author: COLEMAN, Chief Justice.

text:
    Don R. BLACKBURN et ux., Appellants, v. James G. GANTT, Appellee.
    No. 17003.
    Court of Civil Appeals of Texas, Houston (1st Dist.).
    Jan. 26, 1978.

      Arnold S. Cohn, Fisher, Roeh & Gallagher, Craig Lewis, Houston, for appellants.
    Bass & Bass, George T. Bass, Liddell, Sapp, Zivley & Brown, Walter P. Zivley, Houston, for appellee.
   COLEMAN, Chief Justice.

This is an appeal from an order of the Probate Court Number One of Harris County, Texas, appointing Texas Commerce Bank National Association guardian of the estate of Walter Louis Blackburn, an incompetent. Don R. Blackburn, the son of Walter Louis Blackburn and an applicant for the appointment as guardian of the person and estate of Walter Louis Blackburn, asserts that the trial court erred in finding that he did not have sufficient experience or education or ability to serve as guardian of the estate of Walter Louis Blackburn and is incapable of properly and prudently managing and controlling the estate because there is no evidence to support such a finding, or, in the alternative, that the evidence is insufficient to support the finding.

Lena Ruth Blackburn, who was serving as temporary guardian at the time of the trial, asserts that the trial court erred in removing her as temporary guardian of the estate of Walter Louis Blackburn because there was no evidence or insufficient evidence justifying her removal in accordance with Section 110 or Section 222 of the Texas Probate Code.

Appeal of Lena Ruth Blackburn.

In August, 1976, Lena Ruth Blackburn was properly appointed temporary guardian of the estate of Walter Louis Blackburn. The order of appointment specified that she be appointed temporary guardian of the person and estate of Walter Louis Blackburn for a period of 90 days with power to take into her possession and protect all personal properties, cash and other funds and securities belonging to Walter Louis Blackburn, and to expend the sum of $3,000.00 monthly for his support and maintenance pending appointment of a permanent guardian. The order further recited that unless the appointment should be contested after service of citation, it would be continued in force for such a period of time as the court should deem in the interest of Walter Louis Blackburn, or that it should be made permanent.

Section 131 of the Probate Code authorizes the appointment of a temporary guardian of the estate of a person of unsound mind without notice or citation whenever it appears to the judge that the interest of the estate requires the immediate appointment of a personal representative. The order making the appointment must recite that, unless the same is contested after service of citation, it shall be continued in force for such period of time as the court shall deem in the interest of the estate, or that it shall be made permanent if found by the court to be necessary. This article also provides that immediately after the appointment the clerk shall give proper notice to all interested persons to appear at a time stated to contest the appointment if they so desire. The notice or citation must also state that, if no contest is made, the appointment will be continued for such time as appears to the interest of the estate of person involved, or that, if found necessary by the court, it shall be made permanent. In Paragraph (e) of Section 131, supra, it is provided that if the appointment is contested, “the court shall hear and determine the same” and “if the appointment is set aside” the court shall require the temporary guardian to prepare and file a complete exhibit of the condition of the estate.

Paragraph (c), Section 109, Probate Code, provides:

“If a person is an incompetent — these rules shall govern:
Paragraph (1) If such person has a spouse who is not disqualified, such spouse shall be entitled to the guardianship in preference to any other person.
Paragraph (2) If there be no qualified spouse, the nearest of kin to such person, who is not disqualified, or in case of refusal by such spouse or nearest of kin to serve, then any other qualified person shall be entitled to the guardianship.
Paragraph (3) Where two or more persons are equally entitled, the guardianship shall be given to one or the other, according to the circumstances, only the best interest of the ward being considered.

Section 222 of the Code provides for the removal of a personal representative by the court on its own motion or on motion of any interested party and without notice for certain specified reasons. It also states certain grounds for the removal of a personal representative after citation and hearing. There is a requirement that the order of removal shall state the cause thereof.

Lena Blackburn argues that under the order appointing her temporary guardian she is entitled to be appointed the permanent guardian if the court finds that there is a necessity for a permanent guardian unless she be removed as temporary guardian as authorized by Section 222 of the Probate Code.

James G. Gantt filed a motion to remove Lena Blackburn as temporary guardian and an application that he, or in the alternative Texas Commerce Bank National Association, be appointed permanent guardian. Donald R. Blackburn also filed a petition seeking to be appointed the permanent guardian of the person and estate of Walter L. Blackburn. All of these petitions were consolidated for trial by the Probate Court. After a hearing, the Probate Court entered an order finding that the appointment of a permanent guardian is necessary for the care and protection of the person and estate of Walter L. Blackburn; that Donald R. Blackburn is disqualified to serve as guardian of the estate of Walter Louis Blackburn; and that Texas Commerce Bank National Association is a proper party and is qualified to serve as guardian of the estate of Walter L. Blackburn. The court then ordered that Donald R. Blackburn be appointed guardian of the person of Walter Louis Blackburn and that Texas Commerce Bank National Association be appointed guardian of his estate. The court then ordered that the appointment of Lena Ruth Blackburn as temporary guardian of the person and estate of Walter Louis Blackburn be terminated and further ordered her to turn over all assets in her possession belonging to the ward to Texas Commerce Bank National Association upon its qualifying to serve as guardian.

Section 113 of the Probate Code authorizes any person to contest the appointment of a particular person as guardian, and also to commence any proceeding which he deems beneficial to the ward. Mr. Gantt had the right to appear and contest the appointment of Lena Ruth Blackburn as temporary guardian of the estate of Walter Blackburn and also to initiate a proceeding for the appointment of a permanent guardian.

The grounds for the contest of the appointment of a temporary guardian of the estate of an incompetent are not specified in Section 131 of the Probate Code. The contest of an appointment as temporary guardian requires the trial judge to choose between the various applicants for appointment. In such a contest, the trial court must be guided by the provisions of Section 109 and Section 110 of the Probate Code. The procedure in such a contest would be the same as a proceeding brought under the provisions of Section 111 of the Probate Code for the appointment of a permanent guardian.

The trial court found Don R. Blackburn disqualified to serve as guardian by reason of Paragraph (g) of Section 110 Probate Code. Neither of the other persons seeking appointment was related to Walter Louis Blackburn. The trial court was authorized by Paragraph (c)(3) of Article 109 of the Probate Code to appoint as guardian the person shown by the evidence to be best qualified to manage the estate. The qualification of one appointed as permanent guardian of the estate of an incompetent necessarily terminates a temporary guardianship. The trial court’s order specifically set aside the appointment of Lena Ruth Blackburn as temporary guardian. The trial court did not err in so doing. Ex parte Lindley, 163 Tex. 301, 354 S.W.2d 364 (1962); Thomason v. McGeorge, 285 S.W. 285 (Tex.Com.App.1926, jdgmt. adopted); Kinser v. Hudgins, 275 S.W.2d 847 (Tex.Civ.App.—Austin 1955, no writ history); Hall v. Davison, 176 S.W. 642 (Tex.Civ.App.-Galveston 1915, error ref’d).

Appeal of Don R. Blackburn.

Don R. Blackburn, the son of Walter Blackburn, filed his application for appointment as the permanent guardian of the person and estate of Walter Blackburn. The trial court appointed him as guardian of the person of Walter Blackburn but not guardian of his estate.

Paragraph V of the findings of fact filed by the trial court reads:

“Donald R. Blackburn does not have sufficient experience or education or ability to serve as guardian of the estate of Walter Louis Blackburn and is incapable of properly and prudently managing and controlling the estate of Walter Louis Blackburn.”

Paragraph (g) of Section 110 of the Probate Code reads:

“Those who by reason of inexperience or lack of education, or for other good reason are shown to be incapable of properly and prudently managing and controlling the ward or his estate.” (Shall not be appointed guardian).

Donald R. Blackburn contends that this finding of fact is not properly supported by the evidence. Paragraph (g) of Section 110 of Probate Code permits the trial court to evaluate each applicant for guardianship on an individual basis in order to determine whether a particular applicant is incapable of properly and prudently managing and controlling the particular estate involved. In making this determination the court is specifically authorized to consider the education and business experience of the particular applicant.

The testimony in this case established the size of the estate and the various types of investments of which it is composed. An inventory of the estate establishes a value of $1,259,000.00. The principal investments were certificates of deposits in various banks, corporate stocks, notes receivable, and real estate. Certain real estate investments were held by limited partnerships in which Mr. Blackburn was a limited partner.

