Opinion
NO. 2012-CA-002052-MR
10-13-2017
JERRY D. PETERSEN; T.O.; A.C.; AND M.C. APPELLANTS v. DAVID A. BLAKE; FREDA G. BLAKE; AND DERRICK BLAKE APPELLEES
BRIEF FOR APPELLANTS: John H. Ruby Victoria M. O'Grady Michael A. Noll Louisville, Kentucky BRIEF FOR APPELLEES: Natalie R. Lile Frankfort, Kentucky
NOT TO BE PUBLISHED APPEAL FROM HARDIN CIRCUIT COURT
HONORABLE KELLY MARK EASTON, JUDGE
ACTION NO. 11-CI-00889 OPINION
AFFIRMING
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BEFORE: DIXON, JOHNSON, AND MAZE, JUDGES. MAZE, JUDGE: This case arises from a bench trial in the Hardin Circuit Court. The Appellant, Jerry Petersen, was found liable for the balance due on a real estate contract and for damages to a tractor held in bailment. The Appellee, David Blake, was found liable for damages flowing from an armed trespass. Following set-off of Blake's judgment debt, the total judgment against Petersen was $66,912.90.
Petersen alleges three errors of the trial court: (1) the finding that an oral agreement was made for the bailment of the tractor, (2) the omission of a finding that was essential to final judgment of Petersen's intentional infliction of emotional distress claim, and (3) the denial of a new trial based on newly discovered evidence. We affirm the trial court's decisions related to each of the three issues.
I. FACTS AND PROCEDURAL HISTORY
This controversy centers around the sale of twenty-three acres of property in Hardin County in October 2010. After being introduced through a mutual friend, who also acted as the realtor in the transaction, David and Freda Blake sold the land to Petersen through a contract for deed. The property included a pole barn, and a manufactured home that had been severely flood-damaged in May 2010. The contract required Petersen to pay $1,000 per month toward the debt, to pay the property taxes, and to maintain insurance on the improvements. The lien note required a late payment fee of $50 if the payments were made more than ten days after the due date. Under the contract for deed, a payment that was more than thirty days late was a specific default.
Although the written contract required Blake to remove all of his personal property at the time Petersen took possession of the property, Blake left a tractor and its implements on the property. Blake contends that Petersen agreed to allow the tractor to remain on the property until he located an appropriate place to store it. In exchange, Petersen was to have use of the tractor to maintain the property. This alleged oral agreement was witnessed by the realtor who testified so at trial.
Petersen was late in making the first two payments, in December 2010 and January 2011, respectively. When Petersen attempted to make the February 2011 payment after the due date, Blake refused it because it did not include the required late fee. Petersen did not tender any other payment after that time.
Purportedly on the advice of an attorney, Blake believed that the contract for deed left all forms of title to the property vested in himself until Petersen made the final payment, and that the contract only allowed Petersen the option to purchase the property after all payments were made on time. On the other hand, Petersen discontinued making payments, at least in part, because he believed that the Blakes did not have title to the entire property. This belief stemmed from voicemails that Blake left for Petersen. In the voicemails, Blake stated that the Federal Emergency Management Agency (FEMA) had declared the manufactured home destroyed after the earlier flood. Blake stated that FEMA had paid him for the manufactured home, and thus FEMA owned it. In response to this statement, Petersen stopped making insurance payments and taxes because he believed that doing so would amount to fraud. During this action, Blake admitted that he had lied about FEMA owning the manufactured home.
As the trial court recognized, Blake's understanding of the agreement was mistaken. In a contract for deed, equitable title passes to the buyer when the contract is entered, and the seller retains only the bare legal title as security for the payment of the purchase price. Sebastian v. Floyd, 585 S.W.2d 381, 382 (Ky. 1979). In the event of a default, the buyer does not forfeit that interest. Rather, the seller must foreclose on the property. Id.
