Lowe's Feed and Grain, Inc. v. Charles "Rick" Maxwell, Individually ( 2021 )

RENDERED: SEPTEMBER 24, 2021; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0742-MR
LOWE’S FEED AND GRAIN, INC. APPELLANT
APPEAL FROM WARREN CIRCUIT COURT
v. HONORABLE JOHN R. GRISE, JUDGE
ACTION NO. 07-CI-01581
CHARLES “RICK” MAXWELL,
INDIVIDUALLY AND IN HIS
OFFICIAL CAPACITY AS CITY
ELECTRICAL INSPECTOR FOR THE
CITY OF BOWLING GREEN,
KENTUCKY APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, COMBS, AND MAZE, JUDGES.
COMBS, JUDGE: Lowe’s Feed and Grain, Inc., appeals from a judgment of the
Warren Circuit Court entered on April 8, 2020, following a second remand that
was ordered by this Court. The judgment was entered in favor of Charles “Rick”
Maxwell, an employee of the City of Bowling Green. As noted, this was our
second remand in this action, and we directed the circuit court to revisit its analysis
of whether Maxwell had acted in good faith with respect to his duties as an
electrical inspector and, in turn, whether he was entitled to qualified official
immunity related to the claim for negligent misrepresentation asserted against him
by Lowe’s Feed. On appeal, Lowe’s Feed contends that this issue was resolved
squarely against Maxwell by the unanimous verdict rendered by the jury in June
2012 and that the trial court exceeded its authority by adjudging that Maxwell was
entitled to official immunity. After our review, we affirm the judgment.
This matter has been the subject of two prior appeals assigned to
separate panels of this Court and to two remands to the Warren Circuit Court. This
is the third appeal, and it follows the decision of the trial court following the
second remand. For the sake of efficiency, we rely upon the synopsis of the factual
background and procedural history provided in our initial opinion as follows:
[T]his dispute began with the loss of electrical power to
Lowe’s Feed. On September 27, 2002, an 800 amp
breaker in the mill building of Lowe’s Feed
malfunctioned during a storm leaving the building
without power. Don Lowe of Lowe’s Feed contacted an
electrical contractor, Patterson Westbrook, to perform the
needed electrical repairs to the mill building. Westbrook,
in turn, contacted Maxwell, an electrical inspector for the
City. Westbrook and Maxwell arrived at Lowe’s Feed on
the afternoon of September 27, 2002. Maxwell
concluded that the building was unsafe due to numerous
electrical code violations and ordered the electricity to be
disconnected and/or not restored to the mill building until
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the electrical system was in compliance with current
electrical code standards.
The subsequent facts of this case are vigorously
disputed by the parties. However, it is clear that City
Attorney Eugene Harmon mailed a letter dated October
30, 2002, to the attorney for Lowe’s Feed, David
Broderick. In that letter, Harmon informed Broderick
that the City was proceeding to condemn the mill
building for various violations of the International
Property Maintenance Code (IPMC), unless immediate
repairs were made. Under a permit obtained from the
City in January 2003 by Frank Tabor of Brothers Electric
on behalf of Lowe’s Feed, electrical repairs were made to
the mill building during 2003 and early 2004. These
electrical repairs were inspected by Maxwell and
approved in February 2004. Electricity was restored to
the mill building at that time.
On September 27, 2007, Lowe’s Feed filed a
complaint in Warren Circuit Court against Maxwell, in
his individual capacity and in his official capacity, and
against the City. Lowe’s Feed asserted that Maxwell
improperly terminated electricity to the mill building on
September 27, 2002, and then engaged in a conspiracy
with the City to wrongfully deny the mill building
electricity until February 12, 2004. Specifically, Lowe’s
Feed asserted, inter alia, the claims of fraudulent
misrepresentation and negligent misrepresentation
against Maxwell and the City.
Maxwell and the City filed an answer and
eventually filed a motion for summary judgment.
Kentucky Rules of Civil Procedure (CR) 56. Therein,
they argued that the City was entitled to statutory
immunity under the Claims Against Local Government
Act and that Maxwell was entitled to qualified official
immunity. By partial summary judgment entered
January 6, 2012, the circuit court concluded that neither
the City nor Maxwell was entitled to immunity upon the
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claim of fraudulent misrepresentation. As to the claim of
negligent misrepresentation, the circuit court determined
that the City and Maxwell were entitled to immunity for
the discretionary acts of “inspecting and cutting off
power at the mill” but were not entitled to immunity for
the ministerial acts of “alleged failure to communicate
promptly and efficiently.” Additionally, the circuit court
held that [Kentucky Revised Statutes] KRS 65.2002
barred recovery of punitive damages against the City.
