Opinion
NO. 2011-CA-001499-MR
01-17-2014
JULIANNE MAY YOUNG AND MENEESE WALL APPELLANTS v. LOU MAY RICHARDSON; CHARLES M. ORR; CHRISTIE L. ORR; CLAYTON P. ORR; PHIL M. ORR, JR.; PHIL M. ORR, JR. AS INDEPENDENT EXECUTOR OF THE ESTATE OF MARTIELE ORR; PHIL M. ORR, JR. AS TRUSTEE OF THE ORR FAMILY TRUST; AND BUENA VISTA, LLC. APPELLEES
BRIEFS FOR APPELLANTS: Julianne May Young, Pro Se Bryan, Texas BRIEF FOR APPELLEES: D. Kevin Ryan Louisville, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM MARION CIRCUIT COURT
HONORABLE ALLAN RAY BERTRAM, JUDGE
ACTION NO. 07-CI-00147
OPINION
AFFIRMING
BEFORE: CAPERTON, MAZE, AND VANMETER, JUDGES. CAPERTON, JUDGE: The Appellants, Julia May Young and Meneese Wall, appeal the April 6, 2011, order and judgment of the Marion Circuit Court issued following the renewed application of Appellees Lou May Richardson; Christie L. Orr; Clayton P. Orr; Charles M. Orr; Phil M. Orr, Jr., individually, and as independent executor of the estate of Martiele Orr, and as trustee of the Orr Family Trust; and Buena Vista, LLC (hereinafter "Appellees") to confirm the second through twenty-eighth arbitration orders and an award issued in four different cases involving the estates and trusts of Julia C. May and Sam C. May. Upon review of the record, the arguments of the parties, and the applicable law, we affirm.
The Mays were husband and wife, and the parents of Young and Richardson. The Mays' third daughter, Martiele May Orr, died in April of 2000, and was survived by her husband, Phil M. Orr (one of the Appellees herein), and their four children, Charles Orr, Christie Orr, Clayton Orr, and Appellant Wall. Julia May died on March 28, 1998, and Sam May died on November 8, 2005.
In 1991, Sam and Julia May each created revocable living (inter vivos) trusts with provisions which were essentially identical. Although revocable and amendable by the settlor, amendments effecting the powers and duties of the trustee(s) had to be approved in writing by the trustee(s). Each trust provided for two separate funds. Fund A was what is commonly known as a "marital trust" for the benefit of the surviving spouse during his or her lifetime. Fund B was a "credit shelter trust," which was intended to contain a sum equal to the largest amount that could pass free of federal estate tax by reason of the unified credit, subject to certain adjustments.
When the marital trusts were created, Sam and Julia May were identified as the trustees of their respective trusts. Thus, Sam May was the initial trustee of his trust, and Julia May was the trustee of her trust. The trusts provided that upon the death of the trustee, the surviving spouse would become the successor trustee. The Mays' three daughters, Lou Richardson, Julianne Young, and Martiele Orr, were appointed as successor trustees in the event of their parents' inability or desire not to act as trustee.
The beneficiary of Fund A was the surviving spouse during his or her lifetime, with the power to consume both the income and the principal. The surviving spouse also had a power of appointment that permitted him or her to transfer any or all assets of Fund A to anyone, including his or her estate. Upon the death of the surviving spouse, the trust properties (A and B) passed to the three daughters, per capita, or to their heirs, per stirpes. One half of each beneficiary's share was to be distributed in fee and the other half remained in trust, with income benefits payable quarterly, and with the power to consume the principal for the health or education of said children or their children per stirpes, upon the death of the settlors' children.
Following the creation of the May trusts, the following events occurred:
(1) On November 30, 1993, Sam and Julia May each amended their respective trusts to provide that if their three daughters were called upon to act as their successor co-trustees, approval of two of the three of them was required for the successor co-trustees to act on any matter;
(2) On December 29-30, 1994, Sam and Julia May each amended their respective trusts so as to name their three daughters, rather than each other, as their immediate successor co-trustees. In the same instruments, Sam and Julia May resigned as trustees of their respective trusts. Although these amendments were signed by both Martiele Orr and Lou Richardson, Julianne Young did not sign either amendment;
(3) On March 9, 1995, Sam and Julia May amended their respective trusts again, once again noting their resignation and naming their three daughters as their immediate successor co-trustees. The effect of this amendment was to delete the requirement of the November 30, 1993 amendment that allowed two of the three co-trustees to act, thereby requiring the consent of all three trustees in order to exercise a power. Julianne Young agreed to this March 1995 amendment, and agreed to serve as a trustee. However, Martiele Orr and Lou Richardson never signed the March 1995 amendment. Thereafter, none of the daughters exercised any control over the trusts, or the assets of the trusts.
(4) Julia May died on March 24, 1998, and Sam May became the executor of her estate.
(5) In September of 1998, Sam May signed a disclaimer of all his rights to Julia May's Trust Fund A, and disclaimed his general power of appointment. Said disclaimer was filed with the probate court. Within two weeks thereafter, Sam May and his counsel decided that the first disclaimer contained fundamental errors which essentially defeated the entire intent of Sam and Julia Mays' estate planning efforts. As a result, Sam May executed a second
disclaimer on October 9, 1998. The second disclaimer differed from the first in that Sam May did not "specifically disclaim either the remaining principal of Fund A of the Julia C. May Trust or his general power to appoint any assets of Fund A remaining at his death." This second disclaimer was filed in the probate court on October 13, 1998.
