text:
    Phillip Paul MOORE Appellant, v. COMMONWEALTH of Kentucky Appellee.
    No. 2004-SC-0572-MR.
    Supreme Court of Kentucky.
    March 17, 2005.
    As Modified April 21, 2005.

      Ashley Rogers Dye, Lexington, KY, Fred E. Peters, Lexington, KY, for Appellant.
    Gregory D. Stumbo, Attorney General of Kentucky, Jeffrey A. Cross, Assistant Attorney General, Criminal Appellate Division, Office of the Attorney General, Frankfort, KY, for Appellee.
   OPINION

This appeal is from a judgment based on a conditional guilty plea in the Fayette Circuit Court which convicted Moore of four counts of theft of identity of another without consent, one count of second-degree criminal possession of a forged instrument, one count of theft of identity without consent, and two counts of fraudulent use of credit cards — over $100 in a six-month period. He was sentenced to a total of twenty years in prison.

Moore presents two issues: whether the search warrant affidavit upon which the search warrant issued was based failed to establish probable cause to search his home; and, if the warrant provided a sufficient nexus between criminal activity and the address supplied or if information not provided by the detective to the magistrate had an effect on whether the good faith exception applies to allow admission of the fruits of the search of his home.

The trial judge denied the motion to suppress. Although the trial judge determined that the affidavit failed to establish probable cause for a warrant, she relied on the good-faith exception pursuant to Crayton v. Commonwealth, 846 S.W.2d 684 (Ky.1992), to refuse to suppress the incul-patory evidence seized from Moore because the affidavit was made in good faith and the police officer had an objectively reasonable belief in the sufficiency of the warrant and the probable cause determination. This appeal followed.

I. Good Faith Exception

The principal issue argued by Moore is whether the trial judge correctly determined that the good faith exception to the exclusionary rule was applicable so as to preclude the suppression of evidence seized from the residence of the defendant.

United States v. Leon, 468 U.S. 897, 104 S.Ct. 3405, 82 L.Ed.2d 677 (1984), determined that evidence seized by police should not be excluded if it is obtained pursuant to a search warrant which may later be determined to be flawed if the officers executing the warrant had an objectively reasonable good-faith belief in the probable cause determination by the magistrate and the sufficiency of the warrant. In such cases, the evidence will not be suppressed.

There are some further considerations that limit application of the good faith exception. Leon, supra, went on to state that suppression of evidence is appropriate despite availability of the exception where the judge issuing the warrant was misled by information in an affidavit that the affi-ant knew was false or would have known was false except for his reckless disregard for the truth. Likewise, availability of this good faith exception vanishes where the judge abandoned his detached and neutral judicial role, and the affidavit is so lacking in indicia of probable cause as to render official belief in its official existence entirely unreasonable and that the warrant is so facially deficient that the executing officer cannot reasonably presume it to be valid.

Crayton v. Commonwealth, supra, essentially adopted the holding in Leon, stating that the application of a good faith exception to the warrant requirement, as articulated in Leon, does not violate Section Ten of the Kentucky Constitution.

Here, there were no reasonable grounds to believe that the affidavit supporting the warrant was lacking in indicia of probable cause. There was no showing that the officer omitted facts deliberately or recklessly and the inclusion of omitted facts would have bolstered the showing of probable cause rather than undermined it. The warrant was not so facially deficient that an executing officer could not reasonably presume it to be valid. The affidavit in question sets out numerous details regarding the criminal enterprise. Considering all of the circumstances, including information known to the police officer and not set forth in the affidavit, it is readily apparent that the officer acted in good faith and in accordance with the exception. The officer testified at length in the suppression hearing and indicated that prior to preparing the affidavit, she had visited the premises and conducted both surveillance and investigation into the situation. The landlord had advised her that Moore rented an apartment there and she observed a repossession of his vehicle outside the residence. She testified that she had no reason to believe that Moore lived or worked anywhere else other than the address that she was investigating.

For the purposes of determining the availability of the Leon exception in this case, the trial judge properly considered matters outside the affidavit. Cray-ton tolerates consideration of matters outside the affidavit in a good-faith determination. United States v. Martin, 297 F.3d 1308 (11th Cir.2002), states that the majority of federal circuits that have examined this question find that a reviewing court may look outside the four corners of the affidavit to determine whether an officer acted in good faith. United States v. Simpkins, 914 F.2d 1054 (8th Cir.1990), stated that when assessing the objective good faith of police executing a warrant, we must look to the totality of the circumstances, including any information known to the officer but not presented to the issuing magistrate.

II. Search Warrant

The affidavit in support of the search warrant stated that a local bank reported a fraudulent account creation using the following information: name of Phillip P. Moore, 3690 Rabbits Foot Trail Apt. # 7, Lexington, KY 40503, and the account was set up using fraudulent information. The social security number used to open the account does not belong to Phillip P. Moore but belongs to [an individual] in Las Vegas, Nevada. The account was funded with “a computer generated check drawn on the account of Justice Enterprises, Stella Justice, President, Harold, KY, 41635.” The bank employee-informant also reported that this check not only was returned for Not Sufficient Funds (NSF), but that the drafted bank reported that the account was a personal account, not a business account. In addition, that bank reported to the informant that several other checks bearing the Justice Enterprises business name had been presented to it, all of which had been returned NSF.

In addition to the bank account creation, the affidavit described two fraudulent car purchases made through this account scam. The first was the purchase of a Chevrolet Trailblazer, described by its VIN number, description, and license plate number, that had been obtained through a loan from a third bank. This loan was paid using checks from the account made with the informant-bank. Because of the NSF returns on the payments, repossession had already begun on this vehicle. The second vehicle was a 2003 Jaguar, described by VIN number and license plate number. Moore used the fraudulent social security number in this transaction as well. It further describes that he presented two checks for the transaction, one from the Justice Enterprises and the other from a yet another bank account named “Webworks Internet Specialists” with bank name and account number.

Among other things, the warrant was to search for “... computer graphic files which depict Social Security Cards, State Drivers License, and Federal, State or Local issued documents in a manner that could be used in the production of counterfeit documents”. In addition, it sought “computer hardware, or computer software which can collect, analyze, display, store, transmit or print electronic or magnetic data used in the production of counterfeit documents”. It described the apartment location with particularity and the vehicles with particularity.

Moore claims that the trial judge properly determined that this search warrant failed to establish probable cause to search his residence. In particular, he charges that the petition for the warrant failed to provide a “nexus between the place to be searched and the evidence sought.” United States v. Carpenter, 360 F.3d 591, 594 (6th Cir.2004) citing United States v. Van-Shutters, 163 F.3d 331, 336-7 (6th Cir.1998). He contends that the affidavit was totally lacking in facts connecting the Defendant’s residence to his alleged activities.

In Carpenter, supra, police investigation included flying a helicopter over the residence of the suspect. During the flight, the officers spotted numerous marijuana plants growing “near the residence”. The search warrant petition failed to describe any distance from the plants to the residence but merely that a road connected the plants’ location and the residence. It held that the search warrant as presented failed to state facts sufficient to induce a substantial basis for concluding that incriminating evidence would be found there, in the residence, rather than someplace else. See Id., at 594. It gave examples of what facts needed to be included. The government had conceded the point that the warrant in that case was not based on facts sufficient to conclude probable cause in that case.

Our review of a search warrant must give great deference to the warrant-issuing judge’s findings of probable cause and should not be reversed unless arbitrarily exercised. Courts should review the sufficiency of an affidavit underlying a search warrant in a commonsense, rather than hypertechnieal, manner. The traditional standard for reviewing an issuing judge’s finding of probable cause has been that so long as the magistrate had a substantial basis for concluding that a search warrant would uncover evidence of wrongdoing, the Fourth Amendment requires no more. U.S.C.A. Const. Amend. 4. United States v. Miller, 314 F.3d 265, (6th Cir.2002), reh’g and suggestion for reh’g denied, cert. denied, 539 U.S. 908, 123 S.Ct. 2261, 156 L.Ed.2d 121; see also United States v. Ware, 338 F.3d 476 (6th Cir.2003).

Whether probable cause exists is determined by examining the totality of the circumstances. United States v. Hammond, 351 F.3d 765 (6th Cir.2003). Furthermore, the test for probable cause is whether there is a fair probability that contraband or evidence of a crime will be found in a particular place. See Miller, supra. Probable cause does not require certainty that a crime has been committed or that evidence will be present in the place to be searched. United States v. Hall, 8 F.App. 529, (5th Cir.2001), cert. denied, 536 U.S. 961, 122 S.Ct. 2668, 153 L.Ed.2d 841 (2002).

The facts stated in the affidavit made it clear that Moore was conducting criminal activity, and the nature of that activity involved the production of fraudulent instruments. The nature of the evidence is different from Carpenter.

In Carpenter, the contraband plants were themselves evidence of the crime and no information connecting the suspect to the crime was given. Nothing in the facts suggested that the suspect was the one growing the plants. No facts tied the plants or anything about the plants to any activity in the home sought to be searched. For that reason, probable cause was not supported. Here, a suspect is making fraudulent instruments and producing fraudulent identification to induce financial transactions. That suspect is known to be Moore and there are clear facts indicating at least three transactions in which Moore has committed crimes through fraud.

The bank-informant described at least one of the instruments used to fund the account as a “computer generated check”. Unlike growing marijuana plants, it is known from this fact alone that a computer was used to make the instrument. It was highly likely that Moore used a computer or similar machine in the secrecy of his home. Thus, such a description of the instrument and the certainty that Moore was passing the instruments gave information that provided a nexus between the crime and the place.

This information, together with the numerous bank accounts and false social security number led to adequate suspicion that things used to make the fraudulent instruments as well as records and papers documenting the fraud would be found in his home and the vehicles. It was not certain, but there was a fair probability that such evidence would be found in these particular places, and that is all that the Fourth Amendment requires. See Carpenter, supra, at 594 quoting Illinois v. Gates, 462 U.S. 213, 238-39, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983). This search warrant, under the totality of circumstances in this situation, was issued with substantial basis for probable cause.