The details of Donald Blackburn’s education and work experience were fully developed in the evidence. He had completed the sixth grade in school when, at the age of twelve, he ran away from home and began working at various unskilled jobs. Some years later he worked for a railroad company and attained the position of a clerk in the shipping department. Subsequently, he worked as a salesman, then for three years as head of the traffic department of a carpet company, and for three years as terminal manager for a transit company. In 1971, when he had attained the age of 43 years, he obtained a loan from his father and formed his own company, Blackburn Industries, Incorporated. Walter Louis Blackburn was an investor in this company. This is an industrial freight bill auditing firm, a personal service company which audits freight bills for other companies on a contingency basis. Donald Blackburn is president and general manager of the company, but his primary duty is to act as salesman for the services of the company. There was testimony that the firm was marginally successful and that it became necessary for it to borrow money in the years 1972, 1973, 1974 and 1975. In 1976, it earned a substantial gross profit. While Mr. Blackburn’s formal education was quite limited, it is apparent from his employment record that he has attained a considerable degree of self-education.

Mr. Blackburn testified that he was not a financial analyst, an accountant, a lawyer, or an investment counselor. He confessed that he had no experience in investing sums of money of the magnitude involved in this estate. He testified that he had no detailed knowledge of the duties placed on the guardian of an estate by the Probate Code.

There is no testimony developing the duties and responsibilities of a guardian of an estate of this magnitude. Certain bankers and accountants were called to give expert testimony as to whether or not Donald R. Blackburn would be capable of properly and prudently managing and controlling an estate having assets of 1.25 million dollars. From the record made, the expertise of these witnesses is questionable. There is no showing that they are acquainted with the duties and responsibilities of the guardian of the estate of an incompetent. The testimony of these witnesses is entitled to little, if any, weight even though admitted without objection. Adamson v. Burgle, 186 S.W.2d 388 (Tex.Civ.App.-San Antonio 1945, writ ref’d w.m.).

Paragraph (g) of Section 110 of the Probate Code does not require that the guardian of an estate of an incompetent be knowledgable in probate law, be an expert in business management, or be experienced in investing money. The question is whether or not by reason of lack of experience or education or other good reason the applicant is “incapable” of properly and prudently managing the estate with appropriate expert assistance. The question is not whether another applicant is more capable of managing and controlling the estate. The legislative intention that preference be given to the closest relative of the incompetent who has made application for the guardianship is clear. The policy of appointing only those with experience in managing large business affairs or large sums of money as the guardian of the estates of those having substantial assets would, in a large measure, frustrate the intention of the legislature.

In this case, however, the court has made a finding of fact that Donald R. Blackburn does not have sufficient experience, education or ability to serve as guardian of the estate of Walter Louis Blackburn. The court is presumed to know the legal duties and responsibilities of the guardian of an estate of this magnitude. We are unable to hold that the evidence is insufficient to support this finding of fact.

The judgment is affirmed.


source: Caselaw Access Project

author: McCLOUD, Chief Justice.

license: Public Domain

text:
    Charles C. CHEATWOOD et ux., Appellants, v. Rosendo DE LOS SANTOS et ux., Appellees.
    No. 5073.
    Court of Civil Appeals of Texas, Eastland.
    Jan. 26, 1978.
    Rehearing Denied Feb. 16, 1978.

      Herbert C. Martin, Amarillo, for appellants.
    O. M. Calhoun, Folley, Snodgrass & Calhoun, Amarillo, for appellees.
   McCLOUD, Chief Justice.

Plaintiffs, Rosendo De Los Santos and wife, Santos De Los Santos, sued defendants, Charles C. Cheatwood and wife, Louise Cheatwood, seeking specific performance of an oral contract to convey real property, and judgment for the excess of insurance proceeds paid to defendants, over and above the indebtedness, after the house in question was destroyed by fire. The case was tried by the court without a jury. Findings of fact and conclusions of law were filed. Plaintiffs were granted specific performance of the oral contract and judgment of $6,381.50 against defendants. Defendants have appealed. We affirm.

On March 21, 1974, the defendants as sellers and plaintiffs as purchasers entered into an oral contract for the purchase and sale of a house and lot. The total purchase price of the real property under the oral contract was $7,500. The parties agreed upon a $250.00 cash down payment and the balance payable in monthly installments of $55.00 per month starting on April 21,1974. The purchasers went into exclusive possession of the premises and made payments pursuant to the contract for nineteen months. On October 16, 1975, the house was destroyed by fire. At the time of the fire, there was in existence a fire insurance policy in the name of defendants covering the premises in the sum of $12,500. Following the fire, the insurer paid defendants the sum of $12,500.

Defendants contend the insurance policy between defendants and the insurer was a personal contract and plaintiffs were not entitled to any of the proceeds. They argue that the oral contract to sell the real property was unenforceable because it violated the Statute of Frauds, Section 26.01, Texas Business and Commerce Code, and since plaintiffs at the time of the fire had not paid the full consideration of $7,500, or made valuable and permanent improvements upon the house, the contract was not enforceable in equity under the rule announced in Hooks v. Bridgewater, 111 Tex. 122, 229 S.W. 1114 (1921). Plaintiffs argue that at the time of the fire they owned equitable title, were entitled to specific performance of the contract, and defendants held the insurance proceeds as trustee for plaintiffs.

On October 28, 1974, Mrs. Cheatwood wrote plaintiffs a letter which in part stated:

“We have not received your payment yet & it is past due 7 days today — we cannot continue like this on the payments on that house — we need our money when it’s due, I paid the county tax on it, since they charge more if it is not paid in October — It was only $7.71 so please include that in your payment & the City tax will be due in January & it will be $82.44 — this does not have to be paid until January & after that they charge interest & the insurance will be due again in February & you owe us 10 months insurance on this years- — this is how it goes. We took out the insurance in February 21, 1973.
You bought house March 21,” which would actually be 11 months, but we will only charge you 10 months Your insurance premium now is $103.40. The total was $124.00 which would be $10.34 a month X 10 = $103.40. We must have payments on time + keeping taxes paid when due (we will tell you). This insurance must be paid before November 20.”

On January 29, 1975, Mrs. Cheatwood wrote plaintiffs as follows:

“. . . Your insurance is due next month (February) & it will be about $135.00 — I do not have the exact figure, if you can’t pay these two amounts — we will have to raise your payments to $76.00 a month, which I expect you to pay $21.00 + The late charge on January’s payment, I will be expecting a $25.00 check this week, then $76.00 by the 21st of each month thereafter — we cannot continue to pay taxes & insurance out of our own pockets, so to make it easy on you, we will do it this way — So please send us an extra $25.00 on January’s payment or send us $82.44 + $4.00 late charge & this must be paid before the 31st. And if you send the taxes & then we expect you to pay the insurance with February’s payment.”

Mrs. Cheatwood testified as follows:

“Q How much were they supposed to pay a month?
A Fifty-five dollars a month.
Q And during this time was that ever raised from fifty-five a month?
A Yes.
Q To how much?
A Seventy-six.
Q What was the purpose of the raise?
A Because we just couldn’t pay everything and we couldn’t come over here and go back to Fritch all the time.
Q What was it for? Paying taxes and insurance?
A No. Because they had not paid any taxes and insurance.
Q You were paying taxes and insurance out of what they were paying you?
A Not out of the fifty-five a month.
Q Did you take it out of the seventy-six dollars a month?
A No. We paid that before. We paid that before they paid us the seventy-six dollars a month.
Q In 1974 you paid the taxes and insurance and did you pay the taxes, did you pay the insurance when it was due in 1975?
A Yes. Out of our own pockets.”

She further testified:

“Q And then I will hand you another check, Mrs. Cheatwood, dated January 31st, 1975 for the sum of twenty-five dollars. Is that the increase we were talking about for taxes and insurance?
A I raised the payments then.
Q You raised their payments then.
Q Now, Mrs. Cheatwood, on the 29th of January of 1975 you wrote a letter to Mr. and Mrs. De Los Santos wherein you explained to them you would need twenty-five dollars extra this month because you had to pay some taxes and insurance, did you not?
A I raised their payments.
Q Is that the letter you wrote that date?
A (No response.)
Q Is that your letter?
A Yes, that’s my letter.
Q Mrs. Cheatwood, the twenty-five dollar check entered into evidence just now, is it the twenty-five dollars you asked them for in this letter?
A Yes, I raised the payment.
Q And in February 1975 you raised the payments to seventy-six dollars a month?
A Yes.
Q And they paid that up until the time of the fire?
A But no insurance and taxes. That didn’t cover the ’74 insurance and taxes.”