(6) Subsequently, on October 27, 1999, Sam May created a limited liability company, Buena Vista, LLC. The operating agreement of that company, which was executed on the day that the company was formed, identified Sam May as the sole member, and named Martiele Orr and Lou Richardson as the managers. Two days later, on October 29, 1999, pursuant to a power of appointment, Sam May transferred the assets within the Julia C. May Trust, and particularly an Advest brokerage account which was in Fund A of the Julia C. May Trust, to Buena Vista, LLC. On that same day, Sam May also transferred title to two farms which were held in the Sam C. May Trust to Buena Vista, LLC. Five days later, on November 4, 1999, Sam May transferred his entire interest in Buena Vista, LLC, to his three daughters in equal shares.
(7) Martiele Orr passed away in April 2000, and Phil Orr was appointed as her executor. Sam May's health also began to fail, and on October 26, 2001, Phil S. George, Jr. was appointed as Sam May's conservator.
(8) Two months later, in December 2001, Julia Young attempted to act as a trustee with respect to her parents' assets, specifically attempting to get the Advest accounts transferred to her mother's trust. Those efforts caused Phillip Orr and Lou Richardson to file a declaratory judgment action against Julie Young, and Buena Vista, LLC was joined as a third-party defendant. At issue in that matter was whether or not Sam May had the right to direct the transfer of assets from Fund A of the Julia C. May Trust by power of appointment to Buena Vista, LLC, which he did as trustee of the Julia C. May Trust on October 30, 1999, and whether he was the trustee of the Sam C.
May Trust when he executed the deed conveying real property to Buena Vista, LLC on October 29, 1999.
(9) Richardson then filed an action with the Marion Circuit Court, styled Richardson, et. al. v. Young, et. al., Civil Action No. 02-CI-00057, on March 1, 2002.[] Richardson filed that action in an attempt to validate the transfer of assets from the Mays' trusts to the LLC, to the 1994 and 1995 Trust Amendments and trustee resignations "ineffectual", and requesting that Richardson be appointed the sole trustee of the Sam C. May Trust. Young counterclaimed and filed a third-party action against the LLC, requesting a declaration that the transfers from the two trusts to the LLC were void, and that Young and Richardson were co-trustees of the Mays' trusts pursuant to the 1994 and 1995 amendments.[] In that claim, Young filed a motion for partial summary judgment based upon her declaratory claims, which was granted in her favor on April 11, 2003. In granting the partial summary judgment, the trial court determined that the May family assets should be managed through trusts, rather than through a limited liability company.[]
(10)Having concluded that Sam May was acting as a trustee without authority, the trial court attempted to undo each of the transfers made since his resignation as trustee, and to void the transfers pursuant to his testamentary power of appointment. The trial court imposed a constructive trust on the assets in order to transfer all of the assets back to their respective trusts.
(11)Richardson, the Orrs (Phil, Charles, Christie and Clayton), and the LLC appealed, asserting that the trial court erred in deciding that the attempted resignations of the parents were effective, even though the successor trustees did not accept the appointments, that Sam May's first disclaimer of interest could not be amended in the face of a clear mistake, and that the various transfers of assets to Buena Vista, LLC were invalid. Those appeals were consolidated under Richardson v. Young, 2003-CA-0001818-MR. This Court affirmed the trial court's ruling in an unpublished opinion on May 6, 2005. In so doing, this Court agreed with the trial court that Sam and Julia May effectively resigned with their written notice to themselves and the successor trustees in December of 1994. This court held that the resignations of Sam and Julia May were not contingent upon whether or not the daughters signed the amendments or accepted the trustee provisions, and were effective according to the terms of the trust, and that Sam May's disclaimer of his power of appointment was irrevocable. This Court also agreed with the trial court that Sam May was without authority to transfer the assets at issue to Buena Vista, LLC, because: (1) Sam
May was acting as a trustee, though he was no longer a trustee; and (2) Because the attempted transfer was not to himself as a beneficiary, but to a third person - Buena Vista, LLC. This Court held that Sam's attempt to transfer the assets directly to Buena Vista, LLC, as a trustee, did not revoke the trust, and that accordingly, the assets still remained in the trust.
That action was dismissed pursuant to the April 6, 2011, order and judgment entered in this case, and an appeal from that dismissal order is currently pending before this Court as Case No. 2011-CA-1494.
Young's counterclaim and third-party action also included claims of fraud, conversion, tortuous interference with inheritance rights, and fiduciary breach claims. Additionally, Young alleged that the 92-year-old Mr. May was not competent at the time that the LLC documents were purportedly signed. These claims were ultimately never tried, in light of developments which occurred during the ongoing litigation.
More specifically, the trial court found that the power of appointment granted to Sam May did not permit inter vivos exercise thereof, and was to be exercised only through his will. Thus, the court held that Sam's purported exercise thereof on October 29, 1999, and October 30, 1999, to transfer all of the securities from Fund A of the Julia May trust to Buena Vista, LLC was unauthorized and without legal effect. The court also found that Sam May's effort to make an inter vivos exercise of that power of appointment also failed because he specifically and irrevocably disclaimed his right to exercise that power of appointment under his first disclaimer. The court found that upon the filing of that first disclaimer, Sam May no longer had the right to withdraw from Fund A of the Julia C. May trust or to testamentarily appoint assets of Fund A at his death. While acknowledging that Sam May had filed a second disclaimer approximately twenty (20) days after the first, which did not include the revocations contained in the first, the second disclaimer nevertheless did not have the effect of revising, revoking, or amending the first disclaimer.
The court further found that Sam May was not the trustee of the Sam C. May trust, and had not been the trustee since his resignation as trustee on December 30, 1994, at which time he substituted his three daughters as successor cotrustees. The court acknowledged that it is fundamental trust law that the settlor may amend the trust which he or she created, as long as the trust agreement expressly reserved to the settlor the power of amendment. Thus, the court found that where pursuant to Paragraph 2.1 of the Trust Agreements, Sam and Julia May expressly reserved the right to amend the agreements, they were well within their rights to do so without the approval of their daughters. Accordingly, the court held that there was no question that the 1993 Amendments were fully effective. However, the court found that after his resignation as trustee of the Sam C. May trust on December 30, 1994, Sam May was wholly lacking in authority to thereafter execute the duties of trustee, and thus had no legal authority to execute a deed on October 29, 1999, purporting to transfer his farms from the Sam May trust to Buena Vista, LLC.
