author: STEPHENSON, Justice.

text:
    Herman G. RAEBER, Jr., Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    Supreme Court of Kentucky.
    Nov. 18, 1977.
    Jack Emory Farley, Public Defender, Thomas R. Lewis, Asst. Public Defender, Frankfort, for appellant.

      Robert F. Stephens, Atty. Gen., David H. Whalin, Asst. Atty. Gen., Frankfort, for appellee.
   STEPHENSON, Justice.

Herman G. Raeber was convicted of murder, KRS 507.020, and first-degree assault, KRS 508.010. Raeber was sentenced to life imprisonment on the conviction of murder and to a term of ten years’ imprisonment on the conviction of first-degree assault. The sentences were adjudged to run consecutively. We affirm.

Raeber and his wife, Wanda L. Raeber, were married for twenty-three years. For two years prior to the incident which gave rise to this prosecution, Raeber was unemployed due to an allergy condition. While Raeber was out of work, Wanda Raeber was employed at a nursing home where she became acquainted with Jerome Messer. According to Raeber, he became suspicious of the relationship, and after a quarrel with Wanda Raeber on Saturday night, she left in the family automobile. The next morning, Raeber found the family automobile parked in Messer’s driveway and drove the car home. Raeber then called Messer’s house and spoke with his wife. According to Raeber, she informed him that she wanted a divorce. Raeber had been drinking beer and after the telephone conversation had another beer, loaded his pistol, and placed it behind a couch in the living room.

Later Messer drove Wanda Raeber to the Raeber house, where, according to Raeber, Messer made a comment as to his sexual ability with Wanda Raeber. With this, Raeber picked up his pistol and, according to his testimony, pointed at Messer and pulled the trigger. The pistol did not fire, therefore, Raeber pulled the automatic pistol close to his chest to cock it. The pistol then went off striking his wife. Raeber then fired at Messer and chased him outside firing several times. Messer was wounded in three places on his body, but closed with Raeber and disarmed him. .Raeber then reentered his home and had another beer. Wanda Raeber, fatally wounded, was dead on the couch when the police officers arrived.

According to Messer, his relationship with Wanda Raeber was that of a good friend and there was no involvement in the sense of them being lovers. Messer also described the shooting scene differently. He testified that Raeber invited him into the house, “And the next thing I knowed, I heard her say ‘Don’t Sonny, don’t.’ I didn’t know what she meant, but then I looked to see and he had that gun in his hand and he shot her and shot me . .”

During the course of the trial, Raeber’s children testified that Raeber had continually over a period of years beaten his wife Wanda Raeber.

Raeber’s first argument on this appeal is that it was error to admit testimony of prior assaults on his deceased wife. This argument is based principally on the inadmissibility of evidence of other crimes.

We are of the opinion that the simple answer to this argument is that the evidence is admissible to show the motive for killing, to illustrate the state of Raeber’s feelings toward his wife. Sanders v. Commonwealth, 244 Ky. 77, 50 S.W.2d 37 (1932), and McGeorge v. Commonwealth, 145 Ky. 540, 140 S.W. 691 (1911). We are of the further opinion that the remoteness of the assaults does not affect the competency of this evidence but goes only to its weight and that a limiting admonition to the jury regarding the purpose for which it could consider this testimony was not required. Childers v. Commonwealth, 161 Ky. 440, 171 S.W. 149 (1914).

Raeber’s second argument is that it was error to allow testimony of prior assaults on his children. There were two instances of this type question and answer, and on both occasions the trial court sustained Raeber’s objection. Raeber did not request an admonition from the trial court, and his argument that the trial court had a duty to admonish in the absence of a request is answered in Brock v. Commonwealth, Ky., 391 S.W.2d 690 (1965), where it was held that absence of a request for an admonition to the jury operates as a waiver. Waiver applied there when evidence was introduced for a limited purpose and defendant was entitled to an admonition. Here the evidence was incompetent, and we cannot say that Raeber was entitled to an admonition anyway.

No objection was made to the instructions, and we do not find any merit in the other arguments advanced by Raeber.

The judgment is affirmed.

All concur.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    KENTUCKY BAR ASSOCIATION, Complainant, v. Francis E. RINEHART, Respondent.
    Supreme Court of Kentucky.
    Nov. 18, 1977.
    Leslie G. Whitmer, Director, John T. Damron, Kentucky Bar Ass'n, Frankfort, for complainant.
    Francis E. Rinehart, pro se.
   PER CURIAM.

The respondent was convicted on a guilty plea in the United States District Court for the District of Massachusetts of knowingly making and subscribing an untrue and incorrect income tax return for the calendar year of 1971 in violation of Title 26, United States Code, Section 7206(1).

The return reported taxable income for the calendar year 1971 in the amount of $32,201.91. The information to which respondent entered a guilty plea charged respondent well knew the taxable income for the year to be in the amount of $83,719.47. The offense for which respondent was convicted is a felony.

This conviction has been brought to the attention of the court by the president of the Kentucky Bar Association in accordance with RAP 3.320.

The response attempts to characterize the facts of the case as constituting a misdemeanor. We are not disposed to accept respondent’s argument and hold that the facts constitute a felony as charged. Cf. Kentucky Bar Association v. Pope, Ky., 549 S.W.2d 296 (1976). Accordingly we forthwith disbar the respondent and direct him to pay the costs of these proceedings.

It is so ordered.

All concur.


text:
    J. E. LUCKETT, now Maurice Carpenter, Commissioner of Revenue of the Commonwealth of Kentucky, et al., Appellants, v. ELECTRIC AND WATER PLANT BOARD OF the CITY OF FRANKFORT, Kentucky, Appellee.
    Supreme Court of Kentucky.
    Nov. 18, 1977.

      William S. Riley, Asst. Atty. Gen., Kentucky Dept, of Revenue, Frankfort, Glenn McDonald, Louisville, for appellants.
    Marion Rider, Frankfort, for appellee.
   REVERSING

PER CURIAM.

In 1969 the Fiscal Court of Franklin County levied, for the benefit of schools, a utility gross receipts license tax of 3% pursuant to authority granted the fiscal court in KRS 160.613. In conjunction with the enactment in 1966 of KRS 160.613, the General Assembly enacted KRS 160.617 which provided that a utility could increase its rates by 3% in any county in which the utility was required to pay the school tax. If the utility did raise its rates by 3%, the statute required that the bills sent to customers set forth the amount of the increase and identify it as “Rate increase for school tax.”

Appellee availed itself of the provisions of KRS 160.617 and increased its customers’ bills by 3%, designating the increase simply as “school tax.” The additional 3% was not included by appellee in computing its gross receipts upon which the state levies a 5% sales tax and herein lies the controversy.

Appellee contends that it did not increase its rates by 3%. On the contrary, appellee maintains that it was merely collecting the 3% tax from its customers and sending it directly to the proper authorities. In no way did the money constitute gross receipts or provide any benefit to the utility company appellee argues.

It is the position of the Department of Revenue that the 3% additional charge is in fact a rate increase and as such constitutes gross receipts to the utility company. As a result the Department of Revenue sought to recover sales tax from the utility company in an amount equal to 5% of the 3% rate increase for the taxable period. The utility company was ordered to pay the amount by the Kentucky Board of Tax Appeals which supported the Department of Revenue’s interpretation. The board’s order was appealed to the Franklin Circuit Court which adjudged the board’s assessment erroneous and vacated the board’s order. The Franklin Circuit Court found specifically, “The three (3%) percent school tax levied by the Franklin County Fiscal Court pursuant to KRS 160.613, which the Electric and Water Plant Board collects and turns over to the School Board, is not a portion of the gross receipts of sales on utilities and the five (5%) percent gross receipts sales tax does not apply to this three (3%) percent.” We have examined the applicable statutes and cannot agree.

KRS 160.613 authorizes a 3% utility gross receipts license tax on “the gross receipts derived from the furnishing, within the county, of . electric power, water, and natural, artificial, and mixed gas.” The only exception is that gross receipts are not to include amounts received for furnishing energy used in manufacturing, processing, mining or refining or utilities which are to be resold. This license tax is levied upon the utility company, not its customers, and the utility company is the taxpayer ultimately liable for the tax. Further evidence of this fact is seen in KRS 160.617 which is quoted in full as follows:

“The fiscal court may promulgate such regulations as may be necessary for the collection of the tax authorized by KRS 160.613. Notwithstanding the provisions of KRS 278.040(2), any utility required to pay the tax authorized by KRS 160.613 may increase it rates in any county in which it is required to pay the school tax by three per cent (3%). Any utility so increasing its rates shall separately state on the bills sent to its customers the amount of such increase and shall identify such amount as: ‘Rate increase for school tax.’ ” (Emphasis added)

The fact that KRS 160.617 permits the utility company to raise its rates to alleviate the burden on the utility company does not convert the tax into one levied upon the customers in which the utility company merely acts as collection agent. Therefore, the 3% rate increase is no different from the remainder of the utility bill which constitutes gross receipts to the utility company. And as in other cases where a retailer is liable for sales tax upon the sale of goods or services, the utility company could have collected the amount of the tax from its customers. KRS 139.210. If the legislature intended receipts from the 3% permissive rate increase to be exempt from sales tax, it could easily have incorporated its desire into KRS 160.617. It did not and it is not the function of this court to do so.

The judgment is reversed for further proceedings consistent with this opinion.

All concur.

       The first sentence of this statute was deleted by the General Assembly in 1976.


text:
    Mary E. HILL, Appellant, v. Steven ALVEY and Alice Alvey, Appellees.
    Supreme Court of Kentucky.
    Nov. 18, 1977.

      Richard H. Nash, Sr., Nash, Gildersleeve & Nash, Louisville, for appellant.
    Chester A. Vittitow, Jr., Hogan, Taylor, Denzer & Bennett, Louisville, for appellees.
   REVERSING

PER CURIAM.

Appellant Mary E. Hill was injured in an automobile accident on appellees’ driveway. The Jefferson Circuit Court entered summary judgment dismissing her claim and appellant brings this appeal.

