author: O’QUINN, Justice.

text:
    AUSTIN LAKE ESTATES, INC., Appellant, v. George E. MEYER et ux., Appellees.
    No. 12577.
    Court of Civil Appeals of Texas, Austin.
    Oct. 26, 1977.
    Rehearing Denied Nov. 9, 1977.

      Russell G. Ferguson, Ferguson & Ferguson, Austin, for appellant.
    William R. Travis, Hollers & Travis, Austin, for appellees.
   O’QUINN, Justice.

The facts of this case in epitome are that appellant in February of 1965 sold an unimproved lot in Austin Lake Estates subdivision to appellees and subsequently, in 1970, without the knowledge or consent of appel-lees, sold the same lot to a third party, receiving a valuable consideration in each sale.

Appellees did not place their deed of record, and the second sale of the lot, upon which the second buyer made valuable improvements without knowledge of the first sale, deprived appellees of their property. Appellees brought suit for damages and, alternatively, for imposition of a constructive trust to prevent unjust enrichment of appellant.

After trial before the court without a jury, the court entered judgment for appel-lees in the sum of $667.70, the amount appellant received in 1970 as consideration in the second sale.

Appellant brings five points of error and offers a sixth claim by reply brief on appeal. We will overrule all points of error and affirm judgment of the trial court.

Appellees, plaintiffs below, are George E. Meyer and wife Beverly C. Meyer.

Early in the 1960’s Collins Construction Company performed road work under contract for Austin Lake Estates corporation. At least part of the work was paid for in lots created by the subdivision. Upon voluntary dissolution of the Collins company in the mid-1960’s, two lots (numbers 10 and 13) were conveyed by the company to Mrs. Meyer who prior to marriage was Beverly Collins. Since the two lots were not contiguous, the Meyers later sought and made an agreement with Wroe Owens, an attorney, then president of Austin Lake Estates, to trade their lot 13 to the corporation for lot 9, adjoining lot 10.

The record shows that George Meyer delivered the deed to lot 13 to Owens, who assured Meyer that he “would take care of the transfer of the deeds.” Owens later mailed the deed to lot 9 to the Meyers. That deed, dated February 26, 1965, was signed by Owens in his capacity as president of the grantor corporation. The Meyers failed to record the deed, but used the property for camping and other recreational purposes until 1968, when they moved from Austin to Goliad, Texas.

Subsequently, after the Meyers returned to Austin in May of 1972 to live, a visit to the lot in October of that year disclosed that the lot was in possession of Harlan A. Winter who had erected substantial improvements on the property. Winter claimed the lot under a deed from Austin Lake Estates, executed by a trustee, dated April 13,1970, which recited a consideration of $700. The record shows that Winter actually paid $667.70 for the lot, the amount made subject to the constructive trust imposed by the trial court judgment. It is also clear that Winter took the deed and possession of the property without knowledge of the Meyers claim under their unrecorded deed. ■ Upon being consulted by the Meyers, Owens confirmed the second conveyance by Austin Lake Estates to Winter of lot 9.

The Meyers brought suit late in December of 1974, more than two years after discovery of the Winter claim. Plaintiffs prayed for damages and in the alternative for imposition of a constructive trust on proceeds of the second sale of lot 9.

Under points three and four Austin Lake Estates contends that the constructive trust imposed in favor of the Meyers was improper on the ground that a constructive trust may not be imposed in the absence of showing that a fiduciary relationship between the parties has been breached, or because a confidential relationship, before and apart from the agreement made the basis of this suit, did not exist. Neither contention has merit.

The constructive trust is an equitable remedy courts may employ to prevent a wrongdoer from escaping the consequences of selling another’s land and keeping the proceeds. It is not essential for the application of this doctrine that an actual trust or fiduciary relationship exist, for when one party has wrongfully taken the property of another and sold to a third party, the constructive trust will follow the property or its proceeds. Hand v. Errington, 242 S.W. 722, 724 (Tex.Comm’n App.1922); Eldridge v. Barreda, 233 S.W. 319, 320 (Tex.Civ.App. San Antonio 1921, judgment reformed only as to measure of damages, 254 S.W. 769, Tex.Comm’n App.1923); Mitchell v. Simons, 53 S.W. 76 (Tex.Civ.App.1899, no writ).

The Supreme Court in 1974 restated with approval the rule applied in earlier cases. In Meadows v. Bierschwale, 516 S.W.2d 125, 128 (Tex.Sup.1974) the Supreme Court held that the contention “. . . that a constructive trust requiring the defendant to account for profits is an appropriate remedy only when breach of a fiduciary relationship is involved ... is clearly erroneous.” In Meadows the Court again stated the principle of equity, found in Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256 (1951), that “Constructive trusts, being remedial in character, have the very broad function of redressing wrong or unjust enrichment in keeping with basic principles of equity and justice.”

We hold that the trial court properly imposed a constructive trust on the amount received by Austin Lake Estates in the wrongful sale of appellees’ property to a third party. Under the circumstances of this case, that transaction provides a basis for the constructive trust because Austin Lake Estates holds funds which in equity and good conscience should be possessed by the Meyers. Meadows, supra, 516 S.W.2d 131, col. 2.

Appellant corporation contends under points one and two that the action by the Meyers was barred under the two-year and the four-year statutes of limitations. (Arts. 5526 and 5529, V.A.C.S.).

In actions to establish a constructive trust based on fraud, the four-year statute of limitations applies. Culver v. Pickens, 142 Tex. 87, 176 S.W.2d 167, 170 (1943). Fraud will prevent the statute from running until the fraud is discovered or by reasonable diligence should have been discovered. Glenn v. Steele, 141 Tex. 565, 61 S.W.2d 810 (1933); Wise v. Anderson, 163 Tex. 608, 359 S.W.2d 876 (1962); Sherman v. Sipper, 137 Tex. 85,152 S.W.2d 319, 137 A.L.R. 263 (1941); Collins v. Griffith, 125 S.W.2d 419 (Tex.Civ.App. Amarillo 1939, writ ref’d). George Meyer testified that Winter told Meyer on October 17,1972, that Winter claimed the property under deed, and this was sufficient to cause the action to accrue and the limitation period to start running. The Meyers brought their action in December of 1974, well within the four-year statute of limitations.

Appellant argues that because the Meyers claim at law for damages, an alternate action of recovery, is barred by the two-year statute of limitations, under the rule of Quinn v. Press, 135 Tex. 60, 140 S.W.2d 438 (1940), therefore the equitable remedy, accorded by the constructive trust, should be barred by the same statute. Although an action for relief in law, as suit for damages, may be barred in two years by Article 5526, the alternative action for equitable relief, as suit for constructive trust, may be treated separately and allowed, as not barred in less than four years under Article 5529. Blum v. Elkins, 369 S.W.2d 810, 812-13 (Tex.Civ.App. Waco 1963, no writ). The contentions under points one and two are overruled.

By point five appellant challenges the trial court’s judgment on the ground that there was no evidence showing that the corporate deed to the Meyers in 1965 was authorized by action of the board of directors of Austin Lake Estates. Appellant argues that the deed, an unrecorded instrument, was erroneously admitted into evidence under Article 5.08, Texas Business Corporation Act (1955).

Article 5.08 provides that any corporation may convey land by deed when the instrument is signed by the president or a vice president or attorney in fact “. when authorized by appropriate resolution of the board of directors or shareholders.” The statute also provides that “. such deed when recorded, if signed by the president or any vice president . shall constitute prima facie evidence that such resolution of the board of directors or shareholders was duly adopted.” (Emphasis added) Appellant argues that the deed to the Meyers is inadmissible in evidence because under the statute failure to record the instrument rendered the instrument inadmissible. The Supreme Court, confronted by the same contention under a similar earlier statute (Art. 600, Rev.Sts. 1879), held that the corporate deed was admissible in evidence. Kimmarle v. Houston & T. C. Ry. Co., 76 Tex. 686, 12 S.W. 698 (1889).

It is a different matter, however, that after failing to record their deed, the Meyers in introducing the deed could not establish thereby that Wroe Owens, in execution of the deed as president of Austin Lake Estates, acted pursuant to resolution duly adopted by the board of directors. Appellant’s problem, nevertheless, lies in the fact that the corporation failed to deny under oath that Owens had proper authority, as required by Rule 93(h), Texas Rules of Civil Procedure. Unless denied under oath, the deed so challenged “. shall be received in evidence as fully proved.” The deed to the Meyers was properly admitted over appellant’s claim that no showing had been made of Owens’ authority, since appellant failed to deny execution of the deed under oath. Ship Ahoy, Inc. v. Whalen, 347 S.W.2d 662 (Tex.Civ.App. Houston 1961, no writ). The fifth point of error is overruled.

In its reply brief on appeal, appellant contends that the Meyers failed to prove that they traded lot 13 to Austin Lake Estates in exchange for lot 9, resulting in a failure of consideration for conveyance of lot 9 to the Meyers. Both parties have briefed and joined issue on the point before this Court. Appellant affirmatively pleaded failure of consideration as a defense in the trial court as required by Rule 94, Texas Rules of Civil Procedure.

Failure of consideration for a contract may result as a consequence of failure of one party to perform his obligations under the agreement. Citizens National Bank v. Rogers, 449 S.W.2d 839 (Tex.Civ.App. Eastland 1969, writ ref’d n. r. e.). Appellant contends that the Meyers failed to transfer title to lot 13 to Austin Lake Estates, resulting in an effectual defense to the action brought by the Meyers. Food Machinery Corp. v. Moon, 165 S.W.2d 773 (Tex.Civ.App. Amarillo 1942, no writ).

This case was tried before the court without a jury, after which no findings of fact and conclusions of law were filed and none requested. In the absence of findings of facts under the circumstances, this Court must test validity of the judgment on the assumption that every disputed fact was resolved by the trial court in such a way as to support the judgment as rendered. Construction & General Labor Union v. Stephenson, 148 Tex. 434, 225 S.W.2d 958 (1950).

