author: BURDOCK, Justice.

text:
    Lee Cedric STOVALL, Jr., Appellant, v. The STATE of Texas, State.
    No. 2-84-221-CR.
    Court of Appeals of Texas, Fort Worth.
    Jan. 30, 1985.
    John A. Neal, Graham, for appellant.
    Timothy D. Eyssen, Dist. Atty., Graham, for appellee.
    Before FENDER, C.J., and ASHWORTH and BURDOCK, JJ.
   OPINION

BURDOCK, Justice.

This is an appeal from an order revoking probation. On March 4, 1982, appellant pled guilty to the offense of unauthorized use of a motor vehicle and received a three-year probated sentence.

On June 14, 1984, the trial court granted the State’s motion to revoke probation. The court found that the appellant violated his probation in that on April 13, 1984, the appellant was:

[F]requenting a place where alcoholic beverages are sold and consumed, to-wit: a club, Country Junction located in Graham, Young County, Texas, when the specific prohibition in the original Order Probating Sentence was that the defendant should avoid persons or places of disreputable or harmful character and including associating with convicted felons and frequenting or going about places where alcoholic beverages are sold and consumed, as [sic] set out in the Motion to Revoke Probation filed on the May 3, 1984 which is incorporated herein as though copied verbatim. Such violations of the terms and condition of said probation occurred within the probationary term as heretofore set out in the cause.

The order revoking appellant’s probation is set aside and the State’s motion to revoke probation dismissed.

The facts are simple and undisputed. Graham police officer Tommy Martin was working extra hours as security at the “Country Junction” in Young County, Texas. The Country Junction was described by Officer Martin as a popular private club that sells alcoholic beverages and provides entertainment with a live band, dancing, coin operated pool tables, and game machines. Admission to the Country Junction is restricted to members and their guests.

Between the hours of 9:00 p.m. and 10:00 p.m. on April 13, 1984, Officer Martin observed appellant inside the club and then saw him exit to the parking lot. While in the parking lot, Officer Martin asked appellant what he was doing. Appellant replied that he was returning to the club. At that time appellant was carrying a can of beer. Officer Martin then stopped appellant to inform him that he was prohibited from carrying beer into the club. Appellant apologized to Martin, handed the officer the beer and returned to the club. Officer Martin poured the remaining contents of the beer can onto the parking lot and followed the appellant inside the club where appellant finished an uneventful evening.

Appellant’s sole ground of error alleges that the trial court abused its discretion in revoking appellant’s probation because there was insufficient evidence that appellant violated the terms of his probation.

In its motion to revoke probation, the State alleges that appellant violated two conditions of his probation in that appellant did: 1) carry on or about his person an alcoholic beverage at the Country Junction and 2) frequent a place where alcoholic beverages are sold and consumed, to-wit: the Country Junction.

The allegations correspond to the third and fourth terms of the order granting probation wherein appellant was ordered to:

(3) Avoid injurious or vicious habits, (including the use of illegal narcotics or habit forming drugs, and alcoholic beverages)-, and
(4) Avoid persons or places of disreputable or harmful character {and including associating with convicted felons, and frequenting or going about places where alcoholic beverages are sold or consumed)-, [emphasis added].

The terms of probation imposed on appellant by the trial court are more restrictive than those set forth in TEX.CODE CRIM. PROC.ANN. art. 42.12, sec. 6 (Vernon Supp.1984). However, the additional limitations set forth above are permitted as long as the limitation is reasonable. Hernandez v. State, 556 S.W.2d 337, 342 (Tex.Crim.App.1977); Peach v. State, 498 S.W.2d 192, 196 (Tex.Crim.App.1973). The requirement of abstention from the use of alcoholic beverages, as was done here, has been held to be reasonable. Chacon v. State, 558 S.W.2d 874, 875 (Tex.Crim.App.1977); Flores v. State, 513 S.W.2d 66, 69 (Tex.Crim.App.1974).

There is no allegation in the State’s motion to revoke probation that the appellant violated his probation by “use ... alcoholic beverages”, but rather it is merely alleged that appellant did “carry on or about his person an alcoholic beverage”. The trial court made no finding that appellant used alcoholic beverages. We further find that the evidence shows only one episode in which appellant was found around alcoholic beverages. Even if the State had pled and proven the appellant consumed an alcoholic beverage, a single occurrence of the use of an alcoholic beverage cannot be characterized as a habit under the decisions of our Court of Criminal Appeals. See Chacon, 558 S.W.2d at 874; Morales v. State, 538 S.W.2d 629, 630 (Tex.Crim.App.1976).

We therefore find that the evidence is insufficient to support the revocation of appellant’s probation based on the third condition of his probation. We must, however, consider the evidence concerning the violation of the fourth term of probation, since, should one ground for revocation be proven, it is sufficient to revoke probation. See Jones v. State, 571 S.W.2d 191, 193 (Tex.Crim.App.1978).

Under the fourth term of his probation, appellant was ordered to avoid persons or places of disreputable or harmful character (including ... frequenting or going about places where alcoholic beverages are sold or consumed). It is undisputed that alcoholic beverages were sold and consumed at the Country Junction.

Appellant, in his brief, argues that the term “frequent” as used in the terms and conditions of probation would mean more than one occurrence. Like the preceding condition involving the use of the word “habit”, “frequent” would require a showing of something more than a single occurrence.

Webster’s Third New International Dictionary, unabridged, 1981, defines “frequent” in terms of both an adjective and a verb. As a verb, the definitions of “frequent” include “to visit regularly or frequently, to resort to often or habitually, or to use, practice ... or partake of frequently.” Id. at 909.

Other references also define “frequent” in terms of an event that happens more than one time or more than a single occurrence. Here there is no evidence that appellant did anything but leave the Country Junction then return from the parking lot a few minutes later. Likewise, to “go about” is defined as “to pass from one place to another” or to “go here and there”. Id. at 972. This would again imply that a probationer would have to visit more than one liquor establishment to constitute “going about” as set forth in the order of probation.

We agree with the argument of the appellant that the State failed to meet its burden of proof when the only evidence appellant “frequented” this club was this single episode. This is insufficient to revoke probation when the State has alleged appellant frequented a place where alcoholic beverages are sold and consumed.

In addition, we fail to find from the evidence that the “Country Junction” is a place of disreputable or harmful character. There is nothing in the record to reflect that the Country Junction had been judicially declared to be a place of disreputable and harmful character. The State’s only witness, an off-duty police officer, was employed by management to insure that State law is complied with, including liquor regulations.

We find that such a strict interpretation of this term of probation would prohibit a person from going into grocery stores or restaurants where some beer or liquor would be sold. Such an interpretation, in our opinion, is too restrictive.

One of the few cases involving this condition and its relationship to liquor establishments is Whitt v. State, 395 S.W.2d 39 (Tex.Crim.App.1965). In Whitt, the court held that an establishment that sells alcoholic beverages is not disreputable or a place of harmful character when it is a reputable place of business in an area where beer is lawfully sold. We conclude that the court abused its discretion in revoking appellant’s probation.

The order revoking probation is set aside and the State’s motion to revoke probation dismissed.


source: Caselaw Access Project

author: GRAY, Justice.

license: Public Domain

text:
    Gary Bill CRABB, Appellant, v. The STATE of Texas, State.
    No. 2-84-042-CR.
    Court of Appeals of Texas, Fort Worth.
    Jan. 30, 1985.
    William R. Magnussen, William W. Chambers, Fort Worth, for appellant.
    Tim Curry, Criminal Dist. Atty., and David K. Chapman, Asst. Dist. Atty., Fort Worth, for appellee.
    Before FENDER, C.J., and BURDOCK and GRAY, JJ.
   OPINION

GRAY, Justice.

Appellant, Gary Bill Crabb, has appealed his conviction for the offense of involuntary manslaughter. The jury returned a verdict of guilty and assessed punishment at eight years in the Texas Department of Corrections.

We affirm.

The evidence showed that appellant left a nightclub around midnight on October 22, 1981 after a heated argument. He tried to get his ear from the parking lot attendant, but he had no claim ticket. The appellant thereafter took his car from the parking lot by force, driving over a curb and onto the street.

A short time later, appellant failed to negotiate a curve in the road, crossed into the opposite lane of traffic, and collided with the car of Anthony Parrotti. Parrotti died within a few minutes. Appellant reportedly tried to run from the scene of the accident but was detained by a passerby who testified that appellant stated “they’re going to bust me.”

A few hours later, appellant took an in-toxilyzer exam which showed that he had a .22% blood/alcohol level. At trial appellant testified that he had been emotionally upset due to an argument with his girl friend and that brake failure was the true cause of the collision. A friend of the appellant testified that appellant had not been intoxicated.

Appellant’s first two grounds of error complain of the charge to the jury on guilt because it allegedly lowers the State’s burden of proof below as required by law.

The offense of involuntary manslaughter is set out in TEX.PENAL CODE ANN. sec. 19.05 (Vernon 1974) as follows:

(a) A person commits an offense if he:
(1) recklessly causes the death of an individual; or
(2) by accident or mistake when operating a motor vehicle while intoxicated and, by reason of such intoxication, causes the death of an individual.

Id.

The indictment and the application paragraph in the charge to the jury (paragraph 5) both tracked this statute precisely. However, the appellant’s assertion of brake failure as the true cause of the accident required the court to submit instructions on concurrent causation also. See TEX.PENAL CODE ANN. sec. 6.04 (Vernon 1974) which defines causation as follows:

(a) A person is criminally responsible if the result would not have occurred but for his conduct, operating either alone or concurrently with another cause, unless the concurrent cause was clearly sufficient to produce the result and the conduct of the actor clearly insufficient.

Id.

The charge did not track this statute precisely. Instead, it included an instruction in paragraph 6 to the effect that even if the jury found that the appellant had been driving while intoxicated and that the appellant was involved in an accident which caused the death of Parrotti, they still were not to convict unless they further found that the appellant’s intoxication caused or contributed to cause the collision and death. Paragraph 4 of the charge, which set out the elements of involuntary manslaughter, also used the language “contributed to cause.” The appellant alleges that the insertion of this language “contributed to cause” was an improper method of submitting the issue on concurrent causation. We disagree.