Concerning the acceptance of appointments by the successor trustees, the court found that acceptance is presumed unless the trustee expressly declines the position. Accordingly, the court found that the lack of Young's signature on the 1994 written resignation by Sam and Julia May did not render the resignations ineffective. To the contrary, the court found that the signatures of Richardson and Orr on the 1994 amendments, and that of Young on the 1995 amendments were clear evidence that all three daughters knew of their parents' resignations, and that each willingly accepted their position as successor cotrustee.
Richardson and the Orrs then filed a timely petition for rehearing on June 6, 2005, which was ultimately denied by this Court. At that point, the procedural history of this matter became increasingly convoluted, primarily because on June 7, 2005, the parties attended mediation in the "2002" case and the "2004" cases. The parties ultimately signed a "mediation memorandum" in which they agreed to enter into a settlement agreement. The memorandum contained sixteen provisions.
The court had referred to the "2002" action and the "2004" cases to mediation in March of 2005. The parties also mediated a partition suit filed by Richardson and Orr in a different circuit court to partition land inherited under Julia C. May's will, and the will of Betty Avritt, Julia's aunt, which case had not been referred to mediation.
Appellants now maintain that the prefatory "subject to" language in the memorandum makes the agreement unenforceable, because no settlement agreement was signed subsequently, or alternatively, that it makes the agreement incomplete or ambiguous and in combination with other provisions puts into issue the intent of the parties, which requires an evidentiary hearing to ascertain. We discuss this argument in more detail herein, infra.
Two of those provisions which came to be of significant import stated: (1)"All pending cases will be resolved in such a fashion to preserve the tax advantages attendant to utilizing Buena Vista, LLC," and (2)"Any dispute arising out of the estates, this agreement or the definitive settlement agreement shall be settled by binding arbitration."
Thereafter, on August 9, 2005, Richardson, et al., filed a motion for discretionary review of the "2002" action, requesting review of this Court's affirmance of the April 11, 2003, summary judgment order. Discretionary review was denied by our Kentucky Supreme Court on November 15, 2006. No further appeal was taken, and the April 11, 2003, partial summary judgment order became final.
The second and third cases, mediated on June 7, 2006, were 2004 CI-00315 and 2004-CI-00316 (jointly the "2004" cases). The first of those cases, filed by Young, sought administration of the Sam C. May estate by the circuit court due to what Young asserted were certain defalcations by Richardson and Barbara Buckman (the Mays' bookkeeper), which included their alleged failure to timely file the estate tax returns, an inventory or periodic settlements, or to take other actions to properly administer the estate. The second of those cases sought administration of the Julia C. May estate by the circuit court, as Young asserted that Richardson had failed and refused to cooperate with Young in any way or to provide any documents pertaining to the estate which were in the possession of her and Buckman. Those cases were dismissed by the trial court, and are also currently before this Court on appeal.
On December 15, 2005, the court heard Young's motion to remove fiduciaries in the "2004" cases. The court also heard Young's motion in the "2002" case, requesting an order to distribute the income and corpus of the Sam C. May trust. The trial court ultimately found that the parties had settled the "2004" cases and the "2002" action in mediation, and had agreed to arbitrate any disputes under the terms of the mediation memorandum. The court requested the parties to agree upon a distribution from the Sam C. May estate for the payment of taxes, a distribution of corpus to beneficiaries, and an arbitrator, all of which were included in the Agreed Order signed by the trial court on December 15, 2005, and filed in the "2002" and "2004" cases.
See 2011-CA-001494 and 2011-CA-001495.
Contemporaneously with the foregoing litigation, on December 7, 2005, Richardson filed Civil Action No. 2005-CI-000419 (the "2005" action), pursuant to Kentucky Rules of Civil Procedure (CR) 60.02 and 60.03, requesting that the April 11, 2003, summary judgment be vacated, and that the property transfers from the Mays' trusts to the LLC be validated. In that petition, Richardson, the Orrs, and Buena Vista, LLC asserted that there were documents relating to Sam May's transfer of the trust assets that had not been submitted for consideration to the trial court, and which would have resulted in a dramatically different conclusion to the litigation - namely that the transfer of the assets was proper. Young and Wall maintain that this action was both without merit and time-barred.
A week after that petition was filed, on December 15, 2005, the parties signed an agreed order which apparently represented an attempt to resolve the outstanding issues in all three actions. The order was signed and entered by the Marion Circuit Court that same day, and provided as follows:
The Memorandum, executed by the parties on June 7, 2004, is hereby accepted as the settlement agreement of the parties and they shall follow its provisions. John L. Smith, retired attorney [of] Lebanon, Kentucky shall arbitrate disputes or other issues mentioned in said memorandum, subject to his agreement to accept said appointment. Otherwise, if the parties cannot agree to another arbitrator the court shall designate another arbitrator.
Thereafter, on January 17, 2006, Young moved the trial court to abate the proceedings in the CR 60.02 and CR 60.03 action and moved for an extension of time to file a responsive pleading until further order of the court and pending the decision of the arbitrator as agreed by the parties in the December 15, 2005, order. The trial court denied the motion, and the parties proceeded to brief the action.