The record shows that both George Meyer and Wroe Owens testified that they believed lot 13 had been given in consideration for lot 9. Appellant’s sole controverting evidence was a deed purporting to convey lot 13 out of Collins Construction Company to a third party in March of 1965, about one month after Owens, acting as president of Austin Lake Estates, executed the deed to lot 9 conveying title to the Meyers. The deed to the Meyers recited consideration and was supported by parol evidence. No evidence was offered or introduced concerning the deed from Collins Construction to the third party, or concerning the circumstances attending that transaction. We must assume that the trial court resolved this disputed matter in such way as to support the judgment, and, in reaching such resolution, it is reasonable that the court could find that appellant failed to meet its burden of proof on the affirmative defense of no consideration. Appellant’s contention on this issue is overruled.

The judgment of the trial court is in all things affirmed.


source: Caselaw Access Project

author: PALMORE, Justice.

license: Public Domain

text:
    Harold B. McGUFFEY, etc., et al., Appellants, v. William W. HALL, M. D., et al., Appellees. William W. HALL, M. D., et al., Cross-Appellants, v. Harold B. McGUFFEY, etc., et al., Cross-Appellees. John B. FLOYD, Jr., M. D., et al., Cross-Appellants, v. W. Neville CAUDILL, M. D., in his official capacity as President of the Kentucky Peer Review Organization, Inc., etc., Cross-Appellees.
    Supreme Court of Kentucky.
    June 21, 1977.
    Rehearings Denied Sept. 16, 1977.

      Richard S. Smith, Gen. Counsel, Joseph D. Hudson, Dept, of Ins., Frankfort, William E. Scent, Tarrant, Combs & Bullitt, Lexington, Victor Fox, Asst. Atty. Gen., Frankfort, for appellant and cross-appellee Harold B. McGuffey, Com’r.
    Don H. Major, Mulhall, Major, Turner & Taylor, Louisville, for appellant and cross-appellee W. Neville Caudill, M.D.
    Morton J. Holbrook, Ronald M. Sullivan, Jesse T. Mountjoy, Sandidge, Holbrook & Craig, P.S.C., Owensboro, for appellees and cross-appellants William D. Hall, M.D., et al.
    Kent Masterson Brown, Joseph L. Arnold, Robert M. Odear, Lexington, for ap-pellees and cross-appellants John B. Floyd, Jr., M.D., et al.
    John C. Darsie, Jr., Gen. Counsel, Lexington, for amicus curiae University of Kentucky.
    Carl L. Wedekind, Jr., Stites, McElwain & Fowler, Louisville, for amicus curiae Kentucky Medical Ass’n.
    Edgar A. Zingman, Grover C. Potts, Jr., J. Baxter Schilling, Wyatt, Grafton & Sloss, Louisville, for amicus curiae Kentucky Hospital Ass’n.
   PALMORE, Justice.

At its regular session in 1976 the General Assembly enacted a bill entitled, “AN ACT relating to health care malpractice insurance and claims.” § 1 of the Act stated its purpose and § 11 its effective date. § 9 was an amendment of KRS 311.377, and the remaining eight sections became part of KRS Chapter 304, Title 10. In two separate declaratory judgment actions which eventually were consolidated various parties challenged the constitutional validity of the Act and certain of its provisions. The case was submitted to the trial court on briefs and the pleadings and culminated in a judgment declaring §§ 10(3), 10(8)(c), and 10(9) unconstitutional and the remainder of the enactment valid. The matter comes to this court on appeals and cross-appeals and, in addition to the parties, other interested organizations have been allowed to participate in the argument as amici curiae.

All of the objections raised in these two lawsuits were aimed at §§ 9 and 10 of the Act. Hence the judgment of the trial court was a bit too broad in declaring that with certain exceptions the entire enactment is valid. Other individual sections and subsections are in issue only insofar as it is claimed that by reason of constitutional defects in §§ 9 and 10 the whole Act is void. As a passing caveat, however, and without implying any approval of the other unliti-gated portions of the Act, we express deep misgivings with respect to § 3, which relates to procedure and appears clearly to invade the rule-making authority of the court.

The first and most serious objection to § 9 is that it is not germane to the subject of the Act and therefore falls athwart § 51 of the Kentucky Constitution. We think the point is well taken. The subject of the Act is not, as the Commissioner argues, “health care,” but “insurance and claims.” The nouns “insurance” and “claims” are restricted by the modifying adjective “malpractice,” which is further restricted by the term “health care” used in an adverbial sense. Hence the title reaches only such subjects as have some reasonable relationship to medical malpractice claims or insurance.

As indicated in the first paragraph of this opinion, all of the operative contents of the Act were created as sections of KRS Chapter 304 except for § 9, which was an amendment of KRS 311.377. KRS Chapter 304 is the Insurance Code. KRS Chapter 311 is entitled, “Physicians, Osteopaths and Podiatrists,” and excepting a provision for anatomical gifts relates entirely to the practice of medicine, osteopathy and podiatry. Before its amendment by the Act in question KRS 311.377 was a simple little statute providing that physicians and dentists shall not be liable in damages for good-faith actions taken by them in the performance of their duties as members of certain specified peer review boards. The 1976 Act replaced it with a new statute consisting of seven subsections providing in substance as follows:

(1) The content of what formerly was KRS 311.377 is broadened in scope to protect not only the members of certain review groups, but also other participants, employes and advisers, and to embrace review groups constituted by various agencies not theretofore enumerated in KRS 311.377. Among the review groups listed in the new statute are “professional standards review organizations,” or PSRO’s, which are regional boards created by federal law in connection with what are commonly called the Medicare and Medicaid programs.

(2) The proceedings and records of the review groups mentioned in subsection (1) are made immune “to discovery, subpoena, or introduction into evidence, in any civil action in any court or in any administrative proceeding before any board, body, or committee, whether federal, state, county, or city.”

(3) Nothing in subsection (2) is to be construed as restricting the right to discover or use in civil actions or administrative proceedings any evidence discoverable independently of the review proceeding mentioned in subsection (1).

(4) No person who presents or offers evidence in the aforementioned review proceedings, or who was then a member of the review group, may refuse to testify, except as provided in subsection (5), in discovery or upon the trial of a civil action as to any evidence covered in subsection (3) or as to any information within his own knowledge.

(5) No person shall be permitted or compelled to testify concerning his own or any other testimony except that of a defendant given in the review proceeding, or concerning any opinion formed by him as the result of such proceeding.

(6) In an action involving the denial of staff privileges by a health care entity, representatives of that entity may with its permission testify concerning any evidence presented in the proceedings leading to the denial in question.

(7) Nothing in § 9 is to be construed as restricting the presentation of testimony, records, findings, opinions, etc., “or other actions” of any review group mentioned in subsection (1) in any statutory or administrative proceeding relating to its functions or duties.

[4] Although conduct that results in a malpractice claim may also eventuate in a peer review proceeding, the relationship between the two is purely coincidental. A peer review is not designed to serve any purpose of a malpractice claim, and to the extent that the confidentiality conferred upon it serves to protect those who participate in the proceedings, it is a protection against suits for defamation, not malpractice.

§ 51 of the Kentucky Constitution has enjoyed, or suffered, an extremely liberal construction over the years, and we realize that time and technology have diminished the risks of deception it was intended to guard against. Still, however, it is not a lifeless anachronism, and there are wholesome limits to what can be loaded into one bill. We have only to ponder the incredible

morass in Washington, D.C., to be admonished against what can happen to legislation when it can be made up, sidetracked, taken apart, switched around and put together again like a freight train. Happily, our Constitution does not permit it. We are of the opinion that the subject-matter of § 9 of the Act is not sufficiently related to malpractice claims or insurance to satisfy Const. § 51. See Stovall v. Cook, Ky., 512 S.W.2d 487 (1974).

We agree also with the contention that insofar as § 9(2) of the Act purports to include federally-constituted PSRO’s it invades a field the Congress has chosen to occupy and therefore has pre-empted. § 1166 of the 1972 Social Security Amendments provides in effect that all information acquired by a PSRO shall be confidential except as otherwise provided by regulations issued by the Secretary of HEW. Legislation or regulation in the same area by the various states would engender that very confusion the doctrine of pre-emption serves to prevent. Cf. Pennsylvania v. Nelson, 350 U.S. 497, 504, 76 S.Ct. 477, 100 L.Ed. 640 (1956); Charleston & Western Carolina R. Co. v. Varnville Furniture Co., 237 U.S. 597, 604,35 S.Ct. 715, 59 L.Ed. 1137 (1914).

The remaining attacks on § 9 of the Act are less persuasive. The protection against liability extended by subsection (1) does not violate Const. § 54. See Jacobs v. Underwood, Ky., 484 S.W.2d 855, 857 (1972), which we decline to overrule. Though we are unaware of the source of authority by which the legislature of this state may determine just what shall be admissible and not admissible in the federal courts or in the courts and administrative tribunals other than our own, we are not convinced at first blush that the evidentiary limitations placed upon the proceedings of review groups by subsections (2) and (5) conflict with §§ 2, 3, 14, 59, or 60 of the Kentucky Constitution. We refrain, however, from passing final judgment in that respect in this opinion.

§ 10 of the Act consists of nine subsections, as follows:

(1) A state agency named the Kentucky Patients’ Compensation Fund (hereinafter called the Fund) is created within the Department of Insurance, and is to be managed under regulations of the Commissioner of Insurance.

(2) Every physician licensed and practicing in Kentucky and every hospital located in Kentucky shall be a member of the Fund, except that the Commissioner may grant an exception to “any physician who has a limited practice, or is in such special circumstances that he should not reasonably be required to participate in the fund.”

(3) Every member of the Fund must carry professional liability (malpractice) insurance with minimum coverage of $100,000 per occurrence and $300,000 in the aggregate for all claims occurring in any one policy year or, in the alternative, must qualify as a self-insurer.

(4) The basic requirements for self-insurers are specified.

(5) Each member of the Fund must pay into it an annual assessment (as fixed by the Commissioner) not exceeding 10% of the premium for the insurance required by subsection (3) or, in the instance of hospitals, not exceeding $50 per bed. For commercially-insured members these assessments are to be collected in the form of a surcharge by the respective insurers, which are then to pay the money so collected to the Fund. Assessments against self-insurers are determined on the basis of prevailing insurance premiums.

