SUE MCAFEE APPELLANT v. MARJORIE CHRISMAN NORMA ROSE MALVERY MCKIM PAM HUBBARD RUTH MALLORY AND WILMA JEAN SWOPE APPELLEES (2012)

OPINION AND ORDER

AFFIRMING

Before this Court are two appeals from an order of the Breathitt Circuit Court in which the court denied a motion to set aside a mediation settlement agreement in a will contest action.   Appellants Wilma Jean Swope and Sue McAfee challenge the trial court's denial of the motion because they insist that the agreement was procured by fraudulent misrepresentations made during mediation.   However, upon review, we affirm as to both appeals.

Appellant Wilma Jean Swope filed a complaint in the Breathitt Circuit Court in which she contested the will of her aunt, Vada Sebastian.   The beneficiaries of the will were Sebastian's seven nieces, all of whom are the parties to this appeal.   Three of those nieces, Appellees Marjorie Chrisman and Norma Rose and Appellant Sue McAfee, were appointed as co-executrices of Sebastian's estate pursuant to the terms of the will.^Double The complaint named Chrisman and Rose as defendants both in their individual capacities and in their capacities as co-executrices of Sebastian's estate.^Double Swope specifically alleged that the will was invalid because:  (1) Sebastian was under the undue influence of Chrisman and Rose at the time of its execution;  (2) Sebastian was mentally and physically impaired at the time the will was executed due to medical neglect by Chrisman and Rose, and she therefore lacked capacity to make the will.   Sebastian was 84 years old when she executed her will.   She died less than two years later.

The case was sent to mediation on three separate occasions prior to a settlement of all issues on February 6, 2009.   Pursuant to a “Mediation Conference Settlement Agreement” signed by the parties, Appellant McAfee was to receive $118,000.00 and Sebastian's prior residence.   Appellant Swope was to receive $132,000.00, interest in an oil well, and all remaining real estate owned by Sebastian.   The remainder of Sebastian's estate was to be divided equally among the remaining five nieces minus all remaining expenses of the estate, including attorneys' fees and executors' fees.   The agreement further provided that Appellant Swope would “dismiss all claims in Breathitt Circuit and District Court regarding estate of Vada Sebastian Case No. 07–CI–0029[1] and 07–P–00051 and will release the executrixes from any claim arising from the administration of the estate.”   It also provided that “[e]ach party releases all others from any liability or claims arising out of the estate of Vada Sebastian and the civil actions above referenced.”

A few days after the settlement agreement, Appellant McAfee filed a motion to suspend the settlement due to fraud.   She alleged that Appellees Chrisman and Rose had misrepresented the amount of funds in Sebastian's bank account during mediation and had acted to coerce McAfee into accepting a lesser sum than that to which she was entitled by threatening not to reach a settlement with her sister.   McAfee specifically alleged that her attorney had been advised that the balance in the estate's checking account was $45,000.00.   She subsequently learned via a bank statement, however, that there was actually $57,281.91 in the account as of the date of the mediation.

Without waiting for a response from Chrisman and Rose, the trial court sua sponte entered an order denying McAfee's motion.   The court specifically noted that the disputed amount was approximately $12,000.00 – or only 1% of the value of the $1 million estate.   Based on this, the court concluded that McAfee had not been defrauded.   The court further noted that public policy and the principles of judicial administration placed a high priority on the binding nature of agreements.

Meanwhile, Appellees Chrisman and Rose responded to McAfee's motion with their own motion to enforce settlement or, in the alternative, to set a trial date.   In their response, Chrisman and Rose indicated that they had related to the mediator that there was approximately $55,000.00 in the bank account and $10,000.00 in outstanding expenses.   They concluded that there had been a meeting of the minds and that a valid settlement was reached.

Appellants Swope and McAfee then filed motions to alter, amend, or vacate the trial court's order, citing much of the same information set forth above.   In response, Chrisman and Rose asserted that during mediation McAfee had in her possession a copy of the bank statement from which she allegedly learned that there was $57,281.91 in the estate bank account.   Thus, she was fully aware of the status of the account at the time of settlement.   The bank statement in question was attached to McAfee's motion and is dated February 5, 2009.   It provides that the balance as of January 5, 2009, was $55,605.81 and that the balance as of February 5, 2009, was $57,281.91.

