charged, and the other party has available means of
knowing the truth by the exercise of ordinary prudence and
intelligence, and nothing is said or done to prevent inquiry by him, he
must make use of his means of knowledge, or he cannot complain that
he was misled.
Ripy v. Cronan, 131 Ky. 631, 115 S.W. 791, 793 (1909). In the context of a
settlement agreement, the rule is stated as follows:
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Ordinarily the absence of knowledge of a material fact by one of the
parties alone does not afford a ground for the rescission of a
compromise and settlement because the mistake was not mutual. The
law is thus stated in 11 Am.Jur., Compromise and Settlement, Sec. 32:
‘Ignorance of a fact by one party, even though had he known the fact
he would not have entered into the compromise, is not generally
ground for relief, unless it can be shown that the other party had
superior means of ascertaining the facts and concealed the true state of
affairs.
Creson v. Carmody, 310 Ky. 861, 863-864, 222 S.W.2d 935, 936 (1949).
We apply these legal principles to the facts presented.
It is undisputed: (1) that prior to mediation and the settlement agreement,
Premium Hardwoods was provided copies of all notices sent pursuant to KRS
364.130; (2) that prior to mediation, Premium Hardwoods received an email
correspondence from counsel for Buckeye Acres asserting a claim for treble
damages; and (3) that the settlement agreement included a provision that Premium
Hardwoods indemnify the Forbeses and Ladd against any claims by Buckeye
Acres. Thus, Premium Hardwoods was aware that Buckeye Acres was asserting
that it had not received written notice and a claim for treble damages. By simply
reviewing the documents provided by Ladd prior to mediation, Premium
Hardwoods would have discovered whether Buckeye Acres received the statutory
notice. Under the circumstances, we conclude that the evidence is woefully
insufficient to sustain a finding of fraud and, therefore, conclude that the circuit
court’s finding is clearly erroneous.
Based on the foregoing, the order of Christian Circuit Court is reversed and
the case remanded for entry of an order enforcing the settlement agreement.
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ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Robert E. Ison
Hopkinsville, Kentucky
David L. Cotthoff
Hopkinsville, Kentucky
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