(6) If a member of the Fund is unable to acquire the insurance coverage required by subsection (3), or to acquire it at a cost not exceeding three times the average cost to other insureds of the same class and experience, the Commissioner is authorized to provide “coverage within the fund” to the extent of $100,000 — $300,000, to designate a commercial insurer as the servicing carrier for the party so insured, and to charge for such coverage a premium not exceeding three times the average cost to others in the same risk category. The maximum number of members who may be thus accommodated in any one year is 10.

(7) The financial resources of the Fund are to be used for the payment of malpractice judgments against and settlements made by its members in excess of the basic $100,000 — $300,000 insurance coverages, and for reimbursing the amounts of judgments, settlements and costs paid and incurred by the servicing carriers mentioned in subsection (6).

(8) A claimant who has recovered a judgment against or made a settlement (approved by the Commissioner) with a member covered by the Fund may collect from the Fund such portion of it as exceeds $100,000, subject to the limit that not more than $1,000,000 per year may be paid to one claimant under one judgment or settlement. Subsection (8)(c) then provides that if the Fund becomes exhausted such claims “shall be paid out of the general fund of the commonwealth . . .. Any such funds drawn from the general fund shall be repaid with interest at the legal rate [by the Fund] at the earliest practicable time” as determined by the Commissioner.

(9) Carriers providing insurance described in subsection (3) must report cancellations and nonrenewals to the Commissioner. A member who fails to meet the requirements of subsections (3) or (5) is to be reported by the Commissioner to the appropriate state licensing authority, which must then conduct a hearing requiring the delinquent member to show cause why his or its license should not be suspended.

In a preamble to the Act the General Assembly stated in substance that there is in this state a crisis with respect to the availability and cost of medical malpractice insurance, increasing the cost of health care and making it more difficult to attract new doctors and hospitals and to keep those we have, which in turn will have an adverse effect on the health and welfare of its citizens. In simple terms, the root of the problem is that the insurance industry apparently is becoming less willing to insure against malpractice and is charging prohibitive rates when it does. This is the setting against which we must determine the place and scope of the police power as it relates to the means chosen by the General Assembly to address the stated problem. No evidence was taken, nor were any exhibits filed or facts pleaded to explain just how the provisions of the Act might serve to alleviate the problem at which it is aimed. Except, therefore, for the preamble, we are consigned mainly to the realm of judicial notice for information.

It will be observed that by establishing the Fund, which is to be financed through compulsory assessments against the medical community, and from which is to be paid that portion of any malpractice judgment or approved settlement in excess of the commercial insurance coverage required by subsection (3), § 10 of the Act does provide a new source of coverage which otherwise would be available only from the insurance industry. Hence this provision has an easily discernible relationship to the scarcity and high cost of malpractice insurance. Improvidently, however, and obviously in contravention of Const. §§ 50 and 177, the drafters of the Act sought to make the general fund of the state a guarantor.

It does seem to us that by this time, with all of the cases that have been decided under Const. § 50, its simple message should be clear to all. No commitment against future general revenues can be made without a vote of the people. This is nothing less than the keystone guaranty of the state’s fiscal responsibility. No agency of the state, including its legislature, can place an obligation against the general funds otherwise available for appropriation and expenditure by a future legislature. The long series of decisions applying that principle to the resources of the state highway department was reviewed in Turnpike Authority of Kentucky v. Wall, Ky., 336 S.W.2d 551, 556-557 (1960). It is no answer to say that the general fund will be tapped only temporarily, in the form of a loan. The general revenues of 1986 can no more be committed to the purchase of an I.O.U. from the Fund than they could be committed to pay for any other asset placed on order by the legislature of 1976.

The Commissioner cites KRS 45.321, a section of the chapter on budget and financial administration, which provides that budget units of the state having bona fide receivables may be permitted to establish receivable accounts with corresponding credits to allotment accounts. We have not been called upon to construe or pass on the validity of that section, but it cannot validly be taken to mean that presently-existing receivables can be traded for access to future general revenues. In short, the restriction of Const. § 50 against obligating future general revenues is not satisfied by substituting other assets equal in value to the forbidden encroachment. As we see it, the purpose of Const. § 50 is to see that each generation is left free to make its own trades with its own money.

With respect to Const. § 177, which prohibits lending the credit of the Commonwealth, Hager v. Kentucky Children’s Home Soc., 119 Ky. 235, 83 S.W. 605, 607, 67 LRA 815 (1904), held that an annual appropriation of $15,000 to a charitable corporation devoted to the care of destitute children did not involve a giving or lending of credit. The opinion then went on to say that because the purpose was public the act did not offend Const. § 171, and there has been some tendency to misconstrue the language of Hager referring to Const. § 171 as applicable to Const. § 177 as well. Clearly, however, whether the objects of an expenditure are “public” or otherwise is irrelevant to Const. § 177:

“The state cannot now loan or give its credit to any person or corporation for any purpose — public or otherwise.” Hager v. Kentucky Children’s Home Soc., supra, 119 Ky. 235, at 83 S.W. 607.

In Industrial Develop. Auth. v. Eastern Ky. Reg. PI. Com’n, Ky., 332 S.W.2d 274, 278-279 (1960), this court again was called upon to determine whether an act authorizing the use of public funds violated Const. § 177, and it held that the lending of money is not a giving or lending of credit:

“The transactions the Authority would be empowered to make under the Act would involve only a loan of state funds. In such a case, the Authority would not be giving or pledging or lending the credit of the state, because the Authority would not be undertaking to become a surety on, or guarantor of the payment of, any bonds or other obligations in which the state’s money was invested. It would be in the position of a creditor rather than in that of a debtor, which last-mentioned situation arises upon a pledge or loan of credit.” Id., at 332 S.W.2d 278.

In that case, however, the agency in question was authorized to lend money drawn out of a revolving trust fund then and there available for current expenditure. There was no authority at any time to commit funds to be derived from future tax revenues. Here, on the other hand, the Fund is underwritten by a guaranty in which the general funds of the state derivable from future tax revenues are made the surety. If becoming a surety does not amount to a lending of credit, then there cannot be such a thing, in which event it must be concluded that in drafting Const. § 177 the members of the 1891 Convention were just whistling “Dixie.”

After holding that a loan of public money does not involve the public credit, the opinion in Industrial Develop. Auth. v. Eastern Ky. Reg. PI. Com’n, supra, at 332 S.W.2d 274, cites the following excerpt from Almond v. Day, 197 Va. 782, 91 S.E.2d 660, 667 (1956):

“When the underlying and activating purpose of the transaction and the financial obligation incurred are for the state’s benefit, there is no lending of its credit . . .”

The statement is too broad. As specifically pointed out in Hager (119 Ky. 235, 83 S.W. at p. 607), Const. § 177 does not permit the state’s credit to be given or lent for any purpose, public or otherwise.

Stovall v. Eastern Baptist Institute, Ky., 375 S.W.2d 273 (1964), also did no more than distinguish between the making of loans and the lending of credit, so it holds no lesson for this case. In Greer v. Kentucky Health and Geriatric Authority, Ky., 467 S.W.2d 340, 342 (1971), this court did uphold a guaranty arrangement, but the significant difference is that the guaranty fund was to consist of future appropriations if, as and when made by the legislature out of revenues then currently available to and expendable by it. Such an arrangement would have been perfectly feasible in this instance, in which event those persons having claims against the Fund would have been limited to its assets then existing without a guarantee of its solvency through recourse to the general funds of the state.

In several instances this court has held that contracts requiring the state to bear the costs of maintaining certain adjuncts of its public highway system do not violate Const. § 177. Guthrie v. Curlin, Ky., 263 S.W.2d 240, 243 (1953); Turnpike Authority of Kentucky v. Wall, Ky., 336 S.W.2d 551, 556 (1960); Ward v. Louisville & Nashville Railroad Company, Ky., 402 S.W.2d 98,100-101 (1966). Insofar, however, as those decisions pertain solely to the “credit” aspect of Const. § 177, they do not uphold the obligations on the basis of “public purpose,” but through the device of construing them to mean only that the facilities in question would be included “in the regular maintenance program of the Highway Department.” What that program will or will not amount to at any given time is left entirely to the discretion of each succeeding session of the legislature.

One of the amicus curiae briefs cites City of Louisville M. H. Com’n v. Public Housing Admin., Ky., 261 S.W.2d 286 (1953), for the proposition that Const. § 177 “does not apply to state agencies.” The cited opinion did not so hold. Its observation that the prohibition in Const. § 177 “is directed to the Commonwealth as such and not to an agency such as this Housing Commission is shown to be” refers not to the “credit” aspect of § 177, but to the portion stating that the Commonwealth shall not “become an owner or stockholder in, nor make donation to, any company, association or corporation”.

It could be argued (but was not) that in providing that the credit of the Commonwealth shall not be given, pledged or loaned “to any individual, company, corporation or association, municipality, or political subdivision of the State”, Const. § 177 does not prohibit using the state’s credit to back the financial integrity of one of its own agencies, and that § 10(1) of the Act expressly constitutes the Fund as a “state agency.” We think, however, that the listing of entities to which the state’s credit may not be given was intended to be all-inclusive. Literally, it covers everything but the federal government, other states, foreign countries, and the Commonwealth itself. Yet surely it would not be contended that the section does not prevent the use of the state’s credit to shore up the obligations of the federal government, or of some foreign state or country.

In 1891 the kind of governmental administrative agency that is so prevalent today was virtually unknown, and it would not have occurred to the members of the Convention that there might be a need to prohibit using the credit of the state for the benefit of one of its own administrative agencies. But the purpose is clear. Like Const. § 50, which we have already discussed at some length, the “credit” provision of Const. § 177 seeks to prevent transactions that might result in future liabilities against the general resources of the state and thereby encroach upon the freedom of another generation to utilize those resources as it then deems necessary or appropriate. It is a “clincher,” making certain that if perchance some court might hold a contingent or secondary liability not to be a “debt” under Const. § 50, it would nevertheless fall under the interdict of Const. § 177. These two constitutional provisions, originating in the fiscal follies of the 19th century, bespeak the same motivating thought. In contrast with the federal constitution, state constitutions ordinarily forbid one generation from stealing the earnings of another, at least without a vote of the people as a whole. The encroachment here would be quite small and insignificant, but the principle of the thing is just that simple.