Chrisman and Rose also filed affidavits and eight letters between counsel for both parties detailing the estate assets.   In her affidavit, Rose stated that “[i]t was agreed with the mediator that $10,000.00 would be deducted to account for the outstanding expenses and the estate balance was agreed upon at $45,000.00.”   Chrisman further explained her understanding of this exchange in her affidavit:

At the mediation on February 6, 2009, the mediator asked for the balance of the estate account.   I replied it was $55,000.00 the bank balance from January 2009 statement, but that there were many estate expenses outstanding including attorney fees for administrating the estate and trial preparation expenses outstanding.   There was a discussion with the mediator that the trial was only three days away and my attorneys explained they were in the process of preparation.   It was agreed with the mediator that $10,000.00 would be deducted to account for the outstanding expenses and the estate balance was agreed upon at $45,000.00.

Thus, per Chrisman, the $45,000.00 estimate given to the mediator (and relayed to McAfee and Swope) represented the $55,000.00 in the account minus $10,000.00 in expenses.   Chrisman also noted that she did not receive a copy of the February 2009 bank statement until February 7 th.

Following a hearing, the motions to alter, amend, or vacate were denied.   These appeals followed.

On appeal, Appellants again challenge the trial court's refusal to set aside the “Mediation Conference Settlement Agreement” signed by the parties.   However, we are compelled to first address the contention of Appellees Chrisman and Rose that these appeals must be dismissed because Appellants have failed to name indispensable parties in their notices of appeal.   Chrisman and Rose specifically contend that Appellants failed to include them as parties on appeal in their capacities as co-executrices of Vada Sebastian's estate.   Chrisman and Rose assert that this failure is fatal to Appellants' appeals because in their roles as co-executrices, they are necessary parties to a full resolution of this case.

The notice of appeal filed by Appellant Swope provided that “[t]he names of the appellees against whom this appeal is taken are Marjorie Chrisman, Norma Rose, Sue McAfee, Malvery McKim, Pam Hubbard and Ruth Mallory, Defendants in this action.”   The notice of appeal filed by Appellant McAfee provided that “[t]he names of the appellees against whom this appeal is taken are Marjorie Chrisman, Norma Rose, Malvery McKim, Pam Hubbard and Ruth Mallory, Defendants in this action and Wilma Jean Swope, Plaintiff in this action.”   Appellees Chrisman and Rose were not also named as parties to the appeals in their capacities as co-executrices even though Appellant Swope's suit was filed against them in both their individual capacities and in their representative capacities.^Double The question then becomes whether dismissal is required.

“The jurisdictional rule set forth in City of Devondale v. Stallings, 795 S.W.2d 954 (Ky.1990), mandates that all indispensable parties must be timely and specifically named as parties in the notice of appeal.”  Commonwealth v. Maynard, 294 S.W.3d 43, 46 (Ky.App.2009).  “An indispensable party is one whose absence prevents the Court from granting complete relief among those already parties ․ [or] one whose interest would be divested by an adverse judgment.”  Liquor Outlet, LLC v. Alcoholic Beverage Control Bd., 141 S.W.3d 378, 387 (Ky.App.2004) (internal citations omitted);  see also Maynard, 294 S.W.3d at 47–48.  “For purposes of appeal, a person is a necessary party if the person would be a necessary party for further proceedings in the circuit court if the judgment were reversed.”  McBrearty v. Kentucky Cmty. & Technical Coll. Sys., 262 S.W.3d 205, 211 (Ky.App.2008);  see also Kesler v. Shehan, 934 S.W.2d 254, 257 (Ky.1996);  Watkins v. Fannin, 278 S.W.3d 637, 640 (Ky.App.2009).

“A decision of this Court rendered in the absence of an indispensable party necessarily will be inadequate.”  Watkins, 278 S.W.3d at 640.   Consequently, “failure to name an indispensable party in the notice of appeal results in dismissal of the appeal.”  Slone v. Casey, 194 S.W.3d 336, 337 (Ky.App.2006);  see also CR 19.02;  CR 73.02(2);  Courier–Journal, Inc. v. Lawson, 307 S.W.3d 617, 623 (Ky.2010);  Stallings, 795 S.W.2d at 957.   Appellants argue that this issue is unpreserved for our review because it was not raised in Appellees' prehearing conference statement.   However, “[t]he failure to name an indispensable party in the notice of appeal is considered a jurisdictional defect.”  Slone, 194 S.W.3d at 337.   Since “an appellate court may not acquire jurisdiction through waiver,” Watkins, 278 S.W.3d at 643, we are obligated to consider Appellees' argument.