In February 2011, Blake attempted to retake possession of his tractor. At that meeting, Petersen refused to return the tractor, and Blake refused to accept Petersen's payment without the required late fee. Petersen claimed that there was never an oral agreement regarding the tractor and that the tractor had been abandoned and was now his. Blake made other attempts to take possession of the tractor, including filing a citizen's complaint with the Hardin County Attorney. The county attorney warned Blake not to return to the property during this dispute. Blake eventually repossessed his tractor and its implements while Petersen was not at home and discovered damages to the tractor beyond normal wear and tear.
The Blakes filed this action on April 19, 2011, seeking a judgment on the balance due under the contract and to enforce their lien. Approximately one week later, the property flooded again. Blake testified that he was concerned for the safety of Petersen's children and of the property because the electricity had not been disconnected before the flood waters rose. He called the utility company, but the recipient of the call would not speak to him because Blake's name was not on the account. Consequently, Blake decided that, as a master electrician, he would travel to the property by boat to disconnect it himself.
But despite his professed concerns for Petersen's family, Blake waited until after sunset, and watched the house to make sure no lights came on and that no one was home. Blake also brought his son, Derek, along who was armed with a .410 shotgun. He had also commented to a neighbor that he was going across the water "to beat this man half to death," and that he wanted Derek with him to back him up.
Upon arriving at the utility pole to disconnect the power, Petersen's dogs came out of the house. Derek shot both dogs after one of the dogs allegedly bit Blake. Both dogs lived but required veterinary care. Petersen and his children were home at the time and confronted Blake and Derek after the dogs were shot. Petersen alleges that the gun was pointed at him and the children, but the trial court determined from third-party testimony that the gun was pointed at the ground in a ready position. Over Petersen's objections, Blake proceeded to disconnect the power. In doing so, he damaged the utility company's meter. The utility company eventually replaced the meter without cost to Petersen.
Following this incident, the Blakes filed an amended complaint, alleging that Petersen had damaged the tractor and was improperly harvesting timber from the property. Petersen filed a counterclaim against David and Derek Blake, seeking damages for the trespass and for the injuries to his dogs. Petersen also asserted a claim for intentional infliction of emotional distress (IIED) on behalf of his three children.
In support of this claim, Petersen further alleged that, on March 17, 2012, Blake drove by the home and pointed his finger at each of the children in a mock shooting motion. The youngest child told her teacher about the finger-pointing incident, and the child's fears were allayed by assurances from her teacher and principal. Blake denied any involvement in the incident, stating that he was in another county at the time. A neighbor testified to seeing a white truck driving slowly down the road at the time of the incident. However, he could not identify the model of the truck or how many people were in it.
All three children were taken to the Bingham Clinic for evaluation following the incident. They were examined by a social worker, Lisa Sutton, who diagnosed them with PTSD and an anxiety disorder. However, Sutton did not receive a full disclosure of the all of the children's histories. Sutton was told that the youngest child was emotionally neglected and physically abused until she was eight months old, when Petersen received sole custody.
The matter proceeded to a bench trial in May 2012. The court entered findings of fact, conclusions of law and a judgment August 31, 2012. On the primary claim, the trial court ruled in favor of the Blakes for breach of contract. The court concluded that Petersen had breached the contract by failing to make timely payments, by failing to maintain insurance and pay the property taxes, and by committing waste on the property by improperly cutting timber. The court further found that Petersen was not excused from performance based on Blake's misrepresentations about his ownership of the manufactured home. Consequently, the court held that the Blakes properly accelerated the debt and they were entitled to foreclose on the property.
In addition, the trial court also found that the Blakes had not abandoned the tractor. Rather, the parties had agreed to a bailment of the tractor and its equipment for their mutual benefit. The court found that Petersen had damaged the tractor through inappropriate and rough use, and the Blakes were entitled to repossess the tractor. The court awarded the damages in the amount of $4,250 for damages to the tractor.