Summarizing our position on this phase of the controversy now before us, we reiterate that by attempting to underwrite the Fund, through recourse to the general fund of the state, § 10(8)(c) of the Act creates a debt in violation of Const. § 50 and lends the credit of the state in violation of Const. § 177. We need not reach the question of whether it also violates Const. § 230.

The other portions of the Act declared invalid by the trial court were subsections (3) and (9) of § 10, which provide that every doctor and hospital shall carry no less than $100,000 — $300,000 malpractice insurance coverage or must qualify as a self-insurer and that one who fails to do so will lose his or its professional license.

Considering similar legislation in Jones v. State Board of Medicine, 97 Idaho 859, 555 P.2d 399, 408 (1976), the Supreme Court of Idaho upheld the insurance requirement as a reasonable exercise of the state’s police power:

“We hold that such requirements of obtaining medical malpractice insurance as a condition to licensure bear a rational relationship to the health and welfare of the citizens of the state by providing protection to patients who may be injured as a result of medical malpractice and to this extent does not violate the guarantees of due process of law.” (Emphasis ours.) Id., 97 Idaho 859, at 555 P.2d 408.

It is interesting to observe that while arriving at this conclusion the Idaho court at the same time remanded other aspects of the case to the trial court for the purpose of developing factual information sufficient to disclose the relationship between the problem sought to be solved and the means chosen to solve it:

“It is argued that the Act is a necessary legislative response to a ‘crisis in medical malpractice insurance’ in Idaho, but the record does not demonstrate any such ‘crisis.’ Further, there is no evidentiary basis presented here to either support or refute the relationship between the limitations [on amounts of recovery in malpractice suits] created by the Act and the abatement of the alleged crisis. . . . the record here presents no factual basis for understanding the nature and scope of the alleged medical malpractice crisis nationally or in Idaho.” Id., 97 Idaho 859, at 555 P.2d 412, 413.

No doubt our Const. § 54 dampened any legislative disposition to limit the amounts recoverable in medical malpractice suits, as was done in Idaho. What we find odd, however, is that while the Idaho court required evidence to reveal the nature and scope of the stated problem as it might be ameliorated by limiting the amounts of recovery, it apparently had no difficulty in relating it to compulsory insurance. Here, we suggest, somebody got lost in the horse latitudes, because “protection to patients who may be injured as a result of medical malpractice” [97 Idaho 859, 555 P.2d at p. 408, quoted above] most emphatically is not the problem this kind of legislation is intended to solve. And it is on this particular point that we find ourselves unable to see, either from the record or by way of judicial notice, just how a scarce commodity (malpractice insurance) is to be rendered any less scarce by requiring every eligible party to buy it.

§ 1 of the Act states in substance that its purpose is to promote the health and general welfare of the general citizenry through adopting reforms in medical malpractice claims, establishing the Fund so as to increase the availability and lower the cost of medical malpractice insurance, and assuring that medical malpractice judgments and settlements will be satisfied. Conceding, therefore, that the payment of malpractice claims is within the stated purposes of the Act, still it does not appear to have any reasonable relationship to the problem stated in the preamble or to any other problem or threatened problem shown to exist. Is there, for example, any problem or threatened problem in the form of unsatisfied claims against doctors and hospitals? Not to our knowledge. If not, and especially when the legislature has not suggested that there is, must its existence be presumed from the bare circumstance that the legislature has acted on the subject? We do not think so. The police power does have limits.

“It is fundamental that such [an] extraordinary power is not without limitation, for it may not operate unreasonably beyond the occasion or necessity of the case. It may not unreasonably invade private rights and thus violate those rights guaranteed under either the Federal or the State Constitution. . . . The exercise of the power must have a substantial basis and cannot be made a mere pretext for actions that do not come within its scope. To state it another way, the action of the government may not arbitrarily invade liberty or property rights under the guise of police regulation.” Bond Bros. v. Louisville & Jefferson County Met. S. Dist., 307 Ky. 689, 211 S.W.2d 867, 872 (1948).

“It is true that legislative bodies possess what the opinions designate as ‘the primary authority’ to determine whether or not the particular enactment is justified under authority conferred by the Police Power. Therefore, when the law-making department has so determined the rule is, that the courts should hesitate to declare otherwise.

“But the power of the courts to so declare is not thereby denied or taken away. In determining such questions judicial knowledge may be consulted and relied on, and if from that knowledge, or any other source, it appears that the grounds upon which the legislature based its action are arbitrary and unfounded in fact it is not only the right but the duty of courts to say so and declare the consequences.” City of Louisville v. Kuhn, 284 Ky. 684, 145 S.W.2d 851, 854 (1940).

“The rule is that, in order to sustain legislative interference with the business of the citizen, by virtue of the police power, the act or ordinance must have some reasonable relation to the subjects included in such power. If it is claimed that the statute or ordinance is referable to the police power, the court must be able to see that it tends in some degree towards the prevention of offenses, or the preservation of the public health, morals, safety, or welfare. It must be apparent that some such end is the one actually intended, and that there is some connection between the provisions of the law and such purpose. If it is manifest that the statute or ordinance has no such object, but, under the guise of the police regulation, is an invasion of the property rights of the citizen, it is the duty of the court to declare it void.” Tolliver v. Blizzard, 143 Ky. 773, 137 S.W. 509, 510-511, 34 L.R.A. (NS) 890 (1911).

“Moreover, the law must tend toward the accomplishment or promotion of the enumerated objects in a degree that is perceptible and clear.” Schoo v. Rose, Ky., 270 S.W.2d 940, 941 (1954).

In more recent cases we have said that the police power “is as broad and comprehensive as the demands of society make necessary.” Jasper v. Commonwealth, Ky., 375 S.W.2d 709, 711 (1964); Stephens v. Bonding Ass’n of Kentucky, Ky., 538 S.W.2d 580, 583 (1976). It is acknowledged also that the legislative branch of government has the prerogative of declaring public policy, and that the mere wisdom of its choice in that respect is not subject to the judgment of a court. Fann v. McGuffey, Ky., 534 S.W.2d 770, 779 (1975). Nevertheless, these statements in the abstract, like most creeds and principles, are little more than slogans. Their real meaning is to be found only in the pragmatic examples to which they have been applied. The “demands of society” do not, for example, or should not, obviate the necessity for a more orderly process of constitutional amendment. And even if they did, they cannot be made to exist by legislative ipse dixit. They must, in short, be somehow discernible in the mists by the judicial branch of government as well. Otherwise, why a Constitution?

The boundaries of the police power simply have to be sketched out on a case-by-case basis. No one case can be controlled by the window-dressing of another. Coming down to the facts of this particular case, we can take judicial notice that the problem recited in the preamble of the Act does exist. It is common knowledge that insurance companies have become increasingly chary of providing medical malpractice insurance and that as a result, such insurance has become so expensive that some members of the medical community may very well curtail their services rather than insure against the risks, to the detriment of the general public, which in one way or another ultimately pays the bill in any event. The legislature has declared in effect that the public should not be forced to pay in the form of a shortage of healthcare services, which in turn means that it must pay in money, in that the cost of the insurance the medical community is required to buy will inevitably be passed on to the consumers of health-care services. That may indeed be a legitimate legislative choice, but how does it (1) increase the availability, or (2) reduce the cost, of medical malpractice insurance? We do not know and cannot imagine. And how does the protection thus assured to potential malpractice claimants relate to either of those objectives? The answer is that it appears not to relate to them at all.

Nor could we justify the compulsory aspect of the insurance provisions on the theory that the potential claimants need the protection. The need for workmen’s compensation was obvious, because we know that industry always had taken its toll of workmen in the form of injuries for which the common law provided no relief. The need for compulsory automobile-liability insurance is equally clear, because the uninsured motorist is a known and recognized public menace who should have been outlawed long ago. Doctors and hospitals, on the other hand, can hardly be placed in a similar category. One rarely, if ever, hears of unsatisfied claims against them, whether or not they are insured. If statistics indicate a contrary trend in this state, they should be made known, because otherwise we are unable to envision any occasion for compulsory insurance as it relates to the protection of patients against unsatisfied malpractice claims.

We therefore hold, as did the trial court, that the provision for compulsory malpractice insurance has not been shown to be justified as an exercise of the police power, in the absence of which any interference with the natural right of any individual or group to pursue a legitimate business or profession is a violation of Const. 1(5) and 2. Cf. Southern Linen Supply Co. v. City of Hazard, 286 Ky. 626, 151 S.W.2d 758, 760 (1941); Bruner v. City of Danville, Ky., 394 S.W.2d 939, 942 (1965). We express no opinion with respect to the due process provisions of the federal Constitution, which in latter times has become something of a moving target, defying captivity.

The discussion thus far barely opens the lid on the multitude of constitutional objections leveled at § 10 of the Act. Realizing that the patience of the reader whose sturdy horse Perseverance has carried him to this point must be wearing thin, we shall deal with them briefly, as follows:

1. The provision of § 10(2) authorizing the Commissioner to exempt “any physician who has a limited practice, or is in such special circumstances that he should not reasonably be required to participate in the fund”, undoubtedly would have been declared invalid in earlier times, because it indicates no criteria or guidelines within which the Commissioner’s discretion is to be exercised and thus purports to confer an arbitrary power in violation of Const. § 2. Certainly this was a limping effort to provide legislative guidance. It could and should have been done better. Nonetheless, in Butler v. Cerebral Palsy of Northern Ky., Inc., Ky., 352 S.W.2d 203, 208 (1961), we laid out a new course which was thought to be a more practical approach to the “delegation” problem, holding that in appropriate instances a cabinet-level officer or department of the executive branch of the state government may be given broad authority to establish uniform standards and regulations within the scope of the enabling legislation. The theory was that it is better to wait and see what these standards and regulations are and then apply the constitutional tests to the legislation as thus implemented rather than to strike down the enactment itself merely because it might be arbitrarily administered or extended. In a sense, this approach is analogous to the “wait and see” aspect of the perpetuities law enacted in I960. Thus we do not find this particular provision of § 10(2) unconstitutional on its face. Properly implemented, it would violate neither §§ 2, 3, 27, 28, 29 59 nor 60 of the Constitution. We reach the same conclusion regarding the Commissioner’s authority to fix the rate of surcharges under § 10(5) of the Act.