The trial judge ruled that the warrant lacked probable cause, but based on the other testimony of the detective, did not suppress the evidence under the Leon exception for good faith. Given that the evidence is admitted either way, we affirm the trial judge for the correct result, albeit for the wrong reasons. Cf. Newman v. Newman, Ky., 451 S.W.2d 417, 420 (1970); Commonwealth v. Congleton, 267 Ky. 22, 101 S.W.2d 210 (1937).

The judgment of conviction is affirmed.

All concur, except Keller, J., who dissents because the affidavit in support of the search warrant for Appellant’s apartment did not establish probable cause that evidence of counterfeiting would be present in the apartment.


source: Caselaw Access Project

author: KNOPF, Judge.

license: Public Domain

text:
    Johnny K. BLANKENSHIP, Appellant, v. Claude J. ACTON; Janie Acton, His Wife; and Stephen Acton, Appellees.
    No. 2003-CA-000903-MR.
    Court of Appeals of Kentucky.
    April 30, 2004.
    As Modified May 14, 2004.
    Case Ordered Published by Court of Appeals June 25, 2004.
    Discretionary Review Denied by Supreme Court April 13, 2005.

      James H. Moore, III, Campbell, Woods, Bagley, Emerson, McNeer & Herndon, PLLC, Ashland, KY, for appellant.
    John G. Prather, Jr., Winter R. Huff, Scott T. Foster, Law Office of John G. Prather, Somerset, KY, for appellee.
    Before COMBS, DYCHE, and KNOPF, Judges.
   OPINION

KNOPF, Judge.

Johnny K. Blankenship appeals from a judgment of the Pulaski Circuit Court which enjoined him from blocking access to an old public road. We agree with Blankenship that a public road which is not a county or state road may be abandoned without formal governmental action. However, the trial court also correctly found that Blankenship did not have a right to obstruct the Actons’ use of the road. Hence, we reverse in part, and affirm in part.

The material facts of this case are not in dispute. The appellant, Blankenship, and the appellees, Claude J. Acton, Janie Acton, and Stephen Acton (the Actons), own property located on or near Kentucky Highway 39 in the Woodstock community of Pulaski County, Kentucky. Kentucky Highway 39 is a paved, two-lane, state-maintained highway that runs from Somerset, Kentucky north through Crab Orchard, Kentucky in Lincoln County and beyond. It was built in or around 1931 to replace a narrow, unpaved road of ancient origin, which was known in Pulaski County as the “Somerset and Crab Orchard Road” or “the Crab Orchard Road.” After the construction of Kentucky Highway 39, remnants of the old road became known as the “old Crab Orchard Road.” The parties agree that the Somerset and Crab Orchard Road was a public thoroughfare, and that prior to 1931, it was recognized to be the main highway between Somerset in Pulaski County and Crab Orchard in Lincoln County. However, there was no evidence that it was ever officially adopted or maintained by Pulaski County as a county road, nor was there any evidence that the original road was maintained by the state.

Kentucky Highway 39 closely follows the path of the older road it replaced. In some sections, Kentucky Highway 39 was placed directly over the old roadbed. In other sections, it deviated from the course of the old roadbed so as to reduce the severity of curves and mitigate the grade to accommodate the increasing use of automobiles on the highway instead of horse drawn vehicles. Unlike the old roadway, the new roadway is paved with a hard surface. No formal action has ever been taken to close the remnants of the old Crab Orchard Road.

The dispute between the parties arises over the use of a remnant of the old Crab Orchard Road which was bypassed by Kentucky Highway 39. Blankenship and the Actons each own tracts which adjoin a remnant of the old Crab Orchard Road on opposite sides. Since the construction of the new road, that section of the old highway has not been used as a public thoroughfare, but has mainly been used to provide access from the new highway to the Actons’ land so that timber and farm crops could be hauled out and fertilizer could be hauled in. There has also been some isolated use of the road by hunters and other persons.

Blankenship acquired his property in June of 1999. After moving onto his property, Blankenship was troubled by vehicles venturing onto the roadbed late at night. He suffered a theft from his property, which he attributes to the accessibility to his property provided by the old roadbed. In an effort to eliminate that accessibility, Blankenship placed a load of dirt on the roadbed, rendering it impassible.

In response, the Actons filed an action in Pulaski Circuit Court seeking to enjoin Blankenship from obstructing access to the road. Blankenship asserted that the road had long since been abandoned and no longer remained a public road. Following a bench trial, the trial court rendered findings of fact, conclusions of law, and a judgment granting an injunction against Blankenship. The trial court concluded that the old Crab Orchard Road was once a public road, and under KRS 178.020 and 178.050, is presumed to remain a public road unless discontinued by formal governmental action. The trial court further noted that there was no evidence that the old road had once been a part of Blankenship’s land. Consequently, even if the road had been abandoned, the trial court concluded that Blankenship had no right to block the old roadbed. Blankenship now appeals.

The central question in this case is whether a public road may be abandoned without formal governmental action. The Actons cite Mills v. Dawson, Brown v. Roberts, and Maggard v. Breeding, for the proposition that once a road is a public road, it always remains a public road unless it is abandoned in the manner stated in the statutes enacted for the purpose. However, these and other older cases.use the terms “county road” and “public road” interchangeably. In fact, prior to its 1964 amendment, KRS 178.010 defined county roads as “all public roads outside the incorporated cities, except primary roads and federal parkways,” but the current version of KRS 178.010(l)(b)defines “county roads” as “public roads which have been accepted by the fiscal court of the county as a part of the county road system, ...”

In Sarver v. County of Allen, the Kentucky Supreme Court discussed the distinction between “county roads” and “public roads” as follows:

Prior to 1914 it was recognized that an “acceptance” by the county could be accomplished informally, e. g., by maintenance of the road at county expense. Riley v. Buchanan, 116 Ky. 626, 76 S.W. 527, 528, 25 Ky.Law Rep. 863, 63 LRA 642, 8 Ann.Cas. 788 (1903). Since the enactment of Ch. 80, Acts of 1914, however, a formal order of the fiscal court has been necessary to establish a county road. Rose v. Nolen, 166 Ky. 336, 179 S.W. 229, 230 (1915); Illinois Central Railroad Co. v. Hopkins County, Ky., 369 S.W.2d 116, 118 (1963). Otherwise, though a road may be “public,” it is not necessarily a “county road.” Ibid. The obvious reason for this particular distinction is, of course, a public policy against holding counties responsible for the upkeep of any and all highways and biways that chance to become “public” through processes of dedication or prescription over which the counties have no choice or control.
As KRS 178.010(b) necessarily implies, most “county roads” were “public roads” before they were accepted as county roads, but it is not necessary that this be so, because a county is statutorily empowered to lay out and establish a county road before acquiring the necessary right-of-way from the owners of the property over which it will be opened. Cf. KRS 178.080.

The Court in Sarver went on to hold that while a county road is necessarily a public road, not all public roads are county roads. Consequently, a county road adopted by formal action after 1914 may only be abandoned by formal governmental action, but a public road that is not a “county road” can be abandoned without formal action. The Court further held that non-use of a public road for over fifteen years constitutes an abandonment of that status.

The trial court relied on KRS 178.020, 178.025, 178.050 and 178.070 to conclude that formal governmental action is necessary to discontinue a public road. However, KRS 178.020, 178.050 and 178.070 address the establishment or discontinuance of county roads. KRS 178.025 addresses only the establishment of public road, not its discontinuance. Thus, these statutes are not applicable to this case.

The Actons also rely on KRS 178.116, which was enacted shortly after the Supreme Court rendered the Sarver opinion and provides for discontinuance of a county road, or a road formerly maintained by the county or state. Sarver indicates that acts by county officials in improving or maintaining a road do not constitute a continued public use sufficient to negate abandonment. In contrast, KRS 178.116(1) requires formal action to discontinue “[a]ny county road, or road formerly maintained by the county or state.” The Actons correctly note that the old Crab Orchard Road was clearly a public road. However, the trial court specifically noted that there was no evidence that the old Crab Orchard Road had been officially adopted or maintained by Pulaski County as a county road, nor was there any evidence that the road had ever been maintained by the state or the county. Consequently, KRS 178.116 does not modify the rule set out in Sarver — a public road that is neither a county road nor a road that was previously maintained by the county or state may still be discontinued by abandonment without formal governmental action.

Nevertheless, we conclude that the trial court properly enjoined Blankenship from obstructing the Actons’s access to the road. Even if the old Crab Orchard Road has lost its status as a public road, Blankenship failed to prove that this section of the road reverted to his tract of land. As the trial court noted, Blankenship’s deed describes the eastern right-of-way of the old Crab Orchard Road as the boundary of his property, and he presented no evidence that the old Crab Orchard Road had once been part of the land owned by him or his predecessors in title. Thus, Blankenship failed to prove that the roadbed would have reverted to his tract, rather than the tract owned by the Actons.

Accordingly, the judgment of the Pulaski Circuit Court is reversed insofar as it declares the old Crab Orchard Road to be a public way, but is affirmed to the extent that it enjoins Blankenship from obstructing the Actons’ access to the road.

COMBS, Judge, concurs.

DYCHE, Judge, concurs in result.

      . According to the official Kentucky Highway map, Kentucky Highway 39 continues north from Crab Orchard to Lancaster in Garrard County. From Lancaster, Kentucky Highway 39 continues north through Garrard County as a state secondary road as far as Buckeye, and as a rural road to the Kentucky River. The highway does not cross the river, but resumes on the other side in Jessamine County, where it terminates in Nicholasville. http://www.kytc.state.ky.us/planning/maps/offi-cialmap/ 03JK.Yhwymap-official.pdf (Accessed February 4, 2004).

      . 197 Ky. 518, 247 S.W. 764, 766 (1923).

      . 246 Ky., 316, 55 S.W.2d 9, 10 (1932).

      . 290 Ky. 701, 162 S.W.2d 523, 524 (1942).

      . In Mills v. Dawson, supra, the Court referred to the road at issue as a public road, but then discussed how the road had been dedicated to the county shortly after it was established. 247 S.W. at 765. Similarly, the roads at issue in 'Williams v. Woodward, Ky. 240 S.W.2d 94 (1951), Maggard v. Breeding, supra, and Brown v. Roberts, supra, had been state or county-maintained roads. See also Freeman v. Dugger, Ky., 286 S.W.2d 894 (1956).