“Section 6.04(a) establishes a requirement of a ‘but for’ causal connection between the alleged conduct of the defendant and the alleged harm, in either a sole cause or concurrent cause situation.” Robbins v. State, 667 S.W.2d 318, 321 (Tex.App. — El Paso 1984, pet. ref’d). The relevant authority clearly shows that the language “contributed to cause” properly presents the “but for” concept of causation and does not reduce the State’s burden below legal limits. See Clayton v. State, 172 Tex.Cr.R. 595, 361 S.W.2d 385, 386-87 (1962); Yarborough v. State, 160 Tex.Cr.R. 239, 268 S.W.2d 154, 155-56 (1954); Robbins, 667 S.W.2d at 321. We hold that the charge was not in error. Appellant’s first two grounds of error are overruled.

Appellant’s third ground of error alleges that the trial court erred by denying appellant a mistrial based on remarks made during the State’s jury argument at the punishment phase to the effect that appellant took the stand and admitted his remorse over the death of Parrotti but never admitted that he had an alcohol problem. Appellant argues that this statement constituted the personal opinion of the prosecutor and commented on the appellant’s exercise of his constitutional right to plead “not guilty.” Appellant also argues that the prejudicial effect was not erased by the instruction to the jury to disregard the remark. We disagree.

To be permissible, jury argument must fall within one of the following four general areas: (1) summation of the evidence; (2) reasonable deduction from the evidence; (3) answer to argument of opposing counsel; and (4) plea for law enforcement. Darden v. State, 629 S.W.2d 46, 52 (Tex.Crim.App.1982); Alejandro v. State, 493 S.W.2d 230, 231-32 (Tex.Crim.App.1973).

We find that the argument in this case falls within the third category. The comments by the prosecutor followed comments by defense counsel to the effect that the appellant had no further problems with drinking and driving during the two years since the accident, thereby implying that the accident would not be repeated. In so doing, defense counsel made the appellant’s drinking habits a permissible topic of argument.

This argument also falls within the second category, a reasonable deduction from the evidence. Appellant never admitted to the jury that he had been intoxicated in spite of a .22% blood/alcohol level. Viewed from our standpoint, .22% on the intoxilyzer is a problem. The prosecutor certainly was within bounds to argue this evidence and conclusion under Darden, 629 S.W.2d at 52.

Furthermore, we believe that the error, if any, was not reversible in light of the instruction to disregard which was given to the jury. When an argument exceeds permissible bounds, it will not constitute reversible error unless, in light of the record as a whole, the argument is extreme or manifestly improper, violative of a mandatory statute or injects new facts, harmful to the accused into the trial proceeding. Mathews v. State, 635 S.W.2d 532, 539 (Tex.Crim.App.1982); Todd v. State, 598 S.W.2d 286, 296 (Tex.Crim.App.1980).

We do not think that the remarks to which appellant objected seriously affected the punishment assessed, given the abundance of other evidence upon which the jury based its decision.

We hold that the trial court did not err in refusing a mistrial based on the State’s jury argument. The appellant’s third ground of error is overruled.

Affirmed.


author: MILLER, Judge.

text:
    Charles HOLBERT, Appellant, v. WICKES LUMBER SUPPLY; Travelers Insurance Company; Thelma Stovall, Commissioner of Labor and Custodian of the Special Fund; and Workers’ Compensation Board of Kentucky, Appellees.
    Court of Appeals of Kentucky.
    July 27, 1984.
    Rehearing Denied Sept. 21, 1984.
    Discretionary Review Denied Feb. 20, 1985.
    E. André Busald, Florence, for appellant.
    Stephen O’Brien, Lexington, Gemma Harding, Special Fund, Dept, of Labor, Louisville, for appellees.
    Before CLAYTON, McDONALD and MILLER, JJ.
   MILLER, Judge.

This is a workers’ compensation case. The Workers’ Compensation Board (board) awarded twenty per cent (20%) occupational disability, and apportioned ten per cent (10%) on the employer, Wickes Lumber Supply, and ten per cent (10%) on the Special Fund. Wickes appealed to the Fayette Circuit Court; the Special Fund did not. Wickes’s appeal named the Special Fund as a party appellee and the Special Fund filed an appropriate answer denying liability. The circuit court reversed the order of the board on the basis that appellant, Charles Holbert, had “failed to establish a work-related injury” and released both Wickes and the Special Fund from liability. The essence of the circuit court’s ruling was that there was no substantial evidence supporting Holbert’s claim of a job-related injury. We agree. We think the decision of the board was not supported by substantial evidence and was, therefore, clearly erroneous. KRS 342.285(3)(d). We note, parenthetically, that if the board had denied Holbert an award, a contrary ruling would not have been compelled. See Kentland Elkhorn Coal Co. v. Johnson, Ky.App., 549 S.W.2d 308 (1977), and Golden v. Anaconda Wire & Cable Co., Ky.App., 556 S.W.2d 174 (1977).

Appellant sought to support his claim of injury by the testimony of fellow workers. All the workers failed to substantiate his claim of a “back” injury while lifting a stove on June 25, 1979. Rather, the evidence is consistent with the fact that appellant injured his back at home upon another occasion. Other than his own testimony, which appeared inconsistent with the alleged circumstances, his only evidence as to an injury on the job was the self-serving statements given to physicians. We believe the evidence to be insufficient to induce conviction in the minds of reasonable men. See Kentucky State Racing Commission v. Fuller, Ky., 481 S.W.2d 298 (1972), and O’Nan v. Ecklar Moore Express, Inc., Ky., 339 S.W.2d 466 (1960).

Appellant maintains that the award against the Special Fund should stand, notwithstanding the reversal of the award against employer. He bases this upon the fact that the Special Fund did not appeal to the circuit court. KRS 342.285. We, however, think it unnecessary for the Special Fund to file a separate appeal in cases presenting factual situations analogous to those now at bar. Here, the board has found in favor of the claimant and apportioned liability between the employer and the Special Fund. The employer then sought review of the award by the circuit court and based its appeal solely upon the threshold question of whether the injury was work-related and therefore compensa-ble under KRS Chapter 342. The employer presented no arguments concerning the apportionment of the award between the employer and Special Fund which was made after the board found a work-related injury. The Special Fund chose not to appeal the board’s award, but was named as an appellee. Where the employer’s appeal is based upon the underlying entitlement of the claimant to an award, the Special Fund need not pursue a separate appeal on its own behalf in order to enure to the success of the employer’s appeal. The Special Fund never suffers direct liability; it is only a source of funds for satisfaction of liability imposed upon the employer [KRS 342.120(5)] under given conditions. Cf. Peach v. 21 Brands Distillery, Ky.App., 580 S.W.2d 235 (1979); Yocum v. Milish, Ky., 497 S.W.2d 702 (1973); Caldwell v. Bethlehem Mines Corporation, Ky., 455 S.W.2d 67 (1970); Cabe v. Popham, Ky., 444 S.W.2d 910 (1969).

For the foregoing reasons, the judgment of the Fayette Circuit Court is affirmed.

All concur.


author: CLAYTON, Judge.

text:
    Paul V. RAMSEY, Appellant, v. FIRST NATIONAL BANK AND TRUST COMPANY OF CORBIN, Appellee.
    Court of Appeals of Kentucky.
    Aug. 24, 1984.
    Discretionary Review Denied Feb. 21, 1985.

      Larry G. Bryson, Bledsoe, Little, & Bry-son, London, for appellant.
    Darrell L. Saunders, Forcht, Hoskins & Saunders, Corbin, for appellee.
    Before CLAYTON, McDONALD and MILLER, JJ.
   CLAYTON, Judge.

This appeal involves an action on a note made payable to the First National Bank of Corbin, Kentucky, by Granville Brock and Paul Ramsey as co-signers. A judgment for First National of $23,459.83 was entered against Paul Ramsey following a jury trial held in Knox Circuit Court on March 17, 1983. Ramsey now appeals arguing that he was entitled to a directed verdict under KRS 355.3-606, our state’s codification of Uniform Commercial Code § 3-606 entitled “impairment of recourse or of collateral.” Supposedly, when First National released Brock from his obligation to pay in exchange for one-half the balance then due on the note, $12,500, it simultaneously discharged Ramsey from his own payment obligations under the note by operation of law. This second discharge is allegedly due to the bank’s failure to obtain Ramsey’s consent to the release. See KRS 355.3-606(l)(a). Alternatively, Ramsey claims that he is otherwise independently entitled to discharge by the bank’s unjustified impairment of the equipment collateral put up as security for the loan. See KRS 355.3-606(l)(b). We disagree on both accounts and affirm the judgment of the circuit court.

Ramsey, as a co-maker on the note, is not protected by the discharge provisions of KRS 355.3-606(1). See Wohlhu-ter v. St. Charles Lumber & Fuel Co., 62 I11.2d 16, 338 N.E.2d 179, 181-82 (1975); Holcomb State Bank v. Adamson, 107 Ill. App.3d 908, 63 Ill.Dec. 704, 706, 438 N.E.2d 635, 637 (1982); Hooper v. Ryan, 581 S.W.2d 237, 238-39 (Tex.Civ.App.1979). Only those persons who stand in the position of sureties as accommodation parties or guarantors are safeguarded. The “any party to the instrument” language of KRS 355.3-606(1) is intended to apply to those individuals signing ostensibly as makers but who in fact are sureties or accommodation makers. See KRS 355.3-606(1), commentary to Banks-Baldwin edition.

Given the evidence presented at trial we cannot accept the argument that Ramsey’s signature appears on the note as an accommodation maker simply to facilitate a loan for Brock. At the time of the loan, the two were partners in B & R Road Boring & Tapping Company (B & R) by a previously executed partnership agreement. Their signatures appear in their capacity as partners on the security agreement accompanying the loan, the proceeds of which were placed in an account especially created for B & R. Further, Ramsey, on behalf of B & R, drew checks against the account for payment of B & R employee wages. He additionally executed a contract for the installation of sewage lines on behalf of B & R with the City Utilities Commission of Corbin, Kentucky, approximately a year after the execution of the note. Therefore, under the “purposes and benefits” test, used to determine the intent of persons signing as makers but claiming accommodation status, Ramsey is a co-maker, not an accommodation maker covered under KRS 355.3-606(1).