2. The provision of § 10(6) limiting to 10 the number of members who may in any one year be insured within the Fund appears to be arbitrary and violation of Const. § 2. We do not think, however, that it confers a special privilege in violation of Const. § 3 as held in Barker v. Crum, 177 Ky. 637, 198 S.W. 211 (1917), with respect to tuition-free scholarships; or that it would constitute special legislation under Const. § 59; or that it would offend the portion of Const. § 60 which forbids the enactment of any law that is to become effective upon the discretion of some person or authority other than the legislature.

3. The burden of collecting and handling the surcharge mentioned in § 10(5) of the Act would not violate the rights of malpractice insurers under §§ 2, 3, or 13 of the Constitution.

4. The argument that existing contracts for malpractice insurance exceeding the $100,000 — $300,000 coverage specified in § 10 of the Act would be rendered unnecessary by § 10(7), which provides similar excess coverage by the Fund, and that the obligation of such existing contracts would be thereby impaired in violation of Const. § 19 scarcely merits notice. We do not accede to that proposition.

5. Neither would the requirement of § 10(9) of the Act, imposing upon insurers the burden of reporting cancellations and non-renewals, impair their contracts.

6. The requirements of § 10(2) and (5) that all physicians and hospitals be members of and contribute to the Fund do not amount to a taking of property without just compensation or an arbitrary classification. Cf. Bennett v. Oregon State Bar, 256 Or. 37, 470 P.2d 945, 53 A.L.R.3d 1291 (1970). This particular provision would be a permissible exercise of the police power because the Fund, which in effect provides insurance coverage aside from that which is available from commercial insurance carriers, bears a tangible and reasonable relationship to the public problem with which the Act purports to deal. We do not mean to suggest, however, that the members of any profession or business could validly be required to undertake the responsibility of providing for the payment of all malpractice judgments rendered against any of them.

7. The payment of private claims out of the Fund, as authorized by § 10(7), would not violate the requirement of Const. § 171 that public funds be used only for public purposes, because the Fund is drawn from private sources and contains no public money. For the same reason, among others, Const. § 58 is not involved.

8. The restriction of § 10(8)(b) on the amount payable out of the Fund in any one year is in no sense a limitation on the claimant’s right of recovery. To the contrary, the availability of the Fund as an additional source of recovery really would be a gratuitous windfall to the claimant. Const. §§ 54 and 241 have no application to this phase of the Act.

9. Though not presented in the arguments, there is one other aspect of the compulsory insurance requirement that bears mention. We bring it up here for the same reason that we have attempted to cover the other constitutional points that are not strictly necessary to a resolution of the appeals — that is, in order to provide some guidance in the event of further legislation designed to eliminate the constitutional defects hereinbefore identified. We have held the compulsory insurance requirement invalid because there is neither a showing nor anything else of which we may take judicial notice to indicate how it might tend to alleviate the problem of scarcity and high cost of medical malpractice insur-anee. It is entirely possible that this deficiency can be remedied. It should be recognized, in any event, that even if compulsory insurance, as such, is permissible, there are limits to what the members of any profession or business may reasonably be required to pay. They simply cannot be thrown to the mercy of the insurance industry regardless of the cost. The Act here in question, for example, literally would force doctors and hospitals to buy insurance even if the premium rates equalled or exceeded the limits of coverage. Presumably the Department of Insurance would prevent such a result, but of course there are limits also to what a state regulatory agency can do. What we say here is that a blanket mandate to insure or else, be the cost what it may, might very well invite constitutional trouble beyond that which has been resolved in this opinion.

KRS 446.090 declares in substance that if any part of a statute be declared invalid the remaining parts shall remain in force unless the General Assembly has provided to the contrary or unless the remaining parts are essentially and inseparably connected with and dependent upon the unconstitutional part. In this case only §§ 9 and 10 of the Act have been challenged specifically. § 9 is invalid because its contents are not fairly included in the subject of the Act. It is readily apparent that those portions of § 10 we have held invalid are so essential to that section as a whole that the remainder of the section could not stand without them. Hence § 10 is invalid in its entirety. We see nothing in the remaining sections of the Act that would prevent severability.

The judgment is affirmed in part and reversed in part with directions that it be modified in conformity with this opinion.

All concur.

      . “No law enacted by the General Assembly shall relate to more than one subject, and that shall be expressed in the title,” etc.

      . § 249F, Social Security Amendments of 1972, 42 U.S.C. § 1320c.

      . 42 U.S.C. § 1320C-15.

      . “The General Assembly shall have no power to limit the amount to be recovered for injuries resulting in death, or for injuries to person or property.”

      . “Absolute and arbitrary power over the lives, liberty and property of freemen exists nowhere in a republic . . .

      . “All men . . . are equal; and no grant of exclusive, separate public emoluments or privileges shall be made to any man or set of men . . .

      . “All courts shall be open . . . and every person for an injury done him in his lands, goods, person or reputation, shall have remedy by due course of law . .

      . “The General Assembly shall not pass local or special acts . where a general law can be made applicable, no special law shall be enacted.”

      . “No law shall be enacted granting powers or privileges in any case where the granting of such powers or privileges shall have been provided for by a general law . . .

      .“No act of the General Assembly shall authorize any debt to be contracted on behalf of the Commonwealth . . unless provision be made therein to levy and collect an annual tax ... to discharge the debt within thirty years; nor shall such act take effect until it shall have been submitted to the people at a general election,” etc.

      . “The credit of the Commonwealth shall not be given, pledged or loaned to any individual, company, corporation or association, municipality, or political subdivision of the State

      . Ch. 260, § 8, Acts of 1974.

      . Taxes shall be levied and collected for public purposes only

      . “No money shall be drawn from the State Treasury, except in pursuance of appropriations made by law . . .

      . Supra, n. 4.

      . . . The right of acquiring and protecting property.”

      . Supra, n. 5.

      . Supra, n. 5.

      . Ch. 167, § 2, Acts of 1960 (KRS 381.216).

      . Supra, n. 5.

      . Supra, n. 6.

      . “The powers of the government . . . shall be divided into three distinct departments,” etc.

      . “No person . . being of one of those departments, shall exercise any power properly belonging to either of the others . . .

      . “The legislative power shall be vested in a House of Representatives and a Senate . . .”

      . Supra, n. 8.

      . Supra, n. 9.

      . Supra, n. 5.

      . Supra, n. 6.

      . Supra, n. 8.

      . Supra, n. 5.

      . Supra, n. 6.

      . . . nor shall any man’s property be taken or applied to public use . . . without just compensation . .

      . “No ex post facto law, nor any law impairing the obligation of contracts, shall be enacted.”

      . Cf. Const. § 13, supra, n. 32.

      . Cf. Const. §§ 2 and 3, supra, notes 5 and 6.

      . “The General Assembly shall neither audit nor allow any private claim against the Commonwealth . . .

      . Supra, n. 4.

      . (Recovery for wrongful death.)


author: JONES, Justice.

text:
    Harry Melvin KENDRICKS, Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    Supreme Court of Kentucky.
    Oct. 28, 1977.
    Stephen R. Veth, David Kaplan, David M. Lewis, Louisville, for appellant.
    Robert F. Stephens, Atty. Gen., William W. Pollard, Asst. Atty. Gen., Frankfort, for appellee.
   JONES, Justice.

On June 3, 1976, Harry Melvin Kendricks was convicted of the offenses of first degree robbery and of being a persistent felon. In conformity with the jury’s verdict, Kendricks was sentenced to a term of 27 years’ imprisonment. From that judgment, Kendricks appeals. Upon Kendricks’ motion, this court ordered an appeal from an order overruling a motion to vacate the judgment pending in the Court of Appeals transferred to this court. These appeals involve one of the same issues and are considered together. In support of his argument for reversal, Kendricks alleges five errors: (1) he was denied the right to properly confront his accuser; (2) he was entitled to a “missing witness” instruction; (3) the Commonwealth’s Attorney refused to disclose exculpatory evidence; (4) the Commonwealth’s Attorney misused a prior felony conviction for grand larceny to his prejudice; (5) the evidence failed to establish that he was a persistent felony offender beyond a reasonable doubt.

The pertinent facts are as follows: On January 7, 1976, Dan Schnorbus was employed as a parking lot attendant at the Jewish Hospital in Louisville. It was his duty to take the tickets from those leaving the lot and collect the fees. Schnorbus was performing these duties, “at about to approximately 5:30 [P.M.] ... a man approached me . . . and asked if he could have change for . $5.00 bill in quarters.” Schnorbus said, “Well, I don’t give out any money . . At that point, the robber pulled a gun, threw Schnorbus a paper bag and told him to put all the money in the bag. The robber demanded Schnorbus to “hurry up, hurry up or I’ll blow your head off.”

Schnorbus did as he was told. He tried to lay down in a small cubicle in which he worked. The assailant took the money, about $75.00, and left by way of the emergency exit at Jewish Hospital. Schnorbus faced his assailant from a distance of three feet, and observed him for approximately 20 seconds.

Schnorbus called the police. He identified his assailant as being about 6 feet in height, weighing approximately 150 pounds and about 40 years old. He described the robber as having a mustache. He was wearing a brown suede coat and brown pants.

Sometime between 9:00 and 10:00 P.M., the police took Schnorbus to the police station. From the time of the robbery until he went to the police station, the police had apparently apprehended Kendricks by the description Schnorbus gave them. Schnor-bus identified Kendricks from one picture out of many shown him. Subsequently, he identified Kendricks as his assailant in a police line-up of six black males.

Kendricks’ defense was an alibi. He, and three witnesses testified that they were at the home of Kendricks’ sister, “socializing” (drinking, listening to music, and playing cards) from 5:30 P.M. until 10:00 P.M. or later.