On the morning of May 31, 1975, appellee Alice Alvey asked her neighbor, appellant Mary Hill, to assist her in fitting an infant car seat into the Alveys’ automobile which was parked in appellees’ driveway. In attempting to adjust the seat belt on the passenger side of the front seat, appellant knelt in the driveway and leaned in the open front door. While appellant was engrossed in her task, appellees’ three-year-old son, Chris, got into the automobile and dislodged the gear shift lever which had been placed in the park position. The car rolled down the driveway and over both Mrs. Hill and Mrs. Alvey.

Appellant claims a jury question was presented concerning appellees’ negligence in failing to apply the emergency brake when parking their car on an incline, and in negligently permitting their young child to enter the car where it was foreseeable that he might hit or dislodge the gear shift lever thereby setting the car in motion.

It is the opinion of the court that the trial court erred in determining as a matter of law that appellees were free from negligence. In the case of Moore v. Lexington Transit Corporation, Ky., 418 S.W.2d 245 (1967), we reversed a directed verdict in favor of the parents of an eight-year-old boy who opened the door of his father’s car into the side of a passing bus. (The sudden stopping of the bus caused injury to a passenger.) Although the boy had never before opened the car door without being directed to do so, this court held a jury might reasonably find his mother “. . . was negligent in failing to anticipate the child might do what he did do, and in failing to take steps to prevent it.” The court went on to state, “. . .We have consistently recognized the duties of motorists, who are complete strangers, to anticipate the propensities of children. . Certainly a parent should not be held to a lesser degree of care.”

We have repeatedly held that caution must be exercised in granting summary judgment in negligence cases. Cf. Gullett v. McCormick, Ky., 421 S.W.2d 352 (1967). Appellant should have been allowed to present evidence to show, if she could, that ordinary care required the appellees to anticipate that an active three-year-old child might dislodge the gear shift and cause injury to himself or others unless the emergency brake were set when parking the car on an incline.

The judgment is reversed for further proceedings consistent with this opinion.

All concur.


text:
    Homer Lee SHERLEY, Jr., Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    Supreme Court of Kentucky.
    Nov. 18, 1977.
    Jack Emory Farley, Public Defender, J. Vincent Aprile, II, Asst. Public Defender, Frankfort, for appellant.
    Robert F. Stephens, Atty. Gen., Patrick B. Kimberlin, III, Asst. Atty. Gen., Frankfort, for appellee.
   STEPHENSON, Justice.

Homer Lee Sherley, Jr., was indicted and convicted of first-degree assault, KRS 508.-010(l)(a), and of first-degree robbery, KRS 515.020(l)(a). Sherley was also indicted for first-degree rape, KRS 510.040(l)(b) and. (2), and convicted of attempt to commit first-degree rape, KRS 506.010(4)(a).

Sherley was sentenced to twenty years’ imprisonment on the conviction of first-degree assault, sixteen years’ imprisonment on the conviction of first-degree robbery, and twenty years’ imprisonment on the conviction of attempt to commit first-degree rape. The sentences were directed to run consecutively.

Anna Brown, age 87, was assaulted in a Paducah cemetery while visiting the grave of her deceased husband. A black man approached her and suddenly hit her with a stick, demanding that she give her pocketbook to him. After taking the pocketbook, he continued striking her with the stick as well as kicking and slapping her. He forced her into her car, a two-tone Buick. At this point, she lost consciousness and did not remember anything further. As a result of the attack, Anna Brown suffered a massive stroke. When found the following day in a muddy ditch with her clothing pulled down to her ankles and above her hips, she was barely alive according to the physician who treated her.

A witness observed a black man driving a car resembling Anna Brown’s with a white woman sitting on the passenger side. Another witness identified Sherley as the driver of the car.

Other witnesses, near the scene where Anna Brown was found, observed a Buick car resembling Anna Brown’s and saw a man they identified as Sherley appear from behind some bushes, get into the car, and drive away. Their testimony was that Sherley was wearing a light beige or tan shirt and jacket and dark pants.

Sherley’s apartment was searched. Muddy clothes were found there and identified by witnesses as the clothes worn by Sherley when he appeared from behind some bushes and drove away in the Buick car.

A laboratory technician testified that fibers on Sherley’s jacket had the same characteristics as those composing the pantsuit worn by Anna Brown. He further testified that pubic hairs found on Anna Brown had the same characteristics as Sherley’s pubic hair.

Anna Brown’s automobile was found on a Paducah street about eight blocks from Sherley’s apartment.

Sherley’s defense was an alibi for the time of the incident and a denial that he had ever seen Anna Brown before the day of the trial.

Of the several issues argued by Sherley, we find one that merits discussion.

Sherley contends that he was placed in double jeopardy by being convicted of first-degree assault, the essential element of which is serious physical injury, and in the Commonwealth’s using that same evidence of force and serious physical injury to elevate the offense of taking the automobile to first degree robbery and the attempted rape to an attempt to commit a Class A felony.

KRS 505.020 provides in part:

“(1) When a single course of conduct of a defendant may establish the commission of more than one offense, he may be prosecuted for each such offense. He may not, however, be convicted of more than one offense when:
' (a) One offense is included in the other, as defined in subsection (2); or
⅝: ⅜ sfc ‡ _ * ⅜
“(2) A defendant may be convicted of an offense that is included in any offense with which he is formally charged. An offense is so included when:
(a) It is established by proof of the same or less than- all the facts required to establish the commission of the offense charged.”

The commentary to this section of the Penal Code observes that: “Subsection (2) does not make substantial changes in preexisting law. The matter of conviction of ‘included’ offenses has been previously handled by Rule 9.86 of’the Rules of Criminal Procedure.” The problem presented here is to consider the facts, developed on the trial for the charged offenses, in the light of how similar offenses in the repealed section of KRS were handled in order to ascertain pre-existing law on the subject to the extent possible.

We find from the repealed sections of KRS the only comparable section to first-degree assault is KRS 435.170 (repealed) which denounced malicious striking and wounding with a deadly weapon with intent to kill and which provided a punishment of two years’ to twenty-one years’ confinement. Striking with a'stick, if the jury believed the stick was deadly as used, was held to be sufficient in a prosecution under this section. Honaker v. Commonwealth, 25 Ky. Law Rep. 675, 76 S.W. 154 (1903).

The proof to justify a first-degree robbery conviction here required that the robbery of the automobile be accompanied by the use of force and causing physical injury. Prior to the adoption of the Penal Code, there were no provisions for degrees of robbery. The armed robbery section, KRS 433.140 (repealed), we deem inapplicable to the facts here. The section which is comparable to first-degree robbery is KRS 433.150 (repealed). This section provided that any person who, with an offensive weapon or instrument, unlawfully and maliciously assaults another with intent to rob or commits a robbery be confined for not less than ten years to life or punishment by death. Taking of the automobile alone would formerly have been a violation of KRS 433.220 (repealed), grand larceny, with a punishment of one to five years’ confinement. Thus an offense of grand larceny could have been elevated to assault with intent to rob if the taking was accompanied by malicious assault with an offensive weapon.

We are of the opinion that under pre-existing law a conviction on a charge of assault' with intent to rob would preclude prosecution for the offense of striking and wounding with intent to kill and grand larceny since identical facts would be present in conviction for assault with intent to rob. By a parity of reasoning the facts used in the conviction for first-degree assault here resulted in the elevation of the robbery charge and conviction to first-degree robbery, an element of which is physical injury, the beating which took place here. We are of the opinion the elements of first-degree assault merged into the conviction of first-degree robbery and were not subject to a separate charge.

Before the adoption of the Penal Code, there were no statutory degrees of rape. The gravamen of the offense of rape of a female over 12 years of age, KRS 435.090 (repealed), was against the female’s will or consent or by force, serious physical injury not being a factor. The offense of rape under the Penal Code is elevated to a Class A felony if the victim receives a serious physical injury. Here the conviction was for an attempt to commit first-degree rape, a Class A felony. The penalty for criminal attempt was enhanced for the reason serious physical injury resulted.

Previously there was no statutory provision for attempted rape. The offense was classified as a common law misdemeanor (a jail sentence in the discretion of the jury). Cf. Rhye v. Commonwealth, Ky., 263 S.W.2d 923 (1953). KRS 435.110 (repealed), detaining a woman against her will with intent to have carnal knowledge of her, with a penalty of two years’ to seven years’ confinement, has been construed as a lesser included offense of rape, and an instruction should be given on detaining rather than common law attempt where force is used. Hogue v. Commonwealth, 305 Ky. 297, 203 S.W.2d 42 (1947). Certainly a conviction for rape prior to the Penal Code would preclude a conviction for detaining or common law attempt.

We are of the opinion that the force causing serious physical injury which elevated the charge of attempted rape to attempt to commit first-degree rape, a Class A felony, being the same serious physical injury, the basis for the first-degree assault conviction also merged the offense of first-degree assault and attempt to commit first-degree rape, a Class A felony. Thus the conviction for first-degree assault merged with the charge of attempt to commit first-degree rape, a Class A felony.

We also note that the instructions of the trial court on the charge of first-degree robbery required the jury to believe that Sherley “caused physical injury to Anna Brown by striking her with a stick,” and the instructions on first-degree rape, Class A felony, required the jury to believe that “Anna Brown received serious physical injury as a consequence of defendant’s acts.”

We conclude that the force used for conviction of first-degree assault merged with the force used to elevate the punishment for the other offenses and Sherley was convicted of one offense included in others as proscribed in KRS 505.020. Cf. Arnett v. Commonwealth, 270 Ky. 335, 109 S.W.2d 795 (1937).

Sherley did not present this issue of double jeopardy or multiple prosecution to the trial court. However, we are persuaded that failure to preserve this issue for appellate review should not result in permitting a double jeopardy conviction to stand. See Menna v. New York, 423 U.S. 61, 96 S.Ct. 241, 46 L.Ed.2d 195 (1974), which set aside a conviction on the basis of double jeopardy after a guilty plea.

We have reviewed the record and are of the opinion that under the evidence as a whole it was not clearly unreasonable for the jury to find Sherley guilty of robbery in the first degree and attempted rape in the first degree. Jones v. Commonwealth, Ky., 554 S.W.2d 363 (1977). The other issues raised on this appeal do not merit discussion.

The judgment is affirmed as to the convictions of first-degree robbery and attempted first-degree rape. The judgment of conviction for first-degree assault is reversed with directions that the charge be dismissed.