Subsequently, on June 1, 2006, the trial court entered an order which indicated that it had designated an arbitration team with expertise in estates, trusts, and taxation, and granting Young's motion to abate the action pending arbitration. By order dated June 26, 2006, entered in the "2002" action and the "2004" cases, the trial court appointed the same arbitration team for resolution of those issues. That order stated that the arbitrators were appointed "in order to resolve all the disputes or other issues of the parties in these cases as contemplated by the parties in the June 7, 2005, [mediation] memorandum (the parties' settlement agreement) as incorporated by the December 15, 2005, Agreed Order in these actions." On June 29, 2006, the arbitrators requested that the parties submit a list of issues, and on August 18, 2006, notified the parties by e-mail that they would like to schedule an initial conference with the attorneys to get a thorough understanding of the issues and to be able to prioritize their actions.
The parties met with the arbitrators on September 15, 2006. On September 26, 2006, the arbitrators presented a proposed order to the trial court to vacate the April 11, 2003, order of partial summary judgment. The trial court did so on September 27, 2006. In its order, the court made four pertinent findings:
(1) The pleadings filed by the Respondents herein in response to Petitioner's motion for relief pursuant to CR 60 are violative of the obligations of the respondents, Julianne May Young and Meneese Wall, under the Settlement Agreement entered into by the parties on June 7, 2005, as affirmed by Agreed Order signed by the parties and entered in this Court on December 15, 2005.Young v. Richardson, 267 S.W.3d 690, 693-94 (Ky. App. 2008).
(2) The Court finds that there are sufficient grounds under CR 60.02 and 60.03 for the granting of relief from
the Court's prior entry of partial summary judgment herein on April 11, 2003, which grounds include, but are not limited to, the agreement of the parties as to the proper resolution of this matter, as set forth in the Settlement Agreement referenced above. Therefore the Court's prior partial summary judgment herein is hereby set aside in its entirety.
(3) Further, as noted by the Petitioners in their briefs, this Court has substantial power to grant general equitable relief under CR 60, and the Court hereby exercises its discretion to utilize its inherent equitable powers to grant the relief requested in this case. It seems clear that Sam May intended to fund and then give away Buena Vista, LLC so that his heirs could have the advantage of the preferential tax treatment of the assets transferred thereto, although (in Petitioner's words) he may have been clumsy in his attempts to do so. Given the agreement of the parties that all pending cases should be resolved in "such a fashion to preserve the tax advantages attendant to utilizing Buena Vista, LLC," it is appropriate for the Court to exercise its equitable powers of discretion to fulfill the intent of Mr. May in making these transfers to Buena Vista, LLC, as well as the intent of the parties in reaching their undeniably arms' length settlement of their dispute.
(4) Therefore, the Court rules that the transfer of real estate and securities to Buena Vista, LLC in October 1999 .... are valid and binding upon all of the parties in all respects for the reasons set forth in the petition herein, which Petition is unopposed in light of the Court's ruling striking the pleadings of the Respondents that are violative of the Respondents' obligations under the settlement agreement.
Young then filed a motion to alter, amend, or vacate the September 27, 2006, order, arguing that it was signed less than ninety days from date of issuance, contrary to the terms of Kentucky Revised Statutes (KRS) 417.160. That motion was denied. The Supreme Court subsequently entered an order denying discretionary review of the May 6, 2005, opinion affirming the April 11, 2003, partial summary judgment, and this Court heard Young's appeal of the September 27, 2006, order of the Marion Circuit Court, which vacated the partial summary judgment entered in April of 2003.
On appeal to this Court, Young argued that the trial court lacked subject matter jurisdiction to enter the September 27, 2006, order because the motion of discretionary review of the Court of Appeals opinion affirming the judgment was then pending before the Kentucky Supreme Court, which did not enter its order denying discretionary review until November 15, 2006.
We agreed, and issued an opinion on June 25, 2008. Therein, this Court held that despite the pendency of the motion for discretionary review before the Supreme Court, the trial court retained narrow jurisdiction to rule on the CR 60.02(f) and CR 60.03 motions. However, because the trial court's September 27, 2006, order failed to substantively address the equitable grounds advanced under CR 60.02(f) and CR 60.03, and instead concerned the equitable power of the court to effectuate the settlement agreement of the parties, under reasons which this court determined were neither "extraordinary" as required by CR 60.02(f) nor "appropriate" within the meaning of CR 60.03, this court held that the requirements of CR 60.02(f) and CR 60.03 were not met and remanded the case to the trial court for further proceedings. See Young v. Richardson, 267 S.W.3d 690 (Ky. App. 2008).
A second arbitration order was also issued in this matter on October 6, 2006. That order was issued to "implement" the parties' mediation memorandum. After the notice of appeal in Richardson v. Young was filed, the arbitrators issued a series of orders. Young asserts that none of these orders were designated as "awards." One of these orders directed the parties to sign mutual releases of all claims in the "2002" action and the "2004" cases through June 8, 2005, and dismiss the three suits with prejudice, as settled. Young and Wall refused to sign mutual releases in light of the pending appeal in the "2005" CR 60 action. Accordingly, the arbitrators held that neither Young nor Wall was entitled to any distributions under the mediation memorandum until such releases were signed.,
See eleventh order of arbitrators.
The basis for this order was the "doctrine of disentitlement," which, the order stated, "stands for the proposition that a party cannot ask a tribunal for relief while simultaneously disobeying an outstanding order of the tribunal."
