Sherri Lynn Murray Administratrix of the Estate of Ricky Lee Murray v. John Byrnes ( 2022 )

RENDERED: FEBRUARY 11, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0688-DG
SHERRI LYNN MURRAY,
ADMINISTRATRIX OF THE ESTATE
OF RICKY LEE MURRAY APPELLANT
ON DISCRETIONARY REVIEW FROM SHELBY
v. CIRCUIT COURT
HONORABLE CHARLES R. HICKMAN
ACTION NOS. 19-XX-00003 AND 19-XX-00004
JOHN BYRNES; JACKSON MURRAY
(A MINOR); AND RYAN
CLEVIDENCE APPELLEES
OPINION
AFFIRMING
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BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND JONES, JUDGES.
COMBS, JUDGE: Appellant, Sherri Lynn Murray, administratrix of the Estate of
Ricky Lee Murray (the Estate), appeals the decision of the Shelby Circuit Court
that vacated an order of the district court. Acting in its appellate capacity, the
circuit court determined that the lower court lacked subject matter jurisdiction to
consider Murray’s allegations against John Byrnes, the Appellee. Murray
challenges the conclusion of the circuit court that her claims fell within the
exclusive jurisdiction of the circuit court. Because we agree that Murray’s claims
entail an “adversary proceeding” in the circuit court, we affirm the circuit court’s
order vacating.
Ricky Lee Murray, a Louisville chiropractor, died intestate on
September 9, 2016. In his practice, Dr. Murray treated motor vehicle accident
victims, including those entitled to basic reparation benefits (also known as
Personal Injury Protection (PIP) or no-fault benefits) under the provisions of KRS1
304.39-020. John Byrnes, a personal injury lawyer practicing in Louisville,
represented several of Dr. Murray’s patients who had been injured in motor vehicle
accidents and who had claims for bodily injury implicating their PIP benefits.
Following Dr. Murray’s death, the Estate discovered a discrepancy
between 1099 tax forms generated by auto insurer, State Farm, and Dr. Murray’s
own accounts of income derived from State Farm. An informal investigation by
State Farm indicated that eighteen checks made to the order of Dr. Murray had
been negotiated after Dr. Murray’s death. None of these checks had been received
or negotiated by the Estate. State Farm indicated that the disputed checks had been
mailed to John Byrnes. It explained that following Dr. Murray’s death, Byrnes
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Kentucky Revised Statutes.
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directed that checks issued on the insureds’ claims should be made payable to the
insureds -- his clients -- and mailed to his office for disbursement. Thereafter, the
disputed checks were mailed by State Farm to Byrnes’s office. However, they
were made payable to the order of Dr. Murray. The Estate contended that these
checks (totaling $11,827.00) had been issued as compensation for chiropractic
services rendered by Dr. Murray and that Byrnes had wrongfully “diverted” the
payments.
In the administration proceedings pending before the Shelby District
Court, the Estate filed a motion to compel the return of the disputed funds and a
motion for attorney’s fees. The Estate notified Byrnes of the scheduled hearing. A
series of hearings followed at which Byrnes or his counsel appeared. However,
Byrnes did not appear for an evidentiary hearing conducted by the district court on
December 10, 2018.
Following the hearing of December 10, the district court found that
the disputed checks were diverted by Byrnes without the consent of the Estate and
that they were wrongfully negotiated. The district court found that Byrnes had no
authority to re-direct the checks to his firm and that he erred by failing to cooperate
with the Estate’s investigation. Byrnes was ordered to pay $11,827.00 to Sherri
Murray’s counsel. The Estate’s motion for attorney’s fees was also granted.
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Byrnes filed a motion to alter, amend, or vacate. He objected to the
district court’s jurisdiction. He explained in a memorandum that the checks
represented PIP payments due from State Farm to his various personal injury
clients and that he was expressly empowered under provisions of Kentucky’s
Motor Vehicle Reparations Act to direct State Farm to forward the payments to its
insureds -- his clients. Byrnes did not know who endorsed the checks. He
indicated that he did not receive any compensation from the PIP payments. The
motion was heard on February 4, 2019.
By order entered on July 11, 2019, the district court concluded that it
had subject matter jurisdiction to determine whether the disputed checks were
assets of the Estate. It found that there was no evidence in the record to support
Byrnes’s contention that the checks represented PIP payments owed to State
Farm’s insureds, Byrnes’s clients. It found that this contention “is contrary to
every representation Byrnes has made to the widow and this [c]ourt.” It found that
the checks belonged to the Estate and that they had been fraudulently negotiated.
However, it concluded that it lacked subject matter jurisdiction to order Byrnes to
pay $11,827.00 over to the Estate as he was never a party to the Estate’s
administration proceeding. Finally, the court found Byrnes guilty of criminal
contempt. It determined that Byrnes: had been untruthful; was complicit in the
fraudulent endorsement of the disputed checks; obstructed the administration of
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justice and the court’s process; failed to appear for a scheduled hearing; and failed
to respect the court. As punishment, Byrnes was ordered to pay the Estate’s
attorney’s fees in the amount of $18,766.25. Byrnes appealed to the Shelby Circuit
Court.