All concur.


author: JONES, Acting Chief Justice.

text:
    Ancil DUNN, Movant, v. Jay CONLEY, Jr. as Administrator of the Estate of Goldie Compton Collins, Respondent.
    Supreme Court of Kentucky.
    Nov. 18, 1977.
    James D. Ishmael, Jr., Brown, Sledd & McCann, Lexington, for movant.
    Ronald G. Combs, Cooper, Gullett & Combs, Hazard, for respondent.
   OPINION AND ORDER

JONES, Acting Chief Justice.

We are of the opinion that discretionary review of this case, 552 S.W.2d 671 (Ky. App.1977) was improvidently granted.

The order granting discretionary review is vacated and the case is remanded to the Court of Appeals for the issuance of its mandate.

All concur except STERNBERG, J., who did not sit.


text:
    COMMONWEALTH of Kentucky ex rel. Ed W. HANCOCK, Attorney General, Lexington-Fayette Urban County Government, and Public Service Commission of Kentucky, Appellants, v. KENTUCKY UTILITIES COMPANY, Appellee.
    No. CA-1082-I.
    Court of Appeals of Kentucky.
    May 24, 1977.
    Motion to Reconsider Denied Aug. 4, 1977.
    Discretionary Review Granted Nov. 14, 1977.
   ORDER

(1) DENYING MOTION FOR ORAL ARGUMENT

(2) GRANTING MOTION TO DISMISS THE APPEAL

Before HOGGE, WHITE and LESTER, JJ.

The Court, having considered the motion for oral argument, and the response thereto, and being otherwise sufficiently advised, said motion is hereby DENIED.

The Court, having further considered the motion to dismiss the appeal, and the response thereto, and being of the opinion that the Franklin Circuit Court’s order of March 25,1977 is not a final and appealable order, said motion is hereby GRANTED.

ORDER

(1) GRANTING MOTION TO FILE ADDITIONAL AUTHORITIES

(2) DENYING MOTION TO RECONSIDER

Before HAYES, HOWARD, and WIL-HOIT, JJ.

The Court, having considered the motion to file additional authorities, and the response thereto, and being otherwise sufficiently advised, said motion is hereby GRANTED.

The Court, having further considered the motion to reconsider this Court’s May 24, 1977 order of dismissal, and the memorandum of additional authorities, and the response thereto, and being otherwise sufficiently advised, the motion to reconsider is hereby DENIED.


author: HAYES, Judge.

text:
    Robert F. STEPHENS, etc., City of Louisville, and Public Service Commission of Kentucky, Appellants, v. SOUTH CENTRAL BELL, Appellee.
    Court of Appeals of Kentucky.
    Aug. 4, 1977.
    Discretionary Review Granted Nov. 14, 1977.
   ORDER

(1) GRANTING MOTION TO FILE REPLY

(2) GRANTING MOTION TO DISMISS APPEAL

Before HAYES, HOWARD and WIL-HOIT, JJ.

HAYES, Judge.

The Court, having considered the motion of the appellee to file a reply memorandum in support of its motion to dismiss, and having considered the response thereto, and being otherwise sufficiently advised, said motion is hereby GRANTED.

The Court, having considered the motion of the appellee to dismiss the appeal on the ground that the order appealed from was not a final and appealable order, and having considered the responses thereto, and being otherwise sufficiently advised, said motion is hereby GRANTED.


author: WILHOIT, Judge.

text:
    EMPIRE FINANCE COMPANY OF LOUISVILLE, INC., Appellant, v. Melvin EWING, Appellee.
    Court of Appeals of Kentucky.
    Aug. 26, 1977.
    Discretionary Review Denied Jan. 4, 1978.

      James E. Stierle, Stierle & Stierle, Louisville, for appellant.
    Lawrence S. Elswit, Legal Aid Society of Louisville, Inc., Louisville, for appellee.
    John T. McGarvey, Morgan & Pottinger, Louisville, for amicus curiae.
    Before VANCE, WILHOIT and WIN-TERSHEIMER, JJ.
   WILHOIT, Judge.

The principal questions raised on this appeal involve the proper interpretation of certain provisions of the Federal Truth in Lending Act [TILA], 15 U.S.C.A. § 1601 et seq. (1974).

On September 24, 1974, appellee, Melvin Ewing, signed an installment note for $521.00 payable to appellant, Empire Finance Company, over a period of 24 months bearing interest at the rate of 33.21 percent. On April 7, 1976, after default by appellee, this action was brought by the finance company seeking recovery of unpaid principal totalling $484.38, plus interest from November 26, 1975.

By Amended Answer, Ewing asserted that the disclosure statement furnished to him by the finance company violated in a number of respects the provisions of the TILA and the Regulations adopted pursuant thereto (12 C.F.R. § 226 et seq.). Because of such violation, Ewing alleged that under the provisions of the TILA he was entitled to a “set-off” of $398.00 against the debt. He counterclaimed for the $398.00, plus attorneys fees and costs of the action.

The TILA provides that when a lender fails to disclose to a borrower any information required under the act to be disclosed in consumer loans, the lender is liable to the borrower for a penalty equal to twice the finance charge in connection with the transaction, but not less than $100.00 nor more than $1,000.00. 15 U.S.C.A. § 1640(a)(1) (1974) (amended 1976). Also, in a successful action to enforce this liability, the borrower is entitled to recover the costs of the action together with a reasonable attorney’s fee. 15 U.S.C.A. § 1640(a)(2) (1974) (amended 1976).

The trial court found that the finance company had violated the TILA by failing to indicate on its disclosure statement that the after-acquired property clause in the installment note was limited to property acquired within 10 days after the date the loan was made. The court set off the $398.00 against the outstanding principal of the note and permitted the finance company to recover $86.38 plus interest thereon at the rate of 6 percent from November 26, 1975. Ewing was denied recovery of his attorney’s fee and was assessed 75 percent of the costs of the action.

The finance company appeals from this judgment of the trial court alleging three instances of reversible error.

I.

Appellant argues that the court erred in finding that it had violated the TILA by failing to indicate on its disclosure statement that the security interest it retained in the appellee’s household furniture attached only to furniture already owned or acquired by him within 10 days after the loan was made under KRS 355.9-204(4)(b). The applicable regulation, 12 C.F.R. § 226.-8(b)(5), requires disclosure and a description of any security interest retained or acquired by the creditor including a clear identification of the property to which the security interest attaches. This requirement applies to any security interest in after-acquired property of the debtor.

This precise question was considered by the Federal District Court for the Western District of Kentucky in Stone v. Modern Loan Co., Inc., No. C75-0033L(B) (June 2, 1976), and by another federal court in Johnson v. Associates Finance, Inc., 369 F.Supp. 1121 (S.D.Ill.1974). Both courts reached a conclusion contrary to that urged by appellant. They held that disclosure of the 10-day limitation is an important part of the description of the security interest and failure to make such disclosure violates the requirements of the TILA and the Regulations. The trial court here found no authority to justify a refusal to follow the reasoning used in these decisions and neither do we.

II.

Appellant next contends that the $398.00 “set-off” permitted by the trial court is barred by the following subsections of 15 U.S.C.A. § 1640:

“(e) Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation. (Emphasis added).
“(h) A person may not take any action to offset any amount for which a creditor is potentially liable to such person under subsection (a)(2) of this section against any amount owing to such creditor by such person, unless the amount of the creditor’s liability to such person has been determined by judgment of a court of competent jurisdiction in an action to which such person was a party.”

According to appellant, these sections when read together establish a one-year statute of limitation, both for bringing an action to recover the penalty provided for under the TILA and for asserting the penalty as a set-off. It contends that the congressional intent behind these sections is to establish a uniform period throughout the United States for bringing actions to assert the penalty or for doing so by way of set-off, counterclaim, or recoupment.

Appellee counters that § 1640(e) is aimed only at barring after one year affirmative actions by a borrower, and that § 1640(h) is aimed at precluding a borrower from “self help” by unilaterally deducting from his debt the amount of the penalty he decides may be due him from the lender. To hold otherwise, appellee contends, would seriously hamper the purpose of the penalty provision since in most instances borrowers would not become aware of a violation of disclosure provisions until some legal action was commenced by the lender to recover the money lent. Lenders could, therefore, avoid assertion of the penalty by a borrower by simply waiting more than one year to take action.

That the arguments of both appellant and appellee are persuasive is evident from the fact that cases from foreign jurisdictions can be found to support either. Unfortunately, we find no definitive guidance as to the intent of the Congress in enacting these provisions. In the absence of such guidance we believe it is proper to consider the disposition of this case in accordance with Kentucky practice and case law.

The only Kentucky' case which appears to bear directly upon the TILA one-year limitation is our decision in Coombs v. Beneficial Finance Co., Ky.App., 549 S.W.2d 327 (1977). This case seems to support appellant’s position; however, as pointed out by appellee, it does not consider Liter v. Hoagland, 305 Ky. 329, 204 S.W.2d 219 (1947), and the line of cases following it. These cases hold, and appellant concedes, that under Kentucky practice limitations will not bar “mere defenses” arising out of the transaction connected with a plaintiff’s claim.

In a brief filed by an amicus curiae it is maintained that the Liter line of cases is not applicable to this situation because the claim for a penalty is an “ ‘extrinsic byproduct’ of this transaction . . . not dependent upon the lender’s contractual obligations.” This reasoning was adopted by the North Carolina Court of Appeals in Ken-Lu Enterprises, Inc. v. Neal, 29 N.C. App. 78, 223 S.E.2d 831 (1976). Our analysis is contrary. The duties and resultant civil liability of a lender arise out of the loan transaction itself. They are imposed by law upon the lender in the making of such a contract and, in effect, they become a part of the contract.

We conclude that while an affirmative action brought by the appellee to recover a penalty more than one year after violation of the disclosure requirements would be barred by the TILA itself, Wach-tel v. West, 476 F.2d 1062 (6th Cir. 1973), there is no such provision, clearly, barring the assertion of such a violation and penalty as a defense in the nature of recoupment. Inasmuch as our practice permits the assertion of such defenses “so long as the courts will hear the plaintiff’s case,” Liter, supra at 220, the trial court was correct in permitting this defense.

We believe the trial court erred, however, in failing to award the appellant interest on the note at the rate specified therein from November 26, 1975, until date of judgment and thereafter at the statutory rate.

