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    COMPASS BANK, Appellant, v. MFP FINANCIAL SERVICES, INC. f/k/a MFP Technology Services, Inc., Appellee.
    No. 05-02-01830-CV.
    Court of Appeals of Texas, Dallas.
    Jan. 12, 2005.

      Jack M. Kuykendall, Law Office of Jack M. Kuykendall, Dallas, for appellant.
    Brian A. Farlow, Maryann Landrigan, Deborah A. Savarese Sloan, Dallas, for appellee.
    Before Justices MOSELEY, RICHTER, and FRANCIS.
   OPINION

Opinion by

Justice MOSELEY.

MFP Financial Services, Inc. f/k/a MFP Technology Services, Inc. (MFP) and Webb Cooley Company, Inc. (Webb Cooley) entered into a settlement agreement resolving disputes between them. Despite Webb Cooley’s undisputed material breach of the settlement agreement, the purchaser of Webb Cooley’s accounts receivables, Compass Bank, sued MFP based on the settlement agreement. After a bench trial, the trial court entered a take-nothing judgment in favor of MFP. In nine issues, Compass Bank challenges the trial court’s findings of fact and conclusions of law in favor of MFP on MFP’s affirmative defenses and claims for offsets, and on Compass Bank’s own affirmative defense of election of remedies. Compass Bank also argues the trial court erred in not entering a money judgment in its favor. We conclude the trial court did not err in: (1) denying Compass Bank’s untimely motion for new trial; (2) holding that MFP had proved its affirmative defense of prior material breach; and (3) holding that Compass Bank was precluded from asserting its affirmative defense of election of remedies or, alternatively, that Compass Bank’s affirmative defense failed. We therefore affirm the trial court’s judgment.

FACTUAL AND PROCEDURAL BACKGROUND

MFP leased computers and other equipment to customers throughout the United States. As owner of the equipment, MFP was responsible for the personal property ad valorem taxes levied by the taxing authorities in the various jurisdictions where the equipment was located. MFP’s lease agreements require the lessees to reimburse MFP for those taxes. Determining each lessee’s correct share of the taxes owed in each jurisdiction required someone to file renditions of property values with the taxing authorities, pay the tax bills, allocate to each lessee its share of the taxes owed on its leased equipment in each jurisdiction, and recover from each lessee its share of the taxes.

In 1994, MFP and Webb Cooley contracted for Webb Cooley to perform some of those services. Pursuant to their agreement, MFP would supply information regarding the lessees. Based on that information, Webb Cooley would file a rendition of property values with each taxing authority. After the tax assessor reviewed the rendition and assessed the value of the property, Webb Cooley then had the discretion to appeal the assessment. After any appeals, the tax assessor would send Webb Cooley a final tax bill. Webb Cooley would then bill each lessee for the taxes owed and for Webb Cooley’s fee. The lessees would pay into a lockbox account, from which Webb Cooley would pay the tax bill and retain its fee (which was based on the tax savings, if any, realized from appeals).

MFP initially paid Webb Cooley a flat fee for its services, but in 1995 they signed a contract changing the flat fee to a fee-for-savings program effective for the tax years 1996 and 1997. The agreements between MFP and its lessees provided only that the lessees were liable for taxes (and not any administrative fees), so any lessee could refuse to pay Webb Cooley’s fee. In addition, Webb Cooley agreed to waive fees for the lessees who opted out of the fee-for-savings program, even if a lessee opted out after the tax service was rendered. Webb Cooley indemnified MFP for all tax liabilities.

The 1995 agreement was automatically continued for a two-year period. Beginning in tax year 1998, the parties orally agreed that MFP would pay the taxes and invoice the lessees for their share of the tax liability and for Webb Cooley’s fee. Pursuant to this agreement, Webb Cooley would prepare billing files and deliver them to MFP. MFP would use the billing files to “rebill” its lessees by sending them tax invoices. MFP would also invoice its lessees for Webb Cooley’s fees. However, Webb Cooley fell behind in providing the billing files, which resulted in delays in rebilling the lessees and paying Webb Cooley. In addition, Webb Cooley was not paying the taxes on a timely basis. These developments led to litigation between MFP and Webb Cooley in 1999, which was resolved through the execution of a settlement agreement dated January 14, 2000. It is this settlement agreement that is the subject of the present suit.

The settlement agreement provided that Webb Cooley would provide MFP, “as soon as reasonably practicable,” the lessee tax information and Webb Cooley’s billing files pertaining to assets taxed in Alabama, Massachusetts, and West Virginia for the tax year 1998, as well as the billing files pertaining to assets taxed in certain other states for the tax year 1999. The settlement agreement also provided that MFP would pay Webb Cooley’s fees associated with each billing file, as calculated under the 1995 agreement.

In July 2000, Webb Cooley sent MFP the billing files and an invoice for $763,063.20 for its services. However, Webb Cooley’s billing files were incorrect and MFP had to completely redo them in order to rebill its lessees for their shares of the taxes. MFP also invoiced its lessees for Webb Cooley’s fees in the amount of $574,896.60. MFP collected most of those fees from its lessees and deducted amounts for certain opt-outs and errors. In October 2000, MFP paid Webb Cooley $163,177.22.

Webb Cooley’s accounts receivables, including any amounts owed to it by MPP, were acquired by Compass Bank through foreclosure and sale. (The parties agree that Compass Bank’s interest in the MPP receivables is subject to all of the limitations, defenses, and offsets that MFP could have asserted against Webb Cooley.) Compass Bank sued MFP for breach of the settlement agreement based on its failure to pay the face value of Webb Cooley’s July 2000 invoice, minus MFP’s payment. MFP answered, asserting various affirmative defenses. MFP also requested a declaratory judgment that Webb Cooley failed to properly perform the tax services and thereby breached the settlement agreement, or in the alternative, that MFP was entitled to certain offsets based on the errors Webb Cooley made in the billing files.

On August 30, 2002, after a non-jury trial, the trial court rendered a take-nothing judgment in favor of MFP on Compass Bank’s claim. The trial court also entered findings of fact and conclusions of law. Shortly after the final judgment was signed, Compass Bank filed a motion to modify, correct, and reform the judgment. Compass Bank also filed a motion for new trial on October 80, 2002, sixty-one days after the final judgment was signed. The motion asserted that one of the parties’ stipulations constituted a judicial admission by MFP establishing its liability under the settlement agreement and contradicting MFP’s defense of excuse based on Webb Cooley’s prior material breach. On December 12, 2002, the trial court heard the motion for new trial and orally overruled it.

Compass Bank appeals, asserting eight issues. The first and eighth issues relate to Compass Bank’s defense of election of remedies. The outcomes of these issues are dispositive of the appeal.

MOTION FOR NEW TRIAL

In its eighth issue, Compass Bank contends the trial court erred in denying its motion for new trial because the language in Stipulation No. 32 established MFP’s liability under the settlement agreement. A motion for new trial must be filed within thirty days after the judgment is signed. Tex.R. Civ. P. 329b(a). Compass Bank did not file its motion for new trial until the sixty-first day after the judgment was signed. “A court may not enlarge the period for taking any action under the rules relating to new trials except as stated in these rules.” Tex.R. Civ. P. 5. Moreover, an order overruling an untimely motion for new trial cannot be the basis of appellate review, even if the trial court acted within its plenary power period. Moritz v. Preiss, 121 S.W.3d 715, 720 (Tex.2003). Accordingly, we resolve Compass Bank’s eighth issue against it.

FINDINGS/CONCLUSIONS REGARDING AFFIRMATIVE DEFENSES

Compass Bank’s first issue attacks the trial court’s findings of fact and conclusions of law regarding two affirmative defenses: MFP’s affirmative defense of prior material breach and Compass Bank’s own unpleaded affirmative defense that despite Webb Cooley’s breach, MFP elected to treat the settlement agreement as continuing in effect.

A. Applicable Law

1. Affirmative Defenses Generally

An affirmative defense is a matter asserted in avoidance of a party’s argument or position, rather than a matter asserted in denial of that party’s position. See Gorman v. Life Ins. Co. of N. Am., 811 S.W.2d 542, 546 (Tex.1991). The party asserting an affirmative defense bears the burden of pleading and proving its elements. See Welch v. Hrabar, 110 S.W.3d 601, 606 (Tex.App.-Houston [14th Dist.] 2003, pet. denied). Rule 94 requires a party to plead affirmatively those affirmative defenses listed in the rule “and any other matter constituting an avoidance or affirmative defense.” Tex.R. Crv. P. 94. If an affirmative defense is not pleaded or tried by consent, it is waived, and the trial court has no authority to make a fact finding on that issue. RE/MAX of Tex., Inc. v. Katar Corp., 961 S.W.2d 324, 327-28 (Tex.App.-Houston [1st Dist.] 1997, pet. denied).

2. Scope and Standards of Review

Findings of fact in a nonjury trial have the same force and dignity as a jury’s verdict. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994); Ashcraft v. Lookadoo, 952 S.W.2d 907, 910 (Tex.App.Dallas 1997), pet. denied, 977 S.W.2d 562 (Tex.1998) (per curiam). When a complete reporter’s record is filed, the trial court’s fact findings may be reviewed for legal and factual sufficiency under the same standards as jury verdicts. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex.1996) (per curiam); Catalina, 881 S.W.2d at 297. In doing so we do not substitute our judgment for that of the fact finder, even if we would have reached a different conclusion when reviewing the evidence. FDIC v. F & A Equip. Leasing, 854 S.W.2d 681, 684 (Tex.App.-Dallas 1993, no writ). Rather, when addressing a legal sufficiency challenge, we view the evidence in a light most favorable to the finding, consider only the evidence and inferences that support the finding, and disregard all evidence and inferences to the contrary. Catalina, 881 S.W.2d at 297. We uphold the finding if more than a scintilla of evidence exists to support it. Id. In reviewing a factual sufficiency challenge, we examine all of the evidence and set aside a finding only if the evidence is so weak or the finding so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Zieben v. Platt, 786 S.W.2d 797, 799 (Tex.App.-Houston [14th Dist.] 1990, no writ); see also Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986) (per curiam).

We do not review a trial court’s conclusions of law for factual sufficiency. Ashcraft, 952 S.W.2d at 910. Rather, we evaluate them independently, determining whether the trial court correctly drew the legal conclusions from the facts. Dallas Morning News Co. v. Bd. of Trustees of Dallas Indep. Sch. Dist., 861 S.W.2d 532, 536 (Tex.App.-Dallas 1993, writ denied). However, incorrect conclusions of law will not require a reversal if the controlling findings of fact will support the judgment under a correct legal theory. See Westech Eng’g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex.App.-Austin 1992, no writ). When findings of fact are included among the trial court’s conclusions of law, we will review them as findings of fact. Sears Roebuck & Go. v. Dallas Cent. Appraisal Dist., 53 S.W.3d 382, 385-86 (Tex.App.-Dallas 2000, pet. denied).