The remaining claims were eventually tried by a
jury in the Warren Circuit Court in June 2012. The jury
found in favor of Maxwell upon the claim of fraudulent
misrepresentation. However, the jury returned a verdict
in favor of Lowe’s Feed upon its claim of negligent
misrepresentation against Maxwell and the City. The
jury also found in favor of Lowe’s Feed upon the claim
of fraudulent misrepresentation by the City. As for
compensatory damages, the jury awarded Lowe’s Feed
the sum of $850,000 jointly against the City and Maxwell
and also awarded Lowe’s Feed punitive damages of
$120,000 against Maxwell.
City of Bowling Green, Kentucky v. Lowe’s Feed and Grain, Inc., No. 2012-CA-
001899-MR, 2014 WL 6882925, at *1-2 (Ky. App. Dec. 5, 2014) (footnotes
omitted). The City and Maxwell appealed.
In the initial appeal, we considered whether the City was immune
from suit and whether Maxwell was entitled to assert qualified official immunity
against the claims of fraudulent and negligent misrepresentation. We concluded
that the City’s actions amounted to quasi-judicial acts and, consequently, that it
was entitled to immunity.
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With respect to Maxwell, we considered whether he was entitled to
qualified official immunity for communications connected to his duties as the
City’s electrical inspector. We concluded that Maxwell’s decisions concerning the
alleged code violations and his communications regarding those alleged violations
were inextricably intertwined and that his communications concerning the
electrical, building, and maintenance issues at Lowe’s Feed constituted
discretionary acts.
We then considered whether Maxwell had acted in good faith and
within the scope of his authority. We determined that the evidence presented at
trial indicated that he had been working within the scope of his authority.
However, we could not determine from this evidence whether he had been acting
in good faith. After discussing the applicable law established in Yanero v. Davis,
65 S.W.3d 510 (Ky. 2001), including the objective and subjective components of
the good-faith analysis, we held as follows:
As the issue of subjective good faith is often fact specific,
the circuit court is in the best position to determine
whether Maxwell acted in good faith:
“[S]ubjective intent or good faith, is a
factual question that so rarely can be
decided by summary judgment . . . and may
entail broad-ranging discovery and the
deposing of numerous persons, including an
official’s professional colleagues, and
normally requires a trial to resolve[.]” 201
S.W.3d at 474 (brackets omitted). Because
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whether an officer or employee acted in
good faith is a question of fact, we remand
to afford the circuit court an opportunity to
receive evidence on this issue. See [Rowan
Cty. v.] Sloas, 201 S.W.3d [469, 474 (Ky.
2006)].
Coleman v. Smith, 405 S.W.3d 487, 495 (Ky. App. 2012).
City of Bowling Green, 2014 WL 6882925, at *5. We remanded for the circuit
court to determine specifically whether Maxwell had acted in good faith with
respect to his communications with Lowe’s Feed concerning electrical, building,
and maintenance issues at the business. If it was determined that he had acted in
good faith, then he would be entitled to assert his qualified official immunity.
In responding to our first remand, the circuit court established a
briefing schedule for the parties to argue their respective positions. In its brief,
Lowe’s Feed argued that the court’s decision should be based upon the evidence
introduced at trial. Recounting the relevant trial testimony, Lowe’s Feed argued
that:
Maxwell’s actions in withholding accurate information
about repairs needed for his approval for electricity for
[Lowe’s Feed] for seventeen months were so arbitrary,
egregious and reckless as to constitute intentional and
malicious bad faith intent to cause injury to [Lowe’s
Feed] as a matter of law[.]
Lowe’s Feed contended that Maxwell abused his authority as an electrical
inspector as well as the code enforcement process; that his actions were
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intentional; and that he knew or should have known that his actions violated the
rights of Lowe’s Feed and caused it hardship.
In his brief, Maxwell argued that under the objective component of
the good-faith test, there was no evidence of record to support a finding by the
court that his actions violated Lowe’s Feed’s constitutional, statutory, or other
clearly established rights. Maxwell also disputed several factual assertions that
Lowe’s Feed made in its brief. As to the subjective component, Maxwell
contended that Lowe’s Feed had presented no evidence to show that he willfully or
maliciously intended to harm the business or that he acted with a corrupt motive.