The judgment of the trial court is affirmed with instructions that the judgment be amended to award the appellant interest in accordance with' this opinion.

All concur.


author: WINTERSHEIMER, Judge.

text:
    Jesse ABNEY, Larry Bowling, Paul Bruton, J. Mark Christopher, Lonnie Cole, Boyd Elliott, Donald Fox, Wilgus Fox, Robert Frazier, Bobby Henry, Russell Hisle, Vernon Johns, Harry Johnson, Danny R. Jones, William Kennon, Ollie Kenney, Larry Potter, Gary Potts, Shelly Rapier, J. D. Reffett, Michael Schneble, Albert Slusher, Eddie Snowden, Jackie Stamper, Joe Stewart, Shirley Templin, Michael Watkins, Wallace Whitted, Robert Wolfe, Floyd Wright, Tommy Wright, and Gary W. McCord, Appellants, v. CITY OF WINCHESTER, Kentucky, by and through its Mayor, Charles G. Stephenson, Appellee.
    Court of Appeals of Kentucky.
    Sept. 2, 1977.
    Discretionary .Review Denied Jan. 4, 1978.

      Blake H. Page, Winchester, for appellants.
    Edsel T. Jones, Winchester, for appellee.
    Before HOGGE, PARK and WINTER-SHEIMER, JJ.
   WINTERSHEIMER, Judge.

Appellants, thirty-two full-time firefighters for the City of Winchester, Kentucky, are appealing their discharge as city firefighters following a hearing pursuant to KRS 95.450 on charges of misconduct for failure to report for duty at the 7:00 A.M. shift on October 12, 1976. The failure to report for work arose out of unsuccessful labor management negotiations. By agreement, the transcripts of the disciplinary hearing before the city legislative body were certified to the circuit court for its use as a record for this appeal. The trial court ruled that the city properly discharged the thirty-two employees for misconduct.

The issue is whether a third class city, after a proper hearing, can discharge firefighters for misconduct who have failed to report for work after having made unsuccessful demands for collective bargaining during labor negotiations.

This Court affirms the decision of the trial court.

It is well settled that a public employee has no inherent right to strike. Jefferson County Teachers’ Association v. Board of Education, Ky., 463 S.W.2d 627 (1971). As the trial court correctly indicates, the word strike clearly includes a work stoppage and a job action which deprives the public of the services of the employees in question. There is no precedent for authorizing or permitting public employees involved in essential emergency services to strike. Recently, the Supreme Court of Kentucky upheld a $10,000.00 fine for contempt of court when firefighters violated a temporary restraining order arising from a labor dispute and related work stoppage. International Association of Firefighters v. Lexington-Fayette Urban Government, Ky., 555 S.W.2d 258, 24 Ky.L. Summ. 9 (July 1, 1977).

Certainly wages, hours and working conditions are the legitimate concern of all working people, including public employees. However, the ultimate weapon available to most laboring persons is not available to this class of public employees. Surely it is a tragedy that differences do arise between various elements of public service personnel. It might be far better if such differences could be resolved through a system of binding arbitration, but the laws of this Commonwealth do not require the determination of labor differences in this manner in cities of the third class. When an employee fails to report for duty or indicates he does not intend to report for duty, he is facing the probability of disciplinary proceedings and the possible penalty of discharge.

The questions raised relative to Chapter 345 and its validity, if the collective bargaining statutes are not applied to cities of the third class, do not apply in this situation. There is no meritorious evidence in this record of an improper classification or of special legislation that would affect this situation. The record does not indicate any charge made against the firefighters for peaceful picketing or other presentation of their grievances against the city. The constitutional question of free speech is also not a proper part of this appeal since the issue is simply the legality of the city’s right to discharge employees who fail to report for duty.

In this situation the record clearly shows that thirty-two regularly employed firefighters of the City of Winchester failed or refused to report for duty at 7:00 A.M. on October 12, 1976. Subsequent thereto, the city, pursuant to KRS 95.450, conducted a hearing and thereafter discharged the absent firefighters from employment for misconduct. The record does not disclose any abuse of discretion by the trial court in its review of the action of the city legislative body. The city commission was within its legal rights to dismiss its employees for absence from duty. Appellant Donald Fox, although on vacation from the time the work stoppage began until his discharge, was president of the union and the principal spokesman and leader of the striking firefighters. The record indicates he personally expressed his intention not to return to work, and at no time indicated any intention of returning to duty. Since failure to report to duty may be grounds for discharge, then the city may properly discharge the man who leads and encourages such illegal activities. Appellant Paul Bru-ton, on vacation when the strike began, was scheduled to report to work prior to the hearing held by the city commission, but failed to do so. He also failed to deny any charge of participating in the work stoppage.

The judgment of the trial court is affirmed.

All concur.


author: REYNOLDS, Judge.

text:
    Kitty Park McCORD, Appellant, v. William H. McCORD, Jr., Appellee.
    Court of Appeals of Kentucky.
    Sept. 2, 1977.

      S. J. Stallings, Robert G. Stallings, Louisville, for appellant.
    Eli J. George, Jr., Louisville, for appellee.
    Before COOPER, WINTERSHEIMER and REYNOLDS, JJ.
   REYNOLDS, Judge.

Jefferson Circuit Court entered an opinion and order precluding wife from enforcing an alimony agreement with first husband after the annulment of wife’s second marriage. Appellant herein, the former wife, appeals from this order.

The appellant, Kitty McCord, and the ap-pellee, William McCord, were married in 1961 and subsequently divorced in 1969. A separation agreement between the parties had been incorporated into their judgment of divorce which provided:

4. As periodic installment alimony William H. McCord, Jr. will pay Kitty Park McCord the sum of $300.00 per month until the death of either party or her remarriage or the passage of eighty-four (84) months whichever first occurs, being taxable to her and deductible to him. (Emphasis added)

The record reflects that on May 29, 1973 the appellant and her drinking companion, Billy Moore, were married and lived together until July 16, 1973 when both parties reached some degree of sobriety. Thereafter Billy Moore filed an uncontested action for annulment, and judgment was thereafter entered on January 24,1974 by Jefferson Circuit Court. The appellee, William McCord, made no alimony payments. After the entry of the judgment of annulment, appellee was denied a right to intervene in the action. The appellant moved for a rule in the original action, requiring appellee to show cause why he should not pay the alimony recited in the original separation agreement and judgment of divorce. The chancellor, in a studied opinion, denied the reinstatement of the alimony award and dismissed appellant’s motion for the show cause .order.

Appellant argues that a wife is not precluded, as a matter of law, from enforcing an alimony agreement, incorporated in a prior divorce judgment, when the wife’s subsequent remarriage is annulled. The obligation to pay alimony, once terminated, and the question of its reattachment on the annulment of a subsequent marriage is an issue somewhat novel in this jurisdiction. Both parties have cited authority which, if adopted, would support their suggested reasoning.

Some jurisdictions have adopted an inflexible rule that where there is a ceremonial marriage it invariably and automatically terminates a prior alimony obligation. See, e. g., Surabian v. Surabian, 362 Mass. 342, 285 N.E.2d 909 (1972); Beebe v. Beebe, 227 Ga. 248, 179 S.E.2d 758 (1971); Chavez v. Chavez, 82 N.M. 624, 485 P.2d 735 (1971). Other jurisdictions have adopted an equally inflexible position that the annulment of a second marriage automatically revives the alimony obligations resulting from a subsequent marriage. See, e. g., Sleicher v. Sleicher, 251 N.Y. 366, 167 N.E. 501 (1929); Robbins v. Robbins, 343 Mass. 247, 178 N.E.2d 281 (1961). See also, Annot. 45 A.L. R.3d 1033, 1041 § 5(a).

In Gaines v. Jacobsen, 308 N.Y. 218, 124 N.E.2d 290 (1954), the New York Court refused to follow Chief Justice Cardozo’s reasoning in Sleicher, supra, stating that the purposes of justice were better served by limiting a wife to her right to support from the annulled marriage.

The trial chancellor in this case has interpreted that the marriage was voidable, thereby noting a distinction between marriages which are void and those which are merely voidable. We agree with his well reasoned opinion that this void-voidable distinction is to be given weight in determining whether prior alimony obligations should be revived. But, the void-voidable distinction is not controlling in and of itself.

We acknowledge the advantage the trial court has in interpreting its own records and decrees and of its powers of observation. Therefore, its opinion should be given great weight in a matter of this sort.

It is the opinion of this court that inflexible rules of construction should not be binding upon a court of equity when a matter of this sort is at issue. Therefore, we adopt the middle ground, appropriate to a court of equity, that public policy is best served when the equities in favor of either revival or preclusion of alimony are balanced against each other. This position was recently adopted by the Iowa Supreme Court in Peters v. Peters, 214 N.W.2d 151 (1974), and the general facts involved therein are seemingly similar to the facts of this case. However, a close examination of the Peters case demonstrates that the duration of the annulled marriage and the determination by the lower court were distinguishable. While equity operates on fixed rules, as well defined as are the rules of law, it exercises a judicial discretion which may be likened to the civil conscience, and which may vary in the relief accorded, according to the particular facts and circumstances of the particular case. Cox v. Burgess, 139 Ky. 699, 96 S.W. 577 (1906).

We therefore affirm the order and opinion of the trial court and, in effect, this court declines to accept either appellant’s reasoning or invitation to reward appellant for the six weeks’ sojourn which had launched her upon the matrimonial seas for the third time.

All concur.


author: LESTER, Judge.

text:
    Garvis BURKETT, Appellant, v. BOARD OF EDUCATION OF PULASKI COUNTY, Kentucky, Appellee.
    Court of Appeals of Kentucky.
    Oct. 21, 1977.
    Rehearing Denied Dec. 9, 1977.

      Arthur L. Brooks, Brooks & Sullivan, Lexington, for appellant.
    John T. Mandt, Mandt & McEnroe, Somerset, for appellee.
    Before HAYES, HOGGE and LESTER, JJ.
   LESTER, Judge.