Kendricks first contends he was denied the right of confrontation due to his inability to cross-examine Schnorbus about his Navy background. On direct examination Schnorbus revealed that he had some training in identification procedures while in the Navy. Schnorbus declined to describe fully his Navy experience for the reason that it concerned classified military information. Kendricks argues that this constituted a denial of his right of confrontation. He contends that Schnorbus was presented as one specially qualified to make identifications and was allowed to give opinion testimony.

Kendricks’ argument is unfounded. Schnorbus was testifying as an eyewitness. He was not asserting an opinion, but was testifying to what he had observed during the robbery. Schnorbus identified a photograph of Kendricks from one out of many presented him. Likewise, he identified him in a police line-up. At trial he positively identified Kendricks as the man who robbed him.

The fact that the Commonwealth’s Attorney did not call the investigating police officer to the stand is merely a matter for a weak and futile argument. There is absolutely no authority for a “missing witness” presumption or an instruction on this presumption.

There is no merit in Kendricks’ argument that the failure of the Commonwealth’s Attorney to produce the “squawk” report, which is a term used by the police to identify the initial police report, constituted error. At a pre-trial hearing, Kendricks’ attorney stated there was an initial report which was sent out by the police at 5:45 on January 7, 1976, a short time after the robbery. He also indicated that there was a later clearance report. Counsel for Ken-dricks was given the second report, but not the first. As a matter of fact, there is nothing in the record that shows but the one “squawk” report. The record also reveals that the Commonwealth’s Attorney did not know of a first report. Therefore, all of the squawking about a “squawk” report of doubtful existence is just that— squawking. Therefore, it was not error on the part of the Commonwealth’s Attorney to produce a report about which he knew nothing, and was of doubtful existence.

Kendricks’ next complaint is that the Commonwealth’s Attorney misused his previous conviction for grand larceny. Kendricks admitted this conviction on direct examination, and the trial court properly admonished that evidence pertaining to the conviction could be considered only in connection with Kendricks’ credibility as a witness. Actually, Kendricks’ counsel opened the matter when he asked Ken-dricks if he had ever been convicted of a felony. In response to his attorney’s questioning, Kendricks’ last remarks on direct examination were: “No, I never robbed him, I never robbed nobody at no time.” Since counsel for Kendricks had avoided mentioning that the previous conviction was for stealing property, the prosecutor followed up this statement with a series of questions ending with:

“Q. You never robbed anybody, have never taken any property from nobody, is that what you’re saying?”

Counsel for Kendricks objected to these questions and moved the trial court that the entire line of questioning be ignored. That line of inquiry was abandoned. No further relief was requested at the time and this court is not inclined to grant such relief on this appeal. See Humphrey v. Commonwealth, Ky., 442 S.W.2d 599 (1969). It is true that the records of the Jefferson Circuit Court, which were read to the jury for the purpose of establishing Kendricks’ conviction for two prior felonies, did not affirmatively show that the guilty pleas upon which the convictions were based were freely and voluntarily entered. The Commonwealth did not prove that the trial court ever signed the judgments in the order book. However, Kendricks has not alleged that either of these possible defects in the validity of these convictions exist. The record does reveal that on each of the convictions Kendricks was represented by able counsel. Upon being sentenced he was asked in the presence of his counsel if he had any reason to show why he should not be sentenced on the convictions. No reason was shown. This court is of the opinion that the presumption of regularity of the Jefferson Circuit Court orders precludes Kendricks from speculating that the recorded convictions are invalid. Ingram v. Commonwealth, Ky., 427 S.W.2d 815 (1968).

Kendricks’ contention that the evidence failed to establish his status as a persistent felony offender beyond a reasonable doubt is refuted by the record. Ken-dricks contends that the Commonwealth’s Attorney failed to prove the date of the first prior offense charged against Ken-dricks. The record reflects that on February 14, 1969, he pled guilty to the charge and received two years in the penitentiary. It is also noted that on October 23, 1970, Kendricks pled guilty to the second prior offense charged in the indictment.

It is true that the evidence fails to establish that Kendricks was 18 years of age at the time of the commission of the two prior felonies. That requirement is a specific prerequisite under KRS 532.080(2)(b). However, the initial police report filed as an exhibit by counsel for Kendricks, reveals that Kendricks was born August 19, 1945. When he pled guilty to the first prior offense in 1969, he was 24 years of age. When he pled guilty to the prior charge in 1970, he was 25 years of age. In reviewing Kendricks’ testimony, his attorney asked Kendricks, “Q. Harry, beginning back about 1965 when you were drafted would you briefly go through what you have been doing for the last 10 years. A. Yes, sir.” [The evidence of Kendricks shows he served 23 months in military service]. That testimony, coupled with the date of his birth, indicates that he was 20 years of age at the time he was drafted. Because Kendricks was 24 years of age at the time judgment was rendered on the first prior felony, and was 25 years of age at the time judgment was rendered on the second prior conviction, it can be reasonably inferred that he was over 18 at the time he committed each of the offenses. If he had been 18 at the time he committed the first offense, it is unlikely that any court would wait 6 years to try a person charged with a criminal offense. Thus, the totality of the evidence is such that the circumstances allowed the jury to conclude that the prior offenses were committed after Kendricks reached the age of 18. In any event, there was no objection interposed by counsel for Ken-dricks concerning Kendricks’ age at the time the prior offenses were committed.

Therefore, the judgment is affirmed in these consolidated appeals.

All concur.


text:
    Clifford Ray HALL and James Herbert Fultz, Appellants, v. COMMONWEALTH of Kentucky, Appellee.
    Supreme Court of Kentucky.
    Oct. 28, 1977.

      Clifford Ray Hall, pro se.
    James H. Fultz, pro se.
    Robert F. Stephens, Atty. Gen., George Geoghegan, III, Asst. Atty. Gen., Frankfort, for appellee.
   JONES, Justice.

On October 4, 1974, Hall and Fultz were jointly indicted for: (1) the offense of robbery of People’s Bank of Sandy Hook, Kentucky and in so doing used a deadly weapon; (2) imprisoning Betty Ison against her will. See KRS 433.140 and KRS 435.150.

Their trial began February 13, 1975, and was concluded the next day. The jury convicted both of them on each count and fixed the punishment of each at 35 years’ imprisonment on Count No. 1 and 15 years’ imprisonment on Count No. 2. They retained counsel, who represented them at trial. The trial court sentenced them in conformity with the jury’s verdict. He directed the sentences be served concurrently. No appeal from the judgment was taken in the time prescribed by the rules of this court.

After trial the court appointed a public defender to represent them. They promptly filed a motion for his discharge. Both of them desired to prosecute their own appeal because, “the petitioners have a lack of confidence in the public defender’s office to adequately, properly, and effectively carry forward their appeal due to the heavy case load the public defender’s burdened with.” In their own representation they have barraged the Elliott Circuit Court, the United States District Court for the Eastern District of Kentucky, as well as this court, with motions, writs of prohibition, writs of mandamus, pleadings, traverses, petitions for habeas corpus, narrative statements, petitions for belated appeal, motions for extensions of time, subpoenas ad testificandum, and numerous other pleadings.

This court denied their motion for belated appeal. The United States District Court for the Eastern District of Kentucky granted their petition for habeas corpus to the extent that it gave the Elliott Circuit Court 90 days from March 17, 1976 to resentence Hall and Fultz. The trial judge of the United States District Court held that Hall and Fultz had not been informed of their right to appeal when they were first sentenced.

Because of illness of the regular judge, a special judge was appointed to conduct the business of the Elliott Circuit Court. Hall and Fultz were resentenced by the special judge on June 15, 1976. He directed that their respective sentences be served consecutively. On June 22, 1976, Hall and Fultz filed motion and grounds for a new trial. That motion was overruled. The following day their appointed counsel filed notice of appeal. The special judge granted their request to prosecute the appeal without payment of costs.

Hall and Fultz present a number of issues in support of their argument for reversal. These substantially condensed are: (1) a juror lied on voir dire and should have been excused from the panel; (2) they were improperly resentenced; (3) ineffective assistance of counsel; (4) the integrity of the evidence was not preserved by the Commonwealth; (5) misconduct of the trial judge; (6) they were entitled to a change of venue; (7) the trial court should have granted their request for subpoenas; (8) all assignments of error separately or collectively constituted denial of due process of law. In substance they contend their attorney, clerk of the court, Commonwealth’s Attorney, and the trial court, conspired and agreed for a juror to be excused without their consent. They insist the whole court was against them. They accused their attorney of saying: “Well I’ll just go out there and I’ll be ineffective and maybe you’ll get it moved to a new county.”

A resume of the facts reveals that on October 3, 1974, around noon, Fultz “held up” the People’s Bank of Sandy Hook, Kentucky. He flourished a “black” pistol, handed a note to a bank teller and directed her to put “all the money” in a “sack” that he produced. The teller complied with the request. She placed all the money from the desks of three bank tellers in the sack. The total amount taken in the “hold up” amounted to $14,352.64, and included that which was referred to as “bait money.” Fultz also took Betty Ison, a bank employee “seven or eight” months pregnant, as a hostage. Several witnesses testified that Fultz was the “hold up” artist. Hall was the driver of the “get-a-way” automobile. Betty Ison was taken to a motel in Columbus, Ohio, where she was bound and gagged. Shortly after the robbers left, she was able to free herself, and later notified the authorities.

On October 14, 1974, the Kentucky State Police apprehended Hall and Fultz as they attempted to run through a “road block.” Fultz had some of the “marked money” in his possession. Most of the money was found in the possession of Hall and Fultz and in the automobiles they were operating.

At trial Hall and Fultz presented an alibi as their defense. Each testified that at the time of the robbery they were at the penitentiary at Eddyville, where they had gone to visit friends. Both were on parole. Hall was paroled in May 1974; Fultz in August 1974. In explanation of money found in their possession, Fultz testified he had $8000.00 he had earned in the penitentiary by selling televisions to other inmates. As to the “marked money,” they insisted it may have been won in a poker game in Cumberland, Kentucky, the preceding night.

The record reveals that prior to trial in this case Hall and Fultz were convicted in the United States District Court for the Eastern District of Kentucky for armed robbery of a bank in Salt Lick, Kentucky. They were each sentenced to a term of 35 years in federal prison.