      . See City of Pioneer Village v. Bullitt County ex rel. Bullitt Fiscal Court, Ky., 104 S.W.3d 757, 760 (2003).

      . Ky., 582 S.W.2d 40 (1979).

      . Id. at 41.

      . Id. at 42-43. See also Cole v. Gilvin, Ky.App., 59 S.W.3d 468, 475 (2001).

      . KRS 178.116 provides as follows:
      (1) Any county road, or road formerly maintained by the county or state, shall be deemed discontinued and possession shall revert to the owner or owners of the tract of land to which it originally belonged unless at least one (1) of the following conditions exits:
      (a) A public need is served by the road;
      (b) The road provides a necessary access for a private person;
      (c) The road has been maintained and policed by the county or state within a three year period.
      (2) If the only condition which exists is for a necessary access for a private person, by a joint petition of all parties entitled to such access, the road shall be deemed discontinued and possession shall revert to the owner or owners of the tract of land to which it originally belonged
      (3) If the only condition which exists is for a necessary access for a private person, by joint petition of all parties entitled to such access, the road shall be closed to public use but remain open in accordance with its condition and use for the access of the private parties involved.
      (4) If a county road has been discontinued under the provisions of KRS 178.070, then by a joint petition of all private parties entitled to necessary access the road shall be closed to public use but remain open in accordance with its condition and use for the access of the private parties involved, or by a joint petition of all parties entitled to necessary access the road shall revert to the owner or owners of the tract or tracts of land to which it originally belonged.
      (5) For the purposes of this chapter "necessary access” shall be construed to include access to any farm, tract of land, or dwelling, or to any portions of such farm, tract of land, or dwelling.

      . Sarver, 582 S.W.2d at 43.


author: DYCHE, Judge. COMBS, Chief Judge,

text:
    Roberta Holland DOBSON, Appellant, v. Jerry Lynn DOBSON, Appellee.
    No. 2003-CA-000609-MR.
    Court of Appeals of Kentucky.
    July 23, 2004.
    Discretionary Review Denied by Supreme Court April 13, 2005.
    Case Ordered Published by Supreme Court April 13, 2005.
    Susan M. Meschler, Meschler & Cunningham, Taylorsville, KY, for appellant.
    James L. Theiss, Williamson, Simpson & Theiss, LaGrange, KY, for appellee.
    Before COMBS, Chief Judge; DYCHE, Judge; and EMBERTON, Senior Judge.

      . Senior Judge Thomas D. Emberton, sitting as Special Judge by Assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.

   OPINION

DYCHE, Judge.

The matter before this Court involves several issues in the area of family law, one of which is an issue of first impression. We affirm.

In this matter, we review an opinion from Oldham Circuit Court which ordered appellant, Roberta Holland Dobson, to pay forty percent of a tax debt for the business of her husband, (appellee, Jerry Lynn Dobson), although the Internal Revenue Service had awarded her innocent spouse relief under 26 U.S.C. § 6015, the Innocent Spouse Statute, which grants relief from joint and several liability. Once innocent spouse relief is granted, the IRS will no longer look to that spouse for restitution of underpaid taxes plus interest and penalties that may arise. Roberta argues on appeal that the circuit court erred in assigning any of the debt to her.

The history of the debt owed for taxes revolves around Jerry’s role as a shareholder in Cardinal Chemical Company, a Sub Chapter S corporation, which he owned with his brother. Jerry’s corporate tax returns were audited from 1991 through 1999. After reviewing the audits, the IRS disallowed numerous deductions that were claimed on the corporate tax returns, such as meals, travel expenses, automobile expenses, advertising, etc. Roberta was unaware of the audits, and it is undisputed that her name was forged on the Power of Attorney allowing Jerry’s accountant to handle the audits. Between the back taxes owed, penalties and interest, the circuit court found the total tax liability to be $190,748.82.

Originally, the circuit court assigned fifty percent of the tax liability to each party holding as follows:

As a result of audits, certain deductions including entertainment, auto use and advertising costs were disallowed. As a result of these audits, substantial debts were incurred by the parties to the Internal Revenue Service and the Kentucky Revenue Cabinet. The Court notes that the respondent was granted an innocent spouse status by the Internal Revenue Service. The respondent also testified that she located IRS audits hidden in the basement by the petitioner. The Court further finds that both parties have enjoyed the benefits which resulted from the underpayment of taxes during the calendar years in question. The amount of back taxes which have been paid to date equals $155,406.48. The parties are still liable for an additional sum of $80,972.00 to the Internal Revenue Service/Kentucky Revenue Cabinet. The Court has reviewed Neidlinger v. Neidlinger, [Ky.,] 52 S.W.3d 513 (2001). In Neidlinger, supra, the Court held that there was no presumption that debts were to be divided equally or in the same proportion as marital property. With respect to the taxes which had previously been paid totaling $155,406.48, the Court assigns each party 50% of this liability. With respect to the taxes owing to the Internal Revenue Service/Kentucky Revenue Cabinet totaling $80,972.00, the Court assigns 80% of this liability to the petitioner and 20% of this Lability to the respondent.

After this order was rendered, Roberta filed a motion asking the trial court to reconsider making her fifty percent responsible for the tax debt. Upon reconsideration, the circuit court reevaluated the case and assigned Roberta only forty percent of the tax debt. She timely appealed this ruling.

Roberta testified at the circuit court level that she had no knowledge of the disallowed deductions on the corporate return and had no knowledge that an audit had occurred until she found copies of the reports in the basement. Her testimony was also that she had no involvement in the running of the corporation or the filing of the tax returns.

Roberta relies on her status as an innocent spouse pursuant to the IRS ruling for relief in this matter. The parties have not cited to this Court any Kentucky case law regarding the issue concerning an innocent spouse determination in a dissolution matter. We have not found any Kentucky case law either. However, there is persuasive guidance from other jurisdictions.

The IRS’s determination for innocent spouse relief is not entitled to preemption or res judicata because it involves only an administrative process rather than an adjudication, and the only rights adjudged go to which party the IRS pursues for payment. Ravetti v. U.S., 37 F.3d 1393, 1396 (9th Cir.1994). Thus, Roberta concedes that a determination by the IRS or Federal Tax Court is not dispositive in a division of marital debt that includes tax liability.

The fact that the deductions were initially taken created a lower tax burden and allowed Roberta and Jerry to keep more money in their own pocket. Roberta is simply being required to pay taxes that she would have been responsible for had Jerry not taken the deductions which were later disallowed. See generally, Killough v. Killough, 72 Ark.App. 62, 65, 32 S.W.3d 57, 59 (2000).

Roberta did not present evidence that the money the family had as a result of the underpayment of taxes was not spent on family expenses. Some courts have held that if the funds owed to the IRS are spent on nonmarital pursuits, the debt will be nonmarital. Carter v. Carter, 261 Neb. 881, 626 N.W.2d 576 (2001). However, in this matter, no evidence was presented at all of how the money was spent. There being no evidence that Jerry used the funds for non-marital pursuits, we maintain confidence in the trial court and cannot say that it abused its discretion. Weldon v. Weldon, Ky.App., 957 S.W.2d 283, 286 (1997); see also Clark v. Clark, Ky.App., 782 S.W.2d 56, 60 (1990); Platt v. Platt, Ky.App., 728 S.W.2d 542 (1987); Moss v. Moss, Ky.App., 639 S.W.2d 370 (1982).

Further, this is not a case wherein Jerry simply failed to file taxes on time. Some courts have held that, in a case wherein one spouse failed to file taxes on time, only the initial debt owed to the IRS was marital and the resulting penalties and interest were nonmarital due to the late filings of a dilatory spouse. See Meints v. Meints, 258 Neb. 1017, 608 N.W.2d 564 (2000). However, such is not the case in the matter at hand.

Roberta also argues dissipation of marital assets with regard to the taxes owed. However, the time period and taxes in question occurred while the parties still lived together as husband and wife. And Roberta failed to present any evidence that Jerry used the funds for any nonmari-tal pursuits. “[A] court may find dissipation when marital property is expended (1) during a period when there is a separation or dissolution impending; and (2) where there is a clear showing of intent to deprive one’s spouse of her proportionate share of the marital property.” Brosick v. Brosick, Ky.App., 974 S.W.2d 498, 500 (1998) (citing Robinette v. Robinette, Ky.App., 736 S.W.2d 351, 354 (1987)). Neither of these preconditions having been met in this matter; Roberta’s discussion regarding dissipation of marital funds is irrelevant.

Roberta also concedes that “the Courts uniformly state that income tax liability incurred during the marriage is one of the accepted costs of producing marital income, and therefore is generally held to be treated as marital.” However, she also argues that this result might be different where credible evidence establishes that the delinquent tax paying spouse may be guilty of wrongdoing such as fraud, forgery or using significant funds for nonmar-ital pursuits. See Meints, 608 N.W.2d at 564; Franz v. Franz, 729 So.2d 724, 725 (La.App. 1 Cir.1999).

Here, Roberta argues for relief because the tax liability resulted from deductions which were later disallowed for Cardinal Chemical. She maintains that she had no control over the company or any knowledge of the entertainment, automobile use, and advertising deductions being taken on behalf of the company. Thus, she contends that Jerry’s fraud and forgery have dissipated the marital estate. We disagree.

It was only Roberta’s signature on the power of attorney to allow the accountant for Cardinal Chemical to handle the audit that was forged. There are no allegations that it was forged on the tax returns. Roberta does not contend that the accountant incorrectly handled the audits, and she presented no evidence otherwise of fraud which the circuit court found credible. Based on these facts, we can find no abuse of discretion.

The judgment of the Oldham Circuit Court is affirmed.

EMBERTON, Senior Judge, Concurs.

COMBS, Chief Judge, Dissents and Files Separate Opinion.

COMBS, Chief Judge,

Dissenting.

I dissent. Both forgery and fraud deprived Roberta of any opportunity to have the knowledge necessary to question her husband’s behavior. Even the IRS recognizes that the wrongful behavior of one spouse should not be imputed to an innocent spouse. 26 U.S.C. 6015. Where the lesser infraction of failure to file returns on time has been involved, the IRS has absolved the innocent spouse of liability for penalties and interest. Meints, supra.