This appeal represents the second bite at the apple for with one slight variation, the general issues have heretofore been decided as between the same parties in Board of Education of Pulaski County v. Burkett, Ky., 525 S.W.2d 747 (1975). In the first appeal, it was decided that a tenured teacher who is removed from his position pursuant to KRS 161.790(3) and (4) is not deprived of property interests and contract rights without procedural due process, because the school board is cast into and occupies the roles of employer, investigator, accuser, prosecutor, jury and judge. Moreover, Justice Lukowsky, writing for the Court, further concluded that the process of judicial review provided by subsection six of the above mentioned statute and the form of hearing mandated by Osborne v. Bullitt County Board of Education, Ky., 415 S.W.2d 607 (1967) clads the tenured teacher adversely affected by board action with additional and sufficient blankets of protection. In the former appeal, appellant herein sought to disqualify the entire board based upon its multiple functions while presently he seeks to disqualify one or more members and assigns as his reason “actual bias” against him.

The record herein indicates that appellee conducted a hearing in 1973 which resulted in appellant’s loss of employment and Burkett appealed to the circuit court which reversed the board because it was of the opinion that the termination process was a denial of due process. That judgment was reversed by the Court on May 23, 1975. Burkett pitches the present appeal upon denial of due process occasioned by an allege.d actual bias of some board members using as the basis for his argument the evidence adduced upon voir dire examination of the board prior to the hearing in 1973. Since denial of due process is the issue in both appeals and since the eviden-tiary support for the contention was available prior to the Court’s opinion, we believe the doctrine of res judicata prevents the relitigation of the same issues in a subsequent appeal and includes every matter belonging to the subject of the litigation which could have been, as well as those which were, introduced in support of the contention of the parties on the first appeal. Sharp v. Sharp, Ky., 516 S.W.2d 875, 878 (1974) quoting from E. F. Prichard Co. v. Heidelberg Brewing Co., 314 Ky. 100, 234 S.W.2d 486 (1950). This jurisdiction incorporates the doctrine of res judicata into the law of the case rule. Hutchings v. Louisville Trust Company, Ky., 276 S.W.2d 461, 466 (1955). See also 5 Am.Jur.2d Appeal and Error § 752 at 196 and 5B C.J.S. Appeal and Error § 1822 at p. 191. Appellant could and should have raised the question of actual bias as violating due process on the first appeal. We are aware that there was no finding of fact to the effect that there was no actual bias on the part of the members of the board until after the cause was remanded but this would not have precluded its inclusion as a part of the due process argument.

But even if we were considering this appeal without the benefit of the prior opinion of the Court, this appellant would not prevail. When a matter is appealed to this court from a judgment of a circuit court which sat without the intervention of a jury (or with an advisory jury) and the judge made findings of fact and conclusions of law, then the sole question for our determination is whether such findings are clearly erroneous. 7 W. Clay, Kentucky Practice, CR 52.01, Comment 8 at 161 (3rd ed. 1974). The trial judge observed that even though some of the members of appellee had previously discussed the subject matter of the charges made against Burkett with one or more of the individuals who had signed affidavits in support of the charges, nevertheless, each board member stated under oath that he could and would decide the issue solely upon the evidence introduced at the hearing. Judge Helton went on to say “(t)here is nothing in the record to suggest that they did otherwise.” The transcript reveals that the circuit court reviewed the record made at the board’s hearing at least twice and heard oral evidence of two members of appellee. A complete review of the record supports the trial court’s determination that there was no actual or inherent bias as is suggested by appellant and therefore, the finding is not clearly erroneous. Moreover, we find nothing before us indicating personal animosity or a personal stake or interest on the part of any board member as might be necessary to show bias sufficient to deny due process as is suggested in Hortonville School Dist. No. 1 v. Hortonville Education Association, 426 U.S. 482, 96 S.Ct. 2308, 94 L.Ed.2d 1 (1976). This last mentioned decision stands for the principle that (at p. 9, 96 S.Ct. at p. 2314)

[m]ere familiarity with the facts of a case gained by an agency in the performance of its statutory role does not, however, disqualify a decision-maker. Withrow v. Larkin, 421 U.S. 35, 47, 95 S.Ct. 1456, 43 L.Ed.2d 712 (1975).

The judgment of the Pulaski Circuit Court is affirmed.

All concur.


text:
    Charlie MAYNARD, Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    Court of Appeals of Kentucky.
    Nov. 11, 1977.

      Irvin D. Foley, Louisville, for appellant.
    Robert F. Stephens, Atty. Gen., James L. Dickinson, Asst. Atty. Gen., Frankfort, for appellee.
    Before HAYES, HOGGE and LESTER, JJ.
   HAYES, Judge.

The appellant, Charlie Maynard, was indicted by the Russell County Grand Jury for violation of KRS 506.030, for soliciting the murder of Russell Circuit Judge Leonard F. Wilson. Maynard was found guilty by a jury and the minimum sentence of ten (10) years was assessed. He appeals from the judgment of Russell Circuit Court assigning as reversible error, among other things, the trial court’s admission Into evidence:

(1) The hearsay testimony of an F.B.I. Agent as to conversations between Maynard and one Norwood Jones, deceased, which violated Maynard’s right to confrontation as guaranteed by the 6th Amendment of the U.S. Constitution.

(2) The hearsay testimony of Judge Wilson as to the threats made on his life.

(3) Taped recordings of conversations between Maynard and the deceased Jones.

It is necessary that we set forth in more detail than usual the factual circumstances in order to assess the impact of the challenged testimony on the total evidence introduced against the appellant Maynard. A review of the evidence against Maynard demonstrates the Commonwealth’s case against him was highly circumstantial and consisted mainly of testimony by law enforcement personnel, who had no personal knowledge of the circumstances of the charge against Maynard. The only other evidence was portions of a tape recording of conversations on two occasions between Maynard and Norwood Jones, who died before trial.

On the day of trial, October 25, 1976, and before, the attorney for Maynard made numerous objections to the testimony by F.B.I. Agent, Eugene N. Thomeczek concerning conversations the agent had with his informer, Jones. Over these objections, Thomeczek was permitted to testify as follows:

Q. When did you first come into contact with Norwood Elmer Jones?
A. Mr. Jones came to the Louisville office on December 5, 1975, and said he wanted to report a possible violation of Federal law.
Q. Since your meeting with Jones in December of last year, from your own personal knowledge tell the Court and Jury if Jones is now living or dead.
A. Jones is now deceased.
Q. Did you have on the 5th day of December, 1975 a conversation relating to a purported crime against Leonard Wilson?
A. I did.
Q. Would you please tell this Jury what Mr. Jones said to you concerning the commission of a crime against Leonard Wilson?
OBJECTION BY MR. FOLEY: Your Honor at this point we will object on the basis that the testimony is hearsay, and not under oath. Mr. Jones was not under oath at the time he made these statements. His statements are not subject to cross examination, and should this testimony be permitted, then I move for a mistrial.
BY THE COURT: As we have gone into this matter a number of times, and the Court’s ruling still stands that the objection is overruled.
Q. With that in mind proceed to relate the conversation that you had with Mr. Jones.
A. Mr. Jones told me on December 5, 1975 that he was acquainted, uh, he was staying at the Dismas House, which is a pre-release guidance center in Louisville with an individual by the name of Earl Conover. And that in approximately the first part of October, 1975 Conover had come to Jones and asked him if he would like to earn some money. That he thought maybe he could set up a way they could get some money. Jones said he was interested, and subsequently he and Conover traveled to Jamestown, Kentucky where they met with Charlie Maynard. During this meeting Mr. Maynard discussed the fact that Judge Leonard Wilson was the only candidate at that time for the Circuit Judge in Russell County, or for Russell and the other counties, and that if he was elected, that he would put Mr. Maynard out of business, and .
Q. Excuse me, what kind of business was he suppose to have been engaged in?
A. He was a bootlegger, and according to Mr. Jones Mr. Maynard told him that Mr. Wilson if he was elected Judge, and he most assuredly would be since he was the only candidate, he said he had campaigned that he was going to stop bootlegging in Russell County, and Mr. Maynard felt if he did so, and if he stopped, if Judge Wilson stopped Mr. Maynard from bootlegging he would of course not have a source of income. He, during either this trip, or a subsequent trip, offered Mr. Jones and Mr. Conover $2,000.00 to kill Judge Wilson. He told them that he wanted this accomplished before Judge Wilson took office, which I believe was January 6th of this year, and that he would give them the weapons to do so. During the second trip he gave Mr. Con-over and Mr. Jones a .30 caliber carbine, which Mr. Maynard told them was fully automatic.

Special Agent Thomeczek then related that he had a tape recording device placed upon the person of the informant Jones. Jones went to Jamestown, Kentucky, and attempted to engage Maynard into a conversation that would in effect verify the conversations Jones previously had with Agent Thomeczek.

Jones also carried a transmitter on his person during these taped conversations with Maynard. F.B.I. Agents, including Thomeczek, and state police officers listened to the conversations between Jones and Maynard. The officers were secreted in automobiles some distance from the actual presence of Maynard and Jones.

The tape recordings of the Maynard-Jones conversations generally verified that Jones and one Earl Conover had received guns from Maynard and they discussed hand grenades that could be thrown into Wilson’s office.

Armed with this information Agent Tho-meczek went before the Russell County Grand Jury on February 11, 1976, and obtained an indictment against Maynard for soliciting Jones and Conover to murder Judge Wilson. Norwood Jones, the informer, was himself murdered on February 11, 1976, at Paducah, Kentucky. He had been strangulated with a coat hanger. Jones’s death apparently had no connection with his acquaintance with Maynard.

We perceive the issues in this case to be threefold:

(1) Was the F.B.I. agent’s testimony of conversations he had with his informant, Jones, about Maynard prejudicial to Maynard, or stated another way, were these conversations offered by the Commonwealth for their testimonial import?

(2) If the testimony of the F.B.I. agent was prejudicial or was offered by the Commonwealth for the truth of the matter asserted, then was there a violation of the Confrontation Clause of the 6th Amendment to the U.S. Constitution?

(3) If the admission of the testimony was in violation of the Confrontation Clause, was it still properly admitted under a valid exception to the hearsay rule of evidence?

The Commonwealth contends that the testimony of the F.B.I. agent was admissible either because: (A) Even if it was hearsay, it was properly admitted under an exception to the hearsay rule as defined in the Federal Rules of Evidence, which we should adopt, or, (B) the testimony was not offered to assert the truth of the matter contained therein, but for the purpose of explaining the course of events that transpired after the statements were heard by the agent. The Commonwealth relies heavily upon Armstrong v. Commonwealth, Ky., 517 S.W.2d 233 (1975), and Stallard v. Commonwealth, Ky., 432 S.W.2d 401 (1968).