Mr. De Los Santos testified:

“Q And how much were you supposed to pay a month?
A Fifty-five.
Q And when did you start the fifty-five dollar payments?
A The first payment was in April.
Q Of ’74?
A Yes.
Q And did you make that payment?
A Yes.
Q And was there any conversation had at that time concerning taxes and insurance?
A Not right then. But about a month later I asked her if we had insurance on the house and all that and she said since I was buying I was going to have to pay for that. She said thirty-eight dollars and something was principal and interest and the rest was for taxes or insurance.
Q That part of the fifty-five dollars would be for principal and interest and part for taxes and insurance? When did she tell you that?
A Around May or something like that.
Q Did she tell you there was insurance on the property?
A She said it was already paid for and I didn’t have to worry about it for that year. It was already fixed up but after that I was going to have to come up with the insurance money.
Q Then did you agree to buy the house on those terms?
A Yes, sir.”

He further testified:

“Q Do you know whether or not there was insurance on the house?
A Yes.
Q How did you find out?
A The lady came.
Q Before that did you know there was insurance on the house?
A Yes.
Q You talked to Mrs. Cheatwood about, it?
A She told me she was going to raise the payments because of the insurance and taxes and she would take care of the insurance.
Q Was that the purpose of raising your payments to seventy-six a month?
A Yes.”

Defendants introduced an insurance premium receipt showing' that they paid $172.00 on February 19, 1975, for insurance coverage on the property in question.

Our Supreme Court in Sharp v. Stacy, 535 S.W.2d 345 (Tex.1976) recently stated:

“Hooks v. Bridgewater, supra, enumerated three requirements to relieve a parol sale of land from the operation of the statute of frauds. These in brief are: (1) payment of consideration, whether ■ in money or services; (2) possession by the transferee; and (3) making by the transferee of permanent and valuable improvements upon the land with the consent of the transferor . . . ”

Defendants first argue that under Hooks v. Bridgewater, supra, all of the consideration must have been paid. We disagree. The case most nearly in point is Walker v. Walker, 448 S.W.2d 171 (Tex.Civ.App.—Waco 1969, writ ref. n. r. e.) wherein the court clearly held that payment of consideration in full is not required to render a parol sale of real property enforceable if the other two requirements, regarding possession and improvements, have been met. The court said:

“Contention 1 asserts judgment cannot be rendered for the vendee of an oral contract to convey unless the consideration be paid in full; that it is undisputed that the Bobby Walkers paid only $1076.12 of the $3804. purchase price. Appellants cite Salas v. Salas, Tex.Civ.App. (NRE) 229 S.W.2d 881; Watson v. Druid Hills Co., Tex.Civ.App. (NRE) 355 S.W.2d 65; and Pennington v. Bennett, Tex.Civ.App. (NRE) 436 S.W.2d 182 as controlling. These cases, citing Hooks v. Bridgewater, 111 Tex. 122, 229 S.W. 1114, 15 A.L.R. 216, state that to relieve an oral sale from the operation of the Statute of Frauds, payment of the consideration in full, together with possession, and the making of improvements by the vendee is necessary. The requirement that payment of the consideration be ‘in full’ is dicta.
In any event Hooks v. Bridgewater states:
‘ * * * to relieve a parol sale of land from the operation of the statute of frauds, three things (are) necessary: 1. Payment of the consideration, whether it be in money or services. 2. Possession by the vendee. And 3. The making by the vendee of valuable and permanent improvements upon the land with the consent of the vendor * * *. Payment of the consideration, though it be a payment in full, is not sufficient * * * nor is possession of the premises by the vendee * * *. Each of these elements is indispensable, and they must all exist.’
Hooks v. Bridgewater was decided April 13, 1921, and was but a restatement of the existing law. The 1879 case of Ponce v. McWhorter, 50 Tex. 562, 571, recites: ‘The cases in this court are numerous in which verbal sales of land have been recognized as valid, and enforced where the purchase money has been paid, possession taken with the consent of the vendor, and improvements made without his objection. (Garner v. Stubblefield, 5 Tex. 552; Dugan’s Heirs v. Colville’s Heirs, 8 Tex. 126; Ottenhouse v. Burleson, 11 Tex. 87; Whitson v. Smith, 15 Tex. 33, 36; Neatherly v. Ripley, 21 Tex. 434; Hubbard v. Horne, 24 Tex. 270; Taylor v. Rowland, 26 Tex. 293; Hendricks v. Snediker, 30 Tex. 296, 306; Robinson v. Davenport, 40 Tex. 333, 341; Ann Berta Lodge v. Leverton, 42 Tex. 18, 21; Castleman v. Sherry, 42 Tex. 59; Willis v. Matthews, 46 Tex. 478, 483).’
The Neatherly and Dugan Heirs cases, supra, hold that a vendee having paid a portion of the purchase price under a parol agreement for the sale of land, and having taken possession and made improvements thereon, is entitled to specific performance of such agreement.
And the Supreme Court in Clegg v. Braman, 111 Tex. 367, 234 S.W. 1076, 1078 (decided November 16, 1921 and after Hooks v. Bridgewater) said: ‘Possession, payment of the purchase price in full or in part and valuable improvements clearly would take the case out of the statute (of frauds).’
Other cases holding that payment of the purchase price in part suffices are Hunt v. Evans, Tex.Civ.App., Er. Ref., 233 S.W. 854, 858; Shannon v. Staha, Tex.Civ.App., Er. Dismd., 233 S.W. 1038; Reeves v. San Antonio Bldg. Materials Co., Tex.Civ.App., Er. Refused, 27 S.W.2d 904, 906; Willis and Conner v. Turner, Tex.Civ.App., Er. Dismd., 25 S.W.2d 642, 646; Blum v. Dismuke, Tex.Civ.App., Er. Dismd., 314 S.W.2d 635; Union Properties Co. v. Klein, Tex.Civ.App. (NRE) 333 S.W.2d 864, 865, 868.”

The Austin Court of Civil Appeals in Ojeda v. Ojeda, 461 S.W.2d 487 (Tex.Civ.App.—Austin 1970, writ ref. n. r. e.) followed the rule announced in Walker, supra, that payment of consideration in full was not required.

We hold that payment of consideration in full is not required in the instant case if the other requirements enumerated in Hooks v. Bridgewater, supra, are met. Plaintiffs had been in exclusive possession of the house for nineteen months and had paid the monthly installments. The trial court found that plaintiffs made permanent and valuable improvements in good faith believing that they had purchased the property. Defendants argue there is no evidence to support such finding or, alternatively, the finding is against the great weight and preponderance of the evidence. We disagree.

Mr. De Los Santos testified he replaced three window panes; put new linoleum in the kitchen; placed a cabinet on a wall; installed a new front door; repaired a gas line and pipe; painted the kitchen, bathroom, marks on the doors and outside windows; put in hall panels; and, repaired the roof following a hailstorm. There is evidence plaintiffs spent approximately $115.85 for materials, but this amount did not include the value of Mr. De Los Santos’ labor. Plaintiffs did not buy the shingles for the roof. Defendants bought the shingles. Mrs. Cheatwood testified they received some “insurance money” for the damaged roof, but not enough to cover it. Mr. De Los Santos testified the insurance company paid defendants for the shingles but he did the work. He said it took him about three weeks working in the evenings after his regular job to repair the roof. It was necessary to first tear down the old roof. He testified his labor for repairing the roof alone was worth $300.

Mrs. Cheatwood testified she visited the house the day after the fire and she did not observe that any painting had been done in the kitchen. She also stated she furnished seven gallons of paint and that she had put a new kitchen linoleum in just before plaintiffs moved into the house. Mr. De Los Santos denied that defendants furnished any paint.

We hold there is some evidence to support the court’s finding and after considering all the evidence as required by In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660 (1951), we hold the finding is not against the great weight and preponderance of the evidence. See: Davis v. Douglas, 15 S.W.2d 232 (Tex.Com.App.1929, holding approved); Davis v. Crockett, 398 S.W.2d 302 (Tex.Civ.App.—Dallas 1965, no writ); Hines v. Taylor, 476 S.W.2d 81 (Tex.Civ.App.—Houston (14th Dist.) 1971, no writ).

We hold the trial court correctly determined that plaintiffs met the requirements necessary to render the contract enforceable in equity notwithstanding the Statute of Frauds.