The violations at issue here are far more serious and pervasive than a late filing. These parties are not in pari delicto. To impose such a financial burden on Roberta is clearly punitive in effect where she has been determined to be innocent of wrongdoing.

The initial issue is not a showing of how the revenue was spent (i.e., for marital versus nonmarital purposes). What is central to this case is a determination of wrongdoing with an allocation of the financial burden to the spouse who perpetrated the fraud. Equity and due process clearly dictate that Roberta should not pay a pro-rata share of the delinquent taxes and penalties where Jerry is 100% guilty of the fraudulent conduct.

Consequently, I would reverse the order of the trial court.


author: DYCHE, Judge.

text:
    HOME DEPOT, U.S.A., INC., Appellant, v. SAUL SUBSIDIARY I LIMITED PARTNERSHIP, a Maryland Limited Partnership, Appellee.
    Nos. 2002-CA-002118-MR, 2003-CA-001148-MR.
    Court of Appeals of Kentucky.
    July 30, 2004.
    Rehearing Denied Oct. 6, 2004.
    Discretionary Review Denied by Supreme Court April 13, 2005.
    Phillip D. Scott, Michael L. Ades, Anne A. Chesnut, Greenebaum Doll & McDonald PLLC, Lexington, KY, for Appellant.
    William M. Lear, Jr., Steven B. Loy, Stoll, Keenon & Park, LLP, Lexington, KY, for Appellee.
    Before BUCKINGHAM, DYCHE, and TAYLOR, Judges.
   OPINION

DYCHE, Judge.

The parties to this appeal own adjoining tracts of real estate upon which Lexington Mall was developed in the 1970’s. The mall prospered for several years but eventually fell upon hard times in the mid-1990⅛. The dispute herein centers upon the mutual covenants contained in the original agreement that the parties’ predecessors in title entered into which permitted the development of the mall (the 1969 agreement), and the enforcement of those covenants. The Fayette Circuit Court, on remand from this court in an earlier appeal, adjudged that Home Depot breached those covenants and ordered the demolition of Home Depot’s store on the mall property. Home Depot, as one might expect, does not want to lose a valuable, thriving retail business, and it therefore appeals. We affirm.

In order for the mall to be developed on the separately-owned, but contiguous, properties, the parties’ predecessors in title entered into the 1969 agreement, a comprehensive plan setting out mutual restrictive covenants concerning the use of their respective properties. These covenants included provisions mandating the development of the properties

as one (1) mall-type shopping center, compatibly designed and providing entrances into each other’s main area.... The parking area shown on the plan shall be used by the owners of the property described ... as a joint parking area and the means of ingress and egress shown thereon shall be used as joint means of ingress and egress.

The 1969 agreement, however, also recognized that the properties would be “separately developed.”

The present dispute began prior to Home Depot’s purchase of its tract. Home Depot’s intention to construct a freestanding store on a joint parking area within its tract caused Saul to object that such a use would violate the 1969 agreement and the covenants therein in several ways. Saul initiated this litigation prior to Home Depot’s taking title to its tract, seeking, among other things, a permanent injunction against Home Depot’s stated purpose.

Although Home Depot acknowledged that the original covenants existed, it nevertheless proceeded with its purchase of the tract, demolition of a part of the mall located on its tract, and construction of its new, freestanding store thereon. No injunction was issued, and the trial court eventually ruled in favor of Home Depot, holding that its construction did not violate the covenants. This court reversed, finding both parties to be bound by the original agreement, not just Saul, as the trial court originally held. This action was remanded to the trial court “for a determination of the proper remedy for violation of said restrictions.” The Supreme Court of Kentucky denied discretionary review.

The original trial judge was recused on remand, and the new judge conducted extensive mediation sessions in an effort to resolve the matter. The parties came close to an agreement, but the negotiations ultimately failed, and the trial court issued an opinion holding that no evidentiary hearing was required, and that Home Depot had made a deliberate business decision to proceed with its project while the original appeal was pending, knowing the “risk involved yet making a deliberate choice to proceed.” The court further found that Saul’s monetary damages could not be reasonably calculated, that its discretion was extremely narrow, and that Kentucky appellate decisions compelled the enforcement of the covenants. The court issued a mandatory injunction for removal of the offending structure and replacement of the original structure, allowed one year for compliance, but granted Home Depot ninety days within which to make a proposal as to how it could conform without demolition. No acceptable plan was presented, and final judgment was entered. This appeal followed.

Home Depot first argues that the trial judge should have recused herself, on its motion, after having conducted mediation sessions in an attempt to resolve this matter by settlement. Home Depot maintains that it was deprived of due process in that “the decision the Court entered was all based on information outside the record, shared in confidence, and without any evidentiary hearing ... ”; that “[mjediation predisposes the decision-maker to the result”; and that “[t]he judicial code and other authorities forbid what the judge did here.”

KRS 26A.020(1) provides for pretrial recusal of a judge upon showing of partiality.

This statute is an adequate and expedient procedure to review those cases where a judge has declined to disqualify himself or herself. KRS 26A.020(1) serves as a safeguard available to defendants for a determination before trial of the existence of any alleged partiality by the trial court. Second, Petitioner has a constitutional right of appeal from an adverse sentencing decision.

Foster v. Overstreet, Ky., 905 S.W.2d 504, 505 (1995). See also Wilson v. Commonwealth, Ky., 836 S.W.2d 872, 886 (1992), overruled on other grounds by St. Clair v. Roark, Ky., 10 S.W.3d 482, 487 (1999). Home Depot did not pursue this pre-trial remedy.

We disagree that the trial judge was compelled to recuse herself after having conducted mediation in this matter. Our Code of Judicial Conduct specifically provides for such action. Canon 3(B)(7)(d) provides, “A judge may, with the consent of the parties, confer separately with the parties and their lawyers in an effort to mediate or settle matters pending before the judge.” Home Depot suggested or acquiesced in the trial court’s mediation efforts. Home Depot has made no showing of bias or partiality, and we can find none. Absent such showing, the trial court’s hint that it might pass this case to another judge if mediation happened to be unsuccessful is insufficient ground to require recusal. Lovett v. Commonwealth, Ky.App., 858 S.W.2d 205 (1993).

Home Depot next argues that the trial court erred in issuing the mandatory injunction rather than granting other relief to Saul. Home Depot claims that the trial court did not consider the equities of the matter before granting equitable relief to Saul, and that the decision was “clear error.” We disagree. The equities in this case revolve around the uncontradicted facts that Home Depot knew of Saul’s objections before it bought its tract; that Saul had initiated this action to stop Home Depot from continuing with its plans to violate the 1969 agreement before construction began on Home Depot’s new building; that Saul made no actions which could be construed as waiver of its rights under the 1969 agreement; that Home Depot made a “business decision” to proceed with the construction despite these facts; and that no viable and effective alternative was proposed by Home Depot. Home Depot’s injuries herein, if any, are in the nature of self-inflicted.

The trial court cited Marshall v. Adams, Ky., 447 S.W.2d 57 (1969), as authority for its decision:

“If there is a negative covenant, ... the court has no discretion to exercise. If parties for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a court of equity has to do is to say, by way of injunction, that the thing shall not be done. In such a case the injunction does nothing more than give a sanetion of the process of the court to that which already is the contract between the parties. It is not, then, a question of the balance of convenience or inconvenience or of the amount of damage or injury: it is the specific performance by the court of that negative bargain which the parties have made, with their eyes open, between themselves.”

447 S.W.2d at 59-60, citing Van Sant v. Rose, 260 Ill. 401, 103 N.E. 194, 49 L.R.A.N.S. 186 (1913).

Home Depot attempts to distinguish this case from the present, claiming that the trial court’s reliance thereon is “reversible error for myriad reasons.... ” We disagree and find that case to be particularly apt. Home Depot’s predecessor in title entered into the 1969 agreement; Home Depot acknowledged its existence, as well as the existence of the covenants; Home Depot violated those covenants. The trial court’s decision was not error or an abuse of discretion.

As an aside, Home Depot has urged us to revisit the merits of the first appeal, claiming that we can, and should, “reverse [our] own decision as clear and palpable error.” We decline the invitation.

Home Depot’s final argument is that the trial court erred in failing to enforce the settlement between the parties. As the record indicates, and the parties acknowledged in various pleadings and exhibits in the record, there never was an actual agreement. Although the parties were apparently close to agreement, there was no culmination of the process, and therefore nothing to enforce.

The judgment of the Fayette Circuit Court is affirmed.

ALL CONCUR.


author: MINTON, Judge.

text:
    AMERICAN PREMIER INSURANCE COMPANY, D/B/A Atlanta Casualty Group, Inc., Appellant, v. Timothy McBRIDE, Appellee.
    No. 2003-CA-002121-MR.
    Court of Appeals of Kentucky.
    Oct. 8, 2004.
    Discretionary Review Denied by Supreme Court April 13, 2005.

      Robert E. Stopher, David E. Crittenden, Louisville, KY, for appellant.
    Frank N. King, Jr., Henderson, KY, for appellee.
    Before COMBS, Chief Judge; MINTON and VANMETER, Judges.
   OPINION

MINTON, Judge.

The circuit court dismissed American Premier’s automobile property damage subrogation case against Timothy McBride as untimely, applying the two-year statute of limitations found in KRS 413.125, because the complaint was filed more than two years after the claim accrued, which occurred on the date of the automobile accident. We agree with the circuit court’s application of the law, and we affirm the dismissal as time-barred.

On June 10, 2001, a collision occurred between vehicles driven by McBride and by Stephen Roberson (Stephen). Stephen was driving a car owned by his mother, Jane Roberson (Roberson). American Premier insured the Roberson car. American Premier made its first payment to Roberson for property damage to her car on July 17, 2001.

On June 13, 2003, the insurer filed a complaint against McBride seeking recompense for the $6,558.91 which it had paid Roberson for her property damage loss. McBride then filed a motion to dismiss this complaint for failure to state a claim upon which relief may be granted. He asserted that the complaint was untimely, based on the two-year statute of limitations found in KRS 413.125. The circuit court granted McBride’s motion on this basis and dismissed the complaint for failure to state a claim upon which relief can be granted.