We believe the testimony of Agent Tho-meczek had testimonial import and constituted a very significant link in the chain of circumstantial evidence against Maynard. Therefore, the reliance of the Commonwealth on Armstrong v. Commonwealth, supra, is in error. In Armstrong, it was held that the testimony of a police officer, relating his conversations and transactions with his informant, and the substance of the informer’s end of a telephone conversation with an alleged seller of heroin was admissible, even though the informer did not testify at the trial of the heroin seller, because the words and the acts of the informer were part of a relevant course of events observed by the witness, the police officer. The conversation testified to by the officer who overheard the conversations was roughly: “Do you have any stuff? I want some . . . . About two spoons . . Same place . . . . O.K.” It turned out that the person the informer was talking to was not the defendant, Armstrong.

The Court of Appeals stated on page 236 the following:

White’s extrajudicial utterances had no testimonial import. Had he made some such statement as, “I am calling up a man named Danny Robinson. He pushes dope for a fellow named Harry Armstrong,” it would have had a definite testimonial effect and, even though spoken in the course of relevant acts and conduct, might very well have been inadmissible, .

Also, an important factor in Armstrong that we do not have in the case before us is that the police officer in Armstrong was actually present and overheard the telephone conversation.

The testimony permitted by the court in Stallard v. Commonwealth, supra, was by the police officer who repeated the information he had received from people regarding the theft, descriptions and identifications of a stolen motorcycle. The Court of Appeals concluded that none of the testimony was introduced to establish the fact that the appellant, Stallard, was operating the motorcycle without the owner’s consent. The court held that testimony as to the manner in which the investigation of the crime was conducted was an exception to the hearsay rule. Generally, these utterances have no testimonial significance as to the defendant’s guilt. Such is not our case here.

Our belief that Agent Thomec-zek’s testimony of his December 5th conversation with Jones was offered for its effect on the guilt of Maynard is further strengthened when we search the record and find no other mention that Maynard had offered $2,000.00 to Jones and Conover to kill Wilson and that Jones rejected the proposal. The defendant Maynard was indicted for criminal solicitation under KRS 506.030 and, therefore, it would be necessary to show some'rejection on the part of Jones to the offer made by Maynard and whether there was in fact an offer made.

Prior to the enactment of the Kentucky Penal Code in 1975, there was no statutory crime of criminal solicitation, nor can any cases be found where the crime existed at the common law. Previous to the Penal Code, if A hired B to rob C and B did rob C, then A was an accomplice to robbery. If A hired B to rob C and B unsuccessfully attempts to rob C, then A is guilty of attempted robbery, as an accomplice to B. If A agrees with B to rob C and A and B are arrested before an attempt is made to rob C, then A is chargeable as a co-conspirator with B. There was no crime if A asked B to rob C and B said no. This factual situation is what KRS 506.030 attempts to cover. The official commentary to the Kentucky Penal Code, Final Draft, page 81 states:

Section 715 (KRS 506.030) is designed to deal with situations involving an immediate rejection by the solicitee of the initial proposal. Under such circumstances, the criminal culpability of the solicitor is as great as it would be if his proposal should be accepted and the underlying offense completed or attempted by the solicitee and nearly as great as the culpability of a criminal conspirator. (Emphasis ours).

Therefore, even though rejection of the proposal by the solicitee is not specifically mentioned as an element in the statute covering criminal solicitation, nevertheless, if there is no rejection then there necessarily is no crime of criminal solicitation. Otherwise the crime is one of the actual offense of robbery, murder, etc., or one of criminal atteinpt or criminal conspiracy. If there was no rejection of Maynard’s proposal by Jones, then there either was no crime of criminal solicitation or Maynard was indicted for the wrong offense. Were Maynard, Jones and Conover co-conspirators to murder Judge Wilson?

It would be most difficult for us to believe that the jury considered the special agent’s testimony of the December 5th conversation with Jones as merely indicating the manner in which the investigation of the crime was conducted, Stallard v. Commonwealth, supra, or because the words of the informer were part of a relevant course of events observed by the agent, Armstrong v. Commonwealth, supra. The testimony was highly prejudicial to Maynard and it was more probable that the jury considered the testimony as substantial evidence of Maynard’s guilt, Stewart v. Cowan, 528 F.2d 79 (6th Cir. 1976).

Since Thomeczek’s testimony of the December 5th conversation was highly prejudicial to Maynard, the next question is whether the introduction of that testimony violated the Confrontation Clause of the 6th Amendment of the U.S. Constitution, made binding upon the Commonwealth of Kentucky by Pointer v. Texas, 380 U.S. 400, 85 S.Ct. 1065,13 L.Ed.2d 923 (1965). We must first determine what is required by the confrontation clause and naturally turn to cases decided by the U.S. Supreme Court.

In California v. Green, 399 U.S. 149, 90 S.Ct. 1930, 26 L.Ed.2d 489 (1970), the court stated that the confrontation clause was meant to constitutionalize a barrier against flagrant abuses, trial by anonymous accusers, and absent witnesses. It was implied that if the witness or accuser was available, he should be presented to the trier of fact.

Mr. Justice Rehnquist, speaking for the majority in Mancusi v. Stubbs, 408 U.S. 204, 92 S.Ct. 2308, 33 L.Ed.2d 293 (1972), stated that unavailability of the witness is a “predicate” of the confrontation clause which requires the prosecution to produce available declarants whose statements directly bear on the charge against the defendant.

In Barber v. Page, 390 U.S. 719, 88 S.Ct. 1318, 20 L.Ed.2d 255 (1968), the Supreme Court held that the constitution imposes upon the prosecution the burden of showing the unavailability of a declarant before it is permitted to introduce a less reliable account of his declaration, particularly if the evidence to be introduced is “crucial" or “devastating”.

The testimony of Agent Thomeczek of Jones’ conversation with Maynard did violate Maynard’s right to confront the witness against him. Although it violated the confrontation clause, there still would not be reversible error by the trial court’s admission of this testimony into evidence if admissible under a recognized exception to the hearsay rule. Therefore, the unavailability of the declarant is not reason to exclude his testimony, even though a possible violation of the confrontation clause and obviously hearsay, if there exist other indi-cia of reliability. Obviously in our case, the unavailability of the declarant Jones was apparent. Even though the hearsay rule and the 6th Amendment right to confrontation are not the same, the two concepts do protect similar values and are aimed at excluding unreliable testimony. Recently the Federal Courts have adopted rules of evidence which categorize exceptions to the hearsay rule. The only possible exception applicable here is Rule 804.

The Commonwealth, although conceding the testimony of Agent Thomeczek was hearsay, urges this court to adopt the exception to the hearsay rule recognized by Rule 804 of the Federal Rules of Evidence. The appellant Maynard argues that the Federal Rules of Evidence have not been accepted by the Kentucky Courts or legislature and are not applicable. Maynard is partially wrong. The Kentucky Courts have not adopted the Federal Rules of Evidence, in toto, however, the courts have adopted some of the Federal Rules of Evidence. See Heilman v. Snyder, Ky., 520 S.W.2d 321 (1975).

We see no reason why this court should not adopt Federal Rule 804 which adds but another group of exceptions to an already eroded hearsay rule. Rule 804, having to do with the unavailable declarant, states, inter alia:

(a) Definition of unavailability. Unavailability as a witness includes situations in which the declarant:
(4) Is unable to be present or to testify at the hearing because of death .
(b) Hearsay exceptions. The following are not excluded by the hearsay rule if the declarant is unavailable as a witness:
(5) Other exceptions. A statement not specifically covered by any of the foregoing exceptions but having equivalent circumstantial guarantees of trustworthiness, if the court determines that (A) the statement is offered as evidence of a material fact; (B) the statement is more probative on the point for which it is offered than any other evidence which the proponent can procure through reasonable efforts; and (C) the general purposes of these rules and the interests of justice will best be served by admission of the statement into evidence. However, a statement may not be admitted under this exception unless the proponent of it makes known to the adverse party sufficiently in advance of the trial or hearing to provide the adverse party with a fair opportunity to prepare to meet it, his intention to offer the statement and the particulars of it, including the name and address of the declarant.

This rule recognized that there could occur exceptional circumstances where evidence which was found by a court to have guarantees of trustworthiness equivalent to or exceeding the guarantees reflected by the presently listed hearsay exceptions, and found to have a degree of probativeness and necessity, could be properly admissible.

However, the U.S. Senate Judiciary Committee, the proponent of Federal Rule of Evidence 804(b)(5), issued a warning to the judiciary to proceed with great caution. That warning is quoted in 4 Weinstein, Evidence, pp. 803-30 to 803-31 as follows:

It is intended that the residual “hearsay” exceptions will be used very rarely, and only in exceptional circumstances. The Committee does not intend to establish broad license for trial judges to admit “hearsay” statements that do not fall within one of the other exceptions contained in Rule 803 and 804(b). The residual exceptions are not meant to authorize major judicial revision of the hearsay rule, including its present exceptions. Such major revisions are best accomplished by legislative action. It is intended that in any case in which evidence is sought to be admitted under these subsections, the trial judge will exercise no less care, reflection and caution than the courts did under the common law in establishing the now recognized exceptions to the hearsay rule. Senate Committee on the Judiciary, Report on Federal Rules of Evidence, 93rd Congress, 2nd Session, Report Number 93-1277, pp. 18 to 20 (Oct. 18, 1974).

It would be necessary, then, that in order for Agent Thomeczek’s testimony of the December 5, 1975, conversation with Jones to be admissible that there be some equivalent circumstantial guarantees of trustworthiness or as stated in Dutton v. Evans, 400 U.S. 74, 91 S.Ct. 210, 27 L.Ed.2d 213 (1970), if the testimonial import of the evidence to be introduced is “crucial” or “devastating” and there are sufficient “in-dicia of reliability” warranting the admission of the otherwise excludable evidence, it should be admitted. Were the circumstantial guarantees of trustworthiness and indi-cia of reliability sufficiently present in the instant ease to permit the trial judge to allow the introduction into evidence of Agent Thomeczek’s conversations with Jones? We feel constrained to say no.