3.Prior Material Breach

“When one party to a contract commits a material breach of that contract, the other party is discharged or excused from any obligation to perform.” Davis v. Allstate Ins. Co., 945 S.W.2d 844, 845-46 (Tex.App.-Houston [1st Dist.] 1997, pet. withdrawn); see Mustang Pipeline Co. v. Driver Pipeline. Co., 134 S.W.3d 195, 196 (Tex.2004) (per curiam). Thus, the contention that a party to a contract is excused from performance because of a prior material breach by the other contracting party is an affirmative defense that must be affirmatively pleaded. See RE/MAX of Tex., Inc., 961 S.W.2d at 327 (citing Tex.R. Civ. P. 94).

It is undisputed that Webb Cooley materially breached the settlement agreement before MFP declined to pay Webb Cooley’s July 2000 invoice. However, Compass Bank asserts that after Webb Cooley’s material breach, MFP elected to treat the settlement agreement as continuing in effect, and thus waived Webb Cooley’s breach as a basis for terminating the contract.

4.Election of Remedies

Compass Bank’s assertion— election of remedies — is also an affirmative defense. France v. Am. Indem. Co., 648 S.W.2d 283, 285 (Tex.1983); Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 850 (Tex.1980). When applicable, election of remedies bars the successful assertion of inconsistent remedies, rights, and positions arising out of the same state of facts. Bocanegra, 605 S.W.2d at 850. The fact situations in which the election of remedies doctrine may apply are so variable that a single principle underlying the doctrine has not been found. Id. at 851. The supreme court has held that an election may constitute a bar to relief when (1) a person successfully exercises an informed choice (2) between two or more remedies, rights, or states of facts (3) which are so inconsistent as to (4) constitute manifest injustice. Id.

The trial court’s findings/conelusions stated that Webb Cooley’s prior material breach excused MFP from further liability under the settlement agreement. The trial court also found that Compass Bank was precluded from asserting, in response to MFP’s affirmative defense of prior material breach, that MFP had elected to treat the settlement as continuing in force and thus waived any breach on Webb Cooley’s part. In its first issue, Compass Bank challenges the sufficiency of the evidence supporting the trial court’s findings/conclusions regarding election of remedies (except finding/conclusion A.14).

B. Compass Bank’s Failure to Plead Election of Remedies

We first address Compass Bank’s attacks on the trial court’s finding/conelusion A.15, which states:

Compass Bank is precluded from asserting the affirmative defense of election of remedies because Compass Bank did not plead this defense; nor did Compass Bank request a trial amendment; nor was the issue tried by consent.

It is undisputed that Compass Bank did not plead election of remedies, nor did it request a trial amendment to do so. Nevertheless, Compass Bank contends finding/eonclusion A.15 is in error as a matter of law for three reasons: (1) Rule 94 does not apply to a matter asserted in response to an affirmative defense; (2) MFP failed to plead prior material breach, and therefore rule 94 did not require it to plead election of remedies in response; and (3) the issue of election of remedies was tried by consent.

1. Applicability of Rule 94

Compass Bank contends that rule 94 does not require a party to plead a matter in avoidance to another matter of avoidance or affirmative defense. It asserts that a “defense is a response to a claim for recovery, not a response to a defense.” Compass Bank asserts that, because it was the plaintiff below, its contention that MFP elected its remedy as to Webb Cooley’s breach is not an affirmative defense, and thus rule 94 did not require Compass Bank to affirmatively plead that contention. We disagree.

Rule 94 requires a party “[i]n pleading to a preceding pleading” to “set forth affirmatively” those matters listed in the rule and “and any other matter constituting an avoidance or affirmative defense.” Tex.R. Crv P. 94. Often such matters are asserted by a party opposing a claim for recovery or relief. However, the language of rule 94 makes clear that it requires the pleading of any “matter(s) constituting an avoidance” of any other matter — affirmative claim or defense — asserted in another pleading, regardless of the alignment of the parties. See id,.; see also Royal Typewriter Co. v. Vestal, 572 S.W.2d 377, 378 (Tex.Civ. App.-Houston [14th Dist.] 1978, no writ). Here, Compass Bank sought to avoid MFP’s affirmative defense of excuse by asserting that MFP had elected to waive Webb Cooley’s prior material breach. Thus rule 94 required Compass Bank to notify MFP of that assertion by affirmatively pleading election of remedies. We reject Compass Bank’s argument to the contrary.

2. Necessity of Pleading

Rule 94 speaks to pleas that must be asserted “in pleading to a preceding pleading.” Compass Bank contends that MFP’s pleadings did not affirmatively assert that it was excused from performing by Webb Cooley’s prior material breach. Therefore, it claims it was not required to plead election of remedies in response.

Compass Bank admits that MFP alleged Compass Bank’s claims “fail, in whole or in part, because of a prior material breach of the written agreement between MFP and Webb Cooley, Inc.” However, Compass Bank argues the phrase “claims fail” refers to MFP’s position that it was entitled to specific offsets against amounts owed to Webb Cooley under the agreement. It asserts that MFP used that phrase several times, and thus that it amounted to mere “boilerplate language” that did not give notice to Compass Bank that MFP was asserting prior material breach as an affirmative defense. Again, we disagree.

The language quoted from MFP’s pleadings was sufficiently clear and direct to put the bank on notice that MFP was relying on Webb Cooley’s prior material breach in defense of Compass Bank’s breach of contract claim, thereby requiring Compass Bank to affirmatively plead election of remedies if it planned to assert that matter in avoidance of MFP’s position.

3. Trial by Implied Consent

Compass Bank asserts that even if rule 94 required it to plead election of remedies, the issue was tried by implied consent and the trial court erred in concluding to the contrary in its finding/conclusion A.15.

(a) Applicable Law and Standard of Review

When unpleaded issues are tried by the express or implied consent of the parties, “they shall be treated in all respects as if they had been raised in the pleadings.” Tex.R. Civ. P. 67. There is nothing in the record to indicate that election of remedies was tried by express consent. However, if election of remedies was tried by implied consent, Compass Bank’s failure to plead that affirmative defense was, in effect, waived. See Tex.R. Civ. P. 90.

Trial by consent is intended to cover the exceptional case where it clearly appears from the record as a whole that the parties tried the unpleaded issue. Mastin v. Mastin, 70 S.W.3d 148, 154 (Tex.App.-San Antonio 2001, no pet.). It is not intended to establish a general rule of practice and should be applied with care, and never in a doubtful situation. Id. Trial by implied consent “applies only where it appears from the record that the issue was actually tried, although not pleaded.” Johnston v. McKinney Am., Inc., 9 S.WBd 271, 281 (Tex.App.-Houston [14th Dist.] 1999, pet. denied) (citation omitted). When evidence relevant to both a pleaded and an unpleaded issue has been admitted without objection, the doctrine of trial by consent should not be applied unless clearly warranted. Id.

Whether an issue is tried by consent is a legal conclusion by the trial court, which it reaches by applying rule of civil procedure 67 and the cases interpreting it to the record of the proceedings as a whole. See Whatley v. City of Dallas, 758 S.W.2d 301, 306 (Tex.App.-Dallas 1988, writ denied); see also State Bar of Tex. v. Kilpatrick, 874 S.W.2d 656, 657-58 (Tex.1994) (per curiam). To determine whether an unpleaded issue was tried by consent, the trial court examines the record not for evidence of the issue, but rather for evidence of trial of the issue. Mastín, 70 S.W.3d at 154. The trial court has broad discretion in determining whether an un-pleaded issue was tried by implied consent. See Whatley, 758 S.W.2d at 806. Although that discretion is to be exercised liberally in favor of justice, trial by implied consent is the exception, not the rule, and should not be allowed in doubtful cases. Id.

(b) The Record

Compass Bank points to several portions of the record that it contends compels the conclusion that its election of remedies affirmative defense was tried by implied consent, and thus that the trial court abused its discretion in concluding otherwise. Those references consist of briefs and arguments before the trial court, certain testimony elicited by MFP’s counsel, and the trial court’s finding A.16 on the merits of Compass Bank’s affirmative defense.

First, Compass Bank’s trial brief discussed cases dealing with a non-breaching party’s election between continuing or ceasing performance under a contract after a material breach by the other party. In a response brief, MFP: (1) argued that “a party does not ‘continue’ a contract by performing the services itself’; and (2) discussed its actions after Webb Cooley’s material breach, asserting that MFP “treated the contract as completed, albeit defectively” and did not insist on any further work by Webb Cooley. The parties also submitted briefing on the issue post-trial (at the request of the trial court). By way of argument in the record below, Compass Bank points us to its opening statements and its and MFP’s closing arguments, as well as the trial court’s post-trial questioning regarding “continuation of the contract.”

Compass Bank also refers to two instances in which MFP’s counsel elicited testimony from its witness, MFP’s lease accountant responsible for the ad valorem taxes (Christopher Morgan), concerning election of remedies. The first exchange is quoted as follows:

Q: At that time when you received the billing files, when you observed the work that you were then going to have to do in order to determine fees that Webb Cooley was actually entitled to, what were your — what did you believe your options were at that point, sir?
A: Well, our options, at the point — I believed our options at this point were to refuse them and to sue, take the legal avenue, or to redo them and carry on and try to settle this matter out of court.
Q: Why did you refrain from the legal avenue at that point in time?
A: Well, I — I felt at the time that Bill [Blankenship, president of Webb Cooley] was living up to his side of the bargain in some respects, especially the fact that he was honoring his agreement with me to waive fees that were uncol-lectable, to give us offsets for those fees. And we thought that this still — even though it was difficult and even though we felt we were treated very poorly, we felt that we could still work this out somehow if we just kept working at it as hard as we could.

The other exchange is quoted as follows:

Q: Once Webb Cooley delivered the July 2000 billing files to you and you reviewed them, at that point, did you look to Webb Cooley for any other services or assistance?
A: No.
Q: Did MFP insist on any other further performance out of Webb Cooley as of that point in time?
A: No.