On appeal, American Premier raises the following issues: (1) the five-year limitations period found in KRS 413.120(2) is applicable rather than the two-year limitations period found in KRS 413.125; (2) if both KRS 413.125 and KRS 413.120(2) arguably apply, the statute with the longer limitations period governs; and (3) even if the two-year statute of limitations applies, American Premier’s complaint was filed within two years because the claim did not accrue until payment was made to the injured party.

A motion to dismiss a complaint for failure to state a claim should not be granted unless it appears that the pleading party would not be entitled to relief under any set of facts. When considering the sufficiency of the complaint, the allegations must be accepted as true. Because the trial court is not required to make any findings of fact, our review is de novo.

To determine whether the circuit court properly dismissed American Premier’s complaint for failure to state a claim upon which relief may be granted, we must determine the following: (1) the nature of American Premier’s claim, (2) the applicable statute of limitations, and (3) when the claim accrued and the limitations period began to run.

THIS IS A TRUE SUBROGATION CASE

First, we must consider the nature of American Premier’s claim. The insurance company seeks to recover from McBride the $6,558.91 which it has paid to Roberson, its insured, for property damage to her ear. It alleges that the motor vehicle accident which damaged Roberson’s car was the result of McBride’s negligence. The circuit court characterized American Premier’s claim as a subrogation claim. Subrogation is “the rule of law which allows a party under a legal obligation to satisfy the debt of another and acquire the rights of the creditor against the debtor.” The following have been identified as the requisites for subrogation:

(1) payment by one of the debt of another; (2) subrogee is not a volunteer; (3) the debt is not one for which the subro-gee is primarily hable; (4) the entire debt must be paid unless the others who made payment are joined; and (5) sub-rogation must not work any injustice to the rights of others.

In contrast to a claim for subro-gation, a claim for indemnification requires “some form of shared liability (as in the context ... of joint tortfeasors).” Under Kentucky law, there is no common law indemnity without liability. Specifically, common law indemnity requires exposure to liability because of the wrongful act of another with whom one is not equally at fault. For example, in Poole Truck Line v. Com., Transp. Cabinet, a trucking company which was held vicariously liable after one of its drivers struck another truck, killing both drivers, sought indemnification from the Transportation Cabinet, alleging that the fatal accident was caused by the negligent design and construction of the intersection where it occurred.

In the case before us, American Premier shares no liability, direct or vicarious, with McBride for the motor vehicle accident. Instead, it is in what this Court has called “a true subrogation situation!,]” that of “an insurance carrier ... required to make payment to its insured for a loss caused by a third party.” Thus, we find no error in the circuit court’s characterization of American Premier’s claim as one for sub-rogation.

WHY THE TWO-YEAR STATUTE OF LIMITATIONS APPLIES

Next, we must determine what statute of limitations applies to a subrogation claim for property damage arising out of a motor vehicle accident.

Kentucky’s highest court has held that an insurance carrier seeking subrogation for payment of worker’s compensation benefits which it has made to an insured is held to the same limitations period which would be applicable if the insured filed suit against the third-party tortfeasor.

Likewise, this Court has stated, in dicta, that an insurance carrier which is required to make a payment to its insured for a loss caused by a third party is “bound by the limitations period applicable to the claim of the injured insured against the third party.”

To determine the limitations period applicable to American Premier’s subrogation claim, we must look to the statute of limitations which would be applicable if Roberson, the insured, were proceeding directly against the alleged tortfeasor, McBride.

American Premier seeks to recover money it has paid Roberson for damage to her car. Roberson could have proceeded directly against McBride for negligently damaging her car. A car is personal property. So Roberson would be limited by KRS 413.125, which provides the limitations period for an action based on damage to personal property. KRS 413.125 states as follows: “An action for the taking, detaining or injuring of personal property, including an action for specific recovery shall be commenced within two (2) years from the time the cause of action accrued.” The circuit court concluded that American Premier is bound by the same limitations period as Roberson the two-year limitations period found in KRS 413.125.

WHY THE MVRA DOES NOT APPLY

On the contrary, American Premier asserts that the appropriate limitations period is actually five years, based on KRS 413.120(2). KRS 413.120 lists a number of actions which “shall be commenced within five (5) years after the cause of action accrued,” each of which is enumerated in one of the statute’s subsections. Among these subsections is KRS 413.120(2), which covers “[a]n action upon a liability created by statute, when no other time is fixed by the statute creating the liability.” Since this action arose out of a motor vehicle accident, American Premier looked to the Motor Vehicle Reparations Act (MVRA) for an applicable statute of limitations.

Because the MVRA is silent regarding the limitations period for a subrogation claim arising out of a motor vehicle accident, American Premier concludes that KRS 413.120(2) applies. In support of this claim, American Premier relies upon Gray v. State Farm Mut. Auto. Ins. Co. The issue before the court in Gray was determining what limitations period applies to a subrogation action brought by an insurance carrier seeking to recoup its payment of basic reparation benefits under the MVRA to its insured for personal injury. The Gray court concluded that because the MVRA was silent regarding the applicable limitations period for a subrogation claim, the five-year limitations period in KRS 413.120(2) applied.

But we find the instant case to be distinguishable from Gray. Gray dealt with statutory subrogation pursuant to the provisions of the MVRA for basic reparation benefits paid under the act to an insured for personal injury sustained in a motor vehicle accident. In the instant case, the underlying claim is one for property damage, rather than personal injury, arising out of a motor vehicle accident.

Not all actions arising out of motor vehicle accidents are covered by the MVRA. Specifically, we stated in Duncan v. Beck, that the MVRA “does not cover claims for property damage.” As authority to the contrary, American Premier cites KRS 304-39-115 which establishes the loss of use of a motor vehicle for the time reasonably necessary to repair or replace it as a recognizable separate item of damage in any property damage liability claim. KRS 304.39-115 does not appear to apply to the instant case because it addresses only the loss of use of a motor vehicle.

Loss of use and damage to a motor vehicle itself are two distinct measures of recovery. The record is silent regarding whether American Premier paid its insured, Roberson, for the loss of use of her car. But even if it did, it may not raise that issue now for the first time. Because American Premier has based its subrogation claim solely on the amount of money which it paid Roberson to repair her car, KRS 304.39-115 has no direct application. Nevertheless, because the statute was enacted after Duncan was rendered, we must examine its effect, if any, on the scope of the MVRA regarding property damage claims in general.

KRS 304.39-115 is codified within the MVRA. Notwithstanding its location in the code, nothing in the text of the statute suggests that it has any connection to the MVRA. If it is intended to amend the MVRA to include all types of property damage claims, it does not say so on its face. We must accord the words of a statute their commonly understood meaning unless to do so would render an absurd conclusion. We may also “look to the mischief the act was intended to remedy, the historical setting surrounding its enactment, the public policy of the state, the conditions of the law, and all other prior and contemporaneous facts and circumstances that throw intelligent light on the intention of the Legislature.”

Prior to the statute’s enactment, Kentucky common law prevented recovery for loss of use of a motor vehicle unless the vehicle was used for a commercial purpose. Also, loss of use damages were not available for the time needed to replace a motor vehicle that was damaged beyond repair but only for the time needed to repair a damaged vehicle. It is a universal rule of statutory construction that “it must be presumed that the Legislature intended something by what it attempted to do.” Based on the plain meaning of the text of KRS 304.39-115 and its effect, the General Assembly’s purpose in enacting the statute was to do what it did: to alter the common law relating to damages available in a motor vehicle property damage claim, rather than to alter the complex statutory scheme of the MVRA by greatly expanding its coverage.

The limited, available legislative history also supports this conclusion. When this legislation was introduced as House Bill 175 (HB 175), it was merely entitled “AN ACT [sic] relating to automobile insurance,” which was later amended to “AN ACT [sic] relating to motor vehicle insurance.” Neither title indicates legislation proposing a major change to the complex statutory scheme of the MVRA. Indeed, the proposed legislation was originally designated by the reviser as a new section of Subtitle 20, KRS Chapter 304, which would have placed it in the provisions on casualty insurance contracts rather than in the MVRA. But, at the same time, the House Committee on Banking and Insurance proposed a substituted version of HB 175; and its code designation was changed to that of a new section of KRS 304.39-110 to 304.39-120. The reason for this change by the reviser is unknown and is not explained by the changes in the substituted version of HB 175.

The Kentucky Supreme Court has recently clarified that such decisions by the reviser are not to be considered in construing a statute or act. The title of an enactment given to it by the legislative body is a proper consideration in its construction. In contrast, the title of the KRS Chapter where an enactment is placed by the reviser or the location within the code where it is placed are not to be considered in its construction.

It is a fundamental maxim of statutory construction that an act is to be read as a whole. Reading the MVRA as a whole, it is clear that KRS 304.39-115 is not an integral part of the act. In fact, we believe that it was erroneously codified within the middle of the act. And it has no significance on the construction of the MVRA. Reading the MVRA as a whole, even after the enactment of KRS 304.39-115, we reach the same conclusion that a panel of this court did in Duncan v. Beck prior to that statute’s enactment: the MVRA does not cover claims for property damage.

Since the MVRA does not cover property damage claims, any subrogation claim based on property damage arising out of a motor vehicle accident cannot be based on the act’s provisions on subrogation. The underlying claim in this case is common law negligence resulting in property damage. American Premier’s subro-gation claim is based on the provisions of its insurance contract with Roberson and “the principals [sic] of common law subro-gation.” KRS 413.120(2) establishes a five-year limitations period for “[a]n action upon a liability created by statute, when no other time is fixed by the statute creating the liability.” But American Premier’s claim is based entirely upon common law and contractual law. Unlike Gray, this is not an instance in which the action at issue is “[a]n action upon a liability created by a statute.” Therefore, contrary to American Premier’s assertions, KRS 413.120(2) does not apply. We find that the circuit court correctly identified the relevant statute of limitations as KRS 413.125, which establishes a two-year limitations period for actions involving injury to personal property.