The Commonwealth basically offers two factors as other “indicia of reliability”: (a) The tape recording, and (b) the testimony of Agent Thomeczek that he found the informer, Jones, to be reliable.

Agent Thomeczek testified as follows: A. During the first conversation with Mr. Jones, and we probably had 20 or 25 meetings, or periods of time that we were together when we were working on a particular part of the investigation, he related many facts, some concerning Mr. Maynard, and some that had no bearing whatsoever on Mr. Maynard, but things that we would normally know, or we could find out through investigation, and things that related to other criminal acts that were being committed in Kentucky, and all of these facts I know of no thing that Mr. Jones told me that turned out to be false. The information he gave me on December the 8th resulted in the arrest of 3 individuals and recovery of some $500.00 in property that had been stolen out of a residence, because Mr. Jones told me, and because what Mr. Jones told me was credible, it was believable and it was true, and the descriptions that he told me. Things that could be verified were verified, and found to be true. The fact that he had . . . the things that he told me that I could verify I checked out, and I never found him to ever give me any unreliable information. (Emphasis ours.) Considering these two factors in reverse

order, the testimony of Thomeczek about the reliability of Jones would be sufficient if we were merely considering probable cause for the obtaining of a search warrant. We say this even in view of the fact that Thomeczek, on cross examination, testified Jones had numerous arrests and convictions and was a homosexual, who possibly was murdered as a result of some act of sexual perversion, thereby giving the jury sufficient information about the character of Jones that they could readily disbelieve his story. But the indicia of reliability is insufficient for the testimony of Jones to convict Maynard of the crime of solicitation to commit murder. The tape recording, in and of itself, has very little probative value and does not, in our opinion, circumstantially guarantee the trustworthiness of Jones’ testimony about being offered $2,000.00 to murder Judge Wilson and the very prejudicial statement that Jones and Earl Conover in effect planned the act and the manner in which the escape would take place. We do, however, believe the tapes were admissible into evidence based on the ruling in OnLee v. U.S., 343 U.S. 747, 96 L.Ed. 1270, 72 S.Ct. 967 (1952) and Commonwealth v. Brinkley, Ky., 362 S.W.2d 494 (1962).

Since we are reversing on the basis of the error committed in allowing the testimony of Agent Thomeczek about his conversation with the informer, Jones, on December 5, 1975, we need not discuss at length the other alleged errors raised by Maynard; however, since we are reversing for a new trial, we do believe a comment is required on certain actions that took place at the first trial. We believe the testimony of Judge Wilson that he had heard that Jones had been solicited by Maynard to take the Judge’s life was immaterial, irrelevant and inadmissible. The conduct of the Commonwealth was highly improper when the prosecutor asked Maynard if he had been convicted of a previous. felony after the trial court ordered the Commonwealth Attorney not to ask the question. We assume this will' not happen at the retrial. We believe the case should be sent back to Russell Circuit Court for a retrial since there was ample evidence in the record that there was an available witness to the conversation between Jones and Maynard and the Commonwealth should be given the opportunity to produce that witness, Earl Conover. Lacking such testimony, however, the trial court should dismiss the indictment against the appellant, Charlie Maynard.

The judgment is reversed and the appellant is granted a new trial in accordance with the guidelines set forth in this opinion.

All concur.


author: PARK, Judge.

text:
    John Y. BROWN and Eleanor D. Brown, Appellants, v. DEPARTMENT OF REVENUE of the Commonwealth of Kentucky, by and on relation of Maurice P. CARPENTER, Commissioner of Revenue, Appellee.
    Court of Appeals of Kentucky.
    Nov. 18, 1977.

      Thomas A. Brown, Greenbaum, Doll, Mathews & Boone, Louisville, for appellants.
    Thomas A. Duke, Legal Staff, Dept, of Revenue, Frankfort, for appellee.
    Before PARK, WHITE and WINTER-SHEIMER, JJ.
   PARK, Judge.

This appeal presents a single issue: whether a shareholder’s pro rata share of the net operating loss of a subchapter S corporation may be deducted in determining the shareholder’s 1970 Kentucky income tax liability. The Kentucky Board of Tax Appeals and the Franklin Circuit Court both upheld the ruling of the Department of Revenue that no part of a corporation’s net operating loss could be deducted by a shareholder for Kentucky income tax purposes. We agree.

The facts are stipulated. During the year 1970, the appellant, John Y. Brown, was a shareholder of Athletic Enterprises, Inc., a corporation which had elected and qualified as a small business corporation (subchapter S corporation) under sections 1371-1375 of the Internal Revenue Code of 1954 as amended. For its taxable year ending May 31,1970, Athletic Enterprises, Inc., sustained a net operating loss in the amount of $375,961.00. Based upon his stock ownership, Brown’s pro rata share of the corporation’s net operating loss amounted to $70,361.00 when computed in accordance with provisions of section 1374(c) of the Internal Revenue Code.

Brown and his wife timely filed a combined 1970 Kentucky Income Tax Return. On April 9,1974, Brown and his wife timely filed an amended Kentucky Income Tax Return for the taxable year 1970 showing a “loss” in the amount of $70,361.00 attributable to Brown’s stock ownership in Athletic Enterprises, Inc. Brown claimed a refund of Kentucky income taxes in the amount of $4,220.00. From a final ruling of the Department of Revenue issued June 30, 1975, Brown appealed to the Kentucky Board of Tax Appeals. On June 4, 1976, the board affirmed the department’s ruling denying the claim for refund. A further appeal was prosecuted to the Franklin Circuit Court. On February 21, 1977, the circuit court entered a judgment affirming the order of the Kentucky Board of Tax Appeals.

Brown relies upon the provisions of subsections (9), (10) and (11) of KRS 141.010 as they were in effect in 1970. Under subsection (9), “gross income” of Kentucky individual taxpayers meant “gross income” as defined in section 61 of the Internal Revenue Code with certain adjustments. Under subsection (10), “adjusted gross income” meant gross income as defined in subsection (9) “minus the deductions allowed individuals by section 62 of the internal revenue code” with certain adjustments and exceptions. With respect to individual taxpayers not electing to take the standard deduction, subsection (11) provided that “net income” means adjusted gross income as defined in subsection (10) “minus all the deductions allowed individuals by chapter 1 of the Internal Revenue Code” with certain exceptions and adjustments.

Under section 1374(b) of the Internal Revenue Code, each shareholder of an “electing” subchapter S corporation is allowed as a deduction from gross income an amount equal to his pro rata share of the corporation’s net operating loss. Under subsection (d)(1), this deduction is considered as a deduction attributable to “a trade or business carried on by the taxpayer.” Under section 62(1) of the Internal Revenue Code, adjusted gross income is determined by subtracting trade and business deductions from gross income. Brown contends that he is entitled to deduct his pro rata share of the net operating loss of Athletic Enterprises, Inc., when the provisions of sections 62(1) and 1374 of the Internal Revenue Code are considered in conjunction with subsections (9), (10) and (11) of KRS 141.010.

Brown recognizes, that for Kentucky income tax purposes, subparagraph (c) of KRS 141.010(9) excluded from the definition of gross income undistributed taxable income of a subchapter S corporation taxable to shareholders under section 1373 of the Internal Revenue Code. Brown argues that net operating losses of a subchapter S corporation are not a part of undistributed taxable income of such corporations. Hence, it is argued that the deductability of the shareholder’s pro rata share of net operating loss is not affected by the exclusion of undistributed income of a subchapter S corporation from the definition of gross income. Brown also points out that KRS 141.010(9) has been amended to exclude both “undistributed income” and “any losses” attributed to shareholders of a subchap-ter S corporation. 1974 Ky.Acts ch. 163, § 2. Brown claims that the legislature would not have enacted the 1974 amendment if a shareholder’s pro rata share of a small business corporation’s net operating loss had not previously been deductible. Brown cites Eversole v. Eversole, 169 Ky. 793, 185 S.W. 487, 489 (1916). The Department of Revenue counters this rule of statutory construction with the claim that the 1974 amendment was intended to clarify, rather than change, the law. The Department cites 1A Sutherland, Statutes and Statutory Construction § 27.03 (4th Sands Ed., 1972).

Brown also cites KRS 141.050(1) for the rule that computations of gross income and deductions for Kentucky purposes shall be as nearly identical as practicable to those required for federal income tax purposes. The Department of Revenue answers by stating that federal laws on computations must be applied only if not inconsistent with state laws and regulations. Koehler v. Commonwealth ex rel. Luckett, Ky., 432 5.W.2d 397, 398 (1968).

The Department relies on administrative interpretation of the statutes, but Brown asserts that the incidence of a tax is determined by the legislature rather than the Department, citing Commonwealth ex rel. Ross v. Lee’s Ford Dock, Ky., 551 S.W.2d 236, 238 (1977).

This case cannot be decided solely on the basis of the rules of construction cited by the parties. When questions of statutory construction are presented, opposing rules of construction can be found on almost every point. K. Llewellyn, The Common Law Tradition — Deciding Appeals 371-75, 521-35 .(I960). The statutes involved here must not be considered in isolation but as a part of the larger body of income tax law. In that way, the court can construe the statutes in light of the policy and purpose behind the law.

Subchapter S of chapter 1 of the Internal Revenue Code was enacted to provide shareholders of small business corporations with a means of avoiding double taxation. In the absence of an election under subchapter S, income would be taxed at the corporate level and then a second time when distribution was made to the shareholders. The keystone of subchapter S is section 1372 of the Internal Revenue Code. Under subsection (a), a subchapter S corporation may elect not to be subject to the income tax imposed by chapter 1 of the Internal Revenue Code. If an election is made, subsection (b) provides that there are two consequences. First, the corporation is not subject to federal income tax other than the capital gains tax imposed by section 1378. Second, sections 1373, 1374, and 1375 become applicable to the shareholders of the corporation. The provisions of subchap-ter S are interrelated and interdependent. Subchapter S contains provisions respecting taxation of undistributed income to taxpayers (I.R.C. § 1373), taxation of distributions as dividends (I.R.C. § 1376), and the computation of accumulated earnings and profits of the corporation (I.R.C. § 1377), as well as the deduction of net operating losses by the shareholders (I.R.C. § 1374). All of these provisions are based upon the ability of the corporation to elect under section 1372 not to be subject to federal income taxation.