(c) Analysis

We have carefully reviewed these portions of the record in light of the applicable standard of review — abuse of discretion. We conclude that although the trial court could have, within the exercise of its discretion, decided that the issue was tried by consent, the record does not compel such a conclusion, and thus that the trial court’s decision to the contrary does not constitute an abuse of discretion. The parties’ briefing and arguments show that the parties and the trial court were aware of the issue of election of remedies. However, they do not compel the conclusion that the issue was tried. Moreover, MFP objected in its post-trial brief that Compass Bank failed to plead election of remedies.

“If the record demonstrates that evidence on an issue has been fully developed under circumstances evidencing the parties’ understanding that the issue was being decided, then an issue has been tried by consent and the court should allow amendment of the pleadings.” Mo.-Kan.Tex.R.R. Co. v. Alvarez, 703 S.W.2d 367, 377 (Tex.App.-Austin 1986, writ ref'd n.r.e.). The evidence elicited by MFP’s counsel, which Compass Bank argues compels the conclusion that election of remedies was tried by consent, constitutes the only evidence that relates to election of remedies; the record does not show that Compass Bank produced any evidence or testimony on that issue. Thus, there was no conflicting evidence from both parties on the issue. We agree the second exchange between MFP’s counsel and Morgan relates to the issue of election of remedies, but this one exchange alone does not show the issue was “actually tried.” Further, the evidence elicited in the first exchange was also relevant to an issue set forth in the pleadings — MFP’s contention that, after it received defective billing files, it and Webb Cooley reached oral agreements regarding offsets to which MFP was entitled. As such, this exchange does not compel us to conclude that Compass Bank’s unpleaded affirmative defense was tried by consent. See Johnston, 9 S.W.3d at 281.

Neither is this conclusion compelled by the trial court’s finding/eonclusion A.16. As noted earlier, the effect of the conclusion that election of remedies was not tried by consent is that the trial court had no authority to make a fact finding concerning that issue. See RE/ MAX of Tex., Inc., 961 S.W.2d at 327-28. Paradoxically, however, the court then went on to enter finding/conclusion A.16 on the very issue it found was not tried:

Nevertheless, MFP is not barred from asserting the defense of prior material breach because MFP did not insist on further performance by Webb Cooley, nor did it continue itself to operate under the contract after Webb Cooley’s material breach. (A.16)

Compass Bank also points to this finding/conclusion in support of its contention that the issue was tried by consent. However, the fact that the trial court, in an apparent “belt and suspenders” approach, made this finding as well does not require us to conclude that the trial court abused its discretion in entering conclusion A.15.

We conclude the record before us does not compel the conclusion that Compass Bank’s unpleaded affirmative defense was “fully developed under circumstances evidencing the parties’ understanding that the issue was being decided.” Mo.-Kan.Tex.RR. Co., 703 S.W.2d at 377 (trial by consent justifying allowance of trial amendment). Thus, we conclude that the trial court’s conclusion of law that election of remedies was not tried by consent does not constitute an abuse of discretion.

4. Conclusion

It is undisputed that Compass Bank failed to plead election of remedies. Because rule 94 required Compass Bank to plead that matter if it sought to avoid MFP’s affirmative defense of prior material breach, and because the record did not compel the trial court to conclude that election of remedies was tried by consent, we conclude the trial court did not abuse its discretion in entering finding/conclusion A.15. Therefore, we resolve Compass Bank’s challenge regarding finding/conclusion A.15, as set forth in its first issue, against it.

C. Alternative Findings/Conclusions on Election of Remedies

As noted above, despite the trial court’s conclusion that Compass Bank’s affirmative defense was not tried by consent (finding/conclusion A.15), the trial court went on to make findings of fact and conclusions of law regarding whether Compass Bank proved this defense (finding/conclusion A.11, A.13, and A.16 through A.19). Compass Bank’s first point also challenges the legal and factual sufficiency of these findings.

We have concluded that the trial court did not abuse its discretion in entering conclusion A.15. However, in the interests of justice and judicial efficiency, we will consider whether the evidence was legally and factually sufficient to support the remaining findings of fact concerning Compass Bank’s election of remedies defense.

1. Applicable Law

It is a fundamental proposition of contract law that when one party breaches its contract, the other party is put to an election of continuing or ceasing performance, any action indicating an intention to continue will operate as a conclusive choice, not depriving the injured party of his cause of action for the breach which has already taken place, depriving him only of any excuse for ceasing performance on his own part.

Cox, Colton, Stoner, Starr & Co., P.C. v. Deloitte, Haskins & Sells, 672 S.W.2d 282, 287 (Tex.App.-El Paso 1984, no writ) (citation omitted); see Hanks v. GAB Bus. Servs., Inc., 644 S.W.2d 707, 708 (Tex.1982); Houston Belt & Terminal Ry. Co. v. J. Weingarten, Inc., 421 S.W.2d 431, 435 (Tex.Civ.App.-Houston [1st Dist.] 1967, writ ref d n.r.e.).

2. Discussion

(a) Findings/Conclusions AM Through A.19

The trial court found:

Nevertheless, MFP is not barred from asserting the defense of prior material breach because MFP did not insist on further performance by Webb Cooley, nor did it continue itself to operate under the contract after Webb Cooley’s material breach. (A.16)
MFP did not treat the Settlement Agreement as continuing after Webb Cooley’s material breach. (A.17)
Additionally, MFP did not elect between two inconsistent remedies so as to constitute manifest injustice. (A.18)
MFP prevails on the defense of prior material breach. (A.19)

There is evidence that the billing files MFP received in July 2000 contained the lessee information that MFP had supplied to Webb Cooley. However, Webb Cooley’s calculations did not properly allocate the tax liabilities to MFP’s lessees. Other errors included using the incorrect percentage in calculating Webb Cooley’s fee in most of the files and mistakenly including some lessees who had opted out of the service in previous years. Morgan testified that MFP could not use the files Webb Cooley sent to invoice its lessees. MFP “re-created” the files and used its own files to send tax invoices to its lessees.

Further, both Morgan (of MPF) and William Rosenberg, Compass Bank’s officer supervising the recovery of Webb Cooley’s receivables, testified that the July 2000 invoice was incorrect and should be ignored. Rosenberg testified that the amounts Compass Bank sought were actually the amounts reflected in MFP’s billing flies, not the amounts calculated in Webb Cooley’s billing files. Morgan testified that the October 2000 payment reflected his agreements with Bill Blankenship, who was Webb Cooley’s president, with regard to offsets. According to Morgan, the parties’ relationship after the settlement agreement included offsets because MFP had billed lessees in states covered by the settlement agreement but had not yet collected those amounts, and, further, lessees could still opt-out, if they chose to do so. Morgan testified that he would not have made the October 2000 payment if Blankenship had said “no deals,” that is, if Blankenship had withdrawn his agreement as to offsets.

Morgan further testified that he invoiced lessees for $500,000 and then deducted payments because he and Blankenship discussed waiving certain fees and deducting them against the amount owed, as had been the parties’ relationship before the settlement agreement. He also testified that any amount still owed Webb Cooley after the October 2000 payment was subject to offsets such as penalties and interest from taxes Webb Cooley had not paid before and after January 2000, the date of the settlement agreement. Moreover, as noted above, Morgan answered “no” to the question whether MFP looked to Webb Cooley for “other services and assistance” after delivery of the July 2000 billing files and whether MFP insisted on “any other further performance” from Webb Cooley “as of that point in time.” MFP’s recreating of the billing files, which was Webb Cooley’s performance obligation under the settlement agreement, is an act that is inconsistent with the settlement agreement. Thus, there is some evidence supporting the trial court’s finding that MFP did not insist on further performance by Webb Cooley, nor did it continue itself to operate under the settlement agreement after Webb Cooley’s material breach of sending unusable files. Cfi, e.g., Hanks, 644 S.W.2d at 708-09 (company retained assets of business and continued operation, pursuant to sales contract, after party breached covenant not to compete, thereby waiving right to partially rescind contract). There is also some evidence supporting the trial court’s findings that MFP did not treat the settlement agreement as continuing after Webb Cooley’s breach. Cf. id,.; Houston Belt & Terminal Ry. Co., 421 S.W.2d at 434-85 (parties continued to perform track maintenance contract by repairs and payment, despite argument contract rescinded). In addition, there is some evidence supporting the finding that MFP did not elect between two inconsistent remedies, that is, continuing or ceasing performance, so as to constitute manifest injustice. See Bocanegra, 605 S.W.2d at 851; Hanks, 644 S.W.2d at 708-09.

Nevertheless, Compass Bank argues that the evidence is undisputed that MFP chose to continue the contract after receiving the billing files in July 2000. First, Compass Bank argues that Morgan’s testimony regarding MFP’s decision to “carry on” after receiving the billing files (quoted above) is an admission that MFP continued the contract. However, we conclude that this testimony refers to MFP’s decision to wind up its relationship with Webb Cooley by redoing the files, billing lessees, calculating Webb Cooley’s fee pursuant to the 1995 agreement, and seeking Blankenship’s agreement for any offsets. MFP’s decision after the breach was not restricted to either suing Webb Cooley or continuing under the settlement agreement. Instead, the evidence shows that MFP decided not to sue for breach of the settlement agreement but to wind up its relationship with Webb Cooley pursuant to oral agreements.

Second, Compass Bank argues that the October 2000 payment is evidence that MFP continued the contract by paying Webb Cooley under the terms of the settlement agreement. Specifically, Compass Bank relies on: (1) the $163,177.22 payment itself; (2) Exhibit 78, which is the statement of the amount that accompanied the October 2000 payment, that showed Webb Cooley’s fees less the offsets claimed by MFP and that stated specifically that MFP still owed Webb Cooley about $130,000 after the October 2000 payment; (3) Stipulation 32, which states that “[t]he revised billing files prepared by MFP ... and the “Adjusted Fees Outstanding” column of [Exhibit 78] ... accurately reflect the fees owed to Webb Cooley on behalf of each lessee ... ”; and (4) MFP billed its lessees $574,896.60 for Webb Cooley’s fees and collected those fees.

However, the evidence showed that none of the fees were calculated based on Webb Cooley’s billing files; rather, all amounts were calculated by MFP based on its own work in recreating the billing files. For example, Morgan testified that the October 2000 payment included states not covered by the settlement agreement for which Webb Cooley had delivered billing files. Morgan also testified that the payment included offsets agreed to by Blankenship and that any future payment would have been subject to further offsets, as well as penalties and interest. Specifically, Morgan testified that after deducting offsets, penalties, and interest, the amount owed Webb Cooley was a negative number. Moreover, we note that the money MFP collected as Webb Cooley’s fee was not a payment by MFP to Webb Cooley for any work on the billing files pursuant to the settlement agreement; rather, those fees were invoiced pursuant to the 1995 fee-for-savings agreement. Thus, there was some evidence that Exhibit 78 was not a record of payments due under the settlement agreement. Cf. W. Irrigation Co. v. Reeves County Land Co., 233 S.W.2d 599, 602-03 (Tex.Civ.App.-El Paso 1950, no writ) (by paying for wells under contract, party chose to continue contract, thus depriving it of excuse for ceasing performance). Further, there was some evidence that MFP did not receive or retain any benefit from Webb Cooley under the settlement agreement.