Richardson and the other Appellees filed a motion to dismiss the "2004" cases and the "2002" action, and Young and Wall filed motions to vacate the sixth order in the "2005" action, and to vacate the eleventh order in all cases. Pursuant to an arbitration order, Richardson filed the estate tax returns for the Sam C. May estate in July of 2007. The thirteenth order of the arbitrators determined the issues for trial. Young asserts that this thirteenth order precluded all of the issues raised by Appellants as to enforceability of the "mediation memorandum," fraud in the inducement, unconscionability, failure of consideration, and other issues and defenses as "already decided." The twenty-fourth order of the arbitrators provided that no evidence could be introduced at trial that would contradict any prior orders of the arbitrators or the circuit court. In the twenty-eighth order of the arbitrators, the only order to contain an award, the arbitrators ordered Young to pay $100,000 and Wall to pay $25,000 of the arbitration fees and costs for breaching the first paragraph of the mediation memorandum by contesting the "2005" CR 60 action, and by contesting the motion for discretionary review in the "2002" action. The arbitrators refused to make any distributions of the trust assets held by the LLC, based upon their prior orders requiring Appellants to sign the releases. The arbitrators also attempted to reserve jurisdiction to order distributions in the future.
This instant matter was filed on May 7, 2007, to confirm the arbitration orders and award and enter judgment thereon. Wall and Young filed their respective answers in June of 2007, in which they raised the affirmative defenses of collateral estoppel, res judicata, estoppel, improper splitting of causes of action and/or claims for relief and fraud, among other defenses. On May 16, 2008, Appellants also filed their motion to vacate portions of the twenty-eighth order of arbitrators in all five cases. Young's motion to consolidate this case and the "2005" action was filed on April 10, 2010, but was denied on November 30, 2010.
On February 19, 2010, pursuant to the remand ordered by this Court in Young v. Richardson, the trial court again vacated the April 11, 2003, partial summary judgment and order pursuant to CR 60.02(f) and 60.03 in the "2005" action, and filed same in the "2002" action on February 23, 2010. The February 19, 2010, order was modified by orders entered on November 30, 2010, in the "2005" action. Young appealed, claiming that the trial court abused its discretion by vacating its April 11, 2003, judgment pursuant to CR 60.02(f) and CR 60.03 since Appellees' claims of "mistake" and "newly discovered evidence" fall under CR 60.02(a) or (b) and were required to have been asserted within one year after entry of the judgment, which Appellees failed to do. Appellants further claimed that Appellees did not satisfy the requirements for relief under CR 60.02(f) and CR 60.03. That appeal was also decided by this Court, wherein we held that the failure to present documents granting trustee authority warranted grant of motion for relief from judgment for reasons of extraordinary nature pursuant to CR 60.02(f) and 60.03.
Court of Appeals No. 2010-CA-002209, 2012 WL 3136770.
The trial in this matter was held on October 9 and 10, 2007. On April 6, 2011, the Marion Circuit Court entered an order and judgment confirming all portions of the second, third, fourth, fifth, sixth, ninth, tenth, eleventh and thirteenth arbitration orders and the twenty-eighth order which was the final arbitration award, and ordering dismissal of three of the four cases in which the arbitrator appointments were made. A judgment was entered against Young for $100,000, and against Wall for $25,000, which amounts were to be paid from their share of the Mays' estates, Mrs. May's trust, and Young's interest in Buena Vista, LLC if distributed, plus costs of court. The judgment provided for no distributions to Young or Wall from the estates, trusts, or the LLC.
Appellants raise nine issues on appeal: (1) That the trial court erred in not dismissing this suit because it is time-barred under the doctrines of res judicata or collateral estoppel and involved an improper splitting of claims or alternatively was required to be brought in the suits from which the claims arose under the Kentucky Uniform Arbitration Act; (2) The trial court erred in confirming orders and an award which is void for want of jurisdiction; (3) The trial court lacked jurisdiction to enter a judgment in this case while the February 19, 2010, order vacating pursuant to CR 60.02(f) and 60.03 is still pending on appeal in the "2005" action; (4) The trial court erred by entering the April 6, 2011, judgment contrary to the "law of the case;" (5) If the court did have jurisdiction to confirm any arbitration orders or award, the court erred by not granting Apellants' motions to vacate the sixth, eleventh, and twenty-eighth orders of arbitration; (6) If the trial court did have jurisdiction to confirm the award, it exceeded that jurisdiction; (7) The trial court erred in trying to borrow jurisdiction from the "2004" cases to cure its jurisdictional deficits in the "2002" and "2005" actions, thereby further exceeding its subject matter jurisdiction; (8) If the trial court did have jurisdiction, entry of a final judgment was premature; and (9) The mediation memorandum was illegal, unconscionable, and against public policy in the Commonwealth, and the Appellees fraudulently induced Appellants to enter into same.
Specifically, Appellants assert that if we find the court to have had jurisdiction, it exceeded its jurisdiction authority under KRS 417.050 and KRS 417.200 because the arbitration provision did not provide for arbitration in the Commonwealth, because the trial court erred in appointing arbitrators in matters that the parties did not agree to arbitrate, and because the trial court's April 6, 2011, order included numerous matters over which the court did not have jurisdiction under the Kentucky Uniform Arbitration Act.
In response, Appellees argue that: (1) That Appellants' res judicata, collateral estoppel, claims splitting, and KRS 417.060 issues cannot be properly advanced for the first time in this appeal; (2) That the circuit court had legal jurisdiction to confirm the arbitration award; (3) The trial court properly complied with the Kentucky Arbitration Act and applicable law when it confirmed the arbitrators' award; (4) That Appellants' "law of the case" issue is not properly advanced for the first time on appeal; (5) That the trial court correctly refused to grant Appellants' motion to vacate portions of the arbitrators' sixth, eleventh, and twenty-eighth orders; (6) That the trial court properly confirmed the award because the arbitration proceedings were conducted in Kentucky; (7) That the trial court did not "borrow" jurisdiction from estate settlement actions to cure any jurisdictional defects; and (8) That Appellants cite no authority for claims that entry of arbitration award confirmation order and judgment was premature, that the Mediation Settlement Memorandum was illegal or unconscionable, nor that Appellants were fraudulently induced in any manner.