KRS 355.3-606(1), receiving very little attention by our courts, provides,

(1) The holder discharges any party to the instrument to the extent that without such party’s consent the holder
(a) without express reservation of rights releases or agrees not to sue any person against whom the party has to the knowledge of the holder a right of recourse or agrees to suspend the right to enforce against such person the instrument or collateral or otherwise discharges such person, except that failure or delay in effecting any required presentment, protest or notice of dishon- or with respect to any such person does not discharge any party as to whom presentment, protest or notice of dishon- or is effective or unnecessary; or
(b) unjustifiably impairs any collateral for the instrument given by or on behalf of the party or any person against whom he has a right of recourse.
(2) By express reservation of rights against a party with a right of recourse the holder preserves
(a) all his rights against such party as of the time when the instrument was originally due; and
(b) the right of the party to pay the instrument as of that time; and
(c) all rights of such party to recourse against others.

In simpler terms, it protects a surety by relieving him, in part, or sometimes totally, of his obligation to answer for the debt or default of the principal debtor where any holder of an instrument: (1) acts to limit the surety’s possible recovery against the principal debtor, either by releasing him from his obligation to pay, agreeing not to sue him, or otherwise discharging him; or (2) acts to reduce the surety’s protection by unjustifiably impairing collateral taken as security on the instrument. The language of the statute applies not only to actions taken between holders and principal debtors, but also to actions taken between holders and “any person against whom the party [the surety] has to the knowledge of the holder a right of recourse,” including persons whose signatures may not appear on the instrument. However, not every release, discharge or agreement not to sue that passes between a holder and a principal debtor, or other person, will automatically result in a surety’s discharge. Two separate conditions must both be present in order for discharge to occur under KRS 355.3-606(l)(a). The surety must not have given his consent to the modification of the debtor/creditor relationship. Furthermore, the holder must not have made an express reservation of rights against the surety. Cast in the language of the Uniform Commercial Code, The creditor can forestall a surety’s claim of discharge under 3-606 in either of two ways. First, he may procure the surety’s express or implied consent to the modification in the relationship with the debtor. Second, by adding a sentence to the modification agreement to “expressly reserve” his rights against surety, he bars a discharge.

J. White and R. Summers, Uniform Commercial Code § 13-15 (2nd ed. 1980). As for the second part of the quoted portion of the statute, KRS 355.3-606(l)(b), a surety may also be discharged when, without his consent, the creditor handles the collateral carelessly so as to reduce its value, make it unavailable to the surety, or otherwise impair the value of the security interest. In this respect, the creditors’ conduct with regard to the collateral is judged under the “reasonable care” standard of KRS 355.9-207. See White & Summers, supra, at 526. Therefore, in general terms, KRS 355.3-606 can be said to protect sureties whose risk of payment under the terms of an instrument has been increased either by agreement between a holder and a person against whom there is a known right of recourse made without a surety’s consent or a creditor’s reservation of rights, or by careless handling of the collateral by the creditor so as to impair the security interest therein. We do not presume by this abridged explanation of KRS 355.3-606(1) to have fully explored its complexities. Instead, we view the above passages as merely a brief, but beneficial, introduction to an extremely complex area of commercial law.

Turning now to the facts, throughout 1969, Brock and Ramsey were engaged in the construction of waterlines in Harrods-burg, and earlier in Paris, Kentucky. While working in Paris, the two men began discussing the formation of a partnership between them. Apparently Brock, Ramsey’s brother-in-law by Ramsey’s marriage to Brock’s sister, had been, until that time, sole owner of the waterline construction business. On March 31, 1969, a partnership agreement creating B & R Road Boring & Tapping Company was entered into by Ramsey and Brock. Under the terms of that agreement Brock, as partner, was to contribute “several thousands of dollars as capital,” and Ramsey was to “contribute his time and knowledge to the institution of the partnership business....” During the month following execution of the agreement, Brock approached Randolph Stivers, executive vice-president of First National, about securing a loan. Stivers maintains that in the negotiations that followed between himself and Brock, the loan was discussed in terms of the B & R partnership, though Ramsey was never involved in these meetings. On April 25, 1969, a note in the principal amount of $30,000 at an interest rate of 7% per annum was executed in the bank’s favor by Brock. Ramsey’s signature was apparently obtained a short time thereafter, Ramsey being in Harrodsburg, Kentucky, on the 25th of April. No indication appears on the face of the note of the capacity in which the partners signed other than the introductory clause, “after this date we promise to pay.” (our emphasis). On the same date, a security agreement was executed granting First National a security interest in four pieces of equipment used in the business: a backhoe, a boring machine, a drilling machine, and a tapping machine. Beneath the signatures of Brock and Ramsey is the typed addition “doing business as B & R Road Boring & Tapping Company.” Once again, Ramsey’s signature was apparently obtained and notarized at a later date. Concurrently with the execution of the note and agreement, an account in the name of B & R was opened at First National by Brock and the entire proceeds of the loan placed therein. Over the course of the next four weeks, Ramsey drew five checks against the B & R account on form checks including the name of the partnership above his signature. Brock did not join in signing the instruments, though a second line was included on the face of the checks. From the testimony at trial, these checks were apparently drawn to pay B & R employees.

Without notice to Ramsey, and in direct contravention of the partnership agreement, Brock, on December 31, 1969, incorporated B & R listing himself as sole stockholder of the corporation. Upon learning of the incorporation in the early part of 1970, Ramsey created his own construction company, Ramsey Construction Company, in which he was sole proprietor. However, as late as March 4, 1970, Ramsey was still transacting business in the name of B & R. On that date, he entered into agreement with City Utilities Commission of Corbin, Kentucky, for installation of waterlines in Corbin, signing the document beneath the typewritten language “B & R Road Boring Company By.” The performance bond executed between Fireman’s Fund of America and Ramsey two days earlier on March 2, 1970, also contains the same language preceding his signature.

During this entire period of time, the collateral for the loan had been kept at the farm of Granville Brock north of Corbin, Kentucky. The bank did not take possession of the equipment nor did it take any other step to safeguard it. Sometime during 1970, Brock, without notice to the bank or Ramsey, disposed of the backhoe by sale to a pipeline construction firm in Lexington, Kentucky. Due to a prior recorded lien, of which the bank had no knowledge, it having elected to forego an examination of the lien records, the proceeds of the sale were taken by the Corbin Deposit Bank as superior lien holder. Following notice of the completed sale, First National ratified the transaction. In September of 1971, Brock again sold collateral on the note. This time a drilling machine and tapping machine were sold by check payable to B & R and First National and signed by both Brock and Ramsey. The entire amount of the proceeds, some $3500 was applied against the outstanding balance of the note on September 25, 1971. As with the previous sale, neither the bank nor Ramsey received prior notice. Once again the bank ratified Brock’s actions. No effort was ever made by Brock, Ramsey, or the Bank to dispose of the boring machine. The only other action taken concerning the remaining collateral occurred in August, 1973. At that time, $300 received from Charles Brock for use of the boring machine was applied to the balance of the debt. Ramsey, as before, was not informed of the use or the application of the user fee. Indeed, throughout the nine years from the time of Brock’s release from liability for payment on the note on February 16, 1972, until the present action was instituted in December, 1981, Ramsey was never directly informed by Granville Brock or the bank of any disposition of the collateral, default on the note, or release of Brock. That release was accomplished by an agreement between Stivers and Brock containing, in part, the following language,

It is understood that this Release does not waive any right that the undersigned has against the afore-mentioned Paul V. Ramsey for the balance of the indebtedness owing, nor does this Release waive any right of the undersigned to take possession of any collateral securing the payment of the aforesaid note and to apply the proceeds thereof toward the balance of indebtedness owing.

As consideration for the release, Brock paid First National $12,500 in cash which was applied to the outstanding balance on the note. Apparently there is some confusion at this point as to what note Brock was released from. The note mentioned on the face of the release is described as being “dated August 25, 1971.” Whether this date indicates a renewal of the 1969 note, a separate note later executed, or simply a typographical error is unclear. Given the bank’s refusal to sue Brock on the 1969 note and the appellant’s failure to produce evidence of a separate note, we must assume that the difference in dates is but a typographical error.

Following execution of the release, the loan was declared in default on February 25, 1972. Sometime during that year, the testimony is not specific as to the exact date, Stivers, Ramsey, and William Hensley, a local attorney who had drafted the security agreement involved, met at First National to discuss the note. Upon being informed that he was personally responsible for the balance due, Ramsey advised First National that legal action would be necessary to recover payment. In December of 1981, Ramsey discovered from reading the Corbin Times, that he had been sued by First National. Examining his records, in 1982, Ramsey found a small document entitled “notice of note due,” dated August 25, 1970. Listed on the document as maker appears the name of “Gran-ville Brock.” In a separate section entitled “endorsement or collateral” appears the name “Paul Ramsey” along with the abbreviation “sec. agreement.”

In essence, this document summarizes Ramsey’s defense. Throughout his testimony at trial he consistently maintains that the two men were merely contemplating a partnership which would be effected upon Brock’s successful acquisition of $30,000. Ramsey’s signature on the note was thus merely a means to facilitate Brock’s personal loan. As evidence of such an arrangement, Ramsey points to the fact that at no time did he share in the profits of B & R. He was merely an employee foreman, apparently authorized to pay employees under his control and bind B & R on contracts of employment. After the short existence of B & R, he and Brock went their separate ways with Ramsey having minimal involvement on matters involving the note.

We cannot accept this characterization of the facts. The partnership agreement executed between Brock and Ramsey is not expressly conditioned upon the acquisition of capital by Brock, though it does mention that “It is contemplated that the partner, Granville S. Brock, shall contribute several thousands of dollars as' capital.” Ramsey’s own testimony as to his purpose in executing the 1969 note reveals that he did not sign simply to assist Brock in securing an otherwise unobtainable loan. When asked what caused him to execute the note, Ramsey responded,

Granville Brock told me that he borrowed thirty thousand dollars from First National Bank and asked me if I would go down and sign, since we were going to be partners. Mr. Stivers requested that I sign.