Third, Compass Bank argues that MFP benefited from the settlement agreement because it knew in January 2000 that it intended to offset the payment to a certain lessee, Marathon, as reflected on Exhibit 78 as an offset from the amount of Webb Cooley’s fees. However, Morgan testified that the deduction for Marathon reflected his agreement with Blankenship, after the settlement agreement, to take the offset because Marathon was owed a refund for taxes paid in 1998 and earlier, and Webb Cooley chose to take a deduction from the payment rather than pay Marathon directly. Thus, we conclude, contrary to Compass Bank’s argument, that the Marathon offset had nothing to do with the settlement agreement and is, instead, some evidence that MFP did not benefit from the settlement agreement.

We conclude that some evidence supports the trial court’s findings/conclusions A.16 through A.19. Therefore, we reject Compass Bank’s argument that it established its defense as a matter of law. Moreover, after reviewing all the record evidence pertinent to these issues, we conclude the evidence is factually sufficient to support these findings/conclusions. Therefore, we resolve Compass Bank’s first issue against it to the extent it challenges findings/conclusions A.16 through A.19.

(b) Finding I Conclusion A.13

Next, Compass Bank challenges the sufficiency of the evidence supporting finding/conclusion A.13, that MFP’s payment obligation under the settlement agreement is excused by Webb Cooley’s prior material breach. Compass Bank argues that MFP’s payment obligation was not excused because it chose to continue the contract after it knew the state of the billing files delivered in July 2000, and relies on the same evidence we have reviewed under our analysis of findings/conclusions A.16 through A.19. We have already rejected Compass Bank’s argument that the evidence shows as a matter of law that MFP continued the contract. Accordingly, we reject Compass Bank’s argument that this same evidence is insufficient to support finding/conclusion A. 13. Therefore, we resolve Compass Bank’s first issue against it to the extent it challenges finding/conclusion A.13.

(c) Finding I Conclusion A.11

Finally, Compass Bank challenges finding/conclusion A.11, that a party who has materially breached a contract cannot recover on the contract, and, thus, Compass Bank cannot recover on its breach of contract claim. Compass Bank’s argument is premised on MFP’s continuation of the contract. We have rejected that argument. Moreover, it is undisputed that Webb Cooley committed a prior material breach of the settlement agreement. Accordingly, we resolve Compass Bank’s first issue against it to the extent it challenges finding/conclusion A.11.

CONCLUSION

We conclude the trial court did not err in denying Compass Bank’s untimely motion for new trial, and therefore overrule its eighth issue. We also conclude the trial court did not err in holding that Compass Bank was precluded from asserting election of remedies as an affirmative defense in response to MFP’s defense of prior material breach. Further, in the interests of judicial economy, we conclude the evidence was legally and factually sufficient to support the trial court’s findings against Compass Bank with respect to that election of remedies defense. Therefore, we overrule Compass Bank’s first issue.

Because of our disposition of Compass Bank’s first and eighth issues, we need not address Compass Bank’s remaining issues, in which it attacks the trial court’s findings on the defenses of laches, estoppel, waiver, ratification, and offsets. We affirm the trial court’s judgment.

      .The trial court originally entered findings of fact and conclusions of law on November 6, 2002. On November 18, 2002, Compass Bank filed a request for additional and amended findings of fact and conclusions of law. The trial court ruled on that request by making handwritten notations on the filed document; the notations indicate the trial court's rulings were made on December 2, 2002. The trial court also signed amended findings of fact and conclusions of law on April 16, 2003.

      . Stipulation No. 32 states that “[t]he revised billing files prepared by MFP ... and the "Adjusted Fees Outstanding” column of [Exhibit 78] ... accurately reflect the fees owed to Webb Cooley on behalf of each lessee.... ”

      . See supra note 2.

      . An exception to the general rule that affirmative defenses are waived if not pleaded arises if the other party anticipates defensive matters and sets them forth in its own plead-mgs. See Phillips v. Phillips, 820 S.W.2d 785, 789 (Tex.1991). However, Compass Bank does not assert this exception applies in the context of this case.

      . The trial court findings of fact and conclusions of law pertinent to MFP's prior material breach affirmative defense and Compass Bank’s election of remedies affirmative defense are as follows:
      A party who has materially breached a contract cannot recover on the contract. Thus, Compass Bank cannot recover on its breach of contract claim. (A. 11)
      MFP’s payment obligation under the Settlement Agreement is excused by Webb Cooley's prior material breach. (A. 13)
      Compass Bank defends against this affirmative defense by arguing that a non-breaching party who elects to treat a contract as continuing, despite a prior breach, will be deemed to have elected a remedy and thus waives the right to rescind the contract and deprives himself of any excuse for ceasing performance on his own part. (A. 14)
      Compass Bank is precluded from asserting the affirmative defense of election of remedies because Compass Bank did not plead this defense; nor did Compass Bank request a trial amendment; nor was the issue tried by consent. (A. 15)
      Nevertheless, MFP is not barred from asserting the defense of prior material breach because MFP did not insist on further performance by Webb Cooley, nor did it continue itself to operate under the contract after Webb Cooley’s material breach. (A. 16)

        MFP did not treat the Settlement Agreement as continuing after Webb Cooley’s material breach. (A. 17)
      Additionally, MFP did not elect between two inconsistent remedies so as to constitute manifest injustice. (A. 18)
      MFP prevails on the defense of prior material breach. (A. 19)

        . Kilpatrick is distinguishable from the case before us, but its analysis provides insight on the extent of the trial court's discretion to determine whether an issue was tried by consent. Kilpatrick dealt with the trial court's discretion to permit a trial amendment where evidence relevant to an unpleaded issue was objected to during trial. Kilpatrick, 874 S.W.2d at 658. The supreme court stated that the trial court “may allow the pleadings to be amended and shall do so freely when the presentation of the merits will be sub-served and the objecting party fails to satisfy the court that the amendment would prejudice that party in maintaining the action or defense on the merits.” Id. (emphasis original). The court went on to state that a trial court "may not refuse a trial amendment unless (1) the opposing party presents evidence of surprise or prejudice, or (2) the amendment asserts a new cause of action or defense, and thus is prejudicial on its face.” Id. The court added: If the trial amendment is not mandatory [i.e. involves one of those two situations], then the decision to permit or deny the amendment rests within the discretion of the trial court. Id. (citing TexR. Civ. P. 66 and Greenhalgh v. Serv. Lloyds Ins. Co., 787 S.W.2d 938, 939 (Tex.1990)).
      Here, there was no objection to evidence and no request for a trial amendment. However, if Compass Bank had sought a trial amendment to allege election of remedies, it would have fallen in the "non-mandatory” category, and granting or denying the amendment would have been within the trial court's discretion.

      . MFP’s trial brief was filed after the judgment was signed. Compass Bank argues that MFP waived its objection to the failure to plead election of remedies by failing to object before the judgment, as provided by rule of civil procedure 90. That rule provides, in part:
      Every defect, omission or fault in a pleading either of form or of substance, which is not specifically pointed out by exception in writing and brought to the attention of the judge in the trial court before the instruction or charge to the jury or, in a non-jury case, before the judgment is signed, shall be deemed to have been waived by the party seeking reversal on such account....
      Tex.R. Civ. P. 90; see Webb v. Mitchell, 371 S.W.2d 754, 761 (Tex.Civ.App.-Houston 1963, no writ) ("Where a party files exceptions complaining of defects in pleadings pertaining to matters of substance, it is necessary that he call them to the attention of the trial court before the rendition of judgment, in a non-jury trial, and that he secure an order disposing of the exceptions, if the action taken by the court on the exceptions is not otherwise shown by the record.”). However, Compass Bank waived its complaint that MFP failed to comply with rule 90 by failing to bring this complaint to the attention of the trial court. See Tex.R.App. P. 33.1. In addition, the record shows that the trial court requested briefing from the parties on the issue of "continuation of the contract.” The court stated that it was signing the judgment to "move this case off of dead center” and would consider the parties' briefing after judgment was rendered. Under these circumstances, we conclude that MFP's objection to the lack of pleading was not untimely pursuant to rule 90.

      . Compass Bank also argues that MFP sued Compass Bank for declaratory judgment under the settlement agreement, seeking offsets against amounts owed under the settlement agreement. However, the record shows that the trial court dismissed MFP’s declaratory judgment because it was a "mirror image” of Compass Bank’s case, that is, it was identical to MFP’s affirmative defenses.


source: Caselaw Access Project

author: Justice FITZGERALD.

license: Public Domain

text:
    TEXAS RESIDENTIAL MORTGAGE, L.P., Appellant, v. Shalene PORTMAN, Appellee.
    No. 05-04-00597-CV.
    Court of Appeals of Texas, Dallas.
    Jan. 13, 2005.

      Eugene Michael Grossman, Dallas, Pat Martoccio, Lewisville, Mark William Allan, Jay Chase, Allan, Chase & Associates, Irving, for appellant.
    Mary Goodrich, Michael K. Hurst, God-win Gruber, LLP., Dallas, for appellee.
    Before Justices WRIGHT, FITZGERALD, and LANG-MIERS.
   OPINION

Opinion by

Justice FITZGERALD.

Texas Residential Mortgage, L.P. appeals from the trial court’s denial of its motion to compel arbitration. In a single issue, Texas Residential argues that it did not waive its contractual right to compel arbitration. We agree. Accordingly, for the reasons discussed below, we reverse the trial court’s order and remand the case for further proceedings.

BACKGROUND

Appellee Shalene Portman was hired by Texas Residential pursuant to a Net Branch Agreement. Pursuant to that agreement, Portman promised to sell Texas Residential’s products to home owners and home buyers, and she set up an office for that purpose. Disputes arose with both Texas Residential and a number of Portman’s employees concerning her commissions. On May 6, 2003, Portman sued Texas Residential for breach of the agreement, breach of fiduciary duty, conversion, tortious interference, fraud, conspiracy, negligent misrepresentation, unjust enrichment, and equitable accounting. She sought actual and exemplary damages and recovery of her attorney’s fees. On March 8, 2004, Texas Residential moved to compel arbitration, pursuant to the ADR provision of the parties’ agreement. That provision required the parties to submit their disputes to mediation “prior to the commencement of any litigation.” If the mediation were not successful, then the dispute was to be submitted to arbitration. Portman responded to Texas Residential’s motion, claiming Texas Residential had waived its right to compel arbitration. The hearing on the motion was transcribed, although no evidence was offered by either party. Indeed only the agreement, with its ADR clause, was attached to the motion. At the end of the hearing, the judge announced she was denying the motion on the ground of waiver.