Following a hearing, the trial court entered judgment in favor of
Lowe’s Feed on November 16, 2016. It acknowledged that:
[a]lthough this determination should be made by the trier
of fact, such as the jury, both parties have assured this
Court that it can decide the issue on the evidence
presented at the original trial. In other words, both
parties have waived their right to a jury trial on the issues
now before the Court on remand.
Reviewing the evidence presented at trial, the court found that
“Maxwell’s decision not to inform Lowe’s promptly of which violations occurred,
or how to fix them, was willful and unfair to Lowe’s, in a due process sense[,]” and
that “Maxwell, as the de facto arbiter of which consumers receive electrical power,
has a duty to give those he adjudicates to be unsafe a meaningful opportunity to
understand and correct the problem, and he may not consciously delay the process,
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especially after the power is shut off.” The court concluded that “Maxwell is not
entitled to qualified official immunity because he knew, or reasonably should have
known, that his actions as electrical inspector in willfully delaying the process by
which Lowe’s could regain electrical power was a violation of Lowe’s
constitutional due process rights[.]” The court reinstated the $850,000.00 verdict
for negligent misrepresentation and granted judgment in favor of Lowe’s Feed for
that amount, plus costs and interest. Maxwell appealed; Lowe’s Feed cross-
appealed.
In the second appeal, Maxwell argued that the circuit court erred by
concluding that he had violated the right of Lowe’s Feed to due process.
Consequently, he claimed that he was entitled to rely on the protections afforded
by official immunity. In a separate argument, Maxwell contended that the
evidence did not support the jury’s negligent misrepresentation verdict. Lowe’s
Feed responded by arguing that Maxwell was not entitled to appellate review of the
trial court’s resolution of the immunity issue and that questions related to the
sufficiency of the evidence had been settled in the first appeal. In its cross-appeal,
Lowe’s Feed sought an amendment of the 2016 judgment on remand to reflect that
the 2012 judgment remained in effect, meaning that it should bear interest from the
original date of entry.
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Upon our review, we held that Maxwell was entitled to seek review of
the circuit court’s legal ruling that he had acted in bad faith. We also emphasized
that we had not reached the sufficiency-of-the-evidence issue in the first appeal.
Instead, we had reversed the judgment based on the threshold issue of whether
Maxwell was entitled to qualified official immunity. Consequently, we concluded
that Maxwell was entitled to a review of the sufficiency of the evidence to support
the jury’s finding of negligent misrepresentation.
Addressing Maxwell’s arguments on appeal, we considered first
whether the circuit court erred by concluding, as a matter of law, that Maxwell
acted in bad faith and that he was therefore not entitled to qualified official
immunity. We reiterated that qualified official immunity “affords protection from
damages liability for good faith judgment calls made in a legally uncertain
environment” and that it
applies to the negligent performance by a public officer
or employee of (1) discretionary acts or functions, i.e.,
those involving the exercise of discretion and judgment,
or personal deliberation, decision, and judgment; (2) in
good faith; and (3) within the scope of the employee’s
authority.
Yanero, 65 S.W.3d at 522 (citations omitted).
We observed that bad faith could be “predicated on a violation of a
constitutional, statutory, or other clearly established right which a person in the
public employee’s position presumptively would have known was afforded a
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person in the plaintiff’s position, i.e., objective unreasonableness.” Bryant v.
Pulaski Cty. Detention Ctr., 330 S.W.3d 461, 466 (Ky. 2011). Acting in the face
of such knowledge makes the action objectively unreasonable.
In the alternative, we noted that bad faith could be predicated on
whether the public employee “willfully or maliciously intended to harm the
plaintiff or acted with a corrupt motive” -- making the action subjectively
unreasonable. Sloas, 201 S.W.3d at 475. Finally, we reiterated that whether an
individual is entitled to the protection of qualified official immunity is a question
of law, which we review de novo. Id.
Our review of the circuit court’s judgment on remand indicated that
its analysis was based on the objective prong of the bad-faith test. It determined
that Maxwell had knowingly violated the constitutional right of Lowe’s Feed to
due process by willfully delaying the ability of Lowe’s Feed to regain its electrical
power. However, we noted that Lowe’s Feed highlighted evidence relevant to the
subjective prong. Lowe’s Feed argued that Maxwell’s actions in withholding
information “were so arbitrary, egregious and reckless as to constitute intentional
and malicious bad faith intent to cause injury to [Lowe’s Feed] as a matter of law.”