After considering the record and the parties' arguments, we are not persuaded that dismissal is required, although we acknowledge that the question is provocative.   We have no doubt that Appellees Chrisman and Rose were given fair notice that they were parties to these appeals in their fiduciary capacities.   “While this Court recognizes the requirement for compliance with CR 73.03, the purpose of this Rule must be explored in its application.”  Blackburn v. Blackburn, 810 S.W.2d 55, 56 (Ky.1991).   The principal objective of a pleading, including a notice of appeal, is to give the opposing party fair notice.   Id.;  Lee v. Stamper, 300 S.W.2d 251, 253 (Ky.1957).

Accordingly, when “[t]he conduct of the parties throughout this case, as reflected by the record, leaves no doubt that the Appellees, as did the Appellants, fully understood the identity of all of the parties to the appeal throughout the course of the appeal,” our courts have upheld the intent of the “notice” nature of the Civil Rules.  Blackburn, 810 S.W.2d at 56;  Roberts v. Conley, 626 S.W.2d 634, 639 (Ky.1982).   Ultimately, “our emphasis remains on substance over style.”  Lassiter v. Am. Exp. Travel Related Services Co., Inc., 308 S.W.3d 714, 718 (Ky.2010).   Applying these standards and technical deficiencies aside, there is no doubt that the identities of the parties to the appeal in their individual and representative capacities are fully understood by all.   Accordingly, we deny Appellees' motion to dismiss and turn to the merits of these appeals.

Appellants again contend that the mediation settlement agreement should have been set aside because of fraudulent misrepresentations made by Appellees Chrisman and Swope about the balance of the estate bank account.   The trial court concluded, however, that no fraudulent misrepresentation occurred.   For reasons that follow, we agree.

Kentucky law recognizes and encourages the amicable resolution of disputes and settlement agreements.   See Calloway v. Calloway, 707 S.W.2d 789, 791 (Ky.App.1986).   However, as with any other contract, a settlement agreement is subject to judicial scrutiny and will not be enforced when procured by fraud or material misrepresentation.  Humana, Inc. v. Blose, 247 S.W.3d 892, 895 (Ky.2008).

A claim of fraudulent misrepresentation requires proof by clear and convincing evidence of six elements:

(1) that the declarant made a material misrepresentation to the plaintiff, (2) that this representation was false, (3) that the declarant knew the representation was false or made it recklessly, (4) that the declarant induced the plaintiff to act upon the misrepresentation, (5) that the plaintiff relied upon the misrepresentation, and (6) that the misrepresentation caused injury to the plaintiff.

Flegles, Inc. v. Truserv Corp., 289 S.W.3d 544, 549 (Ky.2009).  “The plaintiff's reliance, of course, must be reasonable[.]”  Id. Moreover, if the true facts can be readily ascertained, the plaintiff must use ordinary prudence and care to ascertain those facts.   Courts “will generally give no relief to a complaining party where means of knowledge of the truth or falsity of the representations are at his hands.”  Mayo Arcade Corp. v. Bonded Floors Co., 240 Ky. 212, 41 S.W.2d 1104, 1108 (1931);  see also McClure v. Young, 396 S.W.2d 48, 51 (Ky.1965).   A claim of fraudulent misrepresentation must be proven by clear and convincing evidence.  Flegles, 289 S.W.3d at 549.

The trial court's factual findings as to fraudulent misrepresentation were sparse, but Appellants made no request for additional findings.   As such, we are precluded from consideration of the alleged trial court failure to make findings on essential issues.   Consequently, we are confined to considering the record as a whole to determine if the action of the trial court was clearly erroneous.   See Cherry v. Cherry, 634 S.W.2d 423, 425 (Ky.1982).