Waiver of Right to Compel Arbitration

When a valid arbitration agreement exists, our supreme court has repeatedly expressed a strong presumption favoring arbitration. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003). Any waiver of an arbitration right must be intentional. EZ Pawn Corp. v. Mandas, 934 S.W.2d 87, 89 (Tex.1996); In re Medallion, Ltd., 70 S.W.3d 284, 288 (Tex.App.-San Antonio 2002, no pet.). Thus, implying waiver from a party’s actions is appropriate only if the facts demonstrate that the party seeking to enforce arbitration intended to waive its arbitration right. EZ Pawn Corp., 934 S.W.2d at 89. The party seeking to prove waiver bears a “heavy burden of proof,” and any doubts regarding waiver are resolved in favor of arbitration. Medallion, 70 S.W.3d at 288. A party does not waive a right to arbitration merely by delay. In re Serv. Corp. Intern., 85 S.W.3d 171, 174 (Tex.2002). Nor will courts find a party has waived a right to enforce an arbitration clause by merely taking part in litigation unless the party has substantially invoked the judicial process to the opposing party’s detriment. EZ Pawn Corp., 934 S.W.2d at 89; Medallion, 70 S.W.3d at 288. The waiver determination is a question of law. Service Corp. Intern., 85 S.W.3d at 174. Accordingly, we review the issue de novo.

Texas Residential argues it did not waive its right to compel arbitration, because it did not engage in the litigation beyond participating in the mediation, which — it stresses — was required by the ADR clause of the agreement. Texas Residential further argues it is inconsistent with Texas law to find a waiver based solely on the passage of time. Portman, in turn, argues Texas Residential did waive its right to compel arbitration by participating in the litigation process for nearly a year after suit was filed. Portman stresses that the motion to compel was filed just two months before the case’s second trial setting. She avers that “all pretrial matters are on the verge of being completed,” and she points to Texas Residential’s participation in proceedings that were purportedly consistent with preparing for trial, including responding to her requests for written discovery, taking a deposition, and attending a mediation. Portman argues she is prejudiced by this late motion because she has spent time and effort conducting discovery “with the singular focus of presenting evidence at trial.”

Again, the test for determining waiver is two-pronged: (1) did the party seeking arbitration substantially invoke the judicial process; and (2) did the opposing party prove that it suffered prejudice as a result? Medallion, 70 S.W.3d at 288. As to the first prong, a party’s attempt at settlement or mediation does not invoke the judicial process so as to waive a claim of arbitration. Such attempts are not inconsistent with a desire to arbitrate and will not preclude the exercise of a right to arbitration. In re Certain Underwriters at Lloyd’s, 18 S.W.3d 867, 876 (Tex.App.-Beaumont 2000, no pet.). However, even if we were to assume — without deciding— that Texas Residential had substantially invoked the judicial process, the second prong of the test would defeat Portman’s claim of waiver. Our review of the record uncovers absolutely no evidence that Port-man suffered prejudice as a result of Texas Residential’s ten-month delay in moving to compel arbitration. Portman’s claim of prejudice rests entirely upon her preparation for trial. But she identifies no work that she did or cost that she incurred in anticipation of trial that she would not have done or incurred in anticipation of an arbitration hearing. In the absence of evidence of prejudice, we find no waiver. See, e.g., EZ Pawn Corp., 934 S.W.2d at 90 (no waiver where arbitration opponent does not meet his burden to show he suffered prejudice). We decide Texas Residential’s single issue in its favor.

Conclusion

We conclude the trial court erroneously-denied Texas Residential’s motion to compel arbitration. Accordingly, we reverse the trial court’s order and remand the case for further proceedings consistent with this opinion.

      . According to the parties, Texas Residential took Portman’s deposition after the trial court denied the motion to compel arbitration, while its appeal was pending in this Court.

      . Portman argues that this appeal should be dismissed for want of prosecution, because Texas Residential “abandoned this appeal." The record does not support this charge.


author: /s/ Joseph E. Lambert Chief Justice

text:
    KENTUCKY BAR ASSOCIATION, Petitioner, v. Lawrence HEMMING (KBA Member No. 89198), Respondent.
    No. 2004-SC-0758-KB.
    Supreme Court of Kentucky.
    Jan. 20, 2005.
   OPINION AND ORDER

On April 27, 2003, Respondent assaulted his mother at her home and caused her a minor physical injury. Respondent’s father also received minor injuries in the assault. On May 9, 2003, Respondent pled guilty to the charge of assault in the fourth degree regarding his mother. The charge of assault regarding his father was dismissed. Respondent was sentenced to a twelve-month term of incarceration, with 90 days to serve in the Jefferson County Community Corrections Center. The Court probated the remainder of Respondent’s sentence for a period of two years supervised probation. Respondent also underwent thirty days of inpatient domestic violence offender treatment, substance/alcohol abuse evaluation/treatment, and psychiatric evaluation/treatment following the 90 days home incarceration.

By letter dated May 14, 2003, Respondent informed the Kentucky Bar Association of his criminal conduct and conviction. Respondent expressed regret for his actions and pledged cooperation to the Kentucky Bar Association in its inquiry into this matter. The Inquiry Commission thereafter issued a Complaint against Respondent on July 21, 2003, which evoked no response from Respondent. A letter was then sent to Respondent on September 23, 2003, alerting him of his failure to respond. Again, he did not respond.

The Inquiry Commission charged Respondent with a violation of SCR 3.130-8.3(b) (Count I), for the domestic abuse that occurred on April 27, 2003, and with a violation of SCR 3.130-8.1(b) (Count II), for not responding to requests for information. However, the Board of Governors concluded that Respondent’s letter reporting his misconduct, under these circumstances, was tantamount to filing a response to the Bar Complaint. As such, Respondent was found not guilty of violating SCR 3.130-8.1(b) and guilty of violating SCR 3.130-8.3(b). Accordingly, it is hereby ordered that:

1. Respondent, Lawrence Hemming, is suspended from the practice of law for thirty days with said suspension probated for a period of two years supervised probation, on the condition that Respondent enroll in the Kentucky Lawyers Assistance Program within 30 days following entry of this Court’s Order.
2. Respondent continue to participate in the Kentucky Lawyers Assistance Program as prescribed by the Program for at least two years. Should Respondent fail to enroll in the Program or fail to continue to participate in the Program for the mandated length of time, the thirty-day suspension shall be enforced.
3. Pursuant to SCR 3.450, Respondent is directed to pay all costs associated with these disciplinary proceedings in the amount of $157.60, for which execution may issue from this Court upon finality of this Opinion and Order.

All concur.

ENTERED: January 20, 2005.

/s/ Joseph E. Lambert Chief Justice


text:
    Michael R. MOLONEY, KBA Member No. 49250, Movant, v. KENTUCKY BAR ASSOCIATION, Respondent.
    No. 2004-SC-1053-KB.
    Supreme Court of Kentucky.
    Jan. 20, 2005.

      Bernard Parfunda, Lexington, KY, Counsel for Movant.
    Bruce K. Davis, Executive Director, Cindra Walker, Deputy Bar Counsel, Kentucky Bar Association, Frankfort, KY, Counsel for Respondent.
   OPINION AND ORDER

The Movant, Michael R. Moloney, moves this Court to impose a Public Reprimand for violating SCR 3.130-1.3; SCR 3.130-1.4(a); SCR 3.130-3.4(c); and SCR 3.130-8.3(c). Movant admits that he is guilty of all violations, and we grant his Motion for a Public Reprimand.

The facts underlying Movant’s violations began during his representation of Client A in a criminal matter in 2000. Client A after discharging her trial attorney employed Movant to pursue an appeal upon a third-degree rape conviction and paid the Movant $2,500. Movant filed an appearance, and after Client A’s sentencing phase, he filed a Notice of Appeal in August of 2000. On December 4, 2000, the Kentucky Court of Appeals issued a Show Cause Order stating that the appeal had not been perfected as required. The Show Cause Order directed that an original response to the Show Cause Order and four copies of any response be filed within twenty days. Movant failed to respond.

On January 24, 2001, the Court of Appeals issued a second Show Cause Order stating that Movant had twenty days to show cause why the appeal should not be dismissed for failure to timely file a brief. The second Show Cause Order stated that the Court of Appeals could not determine if Client A received a copy of the original Show Cause Order. Again, Movant failed to respond within twenty days.

On March 19, 2001, the Court of Appeals dismissed the appeal and directed the Movant to file “certifications that appellant [Client A] was served with a copy of the January 24, 2001, show cause order, and this order dismissing the appeal.” Movant was provided fifteen days to comply with the notice that he would have to show cause why professional conduct sanctions should not be imposed. Improvidently, Movant neither responded nor complied with the requirement that he provide the certifications requested.

As a result of Movant’s repeated failure to respond, the Court of Appeals entered another show cause order imposing a sanction of $150.00. On June 28, 2001, the Court of Appeals received a letter dated June 27, 2001 from Movant and a check for $150. In the letter, Movant claimed he did not receive the March 19, 2000 Show Cause Order. But he did acknowledge receipt of the January 24, 2001 Show Cause Order, and stated as follows:

I apologize to the court for this oversight^] I am in the process of preparing the documentation required by the court to submit to my client. I will follow up this letter with certification required by the March [19, 2000] order which I now have in my possession, having received a faxed copy pursuant to my request on June 27, 2001.

Thereafter, Movant did not file the appropriate documentation or provide the certifications he indicated he would provide. Additionally, Movant failed to provide a copy of the dismissal order or any other order as ordered by the Court of Appeals and as promised by his correspondence on June 27, 2001. Movant did not inform his client in any manner. In fact, Movant led his client to believe that the appeal was active and did not attempt to correct that misapprehension. His client attempted to contact him from June 2001 to June 2003.

In June of 2002, Client A discovered that the appeal had been dismissed when she received a copy of the order of dismissal and an order for her to appear at a resentencing hearing on June 29, 2002. The resentencing hearing was continued until September 6, 2002, and she was sentenced to five years imprisonment. Mov-ant continued to represent Client A during the resentencing hearing. Client A was incarcerated in September of 2002. Mov-ant refunded his compensation to Client A’s mother.