This court has reviewed the entire record and has considered each point raised by Hall and Fultz on appeal. The court concludes as follows:

It is noted that 14 jurors were impaneled to try the case. It was called to the attention of the trial court that one juror, the father of a witness for the prosecution, failed to state his relationship to the witness on voir dire. A hearing on the matter was held in chambers. Counsel for the parties agreed that the juror should be excused. The clerk was directed to draw that juror’s name, along with the name of another juror, from the jury box when the case was submitted to the jury. Because two jurors had to be excused, the juror complained of was properly excused under RCr 9.36 on the challenge for cause which was made in chambers. Consequently, the matter of excusing the juror did not violate RCr 9.32.

Hall and Fultz were not deprived of due process by the manner in which they were resentenced. They argue that because they were not notified of the appointment of a special judge, they were denied their right to object. Nevertheless, the record reveals that no objection was made at the hearing as to the appointment of the special judge. Because it was not called to the attention of the trial court, there was no error. When Hall and Fultz failed to object to the authority of an appointed special judge at trial, they waived any objections to any irregularities in such appointment. Jaggers v. Overstreet, Ky., 412 S.W.2d 238 (1967). This court is of the opinion that the resentencing was properly conducted on June 15,1976. That was motion day for the Elliott Circuit Court. Under the provisions of KRS 23.125, other business to be dispatched is permitted. The resentencing of Hall and Fultz was other business.

The record refutes the contention of Hall and Fultz that their retained counsel was ineffective. It reveals that Hall and Fultz chose to hire their own counsel rather than have one appointed. The lawyer chosen by them had much experience in the trial of cases. He served as county attorney for eight years, and had more than 14 years’ experience in representing defendants in the trial of criminal cases. Although Hall and Fultz disagreed with the trial strategy of their lawyer, they had employed him to sail the trial ship. Hall and Fultz waited until the day of the trial to indicate they disagreed with their lawyer’s decision to not subpoena witnesses incarcerated in the state penitentiary at Eddyville. They failed to show good cause for the delay in making this disagreement known to the court. RCr 9.04. They had every right at that time, if counsel was so ineffective, to discharge him as their attorney. Their attorney offered to withdraw as counsel. There is absolutely no evidence

that their retained counsel engaged in jury tampering by concurring with the court on the manner in which the juror was excused. This court does not find the circumstances of the representation were such as to shock the conscience of the court and to render the proceedings a farce and mockery of justice. Wahl v. Commonwealth, Ky., 396 S.W.2d 774 (1965).

There is no merit to the contention of Hall and Fultz that marked currency introduced as evidence was not admissible. There was sufficient testimony to prove that the “bait money” stolen from the bank was properly confiscated from Hall and Fultz and marked at the time of the arrest. The money was positively identified by bank officials. There is ample evidence in the record pertaining to the control and possession of the money introduced in evidence. In no way did the introduction of the money found in the possession of Hall and Fultz as evidence prejudice their right to a fair trial and due process of law.

There is nothing in the record to support the contention of Hall and Fultz as to the misconduct of the trial judge. There is no evidence that he mistreated either of them in any fashion. On the contrary, the record indicates that the trial court was patient to a point almost beyond the tolerance of any court.

There is absolutely no merit to the contention of Hall and Fultz that the trial court erred in denying their motion for a change of venue. The motion for change of venue was made on the day of the commencement of trial. There was nothing in the record to show that the publicity concerning the bank robbery was not such as to deny a fair trial. “. . . failure to make a timely motion to transfer the prosecution to the proper county shall be deemed a waiver of the venue of the prosecution.” KRS 452.650.

This court does not agree with Hall and Fultz that their trial was so replete with error that they were denied due process of the law. A jury selected by them heard all of the evidence. The trial court properly instructed the jury. Closing arguments were made by counsel for Hall and Fultz, and the Commonwealth’s Attorney. The jury chose not to believe their alibi. It accepted the testimony of the witnesses for the prosecution. Hall and Fultz were properly resentenced. When they were conveyed by the sheriff of Elliott County to the penitentiary it was not a maiden voyage for either of them.

It is the opinion of this court that the judgment should be and it is affirmed.

All concur.

      . Money which had been microfilmed to show serial numbers, and marked for identification by each teller.


author: LESTER, Judge.

text:
    Frank EAST, Paul Richardson, Osby Neal, Horace Denney, Deb Branscum and James Higginbotham, Appellants, v. Hon. Ira BELL, Judge, Appellee. Paul RICHARDSON, Frank East, Osby Neal, Horace Denney, Deb Branscum and James Higginbotham, Appellants, v. Hon. Ira BELL, Judge, Appellee.
    Court of Appeals of Kentucky.
    Oct. 7, 1977.
    Hollis E. Edmonds, Russell Springs, for appellants.
    James M. Frazer, Wayne County Atty., James C. Gibson, Jr., Asst. Wayne County Atty., Monticello, for appellees.
    Before HAYES, HOGGE and LESTER, JJ.
   LESTER, Judge.

On March 25, 1977, Paul Richardson, Frank East, Osby Neal, Horace Denney, Deb Branscum and James Higginbotham, six justices of the peace of Wayne County, filed a petition for writ of prohibition and declaratory judgment asking the Wayne Circuit Court to prevent the county judge, Ira Bell, from enforcing an order reapportioning justices’ districts. The court denied this petition finding jurisdiction for the reapportionment in the county court. This appeal presents to us the question of whether we should read KRS 25.680 in such a way to void the reapportionment which realigned the formerly lopsided justice’s districts in accordance with the “one person, one vote” principle. Gray v. Sanders, 372 U.S. 368, 381, 83 S.Ct. 801, 9 L.Ed.2d 821 (1963).

On February 26th, John D. Lyons and Mayor Carl Shearer filed an application with the Wayne County Court for reapportionment of the justices’ districts. On this date, the county judge directed notices posted in the places required by KRS 25.680. These notices informed the public that a special term of the Wayne County Court on March 21, 1977, would conduct a hearing concerning the application for reapportionment. Eighteen days later, on March 16th, the county court appointed three commissioners and their report filed on that date recommended reduction of the magisterial districts from seven to four. .On March 21st, the appellants sought a writ of prohibition which the circuit court denied. Three of the appellants then excepted to the report of the commissioners and the other three filed a notice of intent to file exceptions. The trial on exceptions occurred on March 23rd at which time the county court ordered reapportionment according to the report of the commissioners.

The statutes covering reapportionment of justices’ districts, KRS 25.680, 25.-690 and 25.700, are not entirely free of ambiguity. KRS 25.680 states that,

(n)o commissioners shall be appointed to make the reapportionment unless notice of the application for reapportionment has been given ... at least twenty (20) days before the term of court at which the application is made.

This seems clear enough. One must post the appropriate notice of the application for reapportionment twenty days before making the application. Commissioners will only be appointed after notice has been given for twenty days. However, under KRS 25.700 “(t)he commissioners shall within twenty (20) days after their appointment lay off the boundary line of the districts” which might suggest that the commissioners could be appointed and the notice given concurrently. We believe the first interpretation correct.

KRS 25.700 contains another difficulty in relation to the facts of this case. It provides that,

(a)t the next regular term of the county court commencing not later than ten (10) days after the filing of the report, any citizen of the county may file exceptions, and the court shall fix a day not later than ten (10) days after the filing of the exceptions for the trial thereof.

The commissioners filed their report on March 16th. The county court would not have a regular term until March 28th, more than ten days after the filing of the report. So, Judge Bell continued the regular February 28th term of court until March 21st. We approve of this approach. The statute says that the regular term of court must begin not later than ten days after the filing of the report when any citizen of the county can except to the report. It follows then that March 28th would be too late to have the regular term of court for the filing of the exceptions.

The circuit court did not err in denying the writ of prohibition. To declare the reapportionment void would be an unreasoning application of statutory language and unnecessarily run afoul of the Equal Protection Clause of the United States Constitution. Blair v. Lefler, 210 Ky. 772, 773, 276 S.W. 847 (1925) involved an interpretation of the predecessor of KRS 25.680 in which the court held that notice posted on a telephone pole forty feet from the court house door was “(t)oo far away to be ‘at the court house door’ within the meaning of the statute” and that therefore the county court did not acquire jurisdiction. But Blair, supra, does not answer whether jurisdiction in all circumstances depends on 20 rather than 18 days or one definition of “regular term of court” as opposed to another. Nor do we obtain guidance from Wilson v. Dean, 177 Ky. 97, 197 S.W. 547 (1917).

A compelling basis exists to allow the reapportionment to stand. Appellants have not shown that any departure from the statute placed them at a disadvantage. They had notice and an adequate opportunity to present their objections to the commissioners’ report. In contrast prohibition would dilute the votes of some of the residents of Wayne County. The circuit court found that one of the previous districts had 2,500 registered voters while another had 470. Reapportionment has achieved near equality. Avery v. Midland County, Texas, 390 U.S. 474, 485, 88 S.Ct. 1114, 1120, 20 L.Ed.2d 45 (1968) stands for the proposition

that the Constitution permits no substantial variation from equal population in drawing districts for units of local government having general governmental powers over the entire geographic area served by the body.

Meaningless technicalities as before us here cannot thwart this directive. The Wayne County magisterial race comes within the ambit of Avery, supra. Consequently, we affirm the circuit court’s denial of the writ. However, because we decide the reapportionment proper in this instance does not mean that the statute is unconstitutional or that in another case noncompliance with the statutory procedures would not void the reapportionment.

We affirm.

All concur.


author: HOWARD, Judge.

text:
    Nina Sue ADAMS, Administratrix of the Estate of Edward Adams, Deceased, Appellant, v. Nora BOYD, Administratrix of the Estate of Jesse Hodge Boyd, Deceased, Appellee.
    Court of Appeals of Kentucky.
    Oct. 21, 1977.
    William S. Greenwell, Marion, for appellant.
    J. D. Ruark, Ruark & Hulette, Morgan-field, for appellee.
    Before MARTIN, C. J., and COOPER and HOWARD, JJ.
   HOWARD, Judge.