Since the contract was enforceable, plaintiffs under the executory contract were the equitable owners of the property. We think the appropriate rule is stated in 64 A.L.R.2d 1406 § 4 (1959) as follows:

“Where the purchaser as equitable owner will bear the loss occasioned by a destruction of the property pending completion of the sale, and the contract is silent as to insurance, the rule quite generally followed is that the proceeds of the vendor’s insurance policies, even though the purchaser did not contribute to their maintenance, constitute a trust fund for the benefit of the purchaser to be credited on the purchase price of the destroyed property, the theory being that the vendor is a trustee of the property for the purchaser.”

See also: 77 Am.Jur.2d, Vendor and Purchaser, §§ 370-371 (1975), and 46 C.J.S. Insurance § 1145 (1946).

We have found no case directly in point. Our Supreme Court in Paramount Fire Insurance Company v. Aetna Casualty & Surety Company, 163 Tex. 250, 353 S.W.2d 841 (1962) dealt with a related problem involving which insurance company was liable when both the seller and purchaser had separate policies covering improvements destroyed by fire. The court said:

“. . . As it is not before us here, we leave open the question of whether, where the vendee has no insurance, there can be recovery on the vendor’s policy subject to a constructive trust for the vendee, who is often ignorant of his legal liability in such a situation . . . ”

Although the case ⅛ distinguishable, we conclude from language used by the court that the controlling question in the instant case is whether the plaintiffs or defendants suffered the loss, and this is determined by viewing the whole transaction including related events occurring after the fire. See Powell, Vendor and Purchaser — Insurance, 16 Baylor L.Rev. 304 (1964).

In the instant case, plaintiffs sought and the trial court granted plaintiffs specific performance of the contract. The trial court concluded that the payment of the insurance proceeds to defendants was pro tanto satisfaction of the balance of the purchase price. The plaintiffs would bear the loss resulting from destruction of the property. The trial court determined what 'plaintiffs owed defendants under the contract by deducting the sum of the payments made from the original selling price of $7,500. The court found that plaintiffs had made payments of $1,381.50 at the time of the fire; therefore, plaintiffs owed defendants $6,118.50 on the purchase price. The court deducted this amount from the $12,-500 which defendants had received from the insurer and awarded plaintiffs a $6,381.50 judgment which was the excess of the insurance proceeds over and above the indebtedness owed defendants. The defendants have received the amount of the unpaid purchase price. They have suffered no loss. We hold the trial court correctly held that the defendants held the insurance proceeds in trust for plaintiffs.

Defendants argue that the court’s finding of fact that at the time of the fire the balance owed upon the purchase price was the sum of $6,118.50 conclusively establishes that all of the $1,381.50 paid by plaintiffs was applied to the purchase price and none of it was applied to insurance or taxes. Defendants say this finding by the court establishes that defendants alone paid the premium for the $12,500 policy of insurance issued to them. There is evidence in the record that a part of the monthly payments were to be applied to the cost of insurance. The trial court found that at the request of defendants, beginning in January of 1975, the monthly installments were increased from $55.00 per month to $76.00 per month, and defendants informed plaintiffs that the increase was necessary for the purpose of paying the annual taxes and insurance premiums. The court also found that before the increase of monthly installments the defendants had agreed to pay the taxes and insurance out of the $55.00 per month. These findings of fact by the trial court are not properly challenged. We think it is immaterial, under the peculiar facts of this case, that defendants used their funds to pay for the policy of insurance. Also, we place no significance on the fact that the mathematical calculation used by the trial court apparently credits all of plaintiffs’ payments to the reduction of principal. Defendants do not complain of the trial court’s failure to apply a portion of the monthly payments to interest, taxes, and insurance, even though the trial court expressly found that the monthly installments included 7% interest per annum and the installments were increased at the request of defendants who informed plaintiffs the increase was necessary for paying annual taxes and insurance premiums. Indeed, defendants opposed an attempt by plaintiffs to show by supplemental brief that only a portion of the $1,381.50 paid by plaintiffs should be applied to the principal owed at the time of the fire, thereby, reducing the personal judgment against defendants.

We have considered all points of error and all are overruled. Judgment of the trial court is affirmed.


author: STEPHENSON, Justice.

text:
    DEPARTMENT OF REVENUE ex rel. J. E. LUCKETT and William Mayes, Appellants, v. ALLIED DRUM SERVICE, INC., Appellee.
    Supreme Court of Kentucky.
    Jan. 31, 1978.
    William S. Riley, Asst. Atty. Gen., William P. Sturm, Atty., Legal Staff, Dept, of Revenue, Frankfort, for appellants.
    Irwin G. Waterman, Louisville, for appel-lee.
   STEPHENSON, Justice.

The sole question presented on this appeal is whether the machinery used by Allied Drum Service, Inc., to process and reconstitute used drums is machinery used directly in a manufacturing process and, thus, exempt from sales and use tax.

The Kentucky Board of Tax Appeals found that the process was not manufacturing. The trial court found the process to be manufacturing and reversed the Board of Tax Appeals. The Court of Appeals affirmed the judgment of the trial court. We granted discretionary review for the purpose of attempting to resolve apparent contradictory holdings of this court in the definition of manufacturing.

Allied purchased and installed new machinery to be used in a type of operation not previously performed by Allied. Allied purchased or acquired by trade-in used metal drums which were damaged by reason of puncture, crushed condition, or containing residue of materials and chemicals from the prior use. From the record, the following is a brief description of the process performed on the drums by the new machinery. The top of the drum is sliced and cut off, all paint and any contents remaining from the previous use of the drum are removed by incineration. Incombustibles are removed by a shot-blast operation, the drum is then beveled on a flanging machine and new plugs and gaskets are added. After the drum is reshaped by rolling, it is then made into a liquid-type container by sealing a new head on the drum or a solid-type container by attaching a removable lid. The final operation consists of painting the drum.

This description of the processing of the drums by Allied presents the question of whether or not Allied is engaged in manufacturing.

Machinery used in newly expanded industry is exempt from sales and use tax under KRS 139.480(8). Such machinery is defined in KRS 139.170 as:

“. . . that machinery used directly in the manufacturing process, which is incorporated for the first time into plant facilities established in this state, and which does not replace machinery in such plants.”

The Department of Revenue assessed sales and use tax on this machinery. The litigation resulting from the assessment culminated in this appeal.

The problem presented here is not new. Over the years, this court has struggled with the definition of manufacturing and unfortunately has pronounced so many different definitions that a given set of facts and circumstances can rise or fall depending on which definition is applied.

The Department of Revenue takes the position that the process employed by Allied does not produce a new article, but begins with a used drum and ends with a used drum, thus, the contention that the process is not manufacturing.

The Department of Revenue relies principally upon our opinion in City of Louisville v. Ewing Von-Allmen Dairy Co., 268 Ky. 652, 105 S.W.2d 801 (1937), and Prestonsburg Water Company v. Prestonsburg Board of Supervisors, 279 Ky. 551, 131 S.W.2d 451 (1939), further quoting from Colley v. Eastern Coal Corporation, Ky., 470 S.W.2d 338 (1971), for the same reasoning.

In City of Louisville, it was held that machinery used in pasteurizing raw milk was not machinery used in manufacturing. Manufacturing was defined as “a process whereby a transformation must occur and a new and different article must emerge having a distinctive name, character, or use.” The opinion described the process as removing impurities from the milk and stated that this process began and ended with milk and, interestingly enough, observed that the process only made clean food to be used.

In Prestonsburg Water Company, it was held that the filtration system used to purify water from the Big Sandy River was not manufacturing. The opinion observed that the water as it came from the river contained mud, silt, and acid from refuse from mines, all of which were removed and the water purified and rendered fit for use and consumption, then, relying on City of Louisville observed that after the process the article was still water, hence no manufacturing process.

In Colley, machinery used to size, crush, and wash coal, thereby removing impurities, was held not to be machinery used in manufacturing. There the coal as it was mined and transported to the cleaning plant contained foreign matter and impurities. The process utilized by Eastern reduced the impurity content from 28% to the market standard of 6%. The end product was sold for metallurgical purposes. The opinion observed that the substance was coal when it was extracted from the mine and subjected to the processing and it was coal at the conclusion of the processing, citing City of Louisville and Prestonsburg Water Company.

It is readily apparent that each of these cases is supportive of the position argued by the Department of Revenue. Milk is milk; water is water; coal is coal; drums are drums — ergo, no manufacturing process. However, this line of reasoning is not in harmony with several other opinions by this court.

In David J. Joseph Co. v. City of Ashland, 223 Ky. 203, 3 S.W.2d 218 (1928), this court held that the machinery and mechanical appliances used in a scrap metal yard to change the form and dimensions of scrap metal by cutting it into smaller pieces of relatively uniform size and shape so as to convert the metal into commercial scrap was machinery used in manufacturing.