This testimony coincides with Stivers’ recollection of events as being discussed in terms of partnership. It is further corroborated by the creation of a partnership account, issuance of checks under that account by Ramsey, and Ramsey’s own actions in representing the partnership in contracting with the City of Corbin. That Brock repeatedly breached the terms of the partnership agreement is immaterial to the determination of Ramsey’s obligations under the note.

The legal status of signers to negotiable instruments as co-makers or accommodation makers turns upon the intentions of the signers at the time of execution. See Farmers State Bank of Oakley v. Cooper, 227 Kan. 547, 608 P.2d 929, 934 (citing L. Anderson, The Uniform Commercial Code § 3-415:9 (2nd ed. 1971)). As Farmers State Bank, supra, correctly states,

Two primary factors are indicative of accommodation status: (1) no benefits from the proceeds of the instrument are received by the accommodation party, and (2) the signature is needed by the maker to acquire the loan.

Id. (citing Annotation, 90 A.L.R.3d 342 (1979)). Dubbed the “proceeds” and “purposes” test, these two standards have been applied either jointly or individually to determine the accommodation status of a party in numerous decisions involving section 3-606 of the Uniform Commercial Code. E.g., Stockwell v. Bloomfield State Bank, 367 N.E.2d 42 (Ind.App.1977); Lasky v. Berger, 536 P.2d 1157 (Colo.App.1975). See also, White & Summers, supra, at 521-22 (citing Riegler v. Riegler, 244 Ark. 483, 426 S.W.2d 789 (1968); MacArthur v. Cannon, 4 Conn.Cir. 208, 229 A.2d 372 (1967)). As stated earlier, absent surety status as an accommodation maker under the above test, a co-maker cannot rely on KRS 355.3-606. See Wohlhuter v. St. Charles Lumber & Fuel Co., supra 338 N.E.2d at 181-82; Holcomb State Bank v. Adamson, supra, 63 Ill.Dec. at 706, 438 N.E.2d at 637; Hooper v. Ryan, supra 581 S.W.2d at 238-39.

Quite clearly Ramsey fails under either branch of the test. His own testimony indicates his signature was not added simply to secure an otherwise unobtainable loan. Following execution of the note he made repeated use of the proceeds to pay workmen in his employ thus directly benefiting from the extension of credit. A much clearer picture of the nature of an accommodation party to a business loan is presented in Holcomb State Bank v. Ad-amson, supra. In Holcomb, the defendant Adamson co-signed a $10,000 note for a loan to his son-in-law, Wick, for use in his mushroom growing business. The bank would not approve the loan without Adam-son’s signature, and Adamson did not receive any of the proceeds therefrom, which were deposited in Wick’s pre-existing business account. Adamson was thus determined to fit the classic definition of an accommodation maker found in section 3-415 of the Uniform Commercial Code and codified in our own statutes at KRS 355.3-415(1),

An accommodation party is one who signs the instrument in any capacity for the purpose of lending his name to another party to it.

Ramsey does not fall within this category. However, even were we to declare him an accommodation maker, and some evidence arguably supports that conclusion, our result would remain unchanged. Analysis of KRS 355.3-606(1) under the present facts reveals that Ramsey is not entitled to protection under either subsection (a) or (b). The bank’s reservation of rights clause is sufficient to preserve its rights against Ramsey regardless of his lack of consent. Thus, subsection (a) is of little benefit. Further, subsection (b) offers no solace for two reasons. No unjustifiable impairment occurred and, assuming the contrary, had any occurred no evidence of its extent was offered by the appellant at trial.

There was no unjustifiable impairment of the collateral. The pre-exist-ing lien placed on the backhoe was easily discoverable by First National or Ramsey had they chosen to look before signing the security agreement. First National had no part in creating that superior interest and therefore cannot be said to have impaired its and Ramsey’s interest in the backhoe. As Ramsey retroactively consented to the sale of the drilling and tapping machine by his signature on the buyer’s check, the entire proceeds of which were applied against the debt, no impairment can be considered to have resulted there. Finally, as to the final piece of equipment collateral, the boring machine, there is simply no evidence in the record as to its value or any reduction therein. Presumably either Ramsey or the bank may secure this equipment, sell it, and apply the proceeds to reduce the debt. Assuming that the bank did unjustifiably impair the collateral, Ramsey has totally failed to present any evidence of the extent of that impairment. A defendant debtor relying upon a defense of unjustified impairment of collateral under KRS 355.3-606(l)(b) bears the burden of proving the nature and extent of such impairment. In the absence of that necessary proof he cannot successfully assert the defense.

The judgment of the Knox Circuit Court is affirmed.

All concur.


author: McDONALD, Judge:

text:
    John WADDELL and Carolyn Waddell, Appellants, v. Kendall STEVENSON d/b/a Stevenson Electric; Kashway Building Materials, Inc.; Will Ed Bushart d/b/a Bushart Homebuilders; and Kitchens, Incorporated of Paducah, Appellees.
    Court of Appeals of Kentucky.
    Nov. 16, 1984.
    Rehearing Denied Jan. 25, 1985.

      E.W. Rivers, Rivers & Arflack, Paducah, for appellants.
    Robert L. Prince, Martin W. Johnson, Benton, James A. Anderson III, Roger Wm. Perry, Long & Perry, Benton, for appellees.
    Before COMBS, HOWARD and MCDONALD, JJ.
   McDONALD, Judge:

A judgment was entered against John and Carolyn Waddell in the Marshall Circuit Court, in which Stevenson Electric was awarded the sum of $4,146.72 plus interest, and Kitchens, Incorporated of Paducah was awarded the sum of $1,333.56 plus interest. Both these claims were for materialmen’s liens filed against the Waddells and arose out of two separate actions filed and later consolidated for trial. In addition, the trial court entered a summary judgment against the Waddells on their cross-claim and third party complaint against Will Ed Bushart, d/b/a Bushart Homebuilders which was a part of the action filed by Kitchens. A summary judgment was also entered against the Waddells in favor of Kashway Building Materials, Inc., in the amount of $1,595.19 plus interest, also for a material-men’s lien filed against the Waddells.

This conflict was initiated when the Wad-dells filed an action in the United States District Court at Paducah, Kentucky, against appellee Bushart. The suit was filed for breach of contract in the construction of a house which Bushart was to construct for the Waddells, and demanded damages against Bushart for all the money the Waddells had paid in excess of the contract price of $107,000, cost of repairs due to defective workmanship, and failure to complete construction of the house. None of the other parties to this appeal, who were either subcontractors or independent contractors to Bushart, the prime contractor, were named as parties in the federal court action.

Bushart filed his answer and counterclaim in federal court, in which he made claim for $27,000, alleged that he had engaged subcontractors and asserted the existence of liens against the property. Bus-hart made none of the lienholders parties to the federal court action.

While the action was pending in federal court the two actions mentioned above were filed against the Waddells in circuit court. Kitchens, Inc. first filed a claim on its lien. The Waddells answered the complaint and moved to bring in Bushart, the prime contractor, as a third party defendant. A third party complaint was filed by the Waddells stating that Bushart was liable to the Waddells for any judgment rendered against the Waddells and in favor of Kitchens, Inc.

Secondly, Stevenson Electric filed an action in circuit court asserting its lien on the Waddells’ property. In addition to the Waddells, Kitchens, Inc., Kashway Building Materials, Inc., and Bushart were named as defendants. The Waddells answered Stevenson’s suit and asserted, among other defenses, that jurisdiction of the claim was in the federal court. The Waddells filed a cross-claim in this action in which they asserted that Bushart was liable for any judgment in favor of any lien-holders against the Waddells. Kashway Building Materials filed an answer to Stevenson’s suit and set up its claim for a lien.

The trial court consolidated for trial the two actions pending in state court, namely, the suit of Stevenson Electric against the Waddells and the suit of Kitchens, Inc., against the Waddells. Various motions for continuation of a trial date were made because of the pending federal case.

The federal case was tried in the United States District Court, the result being that the jury found for the Waddells against Bushart on the Waddells’ complaint, and found for the Waddells on Bushart’s counterclaim. Bushart’s counterclaim had asserted various claims for amounts due subcontractors, including those of Kashway, Kitchens, Inc., and Stevenson, in the total amount of $20,528.94.

After the conclusion of the federal trial, trial was held in the Marshall Circuit Court on the two claims filed against the Wad-dells by Kitchens and by Stevenson. The trial of these actions resulted in a judgment for Stevenson against the Waddells for $4,146.72 and a judgment for Kitchens against the Waddells for $1,333.56. In addition, the trial court entered a summary judgment for Kashway in the amount of $1,595.19. The trial court entered summary judgment for Bushart on the third party complaint filed by the Waddells in Stevenson’s suit, stating that the issue was res judicata because of the outcome of the federal action.

On appeal the Waddells make two assignments of error. They assert that the circuit court committed error in denying the Waddells’ motion for judgment on the cross-claim and third party complaint against Bushart because the federal court judgment was res judicata as to the claim for indemnification set out in said cross-claim and third party complaint. Appellants also argue that Stevenson, Kitchens and Kashway should have been precluded from bringing the actions in circuit court and that the federal court judgment should have been res judicata as to their claims.

The Waddells argue that the federal court judgment, which found for the Wad-dells on the claim of Bushart and which denied Bushart his claim for amounts due to subcontractors and materialmen, establishes that as between the Waddells and Bushart, Bushart was liable for the claims of Stevenson, Kitchens and Kashway. Appellants further argue that, therefore, summary judgment should have been entered and the third party complaint and cross-claim of the Waddells against Bushart should have been allowed based upon the finding for the Waddells in federal court. It is undeniable that a federal court judgment is entitled to full faith and credit in the state courts, Burlew v. Fidelity & Casualty Co. of New York, 276 Ky. 132, 122 S.W.2d 990 (1938). However, a judgment becomes res judicata only when there exist identity of the parties, identity of the causes of action, and when the action is decided on its merits. Newman v. Newman, Ky., 451 S.W.2d 417 (1970), and BTC Leasing, Inc., a/k/a Bulk Transit Leasing Corp., Inc. v. Billy R. Martin, Ky.App., 685 S.W.2d 191 (1984) (modified August 24, 1984).

