Court Opinion

ID: 3446419
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:18:18.762294+00
Date Added: 2024-06-11T13:52:31.134289
License: Public Domain

I concur in the conclusion of the court that the statutory powers of the fiscal court were not suspended by the bringing of this action, and that the fiscal court had the power to make the compromise, but am of the opinion that the demurrers to the replies attacking the compromise in both the Bradley and the Rodes cases were properly sustained. The question turns on whether the allegations of fraud or bad faith are sufficient. In order that there may be no misunderstanding of the language employed, I have deemed it best to set out at length the reply in the Bradley case. It is as follows:
    "The plaintiff for further reply to the eighteenth paragraph and without waiving his motion to strike it from the files or his demurrer thereto, the plaintiff says that the alleged compromise and settlement *Page 360 
between the fiscal court, Thomas C. Bradley, the National Surety Company and George R. Hunt, the attorney of said Bradley, and said National Surety Company and as set forth in the eighteenth paragraph of the substituted answer of said Bradley was and is a scheme and a deliberate agreement made and entered into by said parties to impede the due and regular administration of justice in this case as directed in the opinion of the Court of Appeals; and to oust the Fayette circuit court and the court of Appeals of their jurisdiction of said case; and to shield said Bradley and his surety, the National Surety Company, from having to answer and disclose the excess in controversy and account therefor; that said parties knew that the Court of Appeals had said in two opinions said Bradley should settle and account for the excess in controversy; that said Court of Appeals had held that the said fiscal court was incapacitated to act in this case for and on behalf of Fayette county; and that a majority of the members of said fiscal court were parties defendants in this suit; that each of said parties after objecting to the legal capacity of the plaintiff to institute and prosecute this action, knew that the Court of Appeals had overruled their objection and held in two opinions that the plaintiff, Paul E. Shipp, possessed the legal capacity and right to institute and prosecute this action against said Bradley and said National Surety Company for and on behalf of himself, the other taxpayers of the county and the county itself. Plaintiff further states that said Bradley and said National Surety Company by their said attorney had entered into said compromise and settlement of the claim of Fayette county and her taxpayers against said Bradley and said surety company for the purpose of further obstructing the administration of justice in said case got together and attempted to compromise for $10,000.00; when the public inspector's report and the records of Fayette county show that the defendant, Bradley, and the surety company are indebted to the plaintiff and to Fayette county and her taxpayers in the sum of $130,000.00, after deducting each year $5,000.00 as compensation to said Bradley. The plaintiff further states that prior to the attempted compromise the defendant Bradley by his attorney offered to compromise *Page 361 
promise his indebtedness to the plaintiff to Fayette county and her taxpayers for $20,000.00. Plaintiff further says the majority of the members of said fiscal court are parties defendants in this case and were and are disqualified to act for or on behalf of Fayette county herein for any purpose. With these facts shown by the record the defendant, Thomas C. Bradley, the National Surety Company, the fiscal court and George R. Hunt, attorney for said Bradley and said company, for ousting the Fayette circuit court and the Court of Appeals and to prevent the plaintiff from the further prosecution of this case and for the purpose of aiding said Bradley and said company to conceal and evade their liability to Fayette county and her taxpayers and to defeat the due administration of the law herein, made the alleged compromise and settlement relied on as a bar herein. Plaintiff further says that the said fiscal court was and is without power, jurisdiction or authority to compromise or settle said claim with said Bradley and his said surety and the attempted settlement is void; that the order of the fiscal court accepting the proposition of said Bradley to pay said $10,000.00, the order attempting to discharge said Bradley and to release him from all or any liability to Fayette county, her taxpayers and to this plaintiff are ultra vires and void. Plaintiff further says the eighteenth paragraph of the substituted answer of said Bradley herein pleading the alleged settlement and compromise with the fiscal court is a sham and frivolous pleading made for the sole purpose of delaying and to obstruct the due administration of law. The plaintiff for further reply to said eighteenth paragraph says that the Court of Appeals in two opinions has held that Fayette county and her taxpayers had the right to recover said excess from said Bradley now illegally retained by him; that said excess being not only illegally retained but prohibited by section 246 of the Constitution and sections 1729 and 4168, Kentucky Statutes, can not be the basis of a legal compromise or settlement for less than said excess; and that after the right to said excess has been determined in two opinions of the Court of Appeals neither the plaintiff nor the fiscal court has the right or power to dismiss said action to the prejudice of Fayette county or her taxpayers, and that said compromise *Page 362 
and orders of the fiscal court attempting to dismiss this case are void."
In determining whether a pleading is sufficient it must be considered as a whole. Ross v. Columbus Mining Co., 204 Ky. 474,  264 S.W. 1071. Anyone who will take the trouble to read the whole of the foregoing paragraph will see that the purpose, and sole purpose, of the pleader was to allege that because of the steps taken in the action the members of the fiscal court were without power to make the compromise on the ground that it operated to impede the administration of justice by depriving the courts of jurisdiction to proceed with the case. In short, it is a combined plea of contempt of court and want of capacity on the part of the fiscal court to make the settlement. This is clearly shown by the concluding words, "neither the plaintiff nor the fiscal court has the right or power to dismiss said action to the prejudice of Fayette county or her taxpayers, and that said compromise and orders of the fiscal court attempting to dismiss this case are void." The claim that the compromise was a contempt of court was effectually disposed of in Shipp v. Doak, 211 Ky. 737, 277 S.W. 1020, and the further claim that the members of the fiscal court were without power to make the compromise because of the steps taken in the action has been adjudged without merit in the first part of the majority opinion.
