THE MEDICAL VISION GROUP, P.S.C., AND SHATZIE, L.L.C. V. HON. TIMOTHY N. PHILPOT, JUDGE FAYETTE CIRCUIT COURT AND CHARLENE THERESA DUDEE, ET AL, ()Annotate this Case
RENDERED : AUGUST 21, 2008
TO BE PUBLISHED
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THE MEDICAL VISION GROUP, P.S .C .,
AND SCHATZIE, L .L.C.
ON APPEAL FROM COURT OF APPEALS
CASE NUMBER 2007-CA-001759-OA
FAYETTE CIRCUIT COURT NO. 03-CI-00442
HON . TIMOTHY N. PHILPOT, JUDGE
FAYETTE CIRCUIT COURT
CHARLENE THERESA DUDEE,
JITANDER SINGH DUDEE, AND
JAMES W. GARDNER, IN HIS
CAPACITY AS RECEIVER
(REAL PARTIES IN INTEREST)
OPINION OF THE COURT BY JUSTICE ABRAMSON
DISMISSING AS MOOT
The Medical Vision Group, P .S .C . (MVG), and Schatzie, L .L.C. (Schatzie),
petitioned the Kentucky Court of Appeals for a writ prohibiting Judge Timothy Philpot of
the Fayette Circuit Court from appointing a receiver to oversee both business entities
and from asserting external judicial control over the businesses' accounts and assets.
The Court of Appeals denied the writ, finding that because the businesses are alter-ego
corporations of Dr. Jitander Dudee, the trial court had jurisdiction over MVG's business
assets and could direct that they be used to pay 14. Dudee's personal marital debts .
MVG and Schatzie now appeal to this Court as a matter of right. KY Const.§110(2)(a) ;
CR 76 .36(7)(a). Because the trial court recently dismissed the receiver in this case, the
issue before this Court is now moot and this appeal is thereby dismissed for lack of
The underlying case in this appeal is a dissolution proceeding between Dr.
Jitander Dudee and Ms. Charlene Dudee . Dr. and Ms. Dudee were married on January
11, 1995, and had four children together . At the time of the dissolution, the couple had
a nine-year-old, a seven-year-old, and three-year-old twins. During their marriage, Dr.
Dudee maintained a successful solo ophthalmology practice and owned several realestate properties while Ms. Dudee was the main caretaker of their home and their four
children . Dr. Dudee incorporated his ophthalmology practice as The Medical Vision
Group, P.S .C., (MVG), and created Schatzie, L.L .C ., to be a real estate holding
company.' The couple's net marital estate at the time of the divorce proceeding was
valued at $2,766,076.
On February 13, 2006, the Fayette Circuit Court entered its dissolution decree
dissolving the marriage between Dr. and Ms . Dudee. In making its findings of fact, the
trial court determined that the business entities of both MVG and Schatzie were marital
property and that their net worth should be included in the Dudee marital estate .
Subsequently, the trial court awarded to Dr. Dudee, among other things, MVG, which
was valued at $1,006,000, and Schatzie, which was valued at $810,295 .50. The trial
court ordered Dr. Dudee to pay $3,600 per month to Ms . Dudee in child support and to
'Dr. Dudee is the sole owner of MVG . Dr. and Ms . Dudee are the only shareholders
of Schatzie .
pay a lump sum of $1,299,038 to Ms. Dudee to equalize the division of property
between the parties . Several weeks later, on March 28, 2006, the trial court entered an
order also directing Dr. Dudee to pay $5,600 per month to Ms. Dudee for maintenance
until the lump sum property judgment was paid or until the twins began kindergarten,
whichever occurred first.