In the Kentucky income tax law, there is no provision comparable to section 1372 of the Internal Revenue Code. KRS 141.040 provides that every corporation shall pay a tax to be computed upon the corporation’s taxable net income. Brown recognizes that there is no exception to KRS 141.040 for subchapter S corporations such as Athletic Enterprises, Inc. If, as Brown suggests, the provisions of the Internal Revenue Code are to be read into the Kentucky income tax law, it is clear that a shareholder’s right to deduct a portion of the corporation’s net operating loss is dependent upon the corporation’s ability to elect not to be subject to Kentucky income tax. Because a small business corporation cannot so elect, it follows that the other provisions of subchapter S of chapter 1 of the Internal Revenue Code relating to the corporation’s shareholders have no applicability under Kentucky law.

Kentucky has not adopted section 1372 of the Internal Revenue Code. Consequently, the other portions of subchapter S cannot be brought into the Kentucky income tax law piecemeal without regard to the remaining legislation of which it is an integral part. Under the provisions of KRS 141.040, there can be no such thing as an “electing” small business corporation. Therefore, none of the provisions of sub-chapter S of chapter 1 of the Internal Revenue Code is applicable to the individual Kentucky income tax liability of a subchap-ter S corporation shareholder.

The judgment of the circuit court is affirmed.

All concur.

      . KRS 141.010(9) provided in part:
      “Gross income” in the case of taxpayers other than corporation means “gross income” as defined in section 61 of the internal revenue code and adjusted as follows:

      (c) Exclude undistributed income attributed to shareholders of a corporation which has elected to be taxed under subchapter S of chapter 1 of the internal revenue code;

      . KRS 141.010(10) provided:
      “Adjusted gross income” in the case of taxpayers other than corporations means gross income as defined in subsection (9) of this section minus the deductions allowed individuals by section 62 of the internal revenue code and adjusted as follows, except that deductions shall be limited to amounts allo-cable to income subject to taxation under the provisions of this chapter, and except that nothing in this chapter shall be construed to permit the same item to be deducted more than once:
      (a) Include all overpayments of federal income tax refunded or credited to the taxpayer during the taxable year;
      (b) Deduct federal income tax;

      . KRS 141.010(11) provided in part:
      “Net income” in the case of taxpayers other than corporations means adjusted gross income as defined in subsection (10) of this section minus the standard deduction allowed by KRS 141.081, or, at the option of the taxpayer, minus all the deductions allowed individuals by chapter 1 of the internal revenue code except those listed below, except that deductions shall be limited to amounts allocable to income subject to taxation under the provisions of this chapter and that nothing in this chapter shall be construed to permit the same item to be deducted more than once:

      . I.R.C. § 1374 (26 U.S.C. § 1374) provides in part:
      (a) General rule. — -A net operating loss of an electing small business corporation for any taxable year shall be allowed as a deduction from gross income of the shareholders of such corporation in the manner and to the extent set forth in this section.

      (d) Application with other provisions.—
      (1) In general. — The deduction allowed by subsection (b) shall, for purposes of this chapter, be considered as a deduction attributable to a trade or business carried on by the shareholder.

      .I.R.C. § 62 (26 U.S.C. § 62) provides in part:
      For purposes of this subtitle, the term “adjusted gross income” means, in the case of an individual, gross income minus the following deductions:
      (1) Trade and business deductions. — The deductions allowed by this chapter (other than by part VII of this subchapter) which are attributable to a trade or business carried on by the taxpayer, if such trade or business does not consist of the performance of services by the taxpayer as an employee.

      . KRS 141.050(1) provides:
      Except to the extent required by differences between this chapter and its application and the federal income tax law and its application, the administrative and judicial interpretations of the federal income tax law, computations of gross income and deductions therefrom, accounting methods, and accounting procedures, for purposes of this chapter shall be as nearly as practicable identical with those required for federal income tax purposes.

      . I.R.C. § 1372 provides in part:
      (a) Eligibility. — Except as provided in subsection (f), any small business corporation may elect, in accordance with the provisions of this section, not to be subject to the taxes imposed by this chapter
      (b) Effect. — If a small business corporation makes an election under subsection (a), then—
      (1) with respect to the taxable years of the corporation for which such election is in effect, such corporation shall not be subject to the taxes imposed by this chapter (other than the tax imposed by section 1378) and, with respect to such taxable years and all succeeding taxable years, the provisions of section 1377 shall apply to such corporation, and
      (2) with respect to the taxable years of a shareholder of such corporation in which or with which the taxable years of the corporation for which such election is in effect end, the provisions of sections 1373, 1374, and 1375 shall apply to such shareholder, and with respect to such taxable years and all succeeding taxable years, the provisions of section 1376 shall apply to such shareholder.

      . KRS 141.040 provides in part:
      Every corporation organized under the laws of this state, every corporation having its commercial domicile as defined in KRS 141.120(l)(b) in this state, and every foreign corporation owning or leasing property located in this state or having one or more individuals receiving compensation as defined in KRS 141.120(8)(b) in this state, except state and national banks and trust companies, savings and loan associations organized under the laws of this state and under the laws of the United States and making loans to members only, banks for cooperatives, production credit associations, insurance companies, including farmers’ or other mutual hail, cyclone, windstorm or fire insurance companies, insurers and reciprocal underwriters, those corporations exempted by section 501 of the International Revenue Code, and any other religious, educational, charitable or like corporations not organized or conducted for pecuniary profit, shall pay for each taxable year a tax to be computed by the taxpayer upon the taxable net income of the corporation.


author: HOWARD, Judge.

text:
    B. Montague ANDERSON and Elizabeth S. Anderson, Appellants, v. SCHOLZ HOMES, INC., an Ohio Corporation, Appellee.
    Court of Appeals of Kentucky.
    Nov. 25, 1977.
    Michael R. Dowling, Ashland, for appellants.

      H. Gene Baldridge, Rose & Baldridge, Ashland, for appellee.
    Before HAYES, HOWARD, WILHOIT and WINTERSHEIMER, JJ.
   HOWARD, Judge.

This is an appeal from the Greenup Circuit Court wherein the complaint of plaintiffs-appellants, B. Montague Anderson and Elizabeth S. Anderson, was dismissed with prejudice.

Plaintiffs-appellants, B. Montague Anderson and Elizabeth S. Anderson (hereinafter referred to as the Andersons), filed a complaint in the Greenup Circuit Court on September 9, 1976, alleging that the defendant-appellee, Scholz Homes, Inc. (hereinafter referred to as Scholz Homes), was liable to the Andersons for repair of a sagging roof which the Andersons contend it was Scholz Homes’ contractual obligation to fix.

On January 16, 1976, the Andersons entered into a purchase agreement with Scholz Homes for a house and lot in Belle-fonte Heights, Russell, Kentucky, for $67,-500.00. The second paragraph of the purchase agreement provided as follows:

We have examined the property and are familiar with its condition and state of repair and agree to accept the same as is with the understanding that the following items shall be done at no cost to us: All work shall be done to complete this house in a new home condition, the lawn shall be graded and sown with grass, a maximum of $100.00 worth of shrubbery shall be purchased and planted and the concrete driveway shall be extended to tie in with the present street.

On January 22, 1976, the Andersons sent a letter to the realtor agent for Scholz Homes, enumerating some sixteen items which they considered necessary to complete the house in a new home condition. None of the items related to the alleged sagging roof. Scholz Homes filed its motion for failure to state a claim upon which relief may be granted; the motion was sustained; and the Andersons’ complaint was dismissed with prejudice.

The Andersons raise three issues on appeal, to-wit: 1) Was the contract entered into ambiguous and should it be construed against the seller whose agent had prepared the contract for the signatures of the buyers?, 2) May the seller of a new home in the contract of sale in one paragraph include language disclaiming any warranties and in the same paragraph use language of an express warranty without unfairly representing the contractual obligation of the seller to the buyer? and 8) Is there not an implied warranty of quality given by the vendor of a new dwelling for loss or defects occasioned by a defective condition of the dwelling unknown to the purchaser at the time of the sale?

Scholz Homes states that the sole question presented on this appeal is whether or not the complaint, along with the exhibits, contains the basic elements of a cause of action when considering the facts that could be proved consistent with the pleadings.

In Burkhart v. Community Medical Center, Ky., 432 S.W.2d 433 (1968), the court cites with approval, at page 435, this comment found in Clay’s Kentucky Practice, Volume 6, Rule 8.01:

This is not to say that the underlying principles of stating a cause of action are not to be observed. The basic elements thereof must still be fairly shown, i. e., (a) a primary right of the plaintiff, and (b) a wrong of the defendant which breaches the right and results in damage.

And in City of Dayton v. Thompson, Ky., 372 S.W.2d 407 (1963), the court states at page 407 that:

Where a plaintiff chooses to state his complaint in full detail, in lieu of the simple form sufficient under the Civil Rules, and neither its contents nor the inferences reasonably to be drawn from them will support his claim for relief, a motion to dismiss serves substantially the same purpose as a motion for summary judgment and should be sustained. .

Nothing in the complaint speaks to any ambiguity in the contract or to any unfairness represented to the Andersons because of the so-called expressed and disclaimed warranties, as the Andersons contend are issues on this appeal. Nothing in the complaint alleges that there is an implied warranty of quality which Scholz Homes somehow breached.

The Andersons took the home “as is”, after an inspection. The inspection revealed 16 defects, which Scholz Homes repaired in order to complete the house in a new home condition, according to the An-dersons. Kentucky seems to still hold to the doctrine of caveat emptor. In Fannon v. Carden, Ky., 240 S.W.2d 101 (1951), the court states at page 103 that:

As a general rule where no direct representation is made by the vendor concerning definite facts and the purchaser has sufficient opportunity to observe the condition of the premises, the maxim of caveat emptor is applicable .

We do not think that the contractual obligation of Scholz Homes is to repair later-discovered defects in order to “complete this house in a new home condition.” Scholz Homes was not selling the Ander-sons a new home. The Andersons were buying a house “as is”. This is not such a case as in Helm v. Speith, 298 Ky. 255, 182 S.W.2d 635 (1944), where a house which was built in the summertime was found not to be watertight until the following rainy season in the late fall and winter.

The judgment of the trial court dismissing the Andersons’ complaint with prejudice is affirmed.

All concur.