In Commonwealth v. W. J. Sparks Co., 222 Ky. 606, 1 S.W.2d 1050 (1928), it was held that machinery used to process and crush limestone for use as road material was machinery used in manufacturing. The limestone from the quarry began in large chunks broken into sizes suitable for a crusher and, after being crushed, a screening resulted in uniform sizes suitable for road material.

In Alcoa Mining Co. v. Dickerson, Ky., 242 S.W.2d 744 (1951), it was held that machinery used in extracting zinc concentrate from ore bearing rock was held to be machinery used in manufacturing. Briefly, the rock was crushed to a small size, then fed into a ball mill classifier circuit, to a flotation machine where the sphalerite was separated from the waste material, resulting in a marketable material known as zinc concentrate.

By a parity of reasoning to the first cases, scrap should be scrap, limestone should be limestone, and zinc concentrate should be zinc concentrate; yet, in those instances this court held that a manufacturing process had taken place. The opinion in Colley takes a look at Commonwealth v. Sparks, examines it gingerly, and decides that limestone might be something other than just limestone but the court should ignore all other substances.

We are of the opinion that limiting the definition of manufacturing to a process that transforms the article into a new and different article having a distinctive name, character or use is too restrictive. We regard the basis of the case for the Department of Revenue as an oversimplification. In City of Louisville, the end product was milk, a “clean food to be used”; in City of Prestonsburg, the end product was water fit for use; and in Colley, the end result was coal suitable for the metallurgical market. In this sense something new was produced in the same sense that something new (road material) was produced in Commonwealth v. Sparks, in David C. Joseph something new (commercial scrap) was produced, and in Alcoa Mining Co. something new (zinc concentrate) was produced.

The thread that runs through all of these opinions is that material of little or no market value has been converted into a marketable product for its intended use.

Each opinion speaks of the difficulty of fashioning an all-inclusive definition of manufacturing; yet a variety of definitions, as exemplified by the various cases with differing definitions cited by the Court of Appeals, points up the never ending conflict in adapting one definition to a situation without regard to other authoritative definitions.

We are undertaking to define manufacturing once again. We are of the opinion that the definition of a manufacturing process is that: Material having no commercial value for its intended use before processing has appreciable commercial value for its intended use after processing by the machinery. This is not an entirely new definition. Burke v. Stitzel-Weller Distillery, 284 Ky. 676, 145 S.W.2d 861 (1940), used the same reasoning in holding that machinery used in bottling whiskey was machinery used in manufacturing. It was pointed out that in a narrow sense the whiskey is completely manufactured before it is bottled:

“However, with rare exception relating to rectifiers, other distillers and wholesalers, whiskey cannot be put on the market for the use for which it was intended until it is bottled. It appears that under the authorities, supra, whiskey is not ready for the ‘final use for which it is intended’ until it is put in bottles in the amounts specified in the statute, and the use to which the bottling machinery was put constituted a part of the ‘manufacturing’ machinery necessary to make ready the whiskey for the final use for which it was intended.”

By analogy these circumstances are no different from the processing of the used drums. Burke also points out that the definition of the term manufacturing is a question of law for the courts.

City of Louisville, Prestonsburg Water Co., and Colley are not in accord with this definition; and these cases are specifically overruled.

We consider this definition of manufacturing sufficiently restrictive and harmonious with the processes in the opinions setting out varying definitions. A process which involves a material having commercial value for its intended use, that merely upgrades the material so as to increase the value obviously would not be manufacturing.

The Court of Appeals is saying the same in different words: “This is not a case of taking a used drum and ending up with a used drum but is one where the Appellee takes a virtually unusable and non-marketable damaged drum and converts it into a serviceable and marketable commodity.” The purpose for which it was intended.

In any event, let us attempt this definition and await the test of future cases in this area.

The judgment of the Court of Appeals is affirmed.

PALMORE, C. J., and CLAYTON, JONES, LUKOWSKY, REED and STEPHENSON, JJ., sitting.

All concur.

STERNBERG, J., not sitting.

      . The earlier cases defining manufacturing were with regard to KRS 132.200, which relates to ad valorem taxation. Recently the same questions have arisen under the Sales and Use Tax Statute.


author: COOPER, Judge.

text:
    CITIZENS FIDELITY BANK & TRUST CO., Appellant, v. Frank LAMAR, Appellee. CITIZENS FIDELITY BANK & TRUST CO., Appellant, v. Steven X. GIUNTA, Appellee.
    Court of Appeals of Kentucky.
    Sept. 2, 1977.
    Rehearing Denied Oct. 28,1977.
    Discretionary Review Denied March 7,1978.

      Albert F. Reutlinger, Louisville, for appellant.
    Kenneth L. Anderson, Louisville, for ap-pellee.
    Before COOPER, HOWERTON and REYNOLDS, JJ.
   COOPER, Judge.

By agreed motion of appellants and ap-pellees, these two appeals were consolidated by Order of the Court of Appeals entered on April 14, 1977. They are appeals from judgments in the Jefferson Circuit Court wherein both cases were dismissed with prejudice by the trial court.

These actions were brought in the trial court by the Citizens Fidelity Bank & Trust Company as plaintiff against the defendants, Dr. Frank Lamar and Dr. Stephen X. Giunta, in separate actions which have been consolidated on appeal. The suits were brought on what was alleged to be written guaranty agreements whereby the defendants undertook to guarantee the repayment to the Bank of an obligation of a corporation known as Art Accents Corporation. The amount claimed in each action is the sum of $52,000.00.

The said Art Accents Corporation was heavily indebted to the Bank and needed additional monies. A plan was devised whereby the Bank indicated a willingness to lend additional funds to Art Accents Corporation.

Mr. Anthony Scioli had dealt with the Bank for and on behalf of Art Accents Corporation through a Mr. Lehmann, one of the Bank managers.' Mr. Scioli went east to secure persons, evidently interested in investing in tax shelters and contacted Dr. LaMar and Dr. Giunta. Scioli had obtained printed guaranty forms from the Bank which were unsigned and left blank as to amounts, dates, the name of principal, etc.

In what appears to be a hurried proposition, Mr. Scioli obtained the signatures of Dr. LaMar and Dr. Giunta on separate blank guaranty forms. According to the testimony of the appellees, Mr. Scioli had them sign the guaranty contracts in blank with the understanding that it would be a possible future investment for them and with the added purpose of showing the Bank’s officers that he had future potential investors. It was the testimony of the ap-pellees that they in no way authorized Mr. Scioli to fill in the blanks or execute the contracts.

Mr. Scioli returned to the Bank in Louisville armed with the guaranty agreement signed in blank and presented himself to Mr. Lehmann, an officer of the Bank. Mr. Lehmann first requested that the documents be completed in the amount of $156,-000.00, the anticipated amount of the loan, but Scioli prevailed upon the Bank’s officer to limit each defendant’s guaranty agreement to $52,000.00. A secretary of the Bank then completed the forms and the loan was made to Art Accents Corporation.

Mr. Lehmann, the agent for the Bank, accepted unsigned, erroneous and incomplete financial statements from the appel-lees because the company needed the money desperately. As agent for the Bank, he used less than ordinary care to say the least. No further contact was made with the appellees on this matter. Mr. Lehmann admits that Scioli did not present to him any written authority as to agency for ap-pellees, and he was not led to believe by anyone that Scioli was their agent.

The Art Accents Corporation defaulted on its obligation to the Bank and demand was made on the appellees to pay the guaranty agreements in the amount of $52,-000.00 each, which they refused to pay.

The Bank filed separate suits against the appellees pleading non-payment of the guaranty agreements in the amount of $52,-000.00 each. The trial court, in two separate actions, found against the Bank and in favor of the defendants, Dr. LaMar and Dr. Guinta.

The main issues to be decided by this Court are:

(1) DID THE GUARANTY AGREEMENTS CONSTITUTE A BINDING AND ENFORCEABLE CONTRACT?
(2) DID SCIOLI HAVE THE AUTHORITY TO ACT AS AGENT FOR THE APPELLEES UNDER THE STATUTE OF FRAUDS?

The thrust of the appellant’s argument is premised on the assumption that since the appellees signed the guaranty agreements in blank, they are therefore legally responsible for whatever sums or obligations that were later filled in by Scioli and the Bank, as if they were negotiable instruments. It is the contention of the appellees that there was no contract between the parties as the necessary elements of a contract are absent in these matters. The essential, vital terms of these contracts are missing; the documents are not dated; the principal is unknown and the amount to be guaranteed is left bank.