Client A filed a pro se motion to reinstate her appeal based on Movant’s failure to provide competent representation, i.e., timely filing the appropriate documents. The Court to Appeals granted that motion and reinstated her appeal. She obtained other counsel and was released from prison after the reinstatement of her appeal bond.

Movant admits that he violated SCR 3.130-1.3 by failing to timely file a brief in the Court of Appeals and by failing to properly and timely respond to the multiple show cause orders. “A lawyer shall act with reasonable diligence and promptness in representing a client.”

Movant also admits that he violated SCR 3.130-1.4(a) by failing to notify his client that her appeal was dismissed, by failing to provide copies of court orders, and by failing to respond to his client’s requests for information regarding the status of the appeal. SCR 3.130-1.4(a) states, “A lawyer should keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.”

Movant admits that he violated SCR 3.130-3.4(e) by failing to timely file a brief on behalf of his client pursuant to the Kentucky Rules of Civil Procedure and by failing to comply with multiple show cause orders issued by the Court of Appeals. SCR 3.130-3.4(c) states, “A lawyer shall not: knowingly or intentionally disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists.”

Finally, Movant admits that he violated SCR 3.1S0-8.3(c) by misrepresenting to his client that her appeal was pending after it was dismissed, and by misrepresenting to the Court of Appeals that he would provide certification that his client was served with copies of orders. SCR 3.130-8.3(c) states that it is professional misconduct for a lawyer to “[e]ngage in conduct involving dishonesty, fraud, deceit or misrepresentation.”

Considering Movant’s absence of a prior disciplinary record, full and free disclosure to the disciplinary board, a cooperative attitude toward the disciplinary proceedings, the full refund of fees to his client and the imposition of other sanctions, a Public Reprimand is the appropriate sanction in this matter.

Upon the Movant’s acknowledgement that he engaged in multiple instances of professional misconduct as set out above, and upon the foregoing charges and facts, it is ordered that the Movant’s Motion for Public Reprimand be granted. Therefore, it is ORDERED that:

1. Movant, Michael R. Moloney, is hereby publicly reprimanded for violating SCR 3.130-1.3; SCR 3.130-1.4(a); SCR 3.130 — 3.4(c); and SCR 3.130-8.3(c).

2. In accordance with SCR 3.450, Mo-loney is directed to pay all costs associated with these disciplinary proceedings in the amount of $165.44, for which execution may issue from this Court upon finality of this Opinion and Order.

All concur except SCOTT, J., not sitting.

ENTERED: January 20, 2005.

/s/ Joseph E. Lambert Chief Justice

      . SCR 3.130-1.3. See Skaggs v. Kentucky Bar Ass'n, 915 S.W.2d 744 (Ky.1996); Adams v. Kentucky Bar Ass’n, 877 S.W.2d 609 (Ky. 1994) (public reprimand imposed for misrepresenting case status).

      . See Morse v. Kentucky Bar Ass’n, 961 S.W.2d 798 (Ky.1998) (imposing a public reprimand for failing to adequately communicate case status to client or attempting to file required documents); Reskin v. Kentucky Bar

        Ass'n, 98 S.W.3d 863 (Ky.2003) (imposing public reprimand for failing to communicate with client regarding status of case and failing to promptly comply with reasonable request for information).

        .See Kentucky Bar Ass'n v. Jacob, 950 S.W.2d 832 (Ky.1997) (imposing thirty day suspension for failing to comply with a discovery order, knowingly lying to court, and failing to correct misrepresentations of fact in civil proceedings).

        .See Kentucky Bar Ass'n v. Zimmerman, 11 S.W.3d 47 (Ky.2000).


author: /s/ Joseph E. Lambert CHIEF JUSTICE

text:
    KENTUCKY BAR ASSOCIATION, Movant, v. Joel R. EMBRY, KBA Member No. 20905, Respondent.
    No. 2004-SC-0763-KB.
    Supreme Court of Kentucky.
    Jan. 20, 2005.

      Bruce K. Davis, Executive Director, Linda Gosnell, Deputy Bar Counsel, Frankfort, Counsel for Movant.
    Joel R. Embry, Hopkinsville, Counsel for Respondent.
   OPINION AND ORDER

On November 22, 2000, Respondent, Joel Embry, was suspended from the practice of law for failing to pay dues. On April 20, 2001, the Inquiry Commission charged Respondent with one count of violating SCR 3.130-8.3(b) because he pleaded guilty to second-degree manslaughter and first-degree possession of a controlled substance. On January 24, 2003, Respondent was formally sentenced to ten years imprisonment for manslaughter and five years for possession of a controlled substance, to be served concurrently.

The Trial Commissioner recommended that Respondent be suspended from the practice of law for five years subject to conditions including drug tests, that he be allowed to reapply to the KBA for bar membership after five years, and that he be subject to permanent disbarment for any further violations. The Board of Governors of the Kentucky Bar Association (“Board”) voted 19-0 that Respondent was guilty of the charge. The Board voted 13-5 to affirm the Recommendation of the Trial Commissioner, with all conditions, except that the five-year period of suspension is to run from the date of this Order. The Board also concluded that Respondent must participate in the Kentucky Lawyer’s Assistance Program (KYLAP), with the appropriate monitoring to be established by agreement with KYLAP and the Office of Bar Counsel of the KBA. We adopt the recommendation of the Board of Governors that Respondent receive a five year suspension from the practice of law.

It is undisputed that Respondent endured some difficult situations throughout his life. During argument before the Board of Governors, Counsel for Respondent stated that Respondent lived in Hop-kinsville most of his life. His mother stayed home and was afflicted with alcoholism, schizophrenia, and later in her life, was diagnosed with Alzheimer’s disease. His father also drank excessive amounts of alcohol.

Professionally, Respondent had served as a public defender for the Department of Public Advocacy. Respondent took difficult cases including death penalties. In 1982, Respondent was married to a mother of two children. His marriage lasted for about eight years. During those eight years, the daughter died of a brain injury and the son went to prison for shooting a man.

In November 1991, Respondent’s father died and he moved in to take care of his mother. While he was working he was able to hire a caretaker to tend to his mother. However, six months after the death of his father, Respondent began using crack cocaine and became a regular user. As time progressed, Respondent’s use of cocaine increased and his coworkers warned that he should seek treatment for his problem. Respondent responded that he did not want to seek treatment because it would require him to be away from his mother for thirty days. He did not want her committed to a care facility because his father had also refused to do so. He also considered that any drug abuse treatment was unlikely to be successful. Respondent’s drug addiction and financial situation continued to spiral downward until the resources for paying his mother’s caretakers became depleted. In November of 1998, after flunking a drug test, which he agreed to take or face termination, he voluntarily resigned from DPA and attempted to continue in private practice.

On February 7, 1999, Respondent could not awaken his mother, and called for an ambulance. She was transported to the hospital, examined, and diagnosed with pneumonia. Medical personnel determined that due to her emaciated condition that they should contact the police. The police report taken in the emergency room indicated that Respondent’s mother had a body temperature of 85 degrees; that she had multiple sores, abrasions, and contusions; and that she had feces and urine on her body, feet, and legs. During a search of Respondent’s house, the police discovered some deplorable conditions such as a soiled bed and floors. During the search police also discovered drug paraphernalia. His mother died several days later and Respondent was indicted for manslaughter and drug possession. Respondent pleaded guilty to the charges.

On January 24, 2003, Respondent was formally sentenced to ten years imprisonment for manslaughter and five years for possession of a controlled substance, to be served concurrently. On May 1, of 2002, Respondent received shock probation after serving 150 days in jail. Since Respondent’s suspension from the practice of law, he has worked as a lathe operator at a factory and has been free of drugs.

The Board notes that this is a tragic case of a person who was a committed, competent, and conscientious career public defender who had no previous disciplinary charges. As his duties in caring for his mother increased, his drug use escalated. The Board notes that Respondent was remorseful and wished he could practice law again to help people as he did before. Respondent also stated that he would comply with any decision of character and fitness committee, including KYLAP assistance.

Respondent’s admission that he violated SCR 3.130 — 8.3(b) of the Rules of Professional Conduct by his guilty pleas to both felonies is sufficient to support such a violation. SCR 3.130 — 8.3(b) states, “It is professional misconduct for a lawyer to: (b) Commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects.” In Kentucky Bar Association v. Jones, this Court made clear that a plea of guilty to a felony can be such conduct that is calculated to bring a member of the bar into disrepute, and ordered a two-year suspension for two convictions of reckless homicide as a result of that attorney’s drunken driving. Here we have two such pleas that warrant a suspension for five years.

Upon the foregoing facts and charges, it is ordered that the recommendation of the Board of Governors be adopted. Therefore, it is ORDERED that:

1. Respondent is hereby suspended from the practice of law for violating SCR 3.130-8.3 for a period of five years to begin upon the date of this Order.

2. That Respondent comply with the terms of probation imposed by the Court pursuant to his criminal convictions, and that any violation of such terms resulting in the revocation of probation would result in permanent disbarment.

3. That at the end of this suspension Respondent shall be required to reapply for admission to the Kentucky Bar, and that such application be reviewed under the provisions of SCR 3.505, SCR 2.040, and SCR 3.510.

4. In accordance with SCR 3.166(4) and 3.390, Respondent shall, within ten days from the entry of this Opinion and Order, notify in writing all courts in which he may have matters pending and all clients, of his inability to provide further legal services, and furnish the Director of the Kentucky Bar Association with a copy of all such letters. Respondent shall also make arrangements to return all active files to the clients or to new counsel, and shall return all unearned attorney fees and client property to the client and shall advise the KBA Director of such arrangements within the same ten day period.

5.In accordance with SCR 3.450, Respondent is directed to pay all costs associated with these disciplinary proceedings in the amount of $814.59 for which execution may issue from this Court upon finality of this Order.

All concur.

ENTERED: January 20, 2005.

/s/ Joseph E. Lambert CHIEF JUSTICE

      . 759 S.W.2d 61 (Ky.1988).


text:
    INQUIRY COMMISSION, Complainant, v. David W. WILLIAMS, Respondent.
    No. 2004-SC-0740-KB.
    Supreme Court of Kentucky.
    Jan. 20, 2005.
   OPINION AND ORDER

Pursuant to SCR 3.165, the Inquiry Commission petitions this Court to enter an order temporarily suspending Respondent from the practice of law in the Commonwealth of Kentucky. The Inquiry Commission alleges that probable cause exists to believe that Respondent, David W. Williams, whose last known bar roster address is Simpsonville, Kentucky, and who was admitted to the practice of law in this Commonwealth on May 6, 1983, has misappropriated client funds for his own use or has otherwise improperly dealt with client funds. SCR 3.165(l)(a).