THERE IS NO CHOICE BETWEEN COMPETING STATUTES

This determination necessarily disposes of American Premier’s second assertion. Relying on Troxell v. Trammell> American Premier asserts that if KRS 413.120(2) and KRS 413.125 both arguably apply, then the statute with the longer limitations period should govern since “statutes of limitation [sic] are in derogation of a presumably valid claim.” But, unlike Trox-ell, this is not a situation in which a choice must be made between two arguably applicable statutes of limitations. For the reasons previously noted, the circuit court correctly determined that KRS 413.120(2) cannot apply to this action because it is not an action upon a liability created by a statute. Since only KRS 413.125 applies to the instant action, the fact that the limitations period found in KRS 413.120(2) is longer is irrelevant.

THE SUBROGATION CLAIM AROSE ON THE ACCIDENT DATE

Finally, we must determine when American Premier’s claim accrued, beginning the running of the two-year limitations period. The circuit court held that American Premier’s claim accrued at the same time as Roberson’s claim against McBride. Roberson’s claim against McBride accrued when he damaged her car in the accident on June 10, 2001. American Premier did not file its complaint until June 13, 2003. Since this is more than two years after its subrogation claim accrued, the circuit court concluded that American Premier’s complaint was time-barred under KRS 413.125.

But American Premier asserts that its claim did not accrue until July 17, 2001, the date it made its first payment to Roberson for property damage. The filing date of June 13, 2003, is within two years of July 17, 2001. Therefore, American Premier asserts that its suit was timely filed, even if the two-year statute of limitations applies. The insurance carrier relies upon Poole Truck Line, in which this Court stated, “[a] cause of action for indemnification accrues when payment is made to an injured party, not at the time of the underlying accident.”

As previously noted, the instant case is not an action for indemnification but, rather, an action for subrogation. Indeed, American Premier identifies this case as “a property-damage subrogation case” in its brief. Case law concerning the accrual of an indemnification action has no bearing on this subrogation action. In Com. of Kentucky v. All Points Const. Co., one way in which this Court distinguished between a subrogation claim and a claim for indemnification or contribution was to note that the statute of limitations for a claim for indemnification or contribution based on a tort runs from the time of the payment rather than the time of the commission of the tort. The negative implication is that the opposite is true for a claim for subrogation based on a tort. And this is demonstrated in Waters v. Transit Auth. Of River Cityf in which this Court held that an insurance carrier’s subrogation claim to recover workers’ compensation benefits which it had paid to an employee injured in an automobile accident accrued at the same time as the injured employee’s claim against the tortfeasor, at the time of the accident.

American Premier’s subrogation claim based on the underlying tort of negligence committed against its insured accrued when the underlying negligent act occurred. The two-year limitations period for American Premier’s subrogation claim began to run from the date of the motor vehicle accident in which its insured suffered property damage, rather than from the date when it paid its insured. Therefore, the circuit court properly determined that the fact that the complaint was filed within two years of American Premier’s payment to its insured does not save the complaint from being untimely.

DISPOSITION

Because American Premier’s complaint was filed more than two years after its subrogation claim accrued, the circuit court’s order characterized the complaint as untimely and dismissed this action for failure to state a claim upon which relief may be granted. Finding no error, we affirm the order of dismissal.

ALL CONCUR.

      . Kentucky Revised Statutes.

      . Kentucky Rules of Civil Procedure (CR) 12.02(f).

      . Pari-Mutuel Clerks' Union of Kentucky, Local 541 v. Kentucky Jockey Club, Ky., 551 S.W.2d 801, 803 (1977).

      . Pike v. George, Ky., 434 S.W.2d 626, 627 (1968).

      . Wine v. Globe American Cas. Co., Ky., 917 S.W.2d 558, 561 (1996).

      . Bryan v. Henderson Elec. Co., Ky.App., 566 S.W.2d 823, 825 (1978).

      . Board of Educ. of Estill County, Kentucky v. Zurich Ins. Co., 180 F.Supp.2d 890, 892 (E.D.Ky.2002).

      . Clark v. Hauck Mfg. Co., Ky., 910 S.W.2d 247, 253 (1995); ABA Services v. Pineville Community Hosp., Ky.App., 2 S.W.3d 104, 107 (1999).

      . Degener v. Hall Contracting Corp., Ky., 27 S.W.3d 775, 780 (2000).

      . Ky.App., 892 S.W.2d 611, 611-12 (1995).

      . Com. Dept. of Transp. v. All Points Constr. Co., Ky.App., 566 S.W.2d 171, 173 (1977).

      . Whitney v. Louisville & N.R. Co., 296 Ky. 381, 177 S.W.2d 139, 141 (1944).

      . All Points Constr. Co., 566 S.W.2d at 173.

      . KRS 304.39-010 through KRS 304.39-340.

      . Ky.App., 605 S.W.2d 775 (1980).

      . Id. at 775-76.

      . Id. at 776.

      . Id. See KRS 304.39-070(2), KRS 304.39-070(3).

      . Floyd v. Gray, Ky., 657 S.W.2d 936, 939 (1983) (holding that claim for loss of consortium arising out of a motor vehicle accident does not fall within MVRA).

      . Ky.App., 553 S.W.2d 476, 478 (1977), overruled in part on other grounds by Smith v. Higgins, Ky., 819 S.W.2d 710, 712 (1991).

      . KRS 304.39-115 states as follows:
      Loss of use of a motor vehicle, regardless of the type of use, shall be recognized as an element of damage in any property damage liability claim. Such a claim for loss of use of a motor vehicle shall be limited to reasonable and necessary expenses for the time necessary to repair or replace the motor vehicle.

      .Recovery for loss of use of personal property is "a separate item of damages, over and beyond the usual measure of recovery” where the personal property has been damaged through tortious conduct. 22 Am.Jur.2d Damages § 445 (1988). For example, the owner of a car which was damaged through the negligence of another party is entitled not only to traditional property damages-either the difference in the car's market value before and after the accident or the cost to repair the car, whichever is appropriate-but also the reasonable value of the loss of use of the car during the time reasonably necessary to repair the damage. Id.

      . Enacted Ky. Acts 1988, ch. 18, § 1, effective July 15, 1988.

      . As previously noted, the MVRA is found at KRS 304.39-010 through 304.39-340.

      . KRS 446.080, Bailey v. Reeves, Ky., 662 S.W.2d 832, 834 (1984).

      . Grieb v. National Bank of Kentucky’s Receiver, 252 Ky. 753, 68 S.W.2d 21, 23 (1933).

      . See Anderson v. Shields, 314 Ky. 228, 234 S.W.2d 739, 741-42 (1950), Wittmer v. Jones, Ky., 864 S.W.2d 885, 889 (1993).

      . See Wittmer, 864 S.W.2d at 889.

      . Grieb v. National Bond and Inv. Co., 264 Ky. 289, 94 S.W.2d 612, 617 (1936).

      . Journal of the House of Representative of the General Assembly of the Commonwealth of Kentucky [House Journal] at 29 (1988). HB 175, as originally proposed, read as follows:
      The automobile insurer of an insured who damages another person’s automobile in an automobile accident due to the negligence of the insured shall compensate the owner of the automobile damaged by its insured for loss of use of the automobile, regardless of its use, by providing the owner of the damaged automobile with a substitute automobile no later than forty-eight (48) hours after the accident is reported to the insurer and for such time as may be reasonably necessary to repair or replace it.

      . The title was amended pursuant to a recommendation by the House Committee on Banking and Insurance. House Journal at 257.

      . Id.

      . Id. It was also amended when the Senate proposed the addition of what is now the second sentence of KRS 304.39-115. Journal of the Senate of the General Assembly of the Commonwealth of Kentucky at 374 (1988).

      . Popplewell’s Alligator Dock No. 1, Inc. v. Revenue Cabinet, Ky., 133 S.W.3d 456, 463-64 (2004).

      . Id. at 463.

      . Id. at 463-64. See also KRS 446.140.

      . Popplewell's Alligator Dock No. 1, Inc., 133 S.W.3d at 465-66.

      . Cf. id. (holding that KRS 139.483, a tax exemption statute, is an integral part of the Port and River Development Commission Act and must be construed consistently with that act as a whole, despite the fact that the statute was codified in the Sales and Use Chapter, KRS Chapter 139).

      . See Complaint at ¶ 7.

      . See id. at ¶ 9.

      . Ky., 730 S.W.2d 525 (1987).

      . Id. at 528.

      . 892 S.W.2d 611.

        .Id. at 612.

      . Appellant’s Brief, Introduction at 2.

      . 566 S.W.2d 171.

      . Id. at 173.

      . Ky.App., 799 S.W.2d 56 (1990).

        .Id. at 58.


author: RICHARD B. TEITELMAN, Judge. WILLIAM RAY PRICE, JR, Judge,

text:
    HALLMARK CARDS, INC., Appellant, v. DIRECTOR OF REVENUE, Respondent.
    No. SC 86332.
    Supreme Court of Missouri, En Banc.
    March 15, 2005.
    Rehearing Denied April 26, 2005.
    Edward F. Downey, Jefferson City, B. Derek Rose, St. Louis, for appellant.
    Jeremiah W. (Jay) Nixon, Atty. Gen., James R. Layton, State Solicitor, Roger L. Freudenberg, Jefferson City, for respondent.
   RICHARD B. TEITELMAN, Judge.

Hallmark Cards, Inc., seeks review of the Administrative Hearing Commission’s decision that Hallmark is not entitled to interest on sales tax that it overpaid from June 2000 through May 2003. The Commission’s decision is affirmed.

FACTS

The relevant facts are undisputed. During the period from June 2000 through May 2003, Hallmark erroneously paid sales taxes on food and drink sales in its private dining room. On June 18, 2003, Hallmark filed a sales tax refund claim of $695,438.87. The director determined that a refund was due and agreed with Hallmark that the refund amount should be reduced by the amount of tax due on Hallmark’s purchases of meal and drink components. On October 21, 2003, the director issued sales tax refund of $555,705.93. The director did not pay interest on the refund.