In the year following the dissolution decree, Dr. Dudee failed to pay Ms . Dudee
any, part of the outstanding property judgment and eventually, in late February 2007, he
stopped paying M& Dudee's monthly maintenance payments. As a consequence, the
trial court held several hearings to determine whether Dr. Dudee should be held in
contempt of court. At a February 19, 2007 contempt hearing, Dr. Dudee told the trial
court that he did not have the resources to pay Ms. Dudee her property judgment and
stated that if the court doubted his financial hardship, it should appoint a receiver to
audit his businesses . The trial court considered this motion but did not rule on a
receiver at that time . Almost a month later, on March 12, 2007, the trial court concluded
that Dr. Dudee had the ability and resources to pay Ms. Dudee and that he was in
contempt of court for failing to comply with its orders. In its contempt order, the trial
court directed Dr. Dudee to pay Ms. Dudee $15,000 every month toward the
outstanding judgment sentenced Dr. Dudee to serve ninety days in the Fayette County
Detention Center, and permitted Dr. Dudee to participate in work and timesharing
Following the trial court's finding of contempt, on March 21, 2007, Ms. Dudee
filed a motion with the Fayette Circuit Court requesting it to appoint a receiver to operate
MVG and Schatzie . Ms. Dudee stated as grounds for her motion Dr. Dudee's recent
abandonment of his businesses, his refusal to participate in the detention center's work
release program, his remand to the Fayette County Jail for being in contempt of court,
and his continued failure to tender the property judgment payments as previously
ordered by the trial court. On March 23, 2007, the trial court held a hearing to consider
Ms . Dudee's motion for a receiver. Although 14. Dudee stated that he did not believe
the trial court had jurisdiction to appoint a receiver over his separate business entities,
he nonetheless reiterated that he wanted the court to appoint a receiver and would
agree to all aspects of the receivership . Thereafter, on April 2, 2007, the trial court
appointed James Gardner as the receiver for MVG and Schatzie and ordered the
parties to immediately meet with Mr. Gardner in order to determine the parameters of
the receivership .2 Although Dr. and Ms. Dudee originally met and agreed upon the
receiver's role, when it came time to sign the agreed order outlining the receivership, Dr.
Dudee refused to sign the agreement . This led to Ms. Dudee's May 29, 2007 motion
requesting the trial court to define the duties of the receiver for the parties . On June 4,
2007, the trial court responded to Ms. Dudee's motion by authorizing the receiver, Mr.
Gardner, to conduct investigations into the business and accounting practices of both
MVG and Schatzie and to pay Ms. Dudee child support, maintenance, and judgment
amounts as had been previously ordered by the court.
On June 21, 2007, Ms . Dudee filed another motion with the court asking it to
compel Dr. Dudee to make immediate payments, or to permit the receiver to initiate
payments of maintenance, day care costs, the receiver's compensation, and her
previously awarded attorney's fees . The trial court granted Ms. Dudee's motion and on
June 29, 2007, gave Mr. Gardner the authority to take over the business operations of
21n this order, the trial court explained its decision to appoint a receiver by noting that
Ms. Dudee had "filed a Motion for Appointment of a Receiver," and that Dr. Dudee had
"made a similar oral motion before the Court ."
MVG and Schatzie, and from the accounts or assets of those businesses, pay himself,
the day care facility, the past-due maintenance amount, and Ms . Dudee's attorneys
fees. Following this order, on July 10, 2007, Dr. Dudee filed an emergency motion
asking that the court also allow the receiver to pay the necessary and ordinary
expenses of MVG, including but not limited to the business's utilities and staff wages .3
On July 19, 2007, after having considered Dr. Dudee's emergency motion, the
trial court entered an order directing Mr. Gardner to pay the following items from MVG's
accounts in the following order of priority : 1) child support in the amount of $3,600 per
month to Ms. Dudee; 2) maintenance in the amount of $5,600 per month to Ms. Dudee;
and 3) necessary and reasonable expenses of MVG as determined in the receiver's
discretion . Due to this action by the trial court, on August 30, 2007, MVG and Schatzie
filed a writ of prohibition with the Court of Appeals seeking to prevent Judge Philpot
from further imposition of the receivership or any type of external control based on the
marital dissolution action between Dr. Dudee and Ms. Dudee .4 MVG and Schatzie
argued that because they were corporate entities legally separate and distinct from Dr.