The circuit court considered the parties’ arguments and reviewed the
nearly 1,000-page record. In an order entered on April 24, 2020, it concluded that
the district court lacked jurisdiction to order Byrnes to do anything. The order
rejected the district court’s decision to require Byrnes’s participation in the
proceedings (as he was not a party) and its failure to give notice and to conduct a
hearing on the indirect contempt charge. It observed that Byrnes was “deemed
‘guilty’ of diverting the checks, without his ‘guilt’ having been established in
accord with any particular burden of proof, whether it be civil or criminal
following a proceeding which afforded [him] any due process rights.”
Additionally, he was “deemed to be less than candid and cooperative with the
Shelby District Court, and therefore, declared as a diverter of funds, and all
without notice of the contempt charge or an opportunity to defend himself in a
formal proceeding from the charge.” The circuit court concluded that the Estate’s
claims required an “adversary proceeding” contemplated by the provisions of KRS
24A.120(2). The order of the district court was vacated.
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In a motion filed on May 22, 2020, the Estate sought our discretionary
review. By order entered on October 6, 2020, we granted the motion.
The Estate argues that the circuit court erred by concluding that it had
exclusive jurisdiction to adjudicate the issues raised. We disagree.
Our circuit courts are courts of general jurisdiction with authority over
a wide variety of cases. KY. CONST. § 109; Hisle v. Lexington-Fayette Urban
County Government, 258 S.W.3d 422 (Ky. App. 2008). Our circuit courts are
vested with authority to adjudicate all matters of controversy arising under
common law, equity, statute, or the Kentucky Constitution unless the Constitution
requires that the matter be resolved by another body of the government or another
court. Hisle, supra. As the jurisdiction of the circuit court is conferred by our
Constitution, it is not subject to limitation or infringement by statutes enacted by
the legislature. Id.In contrast to the extensive subject matter jurisdiction created by the
Constitution for circuit courts, district courts have limited jurisdiction that may be
exercised only under statutory limits. Id. The provisions of KRS 24A.120 define
the jurisdiction of district courts. First, the district court is granted jurisdiction
over civil cases where the amount in controversy does not exceed five thousand
dollars, exclusive of interest and costs. KRS 24A.120(1). The district court is also
granted jurisdiction over probate matters but only where contested matters do not
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require an “adversary proceeding.” KRS 24A.120(2) (emphasis added). An
“adversary proceeding” must be commenced in the circuit court. A probate matter
is deemed “nonadversarial” where it is not provided by statute to be commenced in
circuit court. KRS 24A.120(3). Thus, the district court exercises jurisdiction over
all probate matters except those matters which can be addressed in actions that by
statute may be commenced in the circuit court.
The provisions of KRS 395.510 permit the personal representative, a
legatee, a distribute, or creditor of an estate to file an action in circuit court seeking
settlement of the estate. KRS 395.515 provides that the petition must state the
amount of the debts and the nature and value of the property -- real and personal --
of the decedent so far as known to the plaintiff. If it appears that there is a genuine
issue concerning the right of any creditor, beneficiary, or heir-at-law to receive
payment or distribution, or if it appears that there is a genuine issue as to what
constitutes a correct and lawful settlement of the estate, that issue may be
adjudicated by the court. Id. Because the circuit court is specifically vested with
jurisdiction to settle the estate under this provision, we believe that it is also
authorized to determine ownership of the assets claimed by the estate, including
disputes concerning ownership of personal property -- in this case, the disputed
checks. As KRS 395.510 specifically authorizes the commencement of a
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settlement action in circuit court, the action is considered an “adversary
proceeding” under KRS 24A.120(2) over which the district court lacks jurisdiction.
While the district court has jurisdiction to oversee nonadversarial
probate proceedings involving the management and settlement of estates, the
proceedings conducted by the Shelby District Court involving the Estate’s
allegations against Byrnes and its claims to the disputed PIP benefits were clearly
adversarial in nature. Adjudication of the ownership of personal property claimed
by the Estate in this case, including the Estate’s allegations against Byrnes of
conversion, constitutes an “adversary proceeding” over which the district court
lacked jurisdiction.
A judgment entered by a court without subject matter jurisdiction is
void. See Covington Trust Co. of Covington v. Owens, 278 Ky. 695, 129 S.W.2d
186 (1939); Wagner v. Peoples Bldg. & Loan Ass’n, 292 Ky. 691, 167 S.W.2d 825(1943). Unlike personal jurisdiction, parties cannot by their actions consent to the
court’s exercise of subject matter jurisdiction. Duncan v. O’Nan, 451 S.W.2d 626(Ky. 1970). Consequently, the Shelby Circuit Court did not err by vacating the
order of the Shelby District Court.
The order of the Shelby Circuit Court is affirmed.
ALL CONCUR.
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BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Kelli E. Brown Timothy Denison
Prospect, Kentucky Louisville, Kentucky
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