As recited by American Jurisprudence:

. [A] signature to an incomplete paper or contract, wanting in any substantial particular, does not bind the signer without further assent on his part to the completion of the instrument, where no delegation of authority is conferred to supply the defect. So, where a form contract is signed with unfilled blanks, and one party fills in the blanks contrary to the authorization of the other party, the latter is not bound thereby. 17 Am. Jur.2d Contracts § 73 at 411-12 (1964).

According to the legal definition, the contract of a guarantor is his own separate contract and the fundamental difference between a contract of guaranty and one of suretyship is that the guarantor’s contract is collateral to and independent of the contract, the performance of which he guarantees, while that of a surety is an original obligation.

Here, ostensibly, we have a contract between the appellees and the Bank. However, if we apply fundamental contract law in this case, the Court is of the opinion there was never a contract between the parties. There was never any mutuality of assent. Scioli was not given any authority to act for appellees, and the Bank, through testimony by its officer, did not treat Scioli as an agent for appellees. Therefore, in this transaction, the minds of the Bank and the appellees never met on any of the terms or conditions of this contract. It is significant to the Court that the Bank never dealt directly with the appellees, and in truth, did not know if the signatures on the contracts were in fact the appellees’. The evidence negated any justification of a presumption or assumption on the Bank’s part that Scioli was an agent, ostensible or otherwise, of the appellees, or had the authority to act for them.

It is the opinion of this Court that the guaranty agreements in these cases must be based on the laws of contracts. We have determined that the essential, vital elements of a contract are missing in these cases.

KRS 371.010(4) requires a promise to answer for the debt of another to be in writing to be enforceable.

KRS 371.090 provides in part as follows:

. No person shall be bound as the surety of another by the acts of an agent unless the authority of the agent is in writing. .

There is no evidence in the record that the appellees gave any written document to Mr. Scioli authorizing him to act as their agent. The law is clear that such agency agreements must be in writing. Therefore, we conclude that no legal agency relationship existed between the appellees and Mr. Scioli.

The judgments of the trial courts are affirmed.

All concur.


author: REYNOLDS, Judge.

text:
    Michael Ray STANDARD, Appellant, v. Karla BUCKNER.
    Court of Appeals of Kentucky.
    Sept. 16, 1977.
    Discretionary Review Denied March 7,1978.

      John Tim McCall, Louisville, for appellant.
    Daniel B. Boone, Louisville, for appellee.
    Before COOPER, WINTERSHEIMER and REYNOLDS, JJ.
   REYNOLDS, Judge.

This appeal is from a judgment following a jury verdict rendered in a civil action in favor of the appellee, Karla Buckner. The jury had found that the appellant, Michael Ray Standard, on two separate occasions, had broken into appellee’s home and raped her and awarded appellee compensatory damages of $25,582.50 and punitive damages of $60,000.00.

At the time of the trial of this civil action appellant was serving a sentence in the state correctional facility for a separate rape conviction, and he was accompanied to this trial by a uniformed guard. In addition, the appellant was under indictment for the rapes alleged in this civil action.

As a matter of law, appellant contends that this action should have been continued, pending final disposition of the criminal charges, citing Anthony v. Clarke, 1 R.I. 284 (1850) and Pettingill v. Rideout, 6 N.H. 454, 25 Am.Dec. 473 (1833). We are of the opinion that the better view would leave the decision of continuances within the sound discretion of the trial court in consideration of all the surrounding circumstances. State v. Schauenberg, 197 Iowa 445, 197 N.W. 295 (1924); Poston v. Home Ins. Co. of New York, 191 S.C. 314, 4 S.E.2d 261 (1939). The record does not demonstrate that the court abused its discretion in denying appellant’s motion for a continuance. There was no discovery which would have conflicted with appellant’s privilege against self-incrimination. The appellant was called by the appellee and testified without exerting this privilege or rendering incriminating statements. In sum, appellant has not shown that under the circumstances of the case his rights were violated or his defense otherwise hampered by the pendency of the indictment.

Appellant contends that the court should have granted a continuance because prior to voir dire potential members of the jury saw the appellant accompanied by the prison guard while in the hallway outside the courtroom. He does not contend that his incarceration was made known to the jury during the trial. In fact, the record discloses that the trial court took particular care to prevent such an occurrence.

The trial court was careful to note of record that it had inquired into the matter and found that the appellant had not been exhibited to the jury as a prisoner. Appellant has not countered the court’s finding by affidavits or otherwise. The question of whether a jury should be discharged for bias is one of fact and bias will not be presumed. Watson v. Commonwealth, Ky., 433 S.W.2d 884, 887 (1968), and the court’s finding in this regard will not be disturbed except for manifest error. Peters v. Commonwealth, Ky., 505 S.W.2d 764 (1974).

Appellant’s third alleged ground for reversal is the court’s failure to grant a mistrial after introduction of hearsay statements related by the appellee. In essence, the appellee testified that the police told her that blood found on her pillowcase matched that of the appellant. The incompetence and potential prejudicial effect of the statement is not disputed. Rather, the question is whether the appellee’s subsequent testimony “cured” the error.

Q. Now you don’t know anything about the testing of that blood or anything, do you? You weren’t trying to say that there was a blood test run on that, were you?
A. There was, but you know, they just told me it wasn’t mine.
Q. The police didn’t tell you the defendant’s either?
A. No, he just said it wasn’t mine.
Mr. McCall: Judge, I want her to withdraw that statement that she said then.
Court: Okay. Then I understand, as I heard a statement that you made that the blood, the police told you that the blood was the defendant’s?
Witness: No.
Court: The police did not tell you that?
Witness: They told me it was the man who raped me.
Court: All right. And as far as you are concerned, they told you that the blood was not yours?
Witness: Yes.
Court: All right. But they did not say that it belonged to somebody by the name of Michael Ray Standard?
Witness: No.
Court: Okay. Well, I want the jury to be advised of that. Okay, continue.

We conclude that the appellee’s unequivo-cable retraction of the prejudicial statement justified denial of appellant’s motion. Behrenfeld v. Breedlove, 27 Cal.App. 419, 150 P. 71 (1915); Canales v. Bank of California, 316 S.W.2d 314 (Tex.Civ.App.1958).

Finally, appellant urges that the jury should have been admonished following his impeachment by a prior felony conviction. No admonition was requested at the trial, and therefore any error was not preserved for review. Franklin v. Commonwealth, Ky., 477 S.W.2d 788 (1972).

The judgment is affirmed.

All concur.


author: GANT, Judge.

text:
    Dr. Byron W. M. HILL, M. D., Appellant, v. Robert WILLMOTT and Arnold & Willmott, Law Firm, Appellees.
    Court of Appeals of Kentucky.
    Jan. 27, 1978.

      Rudy C. Bryant, Henderson, for appellant.
    John Stanley Hoffman, King, Deep & Branaman, Henderson, for appellees.
    Before GANT, VANCE and WILHOIT, JJ.
   GANT, Judge.

This is an appeal from an order of the Henderson Circuit Court granting the ap-pellees/defendants’ motion for a summary judgment and dismissing the action on the grounds that there is no genuine issue as to any material fact and that the appellees are entitled to judgment as a matter of law. The sole issue on appeal is whether a former litigant can sustain an action based on the theory of negligence against the adverse party’s attorney in the prior suit.

A brief chronological review of the facts is necessary to dispose of this appeal. In the summer of 1974 Kenneth and Phyllis Russelburg engaged the services of Sidney H. Hulette, an attorney in Morganfield, Kentucky, for the purpose of investigating the possibility of legal action against the appellant, Dr. Byron W. M. Hill, for what they believed to be an incorrect diagnosis that they had contracted a venereal disease. Shortly thereafter, Hulette advised the Russelburgs that it would be better if they obtained counsel in Dr. Hill’s home town, Henderson, Kentucky, since the action would have to be brought and maintained there. Hulette, with the permission of the Russelburgs, contacted M. Curram Clem, an attorney in Henderson, concerning the case, and subsequently an agreement was reached whereby Clem would represent the Russelburgs in their action against Hill. Clem stated that at this time he informed them that the suit would be filed in the name of an out-of-town attorney due to the fact that Dr. Hill was one of the few surgeons in Henderson and that he frequently used Hill as an expert witness in Workmen’s Compensation proceedings.