In an opinion rendered in May 2018, we determined that the circuit
court erred by concluding that Maxwell violated the due process right asserted by
Lowe’s Feed. We noted that neither Lowe’s Feed nor the circuit court pointed to
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any authority protecting any interest (in the sense of due process) in continued
electrical service when a safety hazard or threat to the public exists -- as was the
case here. The circuit court concluded that Maxwell’s bad faith was predicated on
his failure to notify Lowe’s Feed in writing within one or two days of the specific
code violations; to describe the defective conditions and necessary repairs; and to
inform it of the appeal process. These omissions all fall under the objective bad
faith analysis as they address whether Maxwell violated Lowe’s Feed’s
constitutional due process rights. However, neither the circuit court nor Lowe’s
Feed cited to any provision of the applicable electrical code or any other authority
to support the specific duty imposed by the circuit court. While acknowledging
any customer’s need for timely and accurate notification procedures, we concluded
that those duties mandated by the circuit court must arise from an identifiable
source. As none had been identified in this case, we could not affirm the decision
of the circuit court.
Because the circuit court had not made a determination with regard to
subjective bad faith, there was nothing more for us to review with respect to the
threshold issue of whether Maxwell was immune from suit. Accordingly, we
vacated the circuit court’s final order and judgment. We remanded for a second
time directing the trial court to consider the issue of Maxwell’s subjective good
faith. We advised that if there were any material issues of fact, the matter should
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properly be decided by a finder of fact. We did not reach Maxwell’s argument that
the negligent misrepresentation verdict was not supported by substantial evidence.
The cross-appeal of Lowe’s Feed was rendered moot.
Upon remand, the circuit court again established a briefing schedule
for the parties to argue their positions. In an initial brief, Lowe’s Feed argued
again that the circuit court must complete the analysis that we ordered based upon
the record made at trial. Maxwell agreed that the issue of whether there was
subjective evidence indicating that he had acted in bad faith could be decided by
the trial court based on the record without the presentation of new evidence.
In an extensive substantive brief filed later, Lowe’s Feed again
recounted the trial testimony. It highlighted Maxwell’s “spiteful” and “cocky”
statements and argued that these statements were part of a “deliberate scheme of
malicious deceit and were intentional, oppressive actions” intended to cause harm
to Lowe’s Feed. It contended that evidence of Maxwell’s actions showed that his
interaction with Lowe’s Feed was a departure from his normal practice and
revealed that he was engaged in a scheme to drive Lowe’s Feed out of business.
Separately, Lowe’s Feed argued that Maxwell’s bad faith intention to harm it was
implicit in the jury’s award of punitive damages in its 2012 verdict.
In his brief, Maxwell reviewed evidence indicating that he advised
Lowe’s Feed that he would not authorize electrical power to be restored to its mill
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until the electrical system had been repaired and brought up to code. It was a full
five months later before Lowe’s Feed applied for a permit to repair the electrical
system. The permit was duly granted. Maxwell highlighted testimony indicating
that he met with electrical contractors hired by Lowe’s Feed each and every time
they needed him. He argued that Lowe’s Feed failed to identify affirmative
evidence to show that he did not act in good faith. In fact, Maxwell testified that
his sole motivation was his concern for the safety of the mill, the individuals
working there, and those living in close proximity to it.
Following a hearing, the trial court entered judgment in favor of
Maxwell. It acknowledged that the parties had again waived their right to have any
issue on remand determined by a jury. It recognized that the court was charged
with deciding whether Maxwell had forfeited his immunity by acting willfully or
maliciously with an intent to harm Lowe’s Feed or by acting with a corrupt motive.
Following a thorough review of the evidence, the court determined that although
Maxwell had been “inexcusably indifferent, unhelpful, and unclear,” evidence of
his bad behavior was insufficient to show a malicious intent to harm Lowe’s Feed.
Instead, the court found that the evidence showed no more than a “reckless
indifference to the needs of a business citizen.” The court concluded that the
evidence produced by Lowe’s Feed was insufficient to meet its burden of proof.
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Consequently, judgment was entered in favor of Maxwell. The motion of Lowe’s
Feed to vacate, alter, or amend was denied, and this appeal followed.
On appeal, Lowe’s Feed states broadly that the findings and
conclusions of the Warren Circuit Court are clearly erroneous or, in the alternative,
that the court abused its discretion by acting beyond its authority on remand.
