Simon M. Vanderpool v. K. Petroleum, Inc. ( 2015 )

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RENDERED: OCTOBER 29, 2015
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2015-SC-000106-MR
1A-Act-‘s-
SIMON M. VANDERPOOL, ET AL. APPEL-rANTS—
ON APPEAL FROM COURT OF APPEALS
V. NO. 2014-CA-001495-OA
WHITLEY CIRCUIT COURT NO. 02-CI-00371
K. PETROLEUM, INC. APPELLEE
MEMORANDUM OPINION OF THE COURT
REVERSING
Appellants, Simon M. Vanderpool and Sandra Joan Vanderpool ("the
Vanderpools"), appeal from the Court of Appeals' Order granting a petition for
writ of mandamus filed by Appellee, Kentucky Petroleum, Inc. ("KPI"). For the
reasons set forth below, we reverse.
I. BACKGROUND
The underlying controversy involves a dispute over the rightful use and
production of natural gas. KPI filed suit against the Vanderpools in Whitley
Circuit Court seeking a declaration of its leasehold rights. The Vanderpools
counterclaimed, alleging trespass and wrongful taking of natural gas from their
property. Judgment was entered in favor of the Vanderpools in the amount of
$217,890.24.
KPI filed a notice of appeal to the Court of Appeals on May 9, 2012. Nine
days later, an order of garnishment was issued to Seminole Energy Services,
LLC, which held $45,022.25 belonging to KPI. That amount was ultimately
distributed to the Vanderpools. On June 4, 2012, KPI filed a supersedeas bond
in the amount of $280,000.00.
In the mean time, the Court of Appeals issued an Opinion rendered May
9, 2014, reversing and remanding the underlying matter for new trial.'
Thereafter, KPI filed a motion in the trial court seeking restitution of the
$45,022.25 in garnished funds. The trial court denied the motion on
September 3, 2014, and, on September 12, 2014, KPI filed a petition for writ of
prohibition and/or mandamus in the Court of Appeals. The Court of Appeals
granted KPI's petition for a writ, finding that KPI had demonstrated the lack of
an adequate remedy by appeal or otherwise and irreparable injury:
There is no adequate remedy by appeal or
otherwise for the divestiture of a party's funds without
a due process of adjudication of liability. PremierTox
2.0 v. Miniard, 407 S.W.3d 542, 548 (Ky. 2013). Our
Supreme Court has stated that "[a] judgment which
has been reversed is as though it never has been."
Drury v. Franke, 247 Ky. 758, 57 S.W.2d 969, 972
(1933) (quoting Knights Adm'r v. Ill. Central R. Co., 143
Ky. 418, 136 S.W. 874, 875 (1911). In the present
case, the judgment has been reversed. Consequently,
there has been no adjudication of liability to support
the continuation of the garnishment order. Therefore
the order of the trial court denying the motion for
1 In K Petroleum, Inc. v. Vanderpool, 2014 WL 1881913 (2012-CA-00859-MR)
(Ky. App. 2014), the Court of Appeals determined that the trial court's evidentiary
ruling (excluding a settlement agreement between Sandra Vanderpool's parents and
KPI), and the directed verdicts that followed, were in error and denied KPI aJair trial.
The Court of Appeals directed the circuit court to admit the subject agreement into
evidence at the new trial.
2
restitution 'is essentially a pre judgment attachment
for which . . . [Petitioners] do not have an adequate
remedy* on appeal or otherwise." PremierTox, 407
S.W.3d at 548. We conclude [KPI] has demonstrated
the lack of an adequate remedy by appeal or otherwise.
Gross injustice and irreparable injury result[]
from an order requiring the payment of money in
satisfaction of a judgment without an adjudication on
the merits of the claim. Id. "Aside from the
deprivation of property and its attendant due process
implications, seizing control of such a substantial
amount of an individual's or business's money to
assure payment of an unproven claim can, and often
does result in devastating consequences for that
individual or business's future operations." Id. at 549.
Therefore, we conclude that [KPI] has demonstrated
irreparable injury.
The Vanderpools appealed the Court of Appeal's decision granting the writ, and
that forms the basis of the case presently before this Court.
II. ANALYSIS
On appeal, the Vanderpools argue that: (1) KPI has not shown that there
exists no adequate remedy by appeal; (2) CR 60.03 precludes this action; and
(3) the trial court did not abuse its discretion in refusing to order restitution.
This Court recently discussed the standards under which we review writs
of mandamus:
The issuance of a writ of mandamus is an
extraordinary remedy. . . . As a result of this Court's
cautious approach to writ proceedings, we have
adopted, and stringently applied, a strict set of
requirements for issuing a writ.
Writs are "divided into two classes, which are
distinguished by whether the lower court allegedly is
(1) acting without jurisdiction (which includes 'beyond
its jurisdiction') or (2) acting erroneously within its
3
jurisdiction." . . . [W]e are not now concerned with the
first class of cases.
Under the second class of writ cases, a writ
"may be granted upon a showing . . . that the lower
court is acting or is about to act erroneously, although
within its jurisdiction, and there exists no adequate
remedy by appeal or otherwise and great injustice and
irreparable injury will result if the petition is not
granted." This Court has consistently recognized an
exception to the irreparable harm requirement in
"certain special cases." In these special cases, a writ
may issue "in the absence of a showing of specific
great and irreparable injury . . . provided a substantial
miscarriage of justice will result if the lower court is
proceeding erroneously, and correction of the error is
necessary and appropriate in the interest of orderly
judicial administration." Even when these
requirements are met, the issuance of a writ is not
mandatory; instead, "whether to grant the writ is in
the sound discretion of the Court."