3MVG also responded individually to the trial court's June 291" Order. On July 12,
2007, counsel for MVG filed a Notice of Entry of Special and Limited Appearance with
the Fayette Circuit Court, bringing to the court's attention their intention to represent
MVG as a legal entity separate and distinct from Dr. Dudee .
4In addition to the writ filed on August 30, 2007, MVG and Schatzie also filed a
motion for intermediate/emergency relief with the Court of Appeals requesting the same
relief. On September 6, 2007, the Court of Appeals denied this motion, relying on the
fact that MVG had not demonstrated that immediate and irreparable injury would occur
prior to a hearing on the underlying, original writ action. Subsequently, Mr. Gardner
filed with the trial court his third receiver report on September 17, 2007, recommending
that the court consider closing Dr. Dudee's ophthalmology practice and selling the real
estate owned by Schatzie . In response to this report, MVG filed a renewed motion for
intermediate relief with the Court of Appeals, arguing that irreparable injury was now
imminent due to the potential sale of its business . However, on September 25, 2007,
the Court of Appeals found that the receiver's report did not constitute immediate and
irreparable injury to MVG and denied MVG's renewed motion for emergency relief.
Dudee, the trial court had no jurisdiction to interfere with their business assets and no
authority to "pierce the corporate veil" to satisfy Dr. Dudee's personal debts. In
response to this writ, Ms . Dudee argued to the Court of Appeals that the trial court did
have jurisdiction over MVG's assets because of Dr. Dudee's consent to the receivership
and because, in the alternative, these businesses were Dr. Dudee's alter-ego. On
December 3, 2007, the Court of Appeals agreed with Ms. Dudee and found that Judge
Philpot had jurisdiction over the corporate assets because MVG and Schatzie were the
alter-egos of Dr. Dudee. After the Court of Appeals denied the petition, MVG and
Schatzie filed their notice of appeal to this Court on December 26, 2007.
Following the filing of this appeal, the trial court continued to hold hearings in
order to monitor and review the receiver's role, the most recent of which occurred on
March 1, 2008 . During this hearing, Dr. Dudee revealed to the trial court that he was
taking psychiatric medical leave and was either going to wind-down his medical practice
or hold it in abeyance. A few days later, on March 4, 2008, Dr. Dudee informed the trial
court that he would be leaving his practice for at least eight weeks and did not know if
he would return . Due to this change in circumstance, the trial court entered an order on
March 5, 2008, discharging the receiver and relieving him of all responsibilities with
respect to MVG and Schatzie . 5 Thus, at the present time, the receivership of MVG and
5MVG and Schatzie point out in their brief that the trial court entered two orders on
March 5, 2008. In its first order, the trial court directed that it would neither dismiss the
receiver nor require him to remain in the case. Rather, the court ordered the receiver to
provide notice if he intended to withdraw . In that same order, the trial court stated that if
the receiver chose to remain in the case, he would be required to make certain child
support and property division payments to Ms. Dudee, to distribute salaries to the
remaining MVG staff, and to provide health insurance to the current MVG employees .
In its second order, however, the trial court stated that since the receiver had "informed
the Court of his request to withdraw," he was "discharged and relieved of all
responsibilities with respect to Medical Vision Group, PSC and Schatzie, LLC except as
otherwise contained in this Order."
Schatzie has ceased
nd Dr. Dudee is again in sole control of both business entities.
Ms . Dudee argues in her brief that the issue of the appointment of the receiver
has been rendered moot by the trial court's subsequent discharge of Mr. Gardner. In
their reply brief, however, MVG and Schatzie contend that despite the receiver's
dismissal, this Court can still grant meaningful relief because of their interest in setting
aside the Court of Appeals's finding of fact that they are Dr. Dudee's alter-ego. MVG
and Schatzie maintain that this finding has the potential to produce negative
consequences "if third parties are able to make offensive use of that finding through the
doctrine of collateral estoppel or otherwise ." Furthermore, MVG and Schatzie note that
since their petition did not seek relief from a particular order, but rather sought to
prevent any further imposition of a receivership, the trial court's recent dismissal of the
receiver does not hinder this Court's authority to decide the broader issue of whether
the trial court can properly impose external control over their assets to satisfy Dr.