During the course of representing Birdie A. Morris in the Shelby Circuit Court, case Hallie T. Morris v. Birdie A. Morris, 03-CI-00337, Williams received from Morris the sum of $110,000 to attempt a settlement of the case. The funds were deposited into Williams’ escrow account on July 17, 2003. Following said deposit, the balance of the escrow account was $110,680.03. On July 18, 2003, a $3,300 check drawn on the escrow account to the Internal Revenue Service bearing Williams’ social security number cleared. On the same day, a second check for $493.65 to Pioneer Credit also cleared the escrow account.

On September 4, 2003, the Shelby Circuit Court ordered Birdie Morris to pay $119,379.70 into the court under CR 67.02, pending entry of final judgment in the case. On October 2, 2003, the Shelby Circuit Court ordered Williams to pay into the Shelby Circuit Clerk’s segregated interest bearing account any and all sums which he held in his escrow account related to the Morris case. A check Williams subsequently issued to the circuit clerk in the amount of $110,000 was returned for non-sufficient funds. A copy of the check and non-sufficient funds notice, as well as an affidavit from Shelby Circuit Judge William Stewart are attached to the Commission’s petition.

In a second unrelated matter, WTSP-NET, LLC, a wholesale internet provider, retained Williams to represent it in lease negotiations with the Webb Companies for office space in the Lexington Financial Center (LFC). After paying Williams $2,300 to review a contract, WISPNET paid him an additional retainer fee of $5,600. There was no written fee agreement.

Based upon Williams’ recommendation that WISPNET deposit the amount of one month’s rent into his escrow account to show the Webb Companies that it was negotiating in good faith, WISPNET provided Williams a check in the amount of $12,800. Williams thereafter sent a letter to the Webb Companies stating, “[P]lease be advised that WISPNET, LLC has provided me with a check for the base rent of $12,800.00, which sum I have escrowed and will pay over to LFC forthwith upon agreement being reached.”

After an agreement was reached between WISPNET and the Webb Companies, Williams was requested to forward the escrowed funds as agreed. Williams then informed WISPNET that he had applied the escrowed funds toward his legal fees, although he did not provide an accounting of either the $5,600 retainer or the escrowed money.

On October 29, 2003, WISPNET’s new legal counsel sent a letter to Williams requesting the return of the $12,800. Williams neither replied nor disbursed any funds to WISPNET or the Webb Companies.

Williams essentially admits all the allegations with the exception that he denies that he was requested to forward the es-crowed funds to the Webb Companies. Williams contends, without any written documentation, that in April 2003, WISP-NET agreed to credit the $12,800 against Williams’ retainer for representation during the ensuing months. Williams states that he did not respond to WISPNET’s request for a return of the money based upon the alleged April agreement.

After a review of the Inquiry Commission’s Petition for Temporary Suspension and the documentation supporting the petition, this Court finds probable cause to believe that Williams “is or has been misappropriating funds the attorney holds for others to his/her own use or has been otherwise improperly dealing with said funds[.]” SCR 3.165(l)(a).

ACCORDINGLY, IT IS THEREFORE ORDERED THAT:

1) David W. Williams is temporarily suspended from the practice of law in the Commonwealth effective this date and until this order is superseded by subsequent order.

2) If it has not already done so, the Inquiry Commission shall initiate disciplinary proceedings against Williams pursuant to SCR 3.160 unless he resigns under terms of disbarment.

3) Pursuant to SCR 3.165(5), Williams shall, within twenty (20) days of the date of entry of this order, notify in writing any and all clients of his inability to continue to represent them and shall furnish copies of such written notifications to the Director of the Kentucky Bar Association.

4) Pursuant to SCR 3.165(6), Williams shall, to the extent reasonably possible, immediately cancel and cease any and all advertising activities in which he is engaged.

All concur.

Entered: January 20, 2005.

/s/ Joseph E. Lambert CHIEF JUSTICE


text:
    KENTUCKY BAR ASSOCIATION, Complainant, v. Fred L. TANNER, Respondent.
    No. 2004-SC-0851-KB.
    Supreme Court of Kentucky.
    Jan. 20, 2005.
    Bruce K. Davis, Executive Director, Kentucky Bar Association, Steven T. Pul-liam, Kentucky Bar Association, Frankfort, Counsel for Complainant.
    Fred L. Tanner, Bowling Green, for Respondent.
   OPINION AND ORDER OF PERMANENT DISBARMENT

Fred L. Tanner, KBA No. 69705, of Bowling Green, Kentucky, was charged with the following violations:

1) SCR 3.130-8.3(b) committing a criminal act that reflects adversely on the lawyer’s trustworthiness or fitness as a lawyer; and,
2) SCR 3.130-8.3(c) engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation.

On May 22, 2003, judgment was entered against Tanner finding him guilty of embezzlement under 18 U.S.C. Sec. 656. Tanner had entered a guilty plea on charges that he embezzled funds from his last employer, Bowling Green Bank and Trust Company. On April 24, 2003, this Court temporarily suspended Tanner from the practice of law. On April 10, 2003, the Inquiry Commission served a complaint through the Secretary of State, at his place of incarceration, but Tanner failed to respond to either the original or the reminder letter.

On February 18, 2004 and after entering the charges, the Inquiry Commission again served Tanner through the Warren County Sheriff. Tanner failed to respond to this notice or subsequent reminder letters. Tanner defaulted on the charges and entered no appearance.

The Board unanimously voted for his guilt, and voted 15-1 recommending permanent disbarment. One vote recommended a five-year suspension with restitution as ordered by the Federal Court order.

It is hereby ORDERED:

1) Fred L. Tanner is permanently disbarred from the practice of law in the Commonwealth of Kentucky.

2) Pursuant to SCR 3.390, Tanner shall, within ten days from the entry of this Opinion and Order, notify in writing all courts in which he has matters pending and all clients he is currently representing of his inability to provide further legal services and provide the Director of the Kentucky Bar Association with a copy of all such notice letters, or with a certification that he has no active clients, whichever is applicable.

3) Tanner is further ordered to pay all costs associated with this disciplinary proceeding in the amount of $247.73, pursuant to SCR 3.450, for which execution may issue.

All concur.

Entered: January 20, 2005.

/s/ Joseph E. Lambert Chief Justice


text:
    KENTUCKY BAR ASSOCIATION, Movant, v. John D. HAYS, KBA Member No. 30250, Respondent.
    No. 2004-SC-1029-KB.
    Supreme Court of Kentucky.
    Jan. 20, 2005.
    Bruce K. Davis, Executive Director, Steven T. Pulliam, Deputy Bar Counsel, Kentucky Bar Association, Frankfort, Counsel for Movant.
    John Doug Hays, Pikeville, Counsel for Respondent.
   OPINION AND ORDER

This matter having come before the Court upon the motion of the Kentucky Bar Association (KBA) for an Order of temporary suspension, the Court, having reviewed the record and being otherwise sufficiently advised, hereby orders that Respondent, John D. Hays, of Pikeville, Kentucky is temporarily suspended from the practice of law in the Commonwealth of Kentucky in accordance with SCR 3.166 due to a felony conviction in the United States District Court for the Eastern District of Kentucky for mail fraud.

Respondent was convicted on November 1, 2004. Pursuant to SCR 3.166(1), “[a]ny member of the Kentucky Bar Association who pleads guilty to, or is convicted by a judge or jury of, a felony in this State or in any other jurisdiction shall be automatically suspended from the practice of law in this Commonwealth.”

ACCORDINGLY, IT IS HEREBY ORDERED:

(1)That Respondent was suspended from the practice of law in the Commonwealth of Kentucky from November 2, 2004, “the day following the ... finding of guilt.”

(2) That this suspension will continue until superseded by subsequent order;

(3) In accordance with SCR 3.166(4) and 3.390, Respondent shall, within ten days from the entry of this Opinion and Order, notify in writing all courts in which he may have matters pending and all clients, of his inability to provide further legal services, and furnish the Director of the Kentucky Bar Association with a copy of all such letters. Respondent shall also make arrangements to return all active files to the clients or to new counsel, and shall return all unearned attorney fees and client property to the client and shall advise the KBA Director of such arrangements within the same ten day period.

All concur except SCOTT, J., not sitting.

ENTERED: January 20, 2005.

/s/ Joseph E. Lambert CHIEF JUSTICE

      . 18 U.S.C §§ 2, 1341, and 1346.

      . SCR 3.166(1).


author: VANMETER, Judge.

text:
    George M. MURPHY, Appellant, v. KEY WEST CROSSING, LLC; and Kenton County Board of Adjustment, Appellees.
    No. 2003-CA-001812-MR.
    Court of Appeals of Kentucky.
    Oct. 15, 2004.
    Case Ordered Published by Court of Appeals Nov. 24, 2004.

      Robert P. Gettys, Patrick M. Flannery, Covington, KY, for appellant.
    Gerald F. Dusing, Scott M. Guenther, Covington, KY, for appellee Key West Crossing, LLC.
    Before JOHNSON, TAYLOR, and VANMETER, Judges.
   OPINION

VANMETER, Judge.

George M. Murphy is appealing for the second time from summary judgment orders entered by the Kenton Circuit Court after the Kenton County Board of Adjustment (Board) granted conditional use permits allowing the development and operation of a golf course adjacent to Murphy’s property. We conclude that the Board failed to make required threshold findings of fact before issuing the conditional use permit, and that the circuit court erred by granting summary judgment for appellees.

In March 1998 Roger Shrout, on behalf of appellee Key West Crossing, LLC, filed an application with the Board seeking a conditional use permit to build a golf course in an area zoned for agricultural use. Murphy objected to the request. The Northern Kentucky Area Planning Commission recommended denial of the permit both because the proposed use was not necessary or desirable, and because that use, with access from the adjacent U.S. 25 across busy railroad tracks at the Key West Road crossing, would be detrimental to the public’s health, safety or general welfare. After a hearing in April 1998, the Board tabled the issue for further discussion.

In July 1998 another hearing was conducted. The Planning Commission again recommended denial of the requested conditional use permit, noting that the submitted information was insufficient and incomplete, and that there were concerns about traffic patterns and safe access to the site from U.S. 25. The Board nevertheless granted the requested permit, conditioned on Key West’s future submission of plans for approval by the Board.