As with other decisions that are within the
discretion of the court, the decision of the Court of
Appeals regarding the issuance of a writ is reviewed for
an abuse of discretion. Questions of law, however, will
be reviewed de novo. "And if the alleged error lies in
findings of fact of the Court of Appeals, e.g. the finding
regarding irreparable harm, then we review for clear
error under CR 52.01." Because the decision of the
Court of Appeals only held that Ridgeway had an
adequate remedy by appeal or otherwise, a question of
law, our review is de novo.
Ridgeway Nursing & Rehab. Facility, LLC v. Lane, 415 S.W.3d 635, 639-41 (Ky.
2013) (footnotes omitted).
Sub judice, the Court of Appeals held that KPI demonstrated the lack of
an adequate remedy by appeal or otherwise, relying on PremierTox, 407
S.W.3d at 548.
4
No adequate remedy by appeal or otherwise means
that the injury to be suffered . . . "could not therefore
be rectified in subsequent proceedings in the case." In
order for a writ to issue, the lack of an adequate
remedy by appeal or otherwise is an absolute
prerequisite, regardless of whether the writ is sought
by alleging irreparable harm or invoking the "certain
special circumstances" exception.
Ridgeway, 415 S.W.3d at 640 (footnote omitted).
PremierTox is distinguishable on its facts. It involved a dispute between
Kentucky Spirit, which managed Medicaid payments to medical providers, and
PremierTox, a laboratory. PremierTox alleged that Kentucky Spirit owed it
$1,880,293.46 for services provided to Medicaid recipients for which Kentucky
Spirit had been paid by the Commonwealth of Kentucky. Kentucky Spirit
disputed the validity of PremierTox's claims for payment. The circuit court
ordered Kentucky Spirit to deposit the funds into a court-controlled escrow
account pending adjudication of PremierTox's claim. Kentucky Spirit sought a
writ of prohibition to prevent the circuit court from enforcing the order.
The Court of Appeals issued the writ, concluding that "a circuit court has
no authority 'to require a party to pay a demanded judgment into court in
advance of an adjudication that he owes it"' pursuant to CR 67.02 2 and J.R.E.,
Inc. v. Asbury, 993 S.W.2d 960 (Ky. 1999). PremierTox at 545.
2 CR 67.02 provides:
When it is admitted by the pleading or examination of a
party that he has in his possession or control any money or
other thing capable of delivery which being the subject of
the litigation, is held by him as trustee for another party, or
which belongs or is due to another party, the court may
order the same to be deposited in court or delivered to such
other party, with or without security, subject to further
5
Asbury explained that:
When CR 67.02 was adopted . . . , it incorporated .. .
provisions of . . . of our former Civil Code . . . . [which]
appear to have been a codification of the common law
rule that a party to a controversy involving a right to a
certain sum of money or thing cannot be required to
deposit that money or thing in court, unless it is either
clearly admitted by his pleading or by proof that he
has no right to retain it and that the other party to the
action is entitled to it or at least has an absolute
interest in it.
993 S.W.2d at 962.
This Court affirmed the issuance of the writ in PremierTox, concluding
that the circuit court had misconstrued the function of CR 67.02. "The
amount of money in dispute is significant. The circuit court's order is
essentially a pre judgment attachment[ 3 ] for which Appellees do not have an
adequate remedy on appeal or otherwise." PremierTox, 407 S.W.3d at 548.
direction. If such order is disobeyed, the court may punish
the disobedience as a contempt, and may also require the
sheriff or other proper officer to take the money or property
and deposit or deliver it in accordance with the direction
given. Money paid into court under this rule shall be
deposited in an interest-bearing account or invested in an
interest-bearing instrument approved by the court. At the
conclusion of the action, the interest accruing on any such
account or instrument shall be paid to the person to whom
the principal amount of the account is paid.
3 This Court explained that:
[T]he circuit court's order would effectively convert CR 67
into a substitute for the provisional remedy of pre judgment
attachment established by KRS 425.301 et seq. It would
also circumvent the safeguards built into those statutes.
For example, KRS 425.309 would require PremierTox to
execute a bond of not less than double the amount of its
6
The Court of Appeals' reliance on PremierTox was simply misplaced. In
the case at bar, KPI has not been ordered to pay a sum into court before an
adjudication on the merits. Rather, the adjudication already took place and
KPI seeks restitution of funds that were previously garnished. "Kentucky law
makes it clear that an appellant who fails to file a supersedeas bond does so at
his own risk and that execution may proceed . . . . " Marshall v. Goodwine, 332
S.W.3d 51, 55 (Ky. 2010) (quoting Hardy v. Goodwine, No. 2007-SC-00284-
MR, 2009 WL 1830782, at *2 (Ky. June 25, 2009)). The underlying case has
already been remanded for a new trial. In the event KPI prevails, it does have
an adequate remedy that can be rectified in subsequent proceedings in the
case, either in the trial court or on appeal.
We review the decision of the Court of Appeals in this instance for an
abuse of discretion. "The test for abuse of discretion is whether the trial
judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound
legal principles." The Court of Appeals' decision in the present matter was
unsupported by sound legal principles, as it misapplied PremierTox as noted
above, and therefore, we hold that it abused its discretion in granting KPI's
petition for a writ. Having so concluded, we do not reach the remaining
arguments.
claim, a safeguard not available under the methods
imposed by the circuit court.
Id. at 547.
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III. CONCLUSION
The Court of Appeals' Order granting mandamus is hereby reversed.
All sitting. Minton, C.J., Barber, Cunningham, Keller, Noble, Venters,
JJ., concur. Abramson, J., concurs in result only.
COUNSEL FOR APPELLANTS:
Darrell L. Saunders
COUNSEL FOR APPELLEE:
Scott Marlow Webster
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