Dudee's marital debts . We agree with Ms . Dudee that any issue relating to the
appointment of a receiver has been rendered moot by the trial court's subsequent
discharge of the receiver in this case.
I . Although MVG's and Schatzie's Claim In This Case Is Moot, The Trial Court
Could Join MVG and Schatzie As Parties To This Case In Order To Enforce Its
The Court of Appeals denied MVG's and Schatzie's writ of prohibition in a foursentence order, finding that since the "petitioners fall under the `alter ego' rule," the trial
court had jurisdiction over the corporations and could appoint a receiver to manage
them . We initially note that even in writ cases originating in the Court of Appeals, an
appellate court is prohibited from infringing on the fact-finding role of the trial court .
Commonwealth v. Deloney, 20 S.W.3d 471, 473-474 (Ky. 2000). Here, the trial court
made no mention of the alter-ego theory in its detailed, forty-page findings of fact and
conclusions of law. Although there is some evidence in the trial court's findings
demonstrating that Dr. Dudee frequently paid personal expenses through his corporate
accounts, the trial court relied on this evidence neither to justify its authority over the
corporations nor to support an alter-ego theory . Rather, the trial court referenced the
testimony involving Dr. Dudee's co-mingling of his corporate assets only in the context
of assigning a monetary value to MVG and Schatzie as part of the marital estate .'
Thus, the Court of Appeals engaged in improper fact-finding when it determined that
MVG and Schatzie were Dr. Dudee's alter-ego .
Turning to the issue of mootness, an appellate court is required to dismiss an
appeal when a change in circumstance renders that court unable to grant meaningful
relief to either party . Brown v. Baumer, 301 Ky. 315, 321, 191 S .W.2d 235, 238 (Ky.
1946). Unless there is "an actual case or controversy," this Court has no jurisdiction to
hear an issue and is prohibited from producing mere advisory opinions . Commonwealth
v. Hughes , 873 S.W.2d 828, 829 (Ky. 1994); Ky. Const. § 110. In this case, because
the trial court has discharged Mr. Gardner as the receiver of MVG and Schatzie, Dr.
Dudee is now in sole control of MVG . With Dr. Dudee again in control of MVG, this
6The record in this case indicates that because both parties originally consented to
the receiver, the trial court was not concerned with articulating a separate jurisdictional
basis for its authority to appoint a receiver .
7After classifying MVG and Schatzie as marital property, the trial court heard expert
testimony regarding each company's monetary value. Both Dr. Dudee's and Ms.
Dudee's experts testified that because personal expenses were often paid through the
business entities, it was difficult to accurately determine their value . Even though the
trial court only used this evidence in calculating the worth of MVG and Schatzie and the
total value of the marital estate, the Court of Appeals used this evidence to base its
finding of alter-ego .
Court would not be able to grant meaningful relief to either party in deciding whether the
trial court did or did not have jurisdiction to appoint a receiver. Granting the writ would
be futile because the receiver no longer exists and the trial court is not imposing any
judicial control over Dr. Dudee's business entities. Similarly, denying the writ would be
meaningless because again, the trial court has already discharged the receiver .
Therefore, the question of whether the trial court had jurisdiction to appoint a receiver to
oversee MVG and Schatzie is moot and this Court does not have jurisdiction to consider
Despite this finding of mootness, we note that there is most likely a continuing
question in this case as to whether the trial court can exercise control over Dr. Dudee's
business entities in order to effectuate the dissolution decree . Because this issue could
arise again in this case, we briefly acknowledge the authority provided to trial courts in
divorce proceedings by KRS 403 .150(6). As this Court recognized in Lewis LP Gas,
Inc. v. Lambert, 113 S .W.3d 171, 173, n .1 (Ky. 2003), overruled on other grounds by
Hoskins v. Maricle, 150 S .W .3d 1 (Ky. 2004), KRS 403.150(6) states that in a
dissolution proceeding, the trial court "may join additional parties proper for the exercise
of its authority to implement this chapter." Given the facts and circumstances of this
case, it would be proper for the trial court to join MVG and Schatzie under KRS
403 .150(6) so that it could ensure that Ms. Dudee receives the property judgment to
which she is entitled .