Murphy appealed to the Kenton Circuit Court, which granted appellees’ motion for a summary judgment, holding that the Board’s decision was not arbitrary as KRS 100.237(1) permits a conditional use permit to be granted subject to “attached requirements that something be done before the request may be initiated.” That decision was reversed by this court in Appeal No.2000-CA-001105-MR, which noted that although a board of adjustment may attach conditions to a conditional use permit’s approval, KRS 100.237(1) neither dispenses with a board’s fundamental obligation to make findings of fact based upon substantial evidence, nor allows a board to approve permits conditioned on the future justification of the request. More specifically, this court held:

The Board’s decision to grant a conditional use permit, contingent upon Shrout’s furnishing a plan in the future, lacks a substantial evidentiary foundation. By its very definition, a conditional use permit must contain a “statement of the factual determination by the board of adjustment” which justifies its issuance. KRS 100.111(7).

The matter was remanded to the Board with directions to deny the permit due to the lack of sufficient evidence.

Meanwhile, Key West made property improvements and hired consultants to design a golf course and conduct a feasibility study. Key West then reapplied for a conditional use permit, which the Board denied based on concerns about safe access to the property via the Key West crossing. After a study confirmed that the Key West crossing was unsafe and could not reasonably be improved, Key West began advocating for improvements to the “Murphy crossing” used for access to the Murphy property, so that the golf course could be accessed from U.S. 25 at KY 14.

On October 21, 2002, the Planning Commission recommended approval of Key West’s application for a conditional use permit, subject to the following conditions:

1. That all public improvements be approved by all applicable agencies including, but not limited to, the Kenton County Planning Commission, Norfolk Southern Railroad, and the Kentucky Transportation Cabinet.
2. That the previously submitted development plan, except for the amended access, be incorporated as part of this application and that it meet the minimum requirements of the Kenton County Zoning Ordinance.

The Commission noted that the proposed improvements should be approved by all applicable agencies to ensure that they would “not be detrimental to the health, safety, or general welfare of persons residing or working in the vicinity, or injurious to property or improvements in the vicinity of the site[.]” Further, it concluded that “[t]he proposed golf course is desirable and will provide a facility and service which will contribute to the general well being of the community” as there was a need for recreational facilities in the southern portion of the county.

Three days later, the Board conducted a three-hour public hearing on Key West’s application for a conditional use permit. Evidence was adduced regarding the inability to adequately improve the Key West crossing and the steps which were planned for improving the Murphy crossing at KY 14. Those steps included the installation of railroad gates and signals, the construction of a stacking/deceleration lane, and the construction of a new public roadway. The proposals were supported by the written report of traffic engineer Jack Geh-rum, who confirmed that the upgraded Murphy crossing would conform with standard traffic engineering practices. The proposals also were supported by the report of Viox & Viox, Inc., addressing the dangers of the Key West crossing and recommending its closure. During the hearing there were discussions about acquiring a sufficient right of way for the road, about Key West’s absorption of various costs, and about dedicating the new roadway as a county road. Evidence was adduced concerning the golf course’s anticipated operation and use, and regarding the regional benefits of developing the facility and nearby properties. There was testimony that although the design of the proposed Murphy crossing had not yet been approved by state and local administrative bodies, it had been approved by railroad authorities.

Murphy and his attorney challenged the sufficiency of the evidence to support Key West’s application for a conditional use permit, asserting that there was inadequate evidence to address the impact which passing trains would have on U.S. 25 traffic while cars waited to cross the tracks to the golf course. They asserted that the Murphy crossing would be unsafe for the proposed use, and that safer access to the course could be had through another crossing located ¾ mile away.

At the close of the hearing the Board unanimously agreed to the following motion:

[T]o approve the conditional use permit for an 18-hole golf course on the property located at 175 Key West Road using the supporting information in the Planning Commission report and with the following conditions that all public improvements be approved by all applicable agencies including but not limited to the Kenton County Planning Commission, Norfolk Southern Railroad and the Kentucky Transportation Cabinet and that the previously submitted development plan except for the amended access be incorporated as far as the application and that it meet the minimum requirements of the Kenton County Zoning Ordinance, and furthermore based on discussions that this access be provided at the - where the current Murphy crossing is and that this access include gates and signals of the railroad, in accordance with the requirements of the Norfolk Southern Railroad.

Shrout then was advised in writing that the conditional use permit had been approved subject to the following conditions:

1. That all public improvements be approved by all applicable agencies including, but not limited to, the Kenton County Planning Commission, Norfolk Southern Railroad, and the Kentucky Transportation Cabinet.
2. That the previously submitted development plan, except for the amended access, be incorporated as part of this application and that it meet the minimum requirements of the Kenton County Zoning Ordinance.
3. That a railroad crossing consistent with railroad specifications be constructed prior to issuance of a final Certificate of Occupancy.

On appeal the Kenton Circuit Court entered a summary judgment in favor of appellees. This appeal followed.

Murphy contends on appeal that the trial court erred by failing to find that the Board failed to make necessary findings of fact prior to issuing the conditional use permit. He asserts that the decision to issue the permit was arbitrary as based on insufficient evidence, that the Board misapplied KRS 100.237(1) by failing to determine the issue of safety prior to issuing the permit, and that the conditions which were attached to the permit improperly substituted for the Board’s own findings as to safety. We agree that the conditional use permit was improperly issued.

A local board of adjustment may “hear and decide applications for conditional use permits,” KRS 100.237, and it may attach necessary conditions to any such approved permit. KRS 100.237(1). However, the granting of such a permit “does not exempt the applicant from complying with all of the requirements of building, housing, and other regulations.” KRS 100.237(2). KRS 100.111(6) defines a “conditional use” as one

which is essential to or would promote the public health, safety, or welfare in one (1) or more zones, but which would impair the integrity and character of the zone in which it is located, or in adjoining zones, unless restrictions on location, size, extent, and character of performance are imposed in addition to those imposed in the zoning regulation!.]

KRS 100.111(7) defines a “conditional use permit” as

legal authorization to undertake a conditional use, issued by the administrative official pursuant to authorization by the board of adjustment, consisting of two (2) parts:
(a) A statement of the factual determination by the board of adjustment which justifies the issuance of the permit; and
(b) A statement of the specific conditions which must be met in order for the use to be permitted!.]

Kenton County Zoning Ordinance Section 18.7(4) specifies that before a conditional use permit may be issued, “the board of adjustment shall find that the application” for the permit “meets the requirements of this ordinance and Section 9.14.” Section 9.14(B) in turn adopts the language of KRS 100.237 relating to a board of adjustment’s powers regarding conditional use permits, and Section 9.14(A) specifies in part:

Subject to the requirements of Section 18.7, the board of adjustment may authorize a conditional use to be located within any zone in which such conditional use is permitted, if the evidence presented by the applicant is such as to establish, beyond any reasonable doubt:
1. That the proposed use at the particular location is necessary or desirable to provide a service or facility which will contribute to the general well being of the neighborhood or the community; and
2. That such use will not be detrimental to the health, safety, or general welfare of persons residing or working in the vicinity, or injurious to property or improvements in the vicinity.

(Emphasis added.)

The matter now on appeal turns on whether the Board made adequate findings to satisfy its obligations under KRS Chapter 100 and the Kenton County Zoning Ordinances. An administrative decision which grants relief to a party having the burden of proof, such as Key West, must be supported by findings which are based on substantial evidence. See Bourbon County Board of Adjustment v. Currans, Ky.App., 873 S.W.2d 836, 838 (1994).

Here, Key West adduced evidence to show that the proposed use of the golf course property was desirable and beneficial to the community, and that access to the property via the modified Murphy crossing would not be unsafe. However, Murphy questioned the ability to safely access the golf course via that crossing, and substantial time was spent discussing the issue during the hearing. Nevertheless, the Board never made a specific finding, either on the record during the hearing or in its subsequent order, to address the Section 9.14(A) requirement that Key West must “establish, beyond any reasonable doubt,” that the property’s proposed use “is necessary or desirable to provide a service or facility” which would contribute to the community’s general well being, and that the proposed use would “not be detrimental to the health, safety, or general welfare of persons residing or working in the vicinity, or injurious to property or improvements in the vicinity.”

Appellees assert that substantial evidence was adduced below to support the Board’s issuance of the conditional use permit. However, in light of the obvious dispute regarding the threshold issue of safety, coupled with the Board’s failure to make the Section 9.14(A) required threshold findings before approving the application for a conditional permit, we cannot address whether the evidence was sufficient to support the grant of the permit. Further, as the language of Section 9.14(A) compels the Board to address the threshold issues prior to issuing a permit, there is no merit to appellees’ suggestion that the failure to make the specific threshold determination as to safety can be remedied by subsequent determinations of safety made by other regulatory agencies.

The circuit court’s order is reversed, and this matter is remanded to the Kenton County Board of Adjustment for further proceedings in accordance with the views stated herein.

ALL CONCUR.


author: PER CURIAM.

text:
    STATE of Missouri, Plaintiff/Respondent, v. Antoine L. BULLOCK, Defendant/Appellant.
    No. ED 83275.
    Missouri Court of Appeals, Eastern District, Division Two.
    June 1, 2004.
    Case Transferred to Supreme Court Aug. 25, 2004.
    Case Retransferred to Court of Appeals Dec. 21, 2004.
    Rehearing Denied Jan. 25, 2005.
    Original Opinion Reinstated Jan. 25, 2005.
    Richard B. Dempsey, Washington, MO, for appellant.
    Jeremiah W. (Jay) Nixon, Atty. Gen., Richard A. Starnes, Assistant Attorney General, Jefferson City, MO, for respondent.
    Before GLENN A. NORTON, P.J. and KATHIANNE KNAUP CRANE, J. and MARY K. HOFF, J.
   ORDER

PER CURIAM.

Antoine L. Bullock (Defendant) appeals from the trial court’s judgment and sentence imposed after a bench trial in which the court found him guilty of one count of possession of a controlled substance with intent to distribute, deliver, or sell, in violation of Section 195.211 and punishable under Section 558.011. The trial court sentenced Defendant to five years imprisonment in the Missouri Department of Corrections. This appeal follows. We affirm.

We have reviewed the briefs of the parties, the legal file, and the record on appeal and find the claims of error to be without merit. No error of law appears. An extended opinion reciting the detailed facts and restating the principles of law applicable to this case would have no jurisprudential value. The parties have been furnished with a memorandum for their information only, setting forth the reasons for our decision. We affirm the judgment pursuant to Rule 30.25(b).

      . All statutory references are to RSMo 2000, unless otherwise noted.