Clem then contacted Robert W. Willmott, appellee, of the law firm of Arnold & Will-mott in Lexington, explained the situation surrounding the case and assured Willmott that he would perform all the necessary work to properly present the claim if he would allow Clem to use his name as attorney of record. Willmott agreed, based upon these assurances, and in June of 1975 permitted Clem to affix his signature to the complaint. Willmott received the notices of the taking of the depositions and he immediately telephoned Clem to inform him of the date, time and place of the taking of these depositions and in each instance Clem assured Willmott that he would attend and protect the rights of the Russelburgs. Pri- or to the taking of the Russelburgs’ depositions, Clem again reminded them that the suit had been filed in the name of another attorney.

In April of 1976 Willmott promptly notified Clem of the motion for summary judgment made by Hill and Clem assured Will-mott that he would attend this hearing and resist the motion. Not until some time later when he received notice of the commencement . of this action was Willmott aware that Hill’s motion for a summary judgment had been granted.

On June 11,1976, the appellant instituted this action alleging the following:

That the defendant, Robert Willmott, was negligent in the instituting of the suit against the plaintiff. Dr. Byron W. M. Hill, M. D., in that the defendant, Robert Willmott failed to exercise or possess that degree of skill, care and learning ordinarily exercised or possessed by the average qualified attorney, acting in the same or similar circumstances. Defendant was negligent in that prior to filing suit, he did not consult with Dr. Byron W. M. Hill, M. D., did not consult with any other physicians concerning the skill, care and technique used by a physician in this particular type case, did not consult medical charts of Kenneth Russel-burg and Phyllis Russelburg, did not consult with the State or County Health Departments in determining whether or not Dr. Byron W. M. Hill’s report to the Russelburgs was correct, did not consult in any manner with the plaintiffs, Kenneth Russelburg and Phyllis Russelburg, and was not authorized to file suit on their behalf against Dr. Byron W. M. Hill, M. D. (Emphasis added).

After taking of depositions, the appellees filed a motion for summary judgment and submitted in support thereof the affidavits of Clem and Willmott. Appellant did not file opposing affidavits and, after having heard the arguments of counsel, the court granted the appellees’ motion. This appeal followed.

Appellant’s alleged cause of action is for damages for “negligence” by the appel-lee in filing a malpractice suit against the appellant on behalf of the Russelburgs. As the basis for this allegation the appellant urges that the factual situation involved herein contains the three elements necessary to sustain an action for negligence which include a duty owed by appellee to appellant, a violation of that duty, and resulting damages. See Gosney v. Louisville & Nashville Co., 169 Ky. 323, 183 S.W. 538 (1916). The specific elements constituting the basis for his claim are as follows:

1.A duty owed by Willmott to the appellant to act in accordance with R.A.P. 3.130 which embodies the principles enunciated in the American Bar Association’s Code of Professional Responsibilities. Specifically, the alleged duty is found in Canon 9 entitled “A Lawyer Should Avoid Even the Appearance of Professional Impropriety” and attendant ethical considerations requiring a lawyer to “ . . . promote public confidence in our system and in the legal profession" and to act “ . . . in a manner that promotes public confidence in the integrity and efficiency of the legal system and the legal profession.” See E.C. 9-1 and 9-2.

2. A violation of that duty by Willmott when he filed an unauthorized law suit against the appellant.

3. Damages to the appellant’s practice in the amount of $250,000 as a result of Willmott’s actions.

The main flaw in the appellant’s reasoning lies in the assumption that the duty owing to another pursuant to R.A.P. 3.130 extends to individuals and the remedy provided thereunder is for the redress of private grievances. In holding that a private action for civil damages for alleged breach of an attorney’s oath by the filing of a false claim would not lie, the United States District Court for the Eastern District of Tennessee in Merritt-Chapman & Scott Corp. v. Elgin Coal, Inc., 358 F.Supp. 17 (1972) stated as follows:

While . . . under proper circumstances an action might lie against an attorney for malicious prosecution, fraud or abuse of process by the false initiation and prosecution of litigation, apart from such circumstances, no private action for civil damages will lie for an alleged breach of an attorney’s oath in the filing of a false claim. No authority has been cited by the plaintiff in support of its claim in this regard. Rather, the plaintiff relies upon the analogy that a civil action would generally lie for breach of a statutory duty. The statutory duty here alleged to be involved is not cited, but apparently it is Section 29-108, T.C.A., dealing with the procedure for admission to the practice of law and the oath required therein. The remedy for the breach of the oath therein provided is a public one, not a private one.

This is in accord with the disciplinary nature of Rule 3, et seq. of the Rules of Appellate Procedure. The sole remedial method for a violation of the Code is the imposition of disciplinary measures after a hearing by the Board of Governors of the State Bar Association for any “ . charges brought under this code as well as charges for other unprofessional or unethical conduct calculated to bring the bench and bar into disrepute.” See R.A.P. 3.130. Nowhere does the Code of Professional Responsibility or the Rules attempt to establish standards for civil liability of attorneys for their professional negligence. This is not to say that a cause of action cannot be asserted for negligence on the part of an attorney. All we are holding is that the duty set forth in the Code and the Rules establishes the minimum level of competence for the protection of the public and a violation thereof does not necessarily give rise to a cause of action.

Assuming the attorney owes a duty independent of that set forth in the Rules and the Code and a violation occurs, we must then determine to whom the duty is owed. The California appellate court recently confronted this problem in Donald v. Garry, 19 Cal.App.3d 769, 97 Cal.Rptr. 191 (1971) and reached a workable solution. Therein an attorney employed by a collection agency to bring an action for the collection of a debt owed to a client of the agency was held liable to the individual creditor despite the absence of privity of contract when the collection proceeding was dismissed for lack of diligent prosecution due to the attorney’s negligence. In so holding, the court stated that “An attorney may be liable for damage caused by his negligence to a person intended to be benefited by his performance irrespective of any lack of privity . . . ” (Emphasis added). We believe this to be a proper statement of the law in this Commonwealth.

Kentucky has long recognized an action for malicious prosecution where the suit was instituted with malice and without probable cause. Harter v. Lewis Stores, Ky., 240 S.W.2d 86 (1951). Although actions for malicious prosecution are not favored, they do deter the utilization of the legal process for the purpose of vexation or injury. Reid v. True, Ky., 302 S.W.2d 846 (1957); Davis v. Brady, 218 Ky. 384, 291 S.W. 412 (1927). See 52 Am.Jur.2d Malicious Prosecution, § 1.

There are several public policy reasons to limit the adverse party’s action to one for malicious prosecution. In a similar case, Norton v. Hines, 49 Cal.App.3d 917, 123 Cal.Rptr. 237 (1975), the California Court of Appeal noted the general proposition that “[t]he tort of malicious prosecution is designed to place restraint on a would-be plaintiff while furnishing protection to a wrongfully sued defendant.” In extending this principle to the attorney representing the litigant initiating the action, the court reasoned as follows:

The attorney owes a duty to his client to present his case vigorously in a manner as favorable to the client as the rules of law and professional ethics will permit. He is an advocate and an officer of the court. He is cognizant of the public policy that encourages his clients to solve their problems in a court of law. In our opinion, when representing his client in the initiation of a law suit, he should not be judged by a different standard . Against attorneys, however, he (adverse litigant) proceeds on a cause of action for simple negligence which requires a different and less, demanding standard of proof. We believe the public policy of favoring free access to our courts is still viable. However, if (his) cause of action against attorneys for negligence is permitted, this policy will be subverted. The attorney must have the same freedom in initiating his client’s suit as the client. If he does not, law suits now justifiably commenced will be refused by attorneys, and the client, in most eases, will be denied his day in court.

The Kentucky Court of Appeals had previously adopted a similar viewpoint in Rose v. Davis, 288 Ky. 674, 157 S.W.2d 284 (1941). Therein the court stated:

An attorney is not ordinarily liable to third persons for his acts committed in representing a client. It is only where his acts are fraudulent or tortious and result in injury to third persons that he is liable. To hold an attorney responsible for damages occasioned by an erroneous judicial order, even though the error be induced by him, would make the practice of law one of such financial hazard that few men would care to incur the risk of its practice.

The key to the protection of the basic legal concept allowing free access to the courts is the element of “probable cause” in an action for malicious prosecution. Any less demanding standard would make the attorney “ . an insurer to his client’s adversary that his client will win in litigation.” See Tool Research & Engineering Corp. v. Henigson, 46 Cal.App.3d 675, 120 Cal.Rptr. 291 (1975). To allow a party to bring a negligence action against the adverse attorney would have a chilling effect on the number of meritorious claims filed and this cannot be tolerated under our system.