On December 11, 2003, Hallmark filed a complaint with the Administrative Hearing Commission seeking approximately $40,000 in interest on its refund claim. On August 31, 2004, the Commission affirmed the director’s decision, holding that Hallmark was not entitled to interest. Hallmark filed a petition for review of the Commission’s decision in this Court.

ANALYSIS

This Court reviews de novo the Commission’s construction of state revenue laws. Buchholz Mortuaries v. Director of Revenue, 113 S.W.3d 192, 193 (Mo. banc 2003). The Commission’s decision will be upheld if authorized by law and supported by competent and substantial evidence upon the whole record. Section 621.193, RSMo 2000.

Hallmark argues that section 144.190.2, in conjunction with section 32.065, entitle it to interest. Section 144.190.2 provides that:

If any tax, penalty or interest has been paid more than once, or has been erroneously or illegally collected, or has been erroneously or illegally computed, such sum shall be credited on any taxes then due from the person legally obligated to remit the tax pursuant to sections 144.010 to 144.525, and the balance, with interest as determined by section 32.065, RSMo, shall be refunded to the person legally obligated to remit the tax, but no such credit or refund shall be allowed unless duplicate copies of a claim for refund are filed within three years from date of overpayment (emphasis added).

Section 32.065 provides that the director shall establish an interest rate reflecting the average predominant prime rate quoted by commercial banks to large businesses, as determined by the Federal Reserve.

Section 144.190.2 and section 32.065 have, until recently, governed the payment of interest on sales tax refunds. On June 19, 2002, however, the general assembly enacted two statutes altering the availability of interest on sales tax refunds. The first statute, section 32.068, provides that “[bjeginning January 1, 2003, the director of revenue shall apply the calculated rate of interest as determined by this section to all applicable situations.” Section 32.068.3 RSMo Supp.2003.

The second statute, section 32.069 RSMo Supp.2003, provides in relevant part that:

1. Notwithstanding any other provision of law to the contrary, interest shall be allowed and paid on any refund or overpayment at the rate determined by section 32.068 only if the overpayment is not refunded within one hundred twenty days from the latest of the following dates:
(1) The last day prescribed for filing a tax return or refund claim, without regard to any extension of time granted;
(2) The date the return, payment, or claim is filed; or
(3) The date the taxpayer files for a credit or refund and provides accurate and complete documentation to support such claim (emphasis added).

“In determining the meaning of a statute, the starting point is the plain language of the statute itself.” International Business Machines Corp. v. Director of Revenue, 958 S.W.2d 554, 557 (Mo. banc 1998). The plain language of section 32.068.3 requires the director, beginning January 1, 2003, to pay interest in all “applicable situations” as calculated by section 32.068, not section 32.065. Hallmark concedes that a refund is an “applicable situation.” Furthermore, section 32.069 removes the director’s authority to pay interest if the refund is paid within 120 days. Hallmark filed its refund claim after January 1, 2003 and admits that the director made the refund within 120 days after the latest of the dates set forth in the statute. Therefore, the plain language of section 32.068 and section 32.069 provides that Hallmark is not entitled to interest on its sales tax refund.

Hallmark nonetheless argues that section 32.068 and section 32.069 are inapplicable because the statutes cannot be given retrospective effect to interfere with its vested right in interest that accrued on the overpaid sales tax prior to the effective date of the statutes. This argument incorrectly assumes that the right to interest vests independent of a refund claim. A vested right is “a title, legal or equitable, to the present or future enjoyment of property or to the present or future enjoyment of the demand, or a legal exemption from a demand made by another.” Lar-Z-Boy Chair Co. v. Director of Economic Development, 983 S.W.2d 523, 524 (Mo. banc 1999) (quoting, Fisher v. Reorganized School Dist., 567 S.W.2d 647, 649 (Mo. banc 1978)). A vested right “must be something more than a mere expectation based upon an anticipated continuance of the existing law.” Id. In this case, interest does not apply to a refund claim unless a statute expressly makes it applicable. International Business Machines Corp. v. State Tax Commission, 362 S.W.2d 635, 641 (Mo.1962). Under section 144.190.2, “no credit or refund shall be allowed unless duplicate copies of a claim for refund are filed.” Although a sales tax may be overpaid, there is no right to receive a refund, and thus no right to receive interest, until a claim is filed under section 144.190.2. Hallmark chose to file its request for a refund after the new statutory provisions became applicable and is, therefore, subject to those provisions.

The decision of the Administrative Hearing Commission is affirmed.

WHITE, C.J, WOLFF, STITH and LIMBAUGH, JJ, and VINCENT, Sp.J, concur.

PRICE, J, dissents in separate opinion filed.

RUSSELL, J, not participating.

WILLIAM RAY PRICE, JR, Judge,

dissenting.

I.

I respectfully dissent because a statute may not be applied retrospectively without clear legislative intent.

Between June 2000 and May 2003, Hallmark overpaid its Missouri and local sales tax. During most of that period, the statutes governing tax refunds mandated that interest be paid on overpaid taxes. Sec. 144.190.2, RSMo 2000. On June 19, 2002, a new statutory scheme governing tax refunds was enacted. In January of 2003, the statutory provision took effect that allows for a new method of interest calculation on tax refunds. As part of this new scheme, the director of revenue can now avoid paying any interest when refunds are handled within 120 days of filing.

On June 18, 2003, Hallmark filed a claim for a refund and interest on all of its overpaid taxes. The director issued the refund and denied the request for all interest both before and after December 31, 2002, because it handled the refund within 120 days of filing. Hallmark disputes the denial of interest on its refund from the period before December 31, 2002, because the statute did not expressly provide for retroactive application.

“Statutes are generally presumed to operate prospectively, unless the legislative intent that they be given retroactive operation clearly appears from the express language of the act or by necessary or unavoidable implication.” Dept. of Soc. Serv. v. Villa Capri Homes, Inc., 684 S.W.2d 327, 332 (Mo.1985) (internal cite omitted). Formerly the payment of interest was governed by section 144.190.2, which provides:

If any tax, penalty or interest has been paid more than once, or has been erroneously or illegally collected, or has been erroneously or illegally computed, such sum shall be credited on any taxes then due from the person legally obligated to remit the tax pursuant to sections 144.010 to 144.525, and the balance, with interest as determined by section 32.065, RSMo, shall be refunded to the person legally obligated to remit the tax....

In contrast, the new scheme established by section 32.069, RSMo Cum.Supp.2003, provides: “Notwithstanding any other provision of law to the contrary, interest shall be allowed and paid on any refund or overpayment at the rate determined by section 32.068 only if the overpayment is not refunded within one hundred twenty days....” Section 32.068, in turn, provides: “Beginning January 1, 2003, the director of revenue shall apply the calculated rate of interest as determined by this section to all applicable situations.” Sections 32.068 and 32.069 give no express indication that the new scheme applies retrospectively to interest accrued before the January 1, 2003 beginning date.

Section 144.190.2, the existing authority before the change, provided for payment of interest regardless of the director’s timeliness in issuing the refund. The majority correctly cites International Business Machines Corporation v. Director of Revenue for the proposition that interest does not apply to a refund claim unless a statute expressly provides for it. 362 S.W.2d 635, 641 (Mo.1962). However, the Court then incorrectly looks to the new statute rather than the statute in existence when Hallmark’s interest was accruing. Section 144.190.2 governed all of Hallmark’s claims arising from refunds pertaining to taxes before the new scheme took effect. Section 144.190.2 expressly provides that “the balance, with interest as determined by section 32.065, RSMo, shall be refunded.... ”

Without an express statutory statement that the old scheme should be retrospectively supplanted, Hallmark is entitled to accrued interest on its refund through December 31, 2002.


author: PER CURIAM.

text:
    In re James F. CREWS, Respondent.
    No. SC 86212.
    Supreme Court of Missouri, En Banc.
    April 5, 2005.

      Nancy L. Ripperger, Sharon K Weedin, Office of the Chief Disciplinary Counsel, Jefferson City, MO, for Informant.
    Jeffrey A. Keevil, Columbia, MO, for Respondent.
   PER CURIAM.

I.

James F. Crews, Respondent, obtained his Missouri license to practice law in 1964. Respondent’s disciplinary action involves multiple violations of the rules of professional conduct in relation to his representation of Tom and Betty Hodge and Betty’s son, Richard Vaughn (collectively Plaintiffs). Respondent is ordered suspended from the practice of law indefinitely with leave to apply for reinstatement in one year subject to the successful completion of this Court’s enumerated conditions.

II.

The facts, as reported by the Disciplinary Hearing Panel (DHP), are as follows: The Plaintiffs suffered injuries when a vehicle driven by Jerry Daniels executed a left-hand turn immediately in front of their vehicle making it impossible for Plaintiffs to avoid the ensuing collision. Respondent initially advised Plaintiffs that their own insurance policy would cover their injuries. After that coverage was exhausted, Respondent agreed to represent the Plaintiffs in a personal injury suit against Mr. Daniels and his employer, Miller County Motors (MCM). The fee contingency agreement for this representation was never memorialized in writing.

Respondent hired an investigator to substantiate whether Daniels was acting within the scope of his employment at the time of the accident; a fact the investigator was unable to confirm. As four years ticked by, Respondent failed to pursue the action further and was unresponsive to the Plaintiffs’ repeated inquiries concerning the case. Finally, the Plaintiffs conducted their own investigation and were able to obtain an affidavit from Mr. Daniels stating that he was acting in the course of his employment at the time of the accident. Due to Respondent’s delay in developing the case, the petition was not filed until five days prior to the running of the five-year statute of limitations.

Respondent was also uncommunicative with the Plaintiffs when MCM filed its motion for summary judgment alleging that Daniels was not acting in the scope of his employment at the time of the accident. Respondent filed no response to this motion and did not attend the hearing on the motion resulting in a ruling in favor of the defendants. Later, at the disciplinary hearing, Respondent would testify that it was unnecessary to defend against a summary judgment motion that he believed was deficient on its face. Respondent discounted the language in Rule 74.04(c)(2) mandating a response to summary judgment motions stating that it “doesn’t mean anything.”