Turning to the counterclaims, the trial court found that David and Derek committed an armed trespass during the incident in April 2011. The court awarded Petersen damages for injuries to the dogs and for other damages caused by Blake's improper disconnection of the electricity. The court also assessed $6,000 in punitive damages against the Blakes for this incident. However, the court ruled against Petersen on the children's IIED claims. While the court did not decide whether the finger-pointing incident actually occurred, the court found that Petersen had failed to prove that the children suffered any significant emotional distress as a result of Blake's conduct.
In its judgment, the court awarded the Blakes $70,583.40 as damages for breach of the contract, and $4,250 for damages to the tractor. The court offset Petersen's judgment of $7,920.50 against this amount, for a total judgment in favor of the Blakes in the amount of $66,912.90. The court directed that the property be sold at Master Commissioner's sale to satisfy the judgment.
On September 10, 2012, Petersen filed a motion to alter, amend or vacate the judgment pursuant to CR 59.05. He also filed a motion for a new trial based upon newly-discovered evidence. On the latter motion, Petersen attached a document from the Hardin County Clerk's Office showing that the Blakes surrendered title to the manufactured home in May 2010, one week after it was damaged in the first flood. On October 29, 2012, the trial court denied both motions, specifically concluding that the new evidence could have been discovered in time for trial and would not have compelled a different result. This appeal followed.
Kentucky Rules of Civil Procedure.
Subsequently, the Blakes purchased the property at the Commissioner's sale and obtained possession of the property. Petersen filed for bankruptcy, and this matter was stayed during the pendency of those proceedings. After the bankruptcy stay was released, this appeal was returned to the Court's active docket.
II. ISSUES
Petersen, appealing on behalf of himself and his children, presents three issues on appeal. First, he argues that the trial court erred in finding an oral agreement for a bailment of the tractor. Second, he argues that the trial court erred by omitting an essential finding on the IIED claim. And third, Petersen contends that the trial court erred by denying his motion for a new trial, arguing that the new evidence regarding Blake's title to the manufactured home was directly relevant to his defense of fraud in the inducement. We shall address each argument in turn.
A. Bailment of the tractor.
Petersen notes that the contract for deed expressly provided that "Seller shall leave the property free of trash, debris, and personal property and shall leave the premises 'broom clean.'" The contract also contained a merger clause, specifying that "all terms and conditions pertinent hereto are included in this writing, and no verbal agreements or understandings of any kind shall be binding upon the parties." Based on these clauses, Petersen argues that the trial court clearly erred by considering parol evidence to establish that the parties had an enforceable oral agreement for a bailment of the tractor.
The trial court's finding of fact regarding the existence of an oral agreement will not be disturbed unless it is clearly erroneous. A trial court's finding of fact is not clearly erroneous if it is supported by substantial evidence. Hunter v. Hunter, 127 S.W.3d 656, 659 (Ky. App. 2003). However, the interpretation of a contract is a matter of law subject to de novo review. Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 105 (Ky. 2003). The admission of parol evidence is also subject to de novo review. Radioshack Corp. v. ComSmart, Inc., 222 S.W.3d 256, 260 (Ky. App. 2007).
As Petersen correctly points out, parol evidence is not admissible to vary the terms of a writing. Id. However, where a contract is ambiguous or silent on a vital matter, a court may consider parol and extrinsic evidence involving the circumstances surrounding execution of the contract, the subject matter of the contract, the objects to be accomplished, and the conduct of the parties. Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. App. 2002). In this case, the trial court concluded that the oral agreement related to a specific piece of personal property, and was thus not subject to the contract's terms.
We agree. A contract must be interpreted as a whole with no one part read in isolation. Id. at 384-85. The subject of this contract involved the sale of the real property its attachments. While the contract required Blake to remove any "personal property," we agree with the trial court that the use of this term does not necessarily exclude any other agreements that the parties may have regarding specific items of personal property.