The federal court judgment found in favor of the Waddells for the damages claimed by Bushart, which included the amounts due Kitchens, Stevenson and Kashway. The last three named subcontractors were not parties to the federal suit, not having been impleaded by the Waddells or brought into the suit by the defendant, Bushart. Therefore, the judgment, which in effect held that the Wad-dells were not responsible for the various claims of Bushart, is not tantamount to a finding that Kitchens, Stevenson and Kash-way are not entitled to bring a claim against the Waddells for their own claims.

The Waddells cite 46 Am.Jur.2d Judgments § 518 (1969), which states:

With regard to the persons as to whom the doctrine of res judicata is applicable, the rule is well settled that a judgment is binding in favor of or against all parties to the proceedings in which it is rendered, and their privies, whether the doctrine is asserted on behalf of the plaintiff or defendant in the subsequent action.

The question becomes whether Kitchens, Stevenson and Kashway are in privity with Bushart so as to be barred by the doctrine of res judicata from bringing suit against the Waddells. “Privity” is defined in the case of Grimm v. Rizk, 640 S.W.2d 711 (Tex.App.1982), as follows: “Privity connotes those who are in law so connected with a party to the judgment as to have such an identity of interest that the party to the judgment represented the same legal right.” Id. at 715. We do not believe that the legal rights of Kitchens, Stevenson and Kashway were so connected with that of Bushart as to preclude their bringing suit against the Waddells for amounts due under their liens. Bushart’s interest in the federal lawsuit, as set out in his counterclaim, was for unpaid claims alleged to be due him from the Waddells, including the claims of the three lienholders. It was finally determined in that lawsuit that this particular claim against the Waddells was resolved by the jury in the Waddells’ favor and that Bushart was not entitled to these amounts. In our opinion, however, this falls short of constituting an identity of interest in the three appellees’ interests. The validity of their claims against the Waddells was not resolved in the federal court action; the issue in that court was resolved only between the Waddells and Bushart.

We reach this conclusion because both the Waddells and Bushart were content to leave the three lienholders out of the federal lawsuit when both had a right to join them. Two of the lienholders actually testified as witnesses in the federal case. However, their testimony alone at the trial does not bring them within the purview of McKenzie v. Hinkle, 271 Ky. 587,112 S.W.2d 1019,1021-22 (1938), which instructs us,

that the word “parties” within that requirement were not necessarily confined to actual parties in the litigation in which the judgment was rendered, but that the term also embraced others strangers to the litigation, who were not formal plaintiffs or defendants, but who by their conduct bring themselves in such relationship to the litigation as to become bound by the judgment....
... “The courts look beyond the nominal parties, and treat all those whose interests are involved in the litigation and who conduct and control the action or defense as real parties, and hold them concluded by any judgment which may be rendered.” [Emphases added.]

The lienholders in this case did not participate in the trial to the extent of conducting or controlling the litigation as addressed in McKenzie. Two of them did testify, and a review of their testimony revealed comments about the products sold, the work done on the Waddells’ home, and gave opinions concerning business reputations of the builder and appellee Bushart and appellants’ expert witness, a builder.

Naturally it concerns us that the Wad-dells have tried their case twice, but we must keep in mind that the lienholders have not had theirs tried at all. State Farm Mutual Automobile Ins. Co. v. Shelton, Ky., 368 S.W.2d 734, 737 (1963), sheds some light on this question, and we quote:

The doctrine under which a person not a party to a suit may be bound by a judgment therein is not strictly res judi-cata but “collateral estoppel”. [Case cited.] It is based upon privity between a party to the original suit and the person who should be bound by the judgment. This privity is in turn founded upon such an identity of interest that the party to the judgment represented the same legal right. [Case cited.] The rule is essentially one of justice and fairness and recognizes that a question once litigated should not be relitigated. [Case cited.] But the doctrine may not be invoked to deprive a party of an actual opportunity to be heard on a material issue. [Case cited.]

If res judicata or collateral estoppel applies herein, we have a basic unfairness exercised upon the lienholders. It is not at all clear in the record to what extent the lienholders’ claims were advocated. It was not brought out whether they were independent contractors or subcontractors of Bushart. For example, it was to Bushart’s advantage to have Kitchens, Incorporated of Paducah designated as a subcontractor because then he would get a 10% override commission. The Waddells’ reliance upon the authority of Terry & Wright of Kentucky v. Crick, Ky., 418 S.W.2d 217 (1967), is unwarranted. There the trial court overruled a motion to make Henry Lile a party plaintiff. He was the father of appellee Sara Crick. She admitted the house in question belonged to her father and that she might pay him a part of any recovery from the construction company for the blasting damage. The case stated:

Certainly the judgment herein is res adjudicata insofar as Lile is concerned. While we held in Campbell v. McCoy, Ky., 306 S.W.2d 843 (1957), that the doctrine of res adjudicata does not apply to one who merely participates in a case as a witness, we think this case is clearly distinguishable from the Campbell case in that in the present case Mr. Lile not only testified, but he had knowledge that his daughter filed her suit to include all items of damage, including the house he admitted in the evidence was “his house.” He also negotiated with appellants for settlement of the claim. Id. at 219.

Since res judicata is a rule of justice and fairness, we feel that a contrary result would be reached in this case if the lien-holders were denied an opportunity to present their claims.

Because Kitchens, Stevenson and Kashway were not in privity with Bushart in the federal action, they were not precluded by res judicata from asserting their claims in state court. We find no error in this assignment of appellants.

We likewise find no error in the trial court’s failure to sustain appellants’ motion for summary judgment on their cross-claim because of the argument that the federal court judgment precluded Bushart’s recovering from the Waddells any funds in excess of those awarded him in federal court. The matter was indeed subject to res judi-cata because the action in federal court and the claim asserted in the cross-claim involved identity of the parties, i.e., the Wad-dells and Bushart, identity of the causes of action, and a decision of the merits. The federal action was determinative of any amounts due as between the Waddells and Bushart.

The judgment is affirmed.

All concur.


author: HILL, Justice.

text:
    The ESTATE OF Franklin C. WELKER, Appellant, v. Zelna WELKER, Steve Welker, Connie Welker Briscoe, Douglas Welker, Debra Sue Welker and William Welker, Appellees.
    No. 2-84-146-CV.
    Court of Appeals of Texas, Fort Worth.
    Jan. 17, 1985.

      Charles Oldham, Wichita Falls, for appellant.
    Harold Calvin Ray, Irving, for appellees.
    Before JORDAN, JOE SPURLOCK, II and HILL, JJ.
   OPINION

HILL, Justice.

This appeal involves a claim by the ex-wife and children of Franklin Welker, who is deceased, to the proceeds of an insurance policy of which they were to be beneficiaries under the terms of a property settlement agreement, as opposed to the claim of Mae Ann French Welker, the deceased’s second wife, who was the named beneficiary and independent executrix of the estate.

The claimants moved for summary judgment granting them all the proceeds of the policy. Franklin’s estate moved for summary judgment to deny the claim altogether or to limit recovery to $5,000. The trial court granted the claimants’ motion. In two grounds of error the estate urges error in granting the claimants’ motion for summary judgment in the full amount of the proceeds and in denying its motion for summary judgment.

We reverse and remand, because we find that an ambiguity exists as to the extent to which the property settlement agreement required Franklin to maintain the claimants as beneficiaries of the policies, and because we find that in no event are the claimants entitled to the full proceeds of the policy.

In a summary judgment case, the question on appeal, as well as in the trial court, is not whether the summary judgment proof raises a fact issue with reference to the essential elements of a cause of action, but whether the summary judgment proof establishes as a matter of law that there is no genuine issue of fact as to one or more of the essential elements of the plaintiff’s cause of action. Gibbs v. General Motors Corporation, 450 S.W.2d 827, 828 (Tex.1970). See also TEX.R.CIV.P. 166-A. The burden of proof is on the movant and all doubts as to the existence of a genuine issue of material fact are resolved against him. All conflicts in the evidence are disregarded and the evidence which tends to support the position of the party opposing the motion is accepted as true. Farley v. Prudential Insurance Company, 480 S.W.2d 176, 178 (Tex.1972); Goodwin v. Texas General Indem. Co., 657 S.W.2d 156, 159-60 (Tex.App. — Houston [1st Dist.] 1983, writ ref d n.r.e.).

The provisions of rule 166-A are applicable both to plaintiffs and defendants who move for summary judgment. The judgment sought should be granted, and if granted should be affirmed, only if the summary judgment record establishes the movant’s right thereto as a matter of law. Gibbs, 450 S.W.2d at 828. The movant establishes his entitlement to a summary judgment on the issues expressly presented to the trial court by conclusively proving all essential elements of his cause of action or defense as a matter of law. City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex.1979).

Franklin Welker sold State Farm Insurance. At the time of his divorce, he had a group life insurance policy number 1,297,-201 with State Farm. The company later changed the number of the policy to 205-561. Franklin entered into a property settlement agreement and divorced Zelna Welker on June 8, 1970. The settlement agreement listed several insurance policies. Franklin was to remain the owner of this particular policy and continue to pay the premiums on it. With respect to this particular policy, the list provided as follows:

13. One $5,000.00 group term life insurance policy on Respondent’s life with State Farm Life Insurance Company, Petitioner to be beneficiary for a sum not less than $5,000.00 at any time.