Specifically, it argues that the trial court usurped the role of the jury “by
interpreting facts, drawing inferences, making conclusions, making determinations
of credibility and assigning weight to certain evidence[.]” It argues that the jury’s
award of punitive damages indicates that it was persuaded by the evidence of
Maxwell’s fraud, malice, or oppression -- a finding sufficient to support a
conclusion that Maxwell acted in bad faith. It contends that the trial court’s task
on remand was simply to determine whether the evidence supported the jury’s
award of punitive damages rendered in June 2012. Lastly, concluding that the
evidence was sufficient to support the punitive damages award, Lowe’s Feed
argues that our decision in the first appeal constitutes a palpable error resulting in
manifest injustice. Consequently, Lowe’s Feed asks this Court to reinstate the
judgment rendered in its favor in June 2012 -- including the punitive damages
awarded. We disagree with each of these assertions.
The circuit court clearly understood its task on remand. Pursuant to
the agreement of the parties to waive further jury involvement, the court carefully
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analyzed the evidence presented by Lowe’s Feed arguably demonstrating that
Maxwell failed to act in good faith. However, the court was not persuaded by this
evidence. It was not persuaded that Maxwell acted with a malicious intent to harm
Lowe’s Feed or that he acted with a corrupt motive. Consequently, it concluded
that Maxwell was entitled to assert official immunity. The evidence of record
supports the determination made by the court -- that the evidence is insufficient to
carry the burden of proof imposed by the law upon Lowe’s Feed.
Furthermore, contrary to the assertion of Lowe’s Feed, the trial court
was not bound to infer from the jury’s award of punitive damages that Maxwell
had failed to act in good faith and had thereby forfeited his immunity. In its
verdict, the jury found in favor of Maxwell with respect to the claim of fraudulent
misrepresentation; it found in favor of Lowe’s Feed only upon the claim of
negligent misrepresentation. Having been erroneously instructed, the jury awarded
punitive damages based upon Maxwell’s negligent misrepresentation.
However, as we noted in the initial appeal, punitive damages are not
recoverable on a claim for negligent misrepresentation. Through its verdict, the
jury found that Maxwell provided false information. That finding did not preclude
the circuit court from determining on remand that Lowe’s Feed failed to show that
he acted with a malicious intent to harm the business or that he acted with a corrupt
motive. After sorting out and reconsidering the material facts, the circuit court
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concluded as a matter of law that Maxwell was protected by qualified official
immunity. There was no error.
Lastly, we reject the argument that our decision in the first appeal
constitutes a palpable error resulting in a manifest injustice to Lowe’s Feed and
that reinstatement of the June 2012 judgment -- including punitive damages -- is
required or warranted. The law-of-the-case doctrine is applicable here. That
doctrine embodies the general principle that a court addressing later phases of a
legal action should not reopen questions decided by that court or by a higher court
during earlier phases of the litigation. Wright v. Carroll, 452 S.W.3d 127 (Ky.
2014). “This rule serves the important interest litigants have in finality by
guarding against the endless reopening of already-decided questions.” Id. at 130.
“It also serves the equally important interest courts have in judicial economy by
preventing the drain on judicial resources that would result if previous decisions
were routinely subject to reconsideration.” Id. Despite these sound objectives, an
appellate court may deviate from the doctrine if its previous decision was “clearly
erroneous and would work a manifest injustice.” Id. (citing Arizona v. California,
460 U.S. 605, 618 n.8, 103 S. Ct. 1382, 1391, 75 L. Ed. 2d 318 (1983)). That is
plainly not the case here.
Upon the initial appeal, we held that the circuit court erred by denying
Maxwell’s motion to set aside the jury’s punitive damage award because those
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damages are not recoverable for a claim of negligent misrepresentation. As the
jury found that Maxwell committed only the tort of negligent misrepresentation,
the punitive damage award could not stand as a matter of law. In support of the
well-established rule, we cited the opinion of the court in Morton v. Bank of the
Bluegrass and Trust Company, 18 S.W.3d 353 (Ky. App. 1999), in which we held
that punitive damages could be awarded only for intentional actions such as
fraud, oppression, or malice.
The Supreme Court of Kentucky denied the motion of Lowe’s Feed
for discretionary review of our opinion, and it became final on September 23,
2015. Our decision was not clearly erroneous, nor did it work a manifest injustice.
The judgment of the Warren Circuit Court is affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Charles D. Greenwell Shawn R. Alcott
Prospect, Kentucky Bowling Green, Kentucky
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