Under these circumstances, the trial court properly considered parol evidence to determine the existence of an oral agreement regarding the tractor. We also conclude that the trial court's factual findings on the issues of abandonment and the existence of an oral agreement for a bailment of the tractor were supported by substantial evidence. The elements of abandonment are a voluntary relinquishment of possession and an intent to repudiate ownership. Ellis v. McCormack, 218 S.W.2d 391, 392 (Ky. 1949). Various witnesses testified that the value of the tractor and its implements were somewhere between $10,000 and $15,000. The value of the tractor alone is substantial evidence that Blake did not intend to abandon the tractor.
Similarly, there was substantial evidence to support the trial court's finding that the parties had an oral agreement for a bailment of the tractor. Blake testified that Petersen agreed to allow the tractor to remain on the property until he could find a place to store it. In exchange, Petersen would enjoy use of the tractor to maintain the property until Blake removed it. There was third-party testimony to corroborate the existence of an oral agreement. As the trial court recognized, these facts would be sufficient to create a bailment. See Jones v. Hanna, 814 S.W.2d 287, 289 (Ky. App. 1991), citing 8 Am. Jur. Bailments § 2 and Commonwealth v. Polk, 256 Ky. 100, 75 S.W.2d 761 (1934).
In contrast, Petersen offered no evidence, other than his own testimony, to support his claim that Blake abandoned the tractor. As a finding of fact, the parties' intent to orally agree to the bailment is not clearly erroneous. Since a bailment existed, Petersen had an obligation to exercise ordinary care and diligence in safeguarding the property, and is liable for any damage to the property resulting from his failure to do so. Monarch Warehouse Co. v. Major Breckinridge Corp., 518 S.W.2d 779, 781 (Ky. 1975), citing Webb v. McDaniels, 305 Ky. 739, 205 S.W.2d 511 (1947). Petersen does not dispute the trial court's finding that he damaged the tractor through rough and inappropriate use, nor does he dispute the trial court's calculation of the amount of damages. Therefore, we find no basis to disturb the court's judgment on this point.
In so holding, however, we do not excuse Blake's decision to trespass on the property several additional times to take possession of the tractor and its implements on his own initiative.
B. IIED claim.
Petersen next alleges that the trial court failed to consider the events of the night of the armed trespass as part of his claim for IIED on behalf of the children. The trial court's findings only addressed the finger-pointing incident, and did not address the emotional distress the children suffered as a result of Blake's armed trespass and shooting of the dogs. Furthermore, Petersen specifically requested additional findings on this issue in his post-judgment motion, but the trial court did not make any findings on the question. Petersen argues that the trial court's omission of an essential finding on this issue requires reversal of its decision on the IIED claim.
A claim of IIED consists of four elements: intent, outrageousness, causation, and severity. Childers v. Geile, 367 S.W.3d 576, 579 (Ky. 2012). All four elements must be met for the claim to succeed. Id. Consequently, if one element is not met, the claim fails. Petersen stresses that the trial court made no finding as to any of these elements with respect to Blake's conduct during the armed trespass. CR 52.01 requires a finding of fact to be made whenever a trial is conducted without a jury. However, there is compliance with the rule if the court's opinion shows an understanding of all of the evidence, a resolution of the material issues of fact that penetrate beneath the generality of ultimate conclusions, and an application of the law to those facts. Shepherd v. Shepherd, 295 S.W.2d 557, 558 (Ky. 1956).
Here, the trial court thoroughly addressed the conduct of David and Derek Blake in its analysis of Petersen's claim arising from the armed trespass. The court found that they intentionally trespassed on the property after being advised by the county attorney not to go onto the property. The court further found that they intended to shoot the dogs if they approached. And there was evidence that Blake intended to assault Petersen if he found him there. On the other hand, there was no evidence that either Petersen or his children witnessed the dogs being shot. Furthermore, the trial court specifically found that the gun was never pointed directly at Petersen or the children.