The settlement contained the following additional provisions with respect to the listed policies:

It is agreed and understood by and between the parties that title shall remain in all above policies in Respondent, except item No. 3 above which shall vest title in Petitioner and Petitioner agrees to pay all premiums on the policy in item 3 above. The beneficiary shall remain the same on all children’s policies above. Petitioner shall remain the beneficiary on Respondent’s life insurance policies unless Petitioner remarries in which event the children shall become beneficiaries, but in any event the children shall become primary beneficiaries after each child becomes twenty-ne [sic] years of age except in the event a child is in a college or university upon reaching age twenty-one years then the Petitioner shall remain primary beneficiary in trust for the child until the child completes college or university provided Petitioner is still unmarried.

There is a question as to whether the intention was that Franklin be obligated to maintain the claimants as beneficiaries of the entire policy, in an amount not less than $5,000, or whether the intention was to require him to maintain them as beneficiaries only in the amount of $5,000, with the right to name one or more others as beneficiaries in excess of that amount. This ambiguity creates a fact issue, which precludes summary judgment. If the claimants are entitled to be beneficiaries of the entire policy, they have an equitable interest in the insurance proceeds to the extent of the face amount of the policy at the time of the settlement agreement. Hudspeth v. Stoker, 644 S.W.2d 92, 96 (Tex.App. — San Antonio 1982, no writ); Washington v. Hicks, 109 Wis.2d 10, 325 N.W.2d 68, 70 (App.1982); Reeves v. Reeves, 236 Ga. 209, 223 S.E.2d 112, 115 (1976); Madsen v. Estate of Moffitt, 542 P.2d 187, 188 (Utah 1975). There is a fact issue as to the face amount of the policy on June 8, 1970, the date of the divorce and property settlement agreement, because there was summary judgment proof that the face amount of the policy was in excess of $5,000 at the time of the settlement. If the claimants are only entitled to be beneficiaries in the amount of $5,000, their equitable interest is limited to $5,000.

The claimants rely on the cases of Tomlinson v. Lackey, 555 S.W.2d 810 (Tex.Civ. App. — El Paso 1977, no writ) and O’Neill v. Connecticut Mut. Life Ins. Co., 544 S.W.2d 741 (Tex.Civ.App. — Houston [1st Dist.] 1976, writ ref’d n.r.e.). The estate relies on the case of Hudspeth, 644 S.W.2d at 92. None of these cases contains the ambiguous language which is present in this case.

The judgment is reversed and remanded for trial in accordance with this opinion.


author: BERREY, Judge.

text:
    A.J. HOUSTON, Movant/Appellant, v. Elizabeth E. ZANER, Successor Guardian, John L. Port and Channing D. Blaeuer, Respondents.
    No. WD 34736.
    Missouri Court of Appeals, Western District.
    Nov. 13, 1984.
    Motion for Rehearing and/or Transfer to Supreme Court Overruled and Denied Dec. 26, 1984.

      Elton W. Fay, Columbia, for movant/ap-pellant.
    Mark J. Bredemeier, Kansas City, for respondents.
    Before KENNEDY, P.J., and NUGENT and BERREY, JJ.
   BERREY, Judge.

A.J. Houston appeals from denial by the Probate Division of the Circuit Court of Randolph County of his “Motion to Deny Final Discharge of Guardian and to Set Aside, Vacate and Modify Order of this Court and to Modify the Final Settlement and Objections to and Motion to Modify Final Settlement.” Judgment is reversed and remanded.

In August, 1975, Maud Stigall was declared incompetent to manage her affairs and Thomas B. Stroud was appointed as her guardian. Stroud retained attorney John L. Port to handle necessary legal matters. In January, 1979, Stroud was replaced as guardian by his wife who served until February 16, 1982. Thereafter, Elizabeth Zaner assumed the role of guardian and remained as such for twenty-three days at which time the guardianship estate terminated due to the death of Maud Sti-gall on March 11, 1982.

Port remained attorney for the successor guardians of the Stigall estate throughout the duration of the estate. He was joined by Channing D. Blaeuer, currently circuit judge in Randolph County, as the guardian’s attorney in 1979.

From the inception of the guardianship estate in 1975, until Mrs. Stroud’s retirement in 1982, the guardian and the guardian’s attorney each received the following fee payments from the estate: $695.00, $726.00, $700.00, $224.89, $303.58, $629.00. On February 25, 1982, fees of $2,644.83 and $2,144.83 were paid to the guardian and her attorney, respectively, as final settlement of the Stroud guardianship. Appellant does not contest these payments nor the final settlement of guardian Stroud.

After the death of Maud Stigall, attorneys Port and Blaeuer and successor guardian of twenty-three days, Zaner, filed a motion for final settlement of the guardianship estate with the probate court. The settlement covered the period from February 17, 1982, to April 7, 1982. At that time, the estate consisted of assets totaling $184,563.76 of which a substantial amount was in jointly held assets with the right of survivorship. The attorneys calculated their fees and the guardian’s fees pursuant to the decedent’s estate fee schedule found in § 473.153, RSMo 1980, and arrived at fees of $6,346.63 for the attorneys and $6,346.63 for the guardian. The motion for final settlement was approved.

Appellant is the nephew and sole beneficiary of the testamentary estate of Maud Stigall. He filed his “Motion to Deny Final Discharge ...” based upon the unreasonableness of the fees ordered at final settlement and was granted a hearing.

From the hearing, it was adduced by Port that it is customary in Randolph County to award attorneys and guardians “some sort of discharge fee based on the value of the attorney’s services to the estate over the entire period of the guardianship administration” when the estate is terminated by death or competency restoration of the ward. It was also adduced that the normal way of computing these “Termination” or “Turnover” fees is by plugging the size of the gross estate into the § 473.153 fee schedule regarding decedents’ estates. The probate judge stated several times throughout the course of the hearing that he would not accept time records to aid in fee determination. Moreover, there was no testimony or judicial comment suggesting that any evidence other than the § 473.153 fee schedule is used in Randolph County to determine fees at final settlement of a guardianship estate. When attorney Blaeuer was questioned at the hearing about the manner in which the order allowing attorney and guardian fees was entered he replied, “We may have appeared but I doubt that there was evidence adduced.”

The trial court overruled the “Motion to Deny Final Discharge ...” and appellant’s Request for Findings of Fact and Declarations of Law.

Appellant contends the trial court erred in awarding the final settlement fees because the fees were calculated pursuant to § 473.153 the fee schedule for personal representatives and their attorneys in decedents’ estates, without consideration of the reasonableness of the fees which is required by § 475.265, RSMo 1978, the guardian’s compensation statute.

The Missouri statute concerning compensation of guardians and their attorneys reads “[a] guardian or conservator shall be allowed such compensation for his services as guardian or conservator, as the court shall deem just and reasonable.” Section 475.265, RSMo Supp.1983 (emphasis added). The statute further reads, “[ejompen-sation may also be allowed for necessary expenses in the administration of [the guardian’s or conservator’s] trust, including reasonable attorney fees if the employment of an attorney for the particular purpose is necessary.” Id.

On the other hand, the statute concerning decedents’ estates fees, § 473.153, authorizes the court to order fees based on a minimum fee schedule. The schedule does not set the upper limit and the court may award fees in addition to those allowed at the minimum level if the. additional fees are justified and reasonable. See Estate of Newhart, 622 S.W.2d 398, 401 (Mo.App.1981). In determining what, if any, additional fees are reasonable, the court must collectively take into account the following factors: 1) time required to perform duties, 2) difficulty of duties involved, 3) services performed, 4) applicability of professional rates, and 5) the amount of the estate. In re Estate of Bacheller, 437 S.W.2d 132, 139 (Mo.App.1968); Estate of Newhart, supra, at 402.

Unlike the statute governing compensation of executors, the statute governing compensation for guardians and their attorneys does not set forth a minimum fee schedule; nor does the statute refer the court to a formula for computing just and reasonable fees to be awarded the guardian. For attorney fees, the statute authorizes reasonable fees necessary for particular purposes. Also, there is no mention of a termination or turnover fee to be awarded at the close of the estate.

There seems to be no Missouri case which actually sets forth the factors to be used in determining what is just and reasonable compensation for guardians and their attorneys. However, a noted legal commentator asserts that the compensation is to be based upon “all circumstances of the guardianship, including the size of the estate, the productiveness of the estate, the disbursements from the estate, the nature and difficulty of the services performed, and what is a customary charge for similar services in the community.” 5 Maus, Probate Law and Practice, § 1969, pp. 319-320. See also In re Messer’s Guardianship, 242 Wis. 66, 7 N.W.2d 584, 586 (1943) citing RESTATEMENT OF TRUSTS § 242 (1935). Absent statutory authorization, the court cannot arbitrarily fix a fee schedule to determine what is “just and reasonable compensation” without taking into account evidence of the reasonable value of the services. Lucom v. Atlantic National Bank of West Palm Beach, 97 So.2d 478, 481 (Fla.1957); In re Messer’s Guardianship, supra, 7 N.W.2d at 586.

It is apparent from the record that the probate judge took no evidence on the issue of reasonableness of fees before he ordered them to be paid. In this instance, a thoroughly unjust result has occurred. Guardian Zaner was awarded $6,346.63 for twenty-three days of service where her duties consisted of writing sixteen checks and renewing a few estate investments. The attorneys were also awarded $6,346.63. The probate judge was unconcerned with the particular services the attorneys rendered the estate.

The judge erroneously applied Missouri statutory law by basing his decision to uphold the attorney and guardian fees as reasonable solely on the “county custom” of using the decedent’s estate fee schedule. The court must take evidence and apply the previously noted factors when calculating or approving fees associated with the guardianship estate. The court may consider only those services rendered during the period in which fees have not yet been awarded. Herein, the applicable period would be February 17, 1982, to April 7, 1982. This cause is reversed and remanded for further consideration of the fees to be awarded for said period.

Respondents have made a motion to dismiss which this court has taken with the case. They argue two points upon which this appeal should be dismissed. The motion is overruled.

First, respondents argue appellant failed to timely file the record on appeal as required by Rule 81.18. This court finds that due to delays in preparation and approval of the trial transcripts, appellant’s failure to file the record within ninety days of the notice of appeal was the result of excusable neglect and this court has discretion to extend the time allowed for appellant to act. Rule 44.01(b).