This is an appeal from the Crittenden Circuit Court wherein a jury trial was had and the jury returned a verdict for the defendant-appellee.

This action was commenced by Nina Sue Adams, administratrix of the estate of Edward Adams, deceased (hereinafter referred to as Adams), who filed a wrongful death complaint against Jesse Hodge Boyd (hereinafter referred to as Boyd). Boyd died after the commencement of the action and it was revived against the administratrix of his estate, Nora Boyd. The complaint alleged that Boyd negligently drove a motor vehicle against Adams causing his death.

Boyd and Adams were neighbors, and on January 9, 1973, Boyd hired Adams to help him haul some hay. Twenty-two bales of hay were loaded by both men onto a truck. Adams thereafter drove the truck on a rutted lane up a hill to the spigot where Boyd was standing, watering his horse. On the way up to the spigot, two bales of hay fell off. Adams suggested that Boyd back down the lane and he would help him pick up the two bales of hay. Boyd had no rear view mirror on the right side, but did have one on the left side of his truck. The hay on the truck blocked his view from the mirror inside the truck. In backing down the hill, Boyd was using the left hand mirror for sighting. As Boyd started backing the truck, he saw Adams to his right (through the passenger window) walking down the hill and at an angle that would put him behind the truck where Boyd couldn’t see him. Boyd did not see Adams again until he reached the point where he stopped for the two bales of hay. When Boyd got out of the truck, he heard Adams hollering and found him under the wheels of the truck. He got Adams out, took him to the hospital, and Adams died January 27, 1973.

The evidence as to the facts surrounding the accident consist chiefly of the deposition of Boyd given for discovery purposes, as both parties died prior to trial.

Plaintiff-appellant raises as an issue on this appeal that the court erred in refusing to instruct the jury on the last clear chance doctrine. In Beasley v. Standard Paving and Engineering Co., Inc., Ky., 511 S.W.2d 667 (1974), the court draws a distinction between an inattentive and a helpless plaintiff, as governed by Section 480 of the Restatement of the Law of Torts, Second, and at page 669 states:

The principal difference in the Restatement Standards applicable to recovery by the helpless plaintiff and the inattentive plaintiff is that the helpless plaintiff may recover if the defendant in the exercise of ordinary care should discover the plaintiff’s situation while the inattentive plaintiff may not recover unless the defendant knows the plaintiff’s situation and realizes or has reason to realize that the plaintiff is inattentive and unlikely to discover his peril.

And in R. E. Gaddie, Inc. v. Price, Ky., 528 S.W.2d 708 (1975), the court states at page 711 that, in the case of an inattentive plaintiff, the chance of avoidance by the defendant must be “clear, plain, apparent, self-evident, distinct, manifest and unmistakable.”

Plaintiff-appellant presented no proof that Boyd knew that Adams was in peril. As Adams was an inattentive plaintiff, the instruction on the doctrine of last clear chance was properly not submitted to the jury. All that Boyd knew was that Adams was not in his sight, and that both he and Adams were headed for the two bales of hay. Boyd had no reason to believe that Adams was not watching the truck and the route it was traveling. Boyd’s chance to avoid the accident was not clear and unmistakable.

The judgment of the trial court is affirmed.

All concur.


author: COOPER, Judge.

text:
    GREEN RIVER GAS COMPANY, INC. and John Vogler and Margie K. Vogler, Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellee.
    Court of Appeals of Kentucky.
    Oct. 21, 1977.
    Cecil Davenport, Louisville, Harold M. Streets, Greenville, for appellants.
    David L. VanZant, Elizabethtown, C. Dant Kearns, Louisville, for appellee.
    Before MARTIN, Chief Judge , and HOWARD, COOPER and REYNOLDS, JJ.

      Heard oral argument but disqualified himself before a decision was reached.

   COOPER, Judge.

This is an appeal from a judgment in the Hardin Circuit Court denying relief to the appellants and granting certain relief to the appellee as a result of the alleged failure of the appellee to sign a performance bond with the appellants for the City of Eliza-bethtown.

This case involves the second separate trial of an original action between the City of Elizabethtown, plaintiff in the lower court, and Green River Gas Company, Inc., (hereinafter called Green River Gas) defendant, and the United States Fidelity and Guaranty Company, (hereinafter called U. S. Fidelity) defendant; involving cross-claims between the Green River Gas and the U. S. Fidelity.

In August, 1970, the City of Elizabeth-town authorized the taking of bids for the expansion of the city-owned natural gas system.

Green River Gas, whose principal owner is John Vogler, submitted a bid on the project. It was required to post a bid bond with surety with the bid. The Green River Gas contacted the appellee, U. S. Fidelity, for the purpose of securing the bid bond. The U. S. Fidelity issued the bid bond, but required the Green River Gas to furnish a Master Surety Agreement, along with other conditions.

The Master Surety Agreement and the bid bond are the only two contracts entered into between these parties. The Master Surety Agreement provides, in part, that the Agreement applies to all bonds signed by the U. S. Fidelity either before or after the execution of the Agreement.

The Agreement further provides that the signatories shall indemnify and exonerate the U. S. Fidelity from any loss resulting from them having acted as surety on a bond for Green River Gas.

Further, the Agreement states that the U. S. Fidelity can decline to sign any bond requested by the indemnitors including a performance bond after signing a bid bond.

On September 13,1971, it was determined that the Green River Gas was the low bidder. Green River Gas then asked the U. S. Fidelity to provide the performance bond.

Upon further investigation, the U. S. Fidelity learned that another company in which the Voglers were interested had had a surety loss with the Home Insurance Company. Mr. Milby, the agent of Green River Gas who dealt with the U. S. Fidelity agent, stated that he was not aware of this prior surety claim and that such a claim would be significant in the writing of surety bonds. Further, the U. S. Fidelity learned that the spread between the Green River Gas bid and the next lowest bidder was more than 10%. The U. S. Fidelity used a 10% spread as a guide in determining whether a contractor had left too much money on the table in his bid and in determining whether there was risk to the surety associated with a bid where the spread exceeded 10%.

The U. S. Fidelity suggested to Vogler that if he could put up sufficient collateral, they would agree to sign Green River Gas Co.’s performance bond. Vogler declined to do this.

When Green River Gas was unable to timely file a performance bond, it was declared in default and judgment was entered by the trial court in favor of City of Eliza-bethtown against the U. S. Fidelity in the amount of $35,891.65.

The final judgment of the lower court provided in part as follows:

1. That the crossclaim of Green River Gas Company, Inc., against United States Fidelity and Guaranty Company be and the same is hereby dismissed with prejudice.
2. That United States Fidelity and Guaranty Co. shall have judgment against Green River Gas Co., Inc. John F. Vogler and Margie K. Vogler, his wife, for indemnity for all liabilities, losses and expenses including court costs and counsel fees; and any payments resulting from the superse-deas of the judgment entered herein on October 7, 1975; actually incurred by United States Fidelity and Guaranty Company by reason of it having executed as surety the Bid Bond given to the City of Elizabethtown by Green River Gas Company, Inc., as principal, on the project generally known as the Cecilia, Hardin County, Kentucky Underground Natural Gas Storage Facility.
3.For its costs herein expended.

It appears that all of this litigation is brought about as the result of the failure of the U. S. Fidelity to sign the performance bond for Green River Gas. The only issue to be determined by this Court is:

WHETHER A SURETY COMPANY MAY ENTER INTO A CONTRACT WITH A CONTRACTOR TO POST A BID BOND AND, AFTER THE CONTRACTOR IS SUCCESSFUL IN BIDDING THE PROJECT, DECLINE TO POST A PERFORMANCE BOND?

If this question is answered in the affirmative, all other questions become moot in this case.

No guiding Kentucky authority has been cited by counsel for either side in this matter.

The Master Surety Agreement provides that its conditions apply to bonds written before and after execution of the Agreement. Thus, its provisions would apply irrespective of the date the Agreement was signed by Green River Gas and the Voglers. Russell Edward Davis, agent for the U. S. Fidelity, testified that the signing of the Master Surety Agreement was a condition to his having issued the bid bond and that Vogler had agreed, by telephone, that the Agreement would be signed in consideration of the issuance of the bid bond. The trial court, as the trier of fact, found that the Master Surety Agreement was signed by Green River Gas and the Voglers as a part of the transaction to secure the bid bond and as a consideration for the issuance of the bid bond.

The Surety Agreement contemplated occurrence of this very situation where a bid bond would be issued but a performance bond would not be issued. It recognized that the issuance of a bid bond is a separate and distinct transaction from the issuance of a performance bond. The Agreement provides that the surety is not required to execute any bond, and specifically is not required to execute a performance bond merely because it had executed a bid bond.

The parties acknowledge when they signed the Master Surety Agreement that U. S. Fidelity would have no obligation to execute any performance bond, if it were called upon to do so.

The evidence established that the bid submitted by Green River Gas was $530,198.31 and that the next lowest bidder submitted a bid in the amount of $625,637.63, or a difference of $95,439.32. The testimony of Mr. Reading, who was then Branch Manager of U. S. Fidelity’s Louisville office, was that U. S. Fidelity and other sureties use, as a criterion to determine elements of risk in writing a surety bond, the percentage spread between bids. With U. S. Fidelity a 10% spread requires Home Office review. Here, since the difference in bids was substantially greater than 10%, the writing of a performance bond became a matter of review in U. S. Fidelity’s Home Office. It was determined then that the Voglers, through another business enterprise had had a surety claim involving the Home Insurance Company. Mr. Milby testified that he was unaware of this in his transactions with the U. S. Fidelity agent. Notwithstanding this U. S. Fidelity would have executed the performance bond had the Vo-glers provided sufficient collateral to minimize the risk that U. S. Fidelity felt it may be exposed to by signing the bond. Vogler was asked to put up $90,000 cash collateral and he declined.

The trial court, on the basis of this evidence, concluded that the demands of U. S. Fidelity were not unreasonable and that U. S. Fidelity acted in good faith with the indemnitors.

We have examined the record in this case, and have determined that the trial court was correct in deciding that a surety company may post a bid bond and later decline to sign a performance bond for the same project; and that all other questions were answered correctly based on this finding.

The judgment is affirmed.

All concur.