Upon review of the record, the arguments of the parties, and the applicable law, this Court is of the opinion that the trial court properly complied with the Kentucky Arbitration Act and applicable case law when it confirmed the arbitrators' award. In so finding, we address each of the issues raised by the Appellants in turn.
As their first basis of appeal, Appellants argue that the trial court erred in not dismissing this suit because it is time-barred under the doctrines of res judicata or collateral estoppel and involved an improper splitting of claims or alternatively was required to be brought in the suits from which the claims arose under the Kentucky Uniform Arbitration Act. In making these arguments, Appellants assert that the arbitrators were appointed in the "2002" and "2005" actions, and the two "2004" cases, from which all of the issues to be arbitrated arose.
Concerning whether a party seeking confirmation of an arbitration award must separately file an entirely new lawsuit regarding the validity of the arbitration agreement, we simply find nothing in KRS 417 to indicate that this is required. Concerning the issues of res judicata, claims splitting, collateral estoppel, and the application of KRS 417.060(3), we decline to address these issues for the first time on appeal. While these arguments were initially pled as affirmative defenses, we note that Appellants failed to comply with CR 76.12(4)(c)(v) insofar as there were no specific statements in their brief indicating where and in what manner these issues were preserved or presented to the trial court. Accordingly, we decline to address them further herein.
As their second and third bases for appeal, Appellants argue that the circuit court erred in confirming orders and an award which they allege was void for want of jurisdiction. They argue that the circuit court's appointment of an "arbitration team" to determine issues in the "2002" action was entered while that case was pending before the Kentucky Supreme Court on motion for discretionary review, and notes that the June 26, 2006, order expressly provided for the arbitrators to address issues involved in the appeal. The Appellants also assert that the December 15, 2005, order upon which the appointment was based was also entered without jurisdiction and is a "nullity." They argue that when the notice of appeal was filed, jurisdiction of the "2002" case was also transferred to the appellate courts, and that the trial court had no jurisdiction to render any subsequent orders, including all of the arbitration orders issued in the "2002" action. Thus, Appellants assert that all subsequent actions and orders taken by the arbitrators based on the void June 26, 2006, order appointing them were taken and rendered without jurisdiction.
In making this argument, they note that the first arbitration order was entered in the "2005" action pursuant to the arbitrator appointment from the June 2005 order. Appellants argue that the trial court lacked jurisdiction to make the appointment in that case, and only retained narrow jurisdiction under CR 60.04 to grant or deny the CR 60 action, which did not include appointment of arbitrators or to act on matters pending on appeal. Appellants assert that the first two arbitration orders purported to affect the trial and appellate court decisions in relation to the April 11, 2003, partial summary judgment and order, both of which were issued prior to the denial of the motion for discretionary review. Appellants also argue that jurisdiction in the "2005" action (the matter currently on appeal sub judice) was extremely narrow and did not extend to appointment of arbitrators, asserting that the arbitrators never regained jurisdiction in the "2002" and "2005" actions because no new appointments were made therein. Appellants note that on November 22, 2006, the order of September 27, 2006, was appealed in the "2005" action, and that jurisdiction from that point forward lay with this Court until we rendered our October 6, 2008, opinion.
In making this argument, the Appellants rely upon the holding of this Court in Young v. Richardson, supra, wherein we stated as follows:
In our view the residual jurisdiction remaining in the trial court under these circumstances is limited in scope to consideration of only specifically authorized matters. For example the plain language of CR 60.04 envisions a trial court exercising its jurisdiction solely in those matters brought before it pursuant to CR 60. It does not contemplate any other actions by the trial court while an appeal is pending .....Thus, the Marion Circuit Court was without authority to enter any orders, except to grant or deny the CR 60.02-60.03 motion, from the time the notice of appeal was filed on August 29, 2003 until the Court of Appeals' opinion became final upon the Supreme Court's denial of discretionary review on November 15, 2006. Indeed, any trial-court order entered while the appeal was pending which purported to affect matters involved in the appeal was 'a nullity.'
Upon review of this issue under the facts of this case and in light of applicable law, we are in agreement with the Appellees that the contractual enforceability of the parties' settlement agreements was never dependent upon any ongoing jurisdictional issues concerning any of the related May family cases. The record clearly reveals that regardless of whether or not the trial court retained or had sufficient jurisdictional authority to enter its June 26, 2006, order appointing replacement arbitrators in the "2002" Declaration of Rights Action, then up on appeal, or in the Sam and Julia May Estate Settlement Actions, which were not, it was the parties themselves who selected the original arbitrator through their December 15, 2005, Written Settlement Agreement, and it was also clearly the parties who assisted the trial court's designation of the replacement arbitrators. Thus, we are in agreement with the court below and the Appellees that the contractual enforceability of the parties' settlement agreements was never dependent upon any ongoing jurisdictional issues.
Kentucky law is clear that parties can settle a dispute at any time, even after a case is up on appeal. Indeed, in Jones v. Conner, 915 S.W.2d 756, 757 (Ky. App. 1996), this Court stated:
It has long been recognized in this jurisdiction that the parties to a suit have the absolute right to settle their dispute at any time, even after "the litigation has been brought to the Court of Appeals and there has been a final judgment by that court, determining the rights of the parties ..." Bernheim v. Wallace, 186 Ky. 459, 217 S.W. 916, 921 (1920). By appropriate motion, the settling parties may demand that a trial court to which a case has been remanded by an appellate court enter an order comporting with their agreement even though the order would not comport with the decision of the appellate court. Id. Settlements are favored by the courts, and the parties are always free to make whatever settlement they wish even after an appellate court has finally decided their controversy.