Second, respondents argue that appellant, as the beneficiary of a ward’s decedent estate, lacks standing to object to a court order awarding fees in the guardianship estate and, therefore, appellant lacks standing to assert this appeal. They reason that under Missouri Probate and Guardianship Law, appellant is not the proper party to object to a court-ordered award of guardianship fees.

Respondents cite two cases which they contend support the motion. Estate ofLiv- ingston, 627 S.W.2d 673, 679 (Mo.App. 1982), states, “after the death of a ward an action cannot be commenced against the guardian or the guardianship estate.” However, the court held that under the authority granted the guardian to wind up the estate under § 475.285.3 (repealed by Laws 1983) the guardian may represent the estate in the final disposition of claims against the ward’s estate which were reduced to judgment before the ward died.

In State ex rel. Hollenbeck, 394 S.W.2d 82, 87 (Mo.App.1965), the court held that the guardian may not continue to represent the estate where claims other than funeral expenses, inheritance and estate taxes, and obligations of the ward incurred by the guardian exist. See § 475.320.1, RSMo Supp.1983. Claimant sought appointment of an administrator against whom he could advance an action in tort committed by the ward. The court noted that “[ujnder the Probate Code of 1955, the authority of a guardian still terminates upon the ward’s death subject only to the specific statutory exception” referred to infra. Hollenbeck at 89. The court ordered an administrator be appointed to enable claimant to bring suit.

This court acknowledges the law cited by respondents that the guardian is not the proper party defendant where claimant seeks to bring an action against the ward or the ward’s estate after the ward’s death, but the instant case is an entirely different situation and appears to present a novel question to this court. Here, the appellant, as primary beneficiary of the ward’s estate, is attacking the actions of the guardian and her attorney; appellant is not asserting claims against the ward or the ward’s estate. The guardian-ward relationship terminating upon the death of the ward should be of no consequence when the claimant is not attempting to assert claims against a ward via his legal representative.

Respondents also assert that because the code governing guardianships does not provide for a challenge of a guardian’s fee or a guardian’s attorney fee by the beneficiary of the ward’s estate, that no challenge is available. This court cannot agree with the negative inference respondents seek to advance. The situation herein illustrates why there must be some avenue for contest.

As there is no precedent barring an action against the guardian after the death of the ward when the plaintiff is not seeking to enforce a claim against the ward or the ward’s estate, this court is left with determining whether the appellant was a proper plaintiff in the underlying action and whether he was entitled to assert this appeal.

A civil action “must be prosecuted in the name of the real party in interest.” Rule 52.01. “The purpose of the Rule is to enable those who are directly interested in the subject matter of the suit and are entitled to reap the benefits thereof to be those who maintain the action.” Janssen v. Guaranty Land Title Co., 571 S.W.2d 702, 706 (Mo.App.1978). The plaintiff must have some “actual and justiciable interest susceptible of protection through litigation.” Id.

Under the unusual circumstances presented here, the appellant has the most direct interest in the subject matter of the suit; as the primary beneficiary of Maud Stigall’s decedent estate, he has an actual and justiciable interest which could have been protected by litigation. Respondents were allowed to unduly deplete the estate thereby reducing the appellant’s share in the estate. The personal representative, another potentially proper plaintiff, failed to challenge the final settlement award as being excessive. Also, if beneficiaries of the ward’s estate are not allowed to challenge improper fee awards, final settlements would stand subject only to the undaunted scrutiny of the approving court in instances where no personal representative is required to close the estate, i.e., under § 475.320.1.

Appellant asserts that because property he held jointly with decedent and in which he had survivorship rights was used in calculating the contested fees, he had standing to bring his cause of action.

However, we do not recognize his justicia-ble interest on this ground because the property was a part of the guardianship estate before the death of Maud Stigall and as such, the guardian was charged with the duty of administering it.

To assert appeal, the appellant must have been a party to a suit and aggrieved by the judgment of the trial court. Section 512.020, RSMo 1978; Crigler v. Frame, 632 S.W.2d 94, (Mo.App.1982). Section 472.160.1, RSMo Supp.1983, allows any interested person aggrieved from the order of the probate court to appeal in certain circumstances enumerated thereunder. One such circumstance is “the allowance of any claim against the estate exceeding one hundred dollars.” Section 472.160.1(1). Pursuant to § 475.020, RSMo Supp.1983, the provisions of Chapter 472 apply to guardianships unless therein restricted. Statutes governing the right to appeal judgments of the probate court should be liberally construed, as the law favors the right to appeal. Cooper, supra; Reis v. Nangle, 349 S.W.2d 508, 513 (Mo. App.1961).

Appellant is an interested party entitled to an appeal in that excessive attorney’s and guardian’s fees directly reduce the amount of the estate to which he is entitled as primary beneficiary. The trial court ordered over $12,000.00 to be paid from the estate of which appellant was the primary beneficiary thereby making him an aggrieved party. Inasmuch as beneficiaries of a trust are aggrieved parties to the adverse awarding of attorney’s fees in connection with the trust, see St. Louis Union Trust Co. v. Fitch, 190 S.W.2d 215, 217 (Mo.1945), appellant in this instance is also an aggrieved party who may assert his appeal. Respondent’s Motion to Dismiss is denied.

Judgment is reversed and remanded for proceedings not inconsistent with this opinion.

All concur.


author: HOWERTON, Judge.

text:
    Thelma L. STOVALL, Commissioner of Labor (Special Fund), Appellant, v. Dan F. PFEFFER, Maysville Utility Commission, and Workers’ Compensation Board of Kentucky, Appellees.
    Court of Appeals of Kentucky.
    June 15, 1984.
    Case Ordered Published by Court of Appeals Aug. 3,1984.
    Discretionary Review Denied Feb. 21, 1985.
    Douglas A. U’Sellis, Asst. Counsel, Dept, of Labor, Louisville, for appellant.
    Woodson T. Wood, Fox, Wood & Wood, Maysville, James S. Carroll, Harrodsburg, for appellee Pfeffer.
    Before HOWERTON, REYNOLDS and WILHOIT, JJ.
   HOWERTON, Judge.

The Special Fund appeals from a judgment of the Mason Circuit Court affirming an opinion and award of the Workers’ Compensation Board. The fund argues that the court and board improperly construed the provisions of KRS 342.730 in determining the proper duration of benefits to be paid to Pfeffer.

While employed by the utility commission, Pfeffer was injured in a work-related accident on April 28, 1981. He was found to be temporarily, totally disabled from April 30, 1981, to September 27, 1981. He was also found to have a 25 percent permanent, occupational disability which was apportioned equally between the employer and the Special Fund. The partial disability payments were ordered to be paid for 425 weeks.

Pfeffer was 60 years old at the time of his injury and will reach age 65, the normal retirement age for federal benefits, on September 13, 1985.

From July 15, 1980, until July 15, 1982, KRS 342.730(l)(b) provided that benefits for permanent, partial disability would be paid:

... for a maximum period, from the date the disability arises, of four hundred twenty-five (425) weeks, but such benefits shall not be paid after the employe becomes eligible for normal old age benefits under the federal old age, survivors and disability insurance act.

Effective July 15, 1982, the statute was amended to reflect that benefits for permanent, partial disability would be paid: “... for a maximum period, from the date the disability arises, of four hundred twenty-five (425) weeks.”

The Mason Circuit Court concluded that the statutory limitation, which was in effect at the time of Pfeifer’s injury:

... constituted a future, contingent, termination, and did not result in a present vesting or determination of rights. Had the contingency occurred while the prior provisions of law were in effect, benefits would presumably have terminated at that time, but since the contingency did not occur while the provision for determination existed, the termination is no longer effective.

The court affirmed the award of the board allowing payments for a total of 425 weeks, which would extend beyond Pfeifer’s 65th birthday.

The substantive rights of a claimant for workers’ compensation benefits are fixed by the law in effect on the date of the injury. Maggard v. International Harvester Co., Ky., 508 S.W.2d 777 (1974). See also Beth Elkhorn Corp. v. Thomas, Ky., 404 S.W.2d 16 (1966). The trial court determined that the normal retirement age for old age benefits was contingent. Pfeffer pursues this contingency theory and argues that Congress could change the normal retirement age from 65 to 66 or any other age. He then asks, “Is it to be determined according to the retirement age in existence at the time of the disability, or the retirement age in existence at the time the claimant attained such age?”

We find no problem or contingency. Congress has clearly provided for retirement, and the General Assembly of Kentucky made it the law of this Commonwealth for the period between July 15, 1980, and July 15, 1982, that a claimant could not recover from both sources. The language of “normal old age benefits” may have been an imprecise term, but the obvious intent of the legislature was to provide for a cessation of partial disability benefits at such time as one became eligible for old age benefits, at whatever age Congress might allow.

Pfeffer also argues that the action of the legislature in 1980 was ill-advised, short-lived, and with little or no precedent. It had a minimum life, but we cannot say it was ill-advised or that it provides no precedent. We find the statute, together with Maggard, to be the precedents we must follow in this case.

On April 28, 1981, Pfeifer’s rights to specific compensation were fixed by KRS 342.730, in effect at that time. The statute contained the limitation, and his benefits must terminate at such time as he becomes eligible for “normal old age benefits under the Federal Old Age, Survivors and Disability Insurance Act.” Any action by the United States Congress to increase the retirement age will not act as an amendment to KRS 342.730. It will simply serve to lengthen the time by which Pfei-fer’s benefits are calculated and may be received. Such a variable measuring device is not only proper, but is more definite than the average weekly wage of the State, which is used to determine the maximum allowable benefits under the statute. The average weekly wage changes regularly and frequently, while normal retirement age almost never changes.

The judgment of the Mason Circuit Court is reversed, and this action is remanded for correction of the judgment and for an award consistent with this opinion.

All concur.


author: HOWARD, Judge.

text:
    Thelma L. STOVALL, Commissioner of Labor (Special Fund) (Successor to John Calhoun Wells) and Coal Miners’ Pneumoconiosis Fund, Appellants, v. GREAT FLAME COAL CO., INC. and Elizabeth Baker, Appellees.
    Court of Appeals of Kentucky.
    May 18, 1984.
    Discretionary Review Denied by Supreme Court Sept. 26, 1984.
    Douglas A. U’Sellis, Dept, of Labor, Louisville, for appellants.
    William J. Baird, III, R. Roland Case, Pikeville, for appellees.
    Before HAYES, C.J., and CLAYTON and HOWARD, JJ.
   HOWARD, Judge.