Clearly, there was evidence that the children could have suffered an emotional injury from Blake's conduct. Damages for emotional distress may be proven by either direct or circumstantial evidence. However, the proof must be clear and satisfactory; and evidence based on conjecture will not support a recovery for such damages. See Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437, 454 (Ky. 1999), modified on other grounds in Hollaway v. Direct Gen. Ins. Co. of Mississippi, Inc., 497 S.W.3d 733 (Ky. 2016). Although the trial court only addressed the finger-pointing incident, the court found that Petersen failed to establish that the children suffered severe emotional distress as a result of Blake's conduct.
Petersen relied entirely on the Sutton's testimony to establish the children's emotional distress. While the court found that Sutton was qualified to express an opinion, she admitted that her interactions with the children were limited to three or four hours each. More importantly, Sutton stated that she was only informed of the events from April 2011 through May 2012, and to a select few details of the children's lives prior to April 2011. Sutton further admitted that she could not rule out prior events contributing to the children's diagnoses. By implication, Sutton's failure to establish causation covers all events from the armed trespass in April 2011 to the time of trial. Therefore, the trial court did not clearly err in finding that Petersen failed to establish an essential element of the children's IIED claim.
C. Denial of motion for a new trial.
Finally, Petersen argues that the trial court erred by denying his motion for a new trial based on newly discovered evidence that the Blakes did not have title to the manufactured home at the time they executed the contract for deed and lien instrument. CR 59.01(g) provides that a new trial may be granted based upon "[n]ewly discovered evidence, material for the party applying, which he could not, with reasonable diligence, have discovered and produced at trial." Petersen claims that the evidence regarding the defective title was material to his defense of fraud in the inducement, and would have significantly affected the credibility of Blake's testimony.
The correspondence which Petersen introduced after trial shows that the Blakes were reimbursed by their insurance company following the May 2010 flood. KRS 186A.295 requires that title be surrendered anytime a manufactured home is found to be destroyed such that its repair cannot be obtained through usual commercial repair services at a cost less than its retail value. The additional documentation establishes the Blakes surrendered the title shortly thereafter.
Kentucky Revised Statutes. --------
However, the trial court found that the parties clearly intended to transfer both the land and the manufactured home. Petersen was aware of the condition of the manufactured home when he bought the property, and the surrendered title was a matter of public record. Although the Blakes' failure to disclose that they had surrendered the title may have been grounds for a separate claim, Petersen makes no argument why it would have excused his further performance under the contract for deed and lien instrument. And, as the trial court noted, Petersen never lost possession of the manufactured home due to the defective title.
Moreover, Petersen makes no effort to show that he exercised due diligence to discover this evidence prior to trial. See Meeks v. Ellis, 7 S.W.3d 391, 393 (Ky. App. 1999). Petersen focuses on Blake's initial falsehoods about the title, as well as his refusal to provide the information during discovery. But at the time of the sale, the title insurance company told Petersen that the policy only covered the title to the real property and not the manufactured home. Blake's conflicting representations gave Petersen further cause to inquire about the title to the manufactured home. Furthermore, the surrendered title was a matter of public record. In the absence of a showing that Petersen exercised due diligence to discover this evidence prior to trial, the trial court did not clearly err or abuse its discretion in denying Petersen's motion for a new trial. See Jefferson v. Eggemeyer, 516 S.W.3d 325, 337 (Ky. 2017).
III. CONCLUSION
Based on the foregoing, we find no error as to any of the three issues raised on appeal. First, the trial court properly found that an oral agreement for a bailment of the tractor was not prohibited by the parties' written contract. There was substantial evidence to support both the existence of a bailment and damages arising from Petersen's improper use of the tractor. Second, we find no error in the trial court's implied finding that Petersen failed to establish that the children suffered emotional distress caused by Blake's conduct. And third, we agree with the trial court that Petersen failed to exercise due diligence to obtain the newly discovered evidence.
Accordingly, we affirm the judgment of the Hardin Circuit Court.
ALL CONCUR. BRIEF FOR APPELLANTS: John H. Ruby
Victoria M. O'Grady
Michael A. Noll
Louisville, Kentucky BRIEF FOR APPELLEES: Natalie R. Lile
Frankfort, Kentucky