Two factual elements present in this case entitle the trial court to invoke KRS
8MVG and Schatzie contend that this Court could still grant meaningful relief from
the Court of Appeals' factual finding that they are Dr. Dudee's alter-ego . However, they
cite to no authority supporting their contention that third-party creditors could make
collateral use of the Court of Appeals' finding . Furthermore, since we have found that
the Court of Appeals improperly made this finding of fact, it has no continuing viability.
403 .150(6) and join MVG and Schatzie as additional parties. The first element is Dr.
Dudee's continued failure to abide by the trial court's orders requiring him to pay Ms.
Dudee child support, maintenance, and the $1,299,038 property settlement . As noted,
since the entry of the dissolution decree in February 2006, Dr. Dudee has refused to
pay any amount of the property settlement to Ms. Dudee . Furthermore, Dr. Dudee
stopped paying his monthly maintenance requirements in February 2007, even though
the trial court ultimately held that he had the resources and the ability to make these
payments. The second element is the fact that MVG is solely-owned by Dr. Dudee, and
Schatzie is owned jointly by Dr. Dudee and Ms. Dudee . This is not a case where
innocent third-party shareholders would be harmed if their corporation were joined as a
party to a divorce proceeding . The only owners of the corporations are already parties
to the dissolution action and, moreover, both Dr. Dudee and Ms. Dudee consented to
the trial court's original appointment of the receiver . It was not until the trial court
ordered the receiver to prioritize payments to Ms. Dudee over the regular business
expenses that MVG challenged the court's jurisdiction . Although joining corporations
under KRS 403.150(6) will not be appropriate in every divorce proceeding where
spouses own corporate assets, because of the facts of this case, joining MVG and
Schatzie as additional parties is a proper way, and perhaps the best way, for the trial
court to enforce its dissolution decree.
Since the filing of this appeal, the trial court has dismissed the receiver appointed
to oversee MVG and Schatzie . Because MVG is now under the sole control of Dr.
Dudee and because no receiver exists with regard to either corporation, the issue of
whether the trial court had jurisdiction to appoint a receiver is moot. Even though this
appeal is being dismissed as moot, we acknowledge that in the future, in cases where
one party is consistently noncompliant and the business entities are wholly-owned by
the spouses, trial courts could utilize KRS 403.150(6) to join these business entities as
additional parties in order to enforce the provisions of the dissolution decree . For the
foregoing reasons, this action is dismissed as moot.
Minton, C.J., Cunningham, Noble, Schroder, and Scott, JJ ., concur. Venters, J .,
not sitting .
COUNSEL FOR APPELLANTS:
Trevor Wayne Wells
Miller & Wells, PLLC
300 East Main Street, Suite 360
Lexington, KY 40507
COUNSEL FOR APPELLEE,
HON. TIMOTHY N . PHILPOT, JUDGE,
FAYETTE CIRCUIT COURT:
JudgeTimothy Neil Philpot
Fayette Circuit Court
4837 Bud Lane
Lexington, KY 40513
COUNSEL FOR APPELLEE,
CHARLENE THERESA DUDEE,
REAL PARTY I N INTEREST:
Suzanne Marie Baumgardner
Valerie S . Kershaw
Dawahare & Kershaw, LLP
333 West Vine Street, Suite 1201
Lexington, KY 40507
COUNSEL FOR APPELLEE,
JITANDER SINGH DUDEE,
REAL PARTY IN INTERST:
James Roscoe Stinetorf
Thomas Dulaney Bullock
Harold Lewis Kirtley
Bullock & Coffman, LLP
234 N. Limestone Street
Lexington, KY 40507-1027
COUNSEL FOR APPELLEE,
JAMES W. GARDNER,
IN HIS CAPACITY AS RECEIVER:
James Wilson Gardner
Henry Watz Gardner & Sellars, PSC
401 West Main Street, Suite 314
Lexington, KY 40507