Appellants appeal a judgment of the Pike Circuit Court ordering the Special Fund to continue payment of Workers’ Compensation benefits to the widow of the claimant, pursuant to the Life Expectancy Annuity Table.

On July 11, 1978, Roy Baker was awarded total occupational disability due to pneu-moconiosis. He died of causes unrelated to the disease on March 27, 1981. His wife, Elizabeth Baker, appellee herein, was substituted on the award which was to continue until her remarriage or for Mr. Baker’s life expectancy at the time he became disabled.

On October 28, 1982, Mrs. Baker received a notice that her benefits would cease, permitting recoupment of the attorney fee paid her attorney following her husband’s original award. She then filed a complaint and/or motion for enforcement of the award pursuant to KRS 342.305 in Pike Circuit Court alleging that his life expectancy should be determined under the Life Expectancy and Annuity Table rather than the American Experience Table of Mortality. The trial court found in favor of Mrs. Baker. This appeal now follows. We affirm.

At the time Roy Baker last worked, he was 74 years of age. Under the American Experience Table of Mortality, apparently used by the Workers’ Compensation Board for many years and urged upon us by the appellants, his life expectancy was 6.68 years. The Special Fund does point out that the Board is currently in the process of selecting a new mortality table for use in such cases. It is not disputed that the Board has such authority under KRS 342.-120(6)(b), which states:

For all other benefits awarded under this Chapter, the portions shall be based on the number of weeks shown in actuarial tables adopted by regulations promulgated by the Board.

However, the Legislature has specifically directed the use of the American Experience Table of Mortality in Workers’ Compensation cases only in KRS 342.320. Thus, there is no directive for such table use except for the general authority given under KRS 342.120(6)(b). The appellee, Mrs. Baker, urges the use of the Life Expectancy and Annuity Table, adopted by the Court in Morris v. Morris, Ky., 293 S.W.2d 243 (1956), and set forth in the Kentucky Revised Statutes’ table section. Such table gives a life expectancy of 9.21 years to an individual 74 years of age. Although Morris dealt with estate value, we feel its principles apply to the situation here.

In Morris it was stated:

We know as a practical matter that no person lives or dies according to the pattern of a statistical table but in order to find a rule which, over a period of years and in a great number of cases, will more closely conform to the standards of justice, the adoption of a mortality table has been believed to be the best method of reaching general justice for all even though, occasionally and individually, an injustice is done. But if the initial acceptance of this table was had because of the desire to obtain the best evidence of the common experience of mankind, then it is equally incumbent upon the courts to seek and obtain those mortality tables that best reflect that experience.

This rationale is aptly stated in 29 Am. Jur.2d Evidence § 895 (1967):

Expectancy of life, when in issue, should be shown, as any other fact, by the best evidence obtainable, and improved tables which come into use and are of standard authority may be given in evidence, and should be used, in lieu of the older tables which they supersede. The courts, in order to get the best evidence obtainable, are inclined to favor the latest standard tables, because the facts upon which they are calculated are much more complete.

The table adopted by the court below, and used for many years in the Commonwealth, was prepared with data from 1959-1961, and as such is quite out of date. Yet, it still more accurately reflects life expectancy than the American Experience Table when comparing a 9.21-year expectancy to a 6.68 expectancy. Further, the average lifetime of a 74-year-old individual, according to the National Center for Health Statistics, U.S. Department of Health and Human Services, was 13.3 years in 1980. Although this is just one source, it shows how unjust the further use of the American Experience Table would become. Appellants point out this table has been used for over twenty-five years. We do not believe custom takes priority over reliability.

Until such time as a life expectancy table is adopted which most accurately reflects the modern life expectancy trends, the most recent judicially recognized table must serve. Morris, supra.

For the foregoing reasons, the judgment of the Pike Circuit Court is affirmed.

All concur.


text:
    Ronald STARKS, Appellant, v. KENTUCKY HEALTH FACILITIES and Health Services Certificate of Need and Licensure Board of the Commonwealth of Kentucky: Frank Burke, Sr.; Dr. Harold E. Boyer; Steve Brown; George Buchanan; John B. Clarke; Thomas Duncan; Dr. Juanita Fleming; James Gayheart; Norman C. Horn; H. Glenn Joiner; Sister Mary Joell Overmann; Dr. Frank R. Pitzer; William T. Samuels, Jr.; Mrs. Weldon (Hallie) Shouse; John Vinson and Dr. Thomas R. Watson, Members of and Constituting the Health Facilities and Health Services Certificate of Need and Licensure Board of the Commonwealth of Kentucky; and Hospital Corporation of America/Hospital Corporation of Kentucky, Appellees.
    Court of Appeals of Kentucky.
    July 6, 1984.
    Rehearing Denied Aug. 31, 1984.
    Discretionary Review Denied Feb. 20, 1985.

      J. Granville Clark, Russellville, for appellant.
    Terry L. Morrison, Cabinet for Human Resources, Frankfort, Thomas H. Meeker, Colleen McKinley, Wyatt, Tarrant & Combs, Louisville, for appellees.
    Before HAYES, C.J., and McDONALD and MILLER, JJ.
   MILLER, Judge.

Appellant, Ronald Starks, is a citizen and resident of Logan County, Kentucky. He brings this appeal from a judgment of the Franklin Circuit Court upholding a decision of the Kentucky Health Facilities and Health Services Certificate of Need and Licensure Board (board). The board is a state administrative agency with one of its functions being the authorization of new hospital facilities. KRS Chapter 216B.

On June 9, 1988, appellee/Hospital Corporation of America (HCA) was granted permission by the board to purchase the Logan County Hospital, which it had been operating under a lease, and to construct a new facility to be owned and operated by it. Through procedures provided in Chapter 216B, Ronald Starks has opposed the efforts of HCA from the inception. After issuance of the Certificate of Need to HCA, Starks appealed to the Franklin Circuit Court. KRS 216B.115. The circuit court reviewed the action of the board, in light of KRS 216B.120, and approved. KRS 216B.120 provides:

PARTIES TO JUDICIAL REVIEW-LIMITATION OF REVIEW — APPEAL TO COURT OF APPEALS.—
(1) Each party to the proceedings may participate as a party in the proceedings in the circuit court on an appeal.
(2) In case of an appeal, no new or additional evidence may be introduced in the circuit court except as to fraud or misconduct of some person engaged in the administration of this chapter and affecting the decision or order; the court shall hear the case upon the certified record or abstract thereof, and shall dispose of the case in a summary manner, its review being limited to determining whether the board or cabinet acted within its jurisdiction, whether the decision or order was procured by fraud, and whether the findings of fact in issue are supported by substantial evidence and are not clearly erroneous based upon a review of the record as a whole, (emphasis added)
(3) The court shall enter judgment affirming, modifying, reversing or setting aside the decision or, in its discretion, remanding the case to the board or cabinet for proceedings in conformity with the directions of the court.
(4) Any party to the judicial appeal may appeal from the circuit court to the Court of Appeals in accordance with the Kentucky Rules of Civil Procedure.

Appellant asserts that the evidence does not satisfy the criteria set out in 902 KAR 20:006 § 2(1), (2) and (4). These regulations, promulgated under KRS 216B.040, require that a proposal to develop a health facility “should” be consistent with the state health plan; the proposal “should” meet an identifiable need in a defined geographical area and be accessible to all residents of the area; and the proposal “should” accomplish appropriate “linkages” with other facilities for the purpose of minimizing cost.

We have reviewed the record in light of appellant’s arguments and in light of our duty as a reviewing court. If the findings of fact of an administrative agency are supported by substantial evidence of probative value, they must be accepted as binding upon the reviewing court, and the resulting question is whether or not the agency applied the correct rule of law to the facts so found. See Tackett v. Kentucky Unemployment Insurance Commission, Ky.App., 630 S.W.2d 76 (1982); Southern Bell Telephone and Telegraph Company v. Kentucky Unemployment Insurance Commission, Ky., 437 S.W.2d 775 (1969). Substantial evidence has been defined as being that of substance and relative consequence (O’Nan v. Ecklar Moore Express, Inc., Ky., 339 S.W.2d 466 [1960]), while the test of substantiality has been set forth in Kentucky State Racing Commission v. Fuller, Ky., 481 S.W.2d 298, 308 (1972), as being:

... whether when taken alone or in the light of all the evidence it has sufficient probative value to induce conviction in the minds of reasonable men.

In conclusion, we believe the criteria provided in KRS 216B.040(2) for the issuance of a certificate place broad discretion in the board. The board is restricted only from arbitrary and capricious acts within the traditional framework of the foregoing authority. Medical treatment facilities have come to be an indispensable element of modern society. Where it is shown by substantial evidence that the submitted plan will provide these facilities and existing facilities are or soon will become inadequate, the plan may be approved, notwithstanding some variance with the criteria established under the provisions of KRS 216B.040(2). The prevalent use of the word “should” in the statute and correlative regulations denotes discretion. Appellant’s argument that the statutory use of the word “should” is to be construed as “shall,” inasmuch as should is the past tense of shall, is without merit. We find no case in this jurisdiction upon the interpretation of the word “should” when used in a statute or regulation. However, in University of South Florida v. Tucker, 374 So.2d 16 (Fla.Dis.Ct.App.1979), it was said that the word “should,” when used in an administrative code, denotes discretion. We believe this interpretation to be sound.

The evidence in the case sub judice is overwhelming that the present Logan County Hospital facility is archaic and in the near future will not meet the needs of the people of the area. The evidence is further overwhelming that the resources of the county are not sufficient to replace the present hospital with an adequate facility. We find that the applicant met its burden of proof on all issues by substantial evidence.

For the foregoing reasons, the judgment of the Franklin Circuit Court is affirmed.

All concur.