Further, we note that a Written Settlement Agreement between the parties is a contract, and is governed by contract law. Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 105 (Ky. 2003). The construction and interpretation of a contract is a matter of law for the court. See Morganfield National Bank v. Damien Elder & Sons, 836 S.W.2d 893 (Ky. 1992). A settlement agreement that satisfies the requirements associated with contracts, including an offer and acceptance, full and complete terms, and consideration, is generally enforceable. Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 384 (Ky. App. 2002).
Thus, the trial court did not need to retain any jurisdiction in the 2002 Declaration of Rights Action in order to appoint the replacement arbitrators because it was merely following the terms of the December 15, 2005, contract agreed to by the parties., We simply cannot agree with the assertion made by Wall and Young that the trial court's mistaken entry of the December 15, 2005, Written Settlement Contract as an "Agreed Order" in the formal court records of the Declaration of Rights Action in some manner made the Contract, and by extension, the Mediation Settlement Agreement a "nullity." To the contrary, we are in agreement with the court below that contract law clearly governs the enforceability of the Settlement Agreement, and thus, the court's entry of the Agreed Order did not render either the Mediation Settlement Memorandum or the Written Settlement Contract unenforceable. Accordingly, we affirm.
Moreover, we note that the trial court's entry of a follow-up order on December 4, 2006, subsequent to the Supreme Court's November 15, 2006, denial of discretionary review regarding the Declaration of Rights Action specifically referred to and thus revalidated and confirmed the June 26, 2006, order in each of those three cases.
In so finding, we note that the settlement agreement was a contract which was certainly supported by adequate legal consideration in light of the fact that: (1) Appellants, Young and Wall, immediately received $200,000 and $50,000, respectively, in direct transfers of marketable securities form the Sam C. May trust (as required under the specifically negotiated provisions of Section 1 of the December 15, 2005, agreement); (2) Appellants received direct cash distributions of all of the taxable income earned by the Sam C. May trust for trust calendar year 2005 (as required under the negotiated provisions of Section 2 of the December 15, 2005, agreement); and (3) Payments were made to the IRS and the Kentucky Department of Revenue toward death taxes (as required under the negotiated provisions of Section 3 of the December 15, 2005, agreement).
As their fourth basis for appeal, Appellants argue that the trial court erred by entering the April 16, 2011, judgment contrary to the "law of the case." Appellants assert that the trial court's judgment clearly determines issues from the "2002" and "2005" actions, and violates the "law of the case" in both, as they assert the appeals in both cases were resolved in their favor. We note, upon review of the record, that this issue was never raised to the trial court, nor do Appellants comply with CR 76.12(4)(c)(v) in their attempt to argue this issue on appeal. Accordingly, we decline to address it further herein. See McGinnis v. McGinnis, 920 S.W.2d 68 (Ky. App. 1995).
As their fifth basis of appeal, Appellants argue that if the trial court did have jurisdiction to confirm any arbitration orders or award, it erred by denying their motions to vacate the sixth, eleventh, and twenty-eighth orders of the arbitrators. Appellants assert that though the trial court found that they failed to state proper grounds for vacating these orders pursuant to either KRS 417.160 or KRS 417.170, this was incorrect. Again, we disagree.
This order required Appellants to sign releases in the "2002" action. Appellants argue that this order required them to sign the releases in the "2002" action while Young v. Richardson was pending on appeal, and even though Young had challenged the court's jurisdictional authority to act while the motion for discretionary review was pending.
This order prohibited distribution of the May trust assets to Appellants under the "doctrine of disentitlement." Appellants assert that this doctrine was declared unconstitutional in Degan v. U.S., 517 U.S. 820, 116 S.Ct. 1777, 135 L.Ed.2d 102 (1996). Additionally, Appellants argue that the arbitrators exceeded their powers in applying the doctrine of disentitlement because they exceeded their powers in ordering dismissal of litigation and the execution of releases during the pending appeal.
This order constituted a judgment against Young and Wall in the amounts of $100,000 and $25,000, respectively. Appellants now assert that these fines were punitive, excessive, and unmerited.
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As noted by the trial court, and as confirmed by our review of Appellants' brief, nowhere do they cite specific references within KRS 417.060 and/or KRS 417.080 that would give the court the authority to vacate the portions of the award at issue. Indeed, our Kentucky Supreme Court has clearly held that all arbitration awards arising from agreements entered into after July 13, 1984, may only be set aside by a court pursuant to those grounds listed in the Kentucky Uniform Arbitration Act. 3D Enterprises Contracting Corp. v. Lexington-Fayette Urban County Government, 134 S.W.3d 558, 562-63 (Ky. 2004). We note that KRS 417.150 provides that:
Upon application of a party, the court shall confirm an award unless, within the time limits hereinafter imposed, grounds are urged for vacating or modifying orWhile KRS 417.160 provides the court with authority to vacate an entire award if the arbitrators exceeded their powers, we do not believe that such was the case sub judice. Appellants have cited no authority in support of their argument that the trial court should have only vacated a portion of the award, and indeed, a review of the record clearly indicates that the issues presented to the arbitrators were those upon which the parties agreed.
correcting the award, in which case the court shall proceed as provided in KRS 417.160 and 417.170.
Indeed, pursuant to Paragraph Four of the December 15, 2005, Settlement Agreement, the parties formally agreed that the Mediation Settlement Memorandum, "is hereby accepted as the settlement agreement of the parties and they shall follow its provisions." Accordingly, the issues presented to the arbitrators were those upon which the parties agreed. Having found no basis in the record, or pursuant to KRS 417.060 or KRS 417.070 to vacate these portions of the award, we affirm.