Appellant McAfee asserts that she did not become aware that the bank account contained $57,281.91 instead of $45,000.00 until after the mediation was completed.   However, the bank statement attached to her motion to suspend the mediation settlement indicates otherwise.   It was dated a day before the mediation took place and reflected the exact amount.   Consequently, it appears that the “truth” of the matter was available to her and her claim, therefore, carries no weight.   See McClure, 396 S.W.2d at 51;  Mayo Arcade, 240 Ky. 212, 41 S.W.2d at 1108.

Moreover, the record fails to support Appellants' assertion that a material or fraudulent misrepresentation was made and that Appellees Chrisman and Rose did so knowingly or recklessly.   In their affidavits, Appellees Chrisman and Rose indicated that they advised the mediator that as of January 2009, the estate bank account contained approximately $55,000.00.   It was then agreed with the mediator that $10,000.00 would be deducted to account for outstanding estate expenses and the estate balance was agreed upon at $45,000.00.   Thus, the $45,000 estimate given to the mediator (and relayed to Appellants McAfee and Swope) represented the $55,000.00 in the account at that time minus $10,000.00 in expenses.   We note that McAfee and Swope did not ask the trial court for additional findings on this expense calculation.   From this evidence, there was no trial court error in its finding that Appellees Chrisman and Swope did not make a material misrepresentation.

Moreover, during the hearing on the motion to alter, amend, or vacate, counsel for Appellant Swope acknowledged that “the mediator told me there was $45,000.00 in the bank account, once you took out the outstanding checks.   Or I think he might have used the word expenses, but we understood when we discussed it further that was the outstanding checks.”   Consequently Swope was fully aware that the $45,000.00 figure represented the amount in the bank account minus outstanding obligations.   In view of these facts, we fail to see how Swope can claim that any misrepresentation took place, let alone a material one.   At the very least, she was under an obligation in the mediation to make further inquiry.   Consequently, her claim must fail.

For the foregoing reasons, the decision of the Breathitt Circuit Court is affirmed as to both appeals.

IT IS ORDERED that Appellees' motions to dismiss the appeals are overruled.

CLAYTON, JUDGE, CONCURS.

ENTERED:  April 13, 2012 /s/ Joseph E. Lambert

SENIOR JUDGE, COURT OF APPEALS

ACREE, JUDGE, CONCURS IN PART, DISSENTS IN PART, AND FILES SEPARATE OPINION:

ACREE, JUDGE, CONCURRING IN PART AND DISSENTING IN PART:  I find no fault with the analysis of the majority and, as to the appeal brought by Sue McAfee, I concur.   However, I conclude this Court lacks subject matter jurisdiction as to the appeal brought by Wilma Jean Swope;  her appeal should be dismissed.

Although this dissent may appear somewhat technical and academic (since the outcome would not change under my analysis), I am compelled to make it.   In another case, application of the concepts may have an actual impact on the outcome.

The only final order in this case is the calendar order granting the Appellees' motion to enforce the settlement agreement, entered on the docket and mailed to the parties on February 20, 2009.   McAfee's Notice of Appeal identifies that order as one from which she takes her appeal;  therefore, this Court had jurisdiction to address her appeal.

However, Swope appealed only from orders entered February 10, 2009, and February 24, 2009.   Those orders are interlocutory.

The February 10 order does nothing more than deny the Appellants' motion to set aside their settlement agreement;  the order left for a later date a final order to enforce the agreement and to dismiss the action.   An order, such as the February 10 order, “which adjudicates less than all the claims or the rights and liabilities of less than all the parties shall not terminate the action as to any of the claims or parties, and ․ is interlocutory ․”  CR 54.02(1)(emphasis added).   Since only judgments may be appealed to this Court, Swope's identification of that order in her Notice of Appeal did not invoke the jurisdiction of this Court.

Interlocutory orders, such as the February 10 order, however, remain “subject to revision at any time before entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.”  Id. The Appellants moved the circuit court to revise the February 10 order.   They did not identify the rule upon which they based their motion.   However, since CR 59 applies only to final judgments and not to interlocutory orders, the only authority for the motion was CR 54.02(1).   The motion was denied on February 24, 2009, by means of another interlocutory order.

Appellant Swope identified only the February 10 and February 24 interlocutory orders in her Notice of Appeal.   Therefore, we had no jurisdiction as to her appeal and should have dismissed it.