The Plaintiffs discovered their case was dismissed when they contacted the circuit clerk’s office and inquired about when the case would be docketed. Plaintiffs immediately contacted Respondent who informed them the court had mistaken their case for another case he was handling for them. Respondent assured the Plaintiffs that he would have the summary judgment set aside and filed a motion to set it aside alleging that his staff had improperly calendared the hearing date. In response to the Chief Disciplinary Counsel’s (CDC) inquiry, Respondent wrote that he failed to appear at the hearing because he had confused the personal injury case with the other case.

Respondent next informed Plaintiffs that his motion to set aside the summary judgment had been overruled and that he would have to appeal the ruling. Plaintiffs offered to hire additional attorneys to assist but them offer was refused. Respondent’s initial brief with the court of appeals was stricken for failure to comply with Rule 84.04; however, he was given another opportunity to correctly comply with the rule. Respondent failed on his second attempt to correct his briefs deficiencies and the appeal was dismissed. He never informed the Plaintiffs about the first time his brief was rejected, and when pressed for explanations about the dismissal, he informed them that their case was dismissed, he assumed, “because it was not worth pursuing.”

Plaintiffs filed a complaint with the CDC, and after investigation the CDC filed an information against Respondent’s license. The CDC alleged violations of Rules 4-1.1 (competence), 4H.3 (diligence), 4-1.4 (communication), 4-1.5(c) (fees), and 4r-8.4(c) (misconduct involving dishonesty). Hearing was held before the DHP and the panel recommended that Respondent be disbarred. The CDC now seeks affirmation of the DHP’s recommendations. This Court has jurisdiction because it has the inherent authority to regulate the practice of law.

III.

The findings of fact, conclusions of law, and the recommendations from the DHP are advisory. This Court reviews the evidence de novo, independently determining all issues pertaining to the credibility of witnesses and the weight of the evidence, and draws its own conclusions of law. Professional misconduct must be proven by a preponderance of the evidence before discipline will be imposed.

Having reviewed the briefs, the transcripts from the DHP hearing and all supporting documentation, and having heard oral argument, the Court finds by a preponderance of the evidence that Respondent committed professional misconduct. Respondent’s multiple positions on the events that transpired not only severely dimmish his credibility, but a close examination of the record reveals that he does not contest the factual events as presented and determined by the DHP. Instead, Respondent maintains that the rules of professional conduct would not have required him to perform at a higher standard. This Court disagrees.

Rule 4-1.1 requires competent representation evidenced by the legal knowledge, skill, thoroughness, and preparation reasonably necessary to complete the representation. Rule 4-1.3 states that a “lawyer shall act with reasonable diligence and promptness in representing a client.” Rule 4-1.4 requires a lawyer to keep a client reasonably informed about the status of a matter, to promptly comply with reasonable requests for information, and to explain matters to the extent necessary to allow the client to make informed decisions regarding the representation. Respondent breached these rules by (1) failing to keep the Plaintiffs informed of the progress of their case, (2) failing to adequately investigate Plaintiffs’ claim, (3) failing to diligently pursue Plaintiffs’ claim, (4) failing to respond to the summary judgment motion when required, and (5) failing to prepare an acceptable appellate brief, even after receiving an additional opportunity to correct the original briefs deficiencies.

Respondent’s consistent position that a response was not required when the defendants filed a motion for summary judgment is not only erroneous but is particularly egregious. Respondent’s assertion that the version of Rule 74.04 in effect at the time did not mandate a response in all situations is incorrect. The rale and case precedent have always been clear that if any allegations in the motion were not sufficiently refuted in a response, or if the response failed to refute those allegations in conformity with the rule, that said allegations would be deemed true.

The entire purpose of a defendant filing a summary judgment motion is to claim that no material facts are in dispute and that the defendant is entitled to a judgement as a matter of law. The summary judgment motion from MCM was premised on their claim that at the time of the accident Daniels was not acting within the scope of his employment — a fact Respondent could have easily disputed had he utilized either Daniels’s affidavit or his subsequently acquired deposition. Failure to dispute these allegations constitutes an admission and a concession that the defendant is entitled to a judgment in its favor. Every practicing attorney should understand the consequences of failing to respond to such a motion, especially an attorney who has been in practice for thirty-nine years.

With regard to the fee arrangement, there is no dispute that the contingency fee agreement was not memorialized in writing in violation of Rule 4-1.5. The purpose of this rule is to ensure mutual understanding between the attorney and the client as to what fees will be charged for the agreed upon services. A simple memorization of these arrangements not only prevents fraud or abuse on the part of attorneys that can discredit the entire profession, but also assists with eliminating unnecessary or frivolous fee disputes raised by clients who are merely dissatisfied with the outcome of the services received. In short, like any other contractual relationship, the fee agreement protects both parties. The failure to comply with the rule is not a mere empty violation or a technicality as Respondent alleges just because no fee dispute actually ensued. The violation is grounds for discipline. The actual level of harm created by the acts or omissions of any attorney determines only the level of discipline imposed.

Rule 4-8.4 prohibits an attorney from engaging in dishonest, fraudulent, or deceitful conduct. The multiple and differing explanations Respondent provided to the Plaintiffs, the court and the DHP with regard to his failure to defend against the summary judgment motion and prepare an acceptable brief for the court of appeals supports the determination that he violated Rule 4-8.4(c).

IV.

The fundamental purpose of an attorney disciplinary proceeding is to “protect the public and maintain the integrity of the legal profession.” It is proper to consider mitigating factors, including the attorney’s previous record, when determining the appropriate discipline.

The CDC seeks an order enforcing the DHP’s recommendation that the Court disbar Respondent. “However, disbarment is reserved only for cases of severe misconduct where it is clear the attorney is not fit to continue in this profession.”

Respondent’s misconduct constitutes violations of duties owed to clients and duties owed to the profession. The American Bar Association’s Standards for Imposing Lawyer Sanctions (1991) (ABA Standards) recommend disbarment under these categories when the lawyer has (a) failed to comprehend fundamental legal doctrines, (b) abandoned or failed to perform legal services, (c) deceived a client, or (d) engaged in misconduct with the intent to obtain a benefit; any of which causes serious injury or potentially serious injury to a client, the public, or the legal system. Suspension, on the other hand, is recommended when a lawyer (a) knowingly fails to perform legal services, (b) knowingly engages in a practice that he or she is not competent to handle, (c) deceives a client, (d) engages in a pattern of neglect, or (e) violates a duty owed to the profession; the result of which causes injury or potential injury to a client, the public, or the legal system.

Respondent’s actions demonstrate a pattern of neglect with prosecuting Plaintiffs’ case that resulted in a potential injury to his clients and the legal profession. While this Court cannot say with one hundred percent certainty that Respondent’s actions ultimately cost the Plaintiffs their claim, what the Court can determine is that Respondent’s actions potentially injured the Plaintiffs by effectively eliminating their opportunity to proceed with a potentially valid claim against MCM. Respondent’s neglectful actions coupled with his non-credible attempt to explain those actions to his clients, the court and the DHP also potentially injure the credibility of the profession as a whole.

It should be noted that Respondent’s conduct does not have to be intentional when it comes to deceiving a client in order to warrant discipline. While Respondent may not have intentionally set out to abuse the professional relationship between himself and his clients, Respondent committed misconduct when attempting to shroud his substandard actions with the varying explanations that he proffered. Further complicating his position has been the steadfast refusal to recognize his breach of ethical principles, even when given the opportunity to do so during this Court’s oral argument.

V.

When determining the level of discipline to impose, the Court considers Respondent’s actions, the mitigating factor that Respondent has practiced law in this state for thirty-nine years with only one minor disciplinary action, and the propriety of sanctions under the Missouri rules and the ABA model rules. Respondent is ordered suspended from the practice of law indefinitely with leave to apply for reinstatement in one year. Prior to filing for reinstatement, Respondent must (1) obtain malpractice insurance in an amount no less than $250,000, subject to the CDC’s approval of the policy; (2) must complete office management, civil procedure and ethical practice continuing legal education courses totaling 15 hours of CLE’s of which at least 3 hours must be ethics credits; (3) must prepare and submit for CDC approval an office management plan; and (4) must retake and successfully pass the Multistate Professional Responsibility Examination.

WHITE, C.J., WOLFF, STITH, TEITELMAN, LIMBAUGH and RUSSELL, JJ., and GAERTNER, Sp.J., concur.

PRICE, J., not participating.

      . In re Mid-America Living Trust Associates, Inc., 927 S.W.2d 855, 856 (Mo. banc 1996).

      . In re Snyder, 35 S.W.3d 380, 382 (Mo. banc 2000).

      . Id.

      . Id.

      . See In re Stanley L. Wiles, 107 S.W.3d 228 (Mo. banc 2003); In re Donaho, 98 S.W.3d 871 (Mo. banc 2003); In re Snyder, 35 S.W.3d 380 (Mo. banc 2000); In re Charron, 918 S.W.2d 257 (Mo. banc 1996).

      . Johnston v. Sweany, 68 S.W.3d 398, 402 (Mo. banc 2002).

      . Rule 74.04; ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 377 (Mo. banc 1993).

      . Sweany, 68 S.W.3d at 402; ITT, 854 S.W.2d at 382.

      . In re Stanley L. Wiles, 107 S.W.3d 228, 229 (Mo. banc 2003).

      . In re Mirabile, 975 S.W.2d 936, 939 (Mo. banc 1998).

      . In re Waldron, 790 S.W.2d 456, 457 (Mo. banc 1990).

      . In re Cupples, 952 S.W.2d 226, 237 (Mo. banc 1997). See also In re Harris, 890 S.W.2d 299, 302 (Mo. banc 1994).

      . In re Skunk, 847 S.W.2d 789, 792 (Mo. banc 1993).

      . The American Bar Association's Standards for Imposing Lawyer Sanctions (1991), Rules 4.0 and 7.0.

      . ABA Standards, Rules 4.41, 4.51, 4.61 and 7.1.

      . ABA Standards, Rules 4.42, 4.52, 4.62 and 7.2. See also In re Cupples, 979 S.W.2d 932, 936 (Mo. banc 1998).

      . ABA Standards, Rule 7.2.

      . See Snyder, 35 S.W.3d at 385.

      . Respondent received a public reprimand in 2002 for violations of the rule on diligence, Rule 4-1.3.