As their sixth basis for appeal, Appellants assert that if we find the court to have had jurisdiction, it exceeded its jurisdiction authority under KRS 417.050 and KRS 417.200 because the arbitration provision did not provide for arbitration in the Commonwealth because the trial court erred in appointing arbitrators in matters that the parties did not agree to arbitrate, and because the trial court's April 6, 2011, order included numerous matters over which the court did not have jurisdiction under the Kentucky Uniform Arbitration Act. Again, we disagree.
Appellants assert that the trial court lacked the subject matter jurisdiction to confirm the award because the settlement agreements failed to specify that the arbitration proceedings would be held inside the Commonwealth of Kentucky. However, as the trial court correctly noted, the December 15, 2005, Settlement Agreement appointed a semiretired attorney who lived in Lebanon, Kentucky, as the initial arbitrator, and after he could no longer function as arbitrator, replacement arbitrators from a Louisville firm were selected following a hearing and specific recommendations made by counsel then representing all parties. Moreover, the arbitration proceedings were all held in Louisville, all parties were present, and all orders were rendered there.
In so finding, we opine that the Appellants' attempted reliance upon Artrip v. Samons Construction, Inc., 54 S.W.3d 169 (Ky. App. 2001), among others, is misplaced. Indeed, we note that in Artrip, our Kentucky Supreme Court took judicial notice of decisions from several sister states enforcing awards where the arbitration could have taken place in the home state. Id. at 173. Appellants place strong emphasis on the holding in Ally Cat, LLC v. Chauvin, 274 S.W.3d 451 (Ky. 2009), wherein our Kentucky Supreme Court stated as follows:
We hold that the Court of the Appeals in Tru Green and Artrip got it right. Subject matter jurisdiction to enforce an agreement to arbitrate is conferred upon a Kentucky court only if the agreement provides for arbitration in this state. Thus, an agreement to arbitrate which fails toAlly Cat at 455-56.
include the required provision for arbitration within this state is unenforceable in Kentucky courts. Tru Green and Artrip held that arbitration awards arising from such agreements are unenforceable in Kentucky courts when the arbitration occurred outside the state. We hold now that the parties need not suffer the expense and delay of the arbitration hearing, only to find that the award is unenforceable. When the issue arises prior to the arbitration hearing, as it has in this case, and the agreement upon which arbitration is sought fails to comply with the literal provisions of KRS 417.200, the courts of Kentucky are, pursuant to KRS 417.200, without jurisdiction to enforce the agreement to arbitrate.
However, a reading of the full opinion indicates that the Supreme Court goes on to specifically note that:
We have not heretofore, and do not now, address the situation in which a similarly defective arbitration clause leads to an action to enforce an arbitration award, where the arbitration hearing did in fact occur within Kentucky. Other considerations may therein arise which are not before us now.Id. Indeed, our recent holding in Ping v. Beverly Enterprises, 376 S.W.3d 581 (Ky. 2012), elaborated upon such a situation, stating:
The Estate maintains Kentucky courts lack jurisdiction to enforce the Arbitration Agreement in this case because it does not comply with the Kentucky Act as outlined in Ally Cat, LLC v. Chauvin, 274 S.W.3d 451 (Ky. 2009). In Ally Cat, this Court held that the Kentucky Act applies only to arbitration agreements providing for arbitration in this State. Here, the agreement provides that the arbitration is "to be conducted at a place agreed upon by the Parties, or in the absence of such an agreement, at the Facility." The Estate maintains that because the contract would allow the arbitration to take place outside Kentucky, if the parties so agreed, a Kentucky trial courtPing v. Beverly Enterprises, 376 S.W.3d at 590. We believe Ping to be applicable and pertinent to our facts sub judice. As in Ping, the parties sub judice could have and did select Kentucky arbitrators and chose to conduct all of their arbitration proceedings in Kentucky. Thus, as in Ping, we believe the trial court's jurisdiction was proper and appropriate, and we affirm.
is without jurisdiction to enforce it. However, because either party can insist upon a Kentucky arbitration (an arbitration "at the Facility" in Frankfort), the trial court's jurisdiction under the Kentucky Act was properly invoked. In any event, even if the forum selection clause was not consistent with Ally Cat, Kentucky courts must and do enforce arbitration clauses in contracts subject to the Federal Act. North Fork Collieries, LLC v. Hall, 322 S.W.3d 98, 102, fn. 2 (Ky.2010).
We turn now to the Appellant's seventh basis for appeal, namely that the trial court erred in trying to "borrow" jurisdiction from the "2004" cases to cure its jurisdictional deficits in the "2002" and "2005" actions, thereby further exceeding its subject matter jurisdiction. For reasons previously stated we believe this to be a contract enforcement case in which the court confirmed an arbitration award, and in light of our previous extensive discussion on the issue of jurisdiction, we decline to address these arguments for a second time herein.
Having so found, we turn now to the final two arguments raised by the Appellants, namely that if the trial court did have jurisdiction, entry of a final judgment was premature; and that the mediation memorandum was illegal, unconscionable, and against public policy in the Commonwealth, and the Appellees fraudulently induced Appellants to enter into same. Having reviewed these arguments, the record, and the applicable law, we reject these arguments. In so doing, we note that the arguments themselves are very brief and include no reference to any supporting legal authorities. It is simply not our function as an appellate court to research and construct a party's legal arguments. Hadley v. Citizen Deposit Bank, 186 S.W.3d 754, 759 (Ky. App. 2005). Absent any citation to supporting legal authorities to support these arguments, we decline to address them further herein.
Wherefore, for the foregoing reasons, we hereby affirm the April 6, 2011, order and judgment of the Marion Circuit Court, the Honorable Allan Ray Bertram, presiding.
ALL CONCUR. BRIEFS FOR APPELLANTS: Julianne May Young, Pro Se
Bryan, Texas
BRIEF FOR APPELLEES: D. Kevin Ryan
Louisville, Kentucky
Young v. Richardson at 696.