Applying the foregoing principles to the case at bar, it is readily apparent that Willmott did not owe the alleged duty urged by Hill nor was the appellant an intended beneficiary of Willmott’s services. Willmott’s alleged failure to investigate the facts and law prior to the filing of the suit in his name would have been material as to the question of “probable cause” in a malicious prosecution action if such had been pleaded. However, his alleged failure to investigate was not a duty owing to Hill and as such does not constitute a cause of action by him. For an excellent discussion of this topic, see Birnbaum, Physicians’ Counterattack: Liability of Lawyers for Instituting Unjustified Medical Malpractice Actions, 54 Fordham L.Rev. 1003 (1977).

For the above stated reasons, the summary judgment of the lower court is affirmed.

All concur.


author: HOWARD, Judge.

text:
    William Burt MANN, Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    Court of Appeals of Kentucky.
    Jan. 27, 1978.

      Richard L. Receveur, Asst. Dist. Defender, Terrence R. Fitzgerald, Deputy Dist. Defender, Louisville, for appellant.
    Robert F. Stephens, Atty. Gen., Guy C. Shearer, Asst. Atty. Gen., Frankfort, for appellee.
    Before COOPER, HOWARD and WHITE, JJ.
   HOWARD, Judge.

On the evening of September 3, 1973, appellant and three others were arrested for the robbery of two employees of a Blue Boar Cafeteria. A trial was held on February 28, 1977, at which time appellant was found guilty of armed robbery and was sentenced to ten years of confinement on April 4, 1977.

Appellant raises four issues on this appeal: 1) Did the trial court commit reversible error by failing to dismiss the indictment on the grounds that appellant had been denied his right to a speedy trial; 2) Did the trial court commit reversible error by failing to suppress the evidence obtained as the result of an alleged illegal arrest for which the arresting officers had no probable cause; 3) Did the trial court commit reversible error by failing to order production of notes dealing with the substance of a prosecution witness’s testimony for use in cross-examination by defense counsel; and 4) Did the trial court commit reversible error by failing to suppress the identification of appellant which occurred during an alleged suggestive line-up procedure?

We first discuss appellant’s claim of lack of probable cause for the arrest. In the instant case, an FBI agent testified that he received a call from a confidential informant who told him that a robbery had occurred “at the Blue Boar in the South End” and that the men, guns, and money were in a trailer at a certain location. The information received was subsequently given to a Louisville Police Officer and relayed to the arresting officers.

In Church v. Commonwealth, Ky., 411 S.W.2d 309, 311 (1967) the court said:

Turning to the question whether the evidence obtained incident to the arrest of appellant should have been suppressed, we must look to decisions of the Supreme Court in light of Mapp v. State of Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081, 84 A.L.R.2d 933. In Draper v. United States, 358 U.S. 307, 79 S.Ct. 329, 3 L.Ed.2d 327, evidence obtained upon a warrantless arrest was held to have been properly admitted. The basis of the decision is that the arresting federal officers had “probable cause” to believe the arrested person had committed a felony within the meaning of the Fourth Amendment, U.S. Constitution. The “probable cause” there rested on information furnished by a “reliable paid informer.”
In analyzing the meaning of “probable cause” as a basis for a warrantless arrest on a felony charge, the following language found in the Draper opinion is pertinent:
“ ‘In dealing with probable cause, * * as the very name implies, we deal with probabilities. These are not technical; they are the factual and practical considerations of everyday life on which reasonable and prudent men, not legal technicians, act.’ Brinegar v. United States, supra, 338 U.S. [160] at page 175, 69 S.Ct. [1302] at page 1310 [93 L.Ed. 1879], Probable cause exists where ‘the facts and circumstances within their [the arresting officers’] knowledge and of which they had reasonably trustworthy information [are] sufficient in themselves to warrant a man of reasonable caution in the belief that’ an offense has been or is being committed. Carroll v. United States, 267 U.S. 132, 162, 45 S.Ct. 280, 288, [69 L.Ed. 543, 555, 39 A.L.R. 790].” Ibid., 79 S.Ct. at 333, 3 L.Ed.2d at 332.

The Transcript of Evidence reveals that in the pre-trial suppression hearing, the FBI agent testified that the confidential informant had been very reliable and very effective in the past. There was also testimony given at the pre-trial hearing that a surveillance was being conducted in the trailer park. The robbery had been reported and the police report was heard coming over the radio.

In Shull v. Commonwealth, Ky., 475 S.W.2d 469 (1971), the court notes that when a trial court determines that an officer had probable cause for arresting an individual, if the finding is supported by competent evidence, it cannot lightly be set aside. We agree with the trial court’s determination that probable cause for the arrest of appellant existed, and that the arrest was legal.

The Transcript of Evidence indicates that during cross-examination of the FBI agent, appellant’s attorney discovered that the agent had made private notes or memoran-da concerning the conversation with the informant. Appellant’s counsel then requested production of the notes and since the name of the confidential informant was possibly contained therein, requested the trial judge to make a preliminary review of the notes before tendering them to the appellant’s counsel. The trial court refused to require production of the notes.

RCr 7.26 is not applicable in every situation. See Delaney v. Commonwealth, Ky., 520 S.W.2d 747, 748 (1975). There was no reversible error committed by the trial court by failing to order the production of these notes or memoranda.

The “primary evil to be avoided” in an identification is “a very substantial likelihood of irreparable misidentification.” Simmons v. United States, 390 U.S. 377, 384, 88 S.Ct. 967, 971, 19 L.Ed.2d 1247 (1968).

Both the robbery victims had been informed prior to the line-up that the stolen property had been recovered. One of the robbery victims was unable to make any kind of identification; another victim identified appellant as one of the perpetrators of the robbery. After reviewing the description of the line-up and the picture of the line-up, we do not feel the identification procedure was unduly suggestive, or that a substantial likelihood of irreparable mis-identification resulted.

We do feel, however, that the appellant has been denied his right to a speedy trial.

Appellant was arrested on September 7, 1973. He was indicted on April 25, 1974. Appellant, at that time, was incarcerated at the Kentucky State Penitentiary. On April 29,1974, a detainer was lodged against him. On July 12, 1976, appellant filed a pro se motion, demanding a speedy trial or the dismissal of charges. The trial was then scheduled for September 30, 1976.

The trial date thereafter was rescheduled for November 16, 1976, and then to February 28, 1977, at which time the trial was held. The Commonwealth states in its brief that the continuances of September 30,1976 and November 16, 1976 were on the Commonwealth’s motions. Meanwhile, appellant moved the court for a dismissal of the indictment on the matter on November 5, 1976; December 2, 1976; and February 28, 1977.

Appellant alleges that his ability to present his defense was prejudiced by the delay. However, we note that the loss of one potential witness because of death and the loss of another potential witness because of unavailability occurred before appellant made his first motion for a speedy trial.

In Blair v. Commonwealth, Ky., 458 S.W.2d 761 (1970), the court, at page 763, makes these observations:

We adhere to the principle that the failure of the accused to demand trial constitutes a waiver. Barker v. Commonwealth, Ky., 385 S.W.2d 671 (1964); La vigne v. Commonwealth, Ky., 398 S.W.2d 691 (1966). As above noted, what could be considered a demand for a speedy trial was not made until July 8, 1968. The case was assigned for trial two and one-half months later, and it was then tried. We do not consider this unreasonable delay. See Clark v. Commonwealth, Ky., 293 S.W.2d 465 (1956).

And, in Clark v. Commonwealth, Ky., 293 S.W.2d 465, 466 (1956), the court states: “. . . It is well settled that the right of a speedy trial means that the trial will take place as soon as possible after the indictment, not depriving the prosecution of a reasonable time to prepare its case.” (Emphasis ours). In Clark, supra, the defendant was tried in the next regular term of court in Oldham County, after he made his motion to be produced before the court for trial.

In the present case, after appellant’s demand for a speedy trial, two continuances were granted to the Commonwealth. This was approximately a seven and a half month delay between the demand for a speedy trial and the trial itself. Notwithstanding the principle that the failure of the accused constitutes a waiver, there was still a two-year period before appellant’s demand for a speedy trial, during which time we would hope the Commonwealth was performing some work on appellant’s case. We feel that the delay in bringing appellant to trial, after his first demand for a speedy trial in July, 1976, was unreasonable, in view of the Commonwealth’s lack of a proper showing of the need to prepare itself. See Kelly v. Richardson, Ky., 469 S.W.2d 700 (1971).

We feel that, in the present case, appellant was denied his right to a speedy trial as guaranteed by the Constitution of Kentucky. We are remanding this case to the trial court so that an order dismissing this charge against appellant can be entered.

All concur.