But, even if we assume contrary to the law of good pleading that certain expressions may be separated from their context and construed for a purpose not intended, it remains to determine whether they are legally sufficient to sustain a charge of bad faith. There are certain principles of law concerning which the courts entertain a difference of opinion, but the rules applicable to this case have never been questioned by any court since the beginning of time. They are:
(1) Pleadings are construed most strongly against, the pleader. Hughes v. Collins, 197 Ky. 589, 247 S.W. 737.
(2) Fraud is not presumed, but must be clearly alleged and proved. Indiana National Life Insurance Co. v. Maines,191 Ky. 309, 230 S.W. 54.
(3) General averments of fraud are not sufficient, but the particular facts and circumstances constituting the fraud must be clearly, concisely and specifically set out. Jasper v. Hamilton, 3 Dana 280; Loesser v. Loesser, *Page 363 81 Ky. 139; Phillips' Admr. v. Phillips, 81 Ky. 147; Machen v. Bernheim 93 S.W. 621, 29 Ky. Law Rep. 427; Star Milling Co. v. Board of Councilmen, 125 S.W. 1051; Cary v. Mire, 143 Ky. 63,135 S.W. 403; Crider v. Sutherland, 186 Ky. 7, 216 S.W. 37; Creekmore v. Central Construction Co., 157 Ky. 336,163 S.W. 194; Town of Russell v. Whitt, 161 Ky. 187, 170 S.W. 609; 9 Encyclopedia Pleading  Practice, 687, 16 Cyc. 231; Hays Creek Coal Co. v. Eagle Coal Co., 170 Ky. 323, 185 S.W. 1113; 27 C. J. 28; 12 Rawle C. L. 419.
The reason for the rule is twofold: (1) To enable the court to determine whether the facts relied on constitute fraud; (2) to apprise the opposite party of what he is called upon to answer.
With these principles in mind let us examine the allegations which the majority opinion holds are sufficient to make out a charge of fraud or bad faith. They are:
    (1) "The parties to the compromise, for the purpose of further obstructing the administration of justice in said case got together and attempted to compromise for $10,000.00, when the public inspector's report and the records of Fayette county show that the defendant, Bradley, and the surety company are indebted to the plaintiff and to Fayette county and her taxpayers in the sum of $130,000.00, after deducting each year $5,000.00 as compensation to said Bradley."
    (2) "Prior to the attempted compromise the defendant Bradley by his attorney offered to compromise his indebtedness to the plaintiff to Fayette county and her taxpayers for $20,000.00."
    (3) "The alleged compromise . . . . was and is a scheme and a deliberate agreement made and entered into by said parties to impede the due and regular administration of justice in this case as directed in the opinion of the Court of Appeals; and to oust the Fayette circuit court and the Court of Appeals of their jurisdiction of said case; and to shield said Bradley and his surety, the National Surety Company, from having to answer and disclose the excess in controversy and account therefor."
    (4) "The alleged compromise was made for (the purpose of) ousting the Fayette circuit court and the Court of Appeals and to prevent the plaintiff *Page 364 
from the further prosecution of this case and for the purpose of aiding said Bradley and said company to conceal and evade their liability to Fayette county and her taxpayers and to defeat the due administration of the law herein."
(1) Taking up allegation No. 1, it will be observed that it contains no averment that the members of the fiscal court knew or were ever informed of the existence of the report of the public inspector, whoever he may be, or of what it is alleged the records of Fayette county show. Nor are any facts alleged showing how or why the public inspector's report and other matters referred to happened to be of record, or that they were properly recorded. Therefore, no case of imputed notice is presented. But, aside from this, can a public record be pleaded by an allegation that it shows so and so? The question is answered in City of Newport v. Lang, 155 Ky. 776,160 S.W. 499, where we used the following language:
    "Where the interpretation of public records is involved and their legal effect is to be adjudged, good pleading requires either that the records should be set forth at length in the body of the pleading, or that copies of them should be filed; otherwise, the courts will be left to the interpretation of such records which are contained in the conclusions reached by the pleader or his attorney."
If this be the rule as to an admitted public record, is it not all the more necessary to set forth the contents of other alleged records when there is nothing in the pleading to indicate that the matters recorded were properly of record, or were such as to charge the public with notice of their contents? It is apparent therefore, that the allegation as to what the public inspector's report and the records of Fayette county showed, is but a conclusion of the pleader without facts to support it. But, even if we go further and admit the sufficiency of the allegation, surely the time has not come when fraud or bad faith may be predicated on a fact of which those charged with fraud or bad faith have no knowledge either actual or constructive. In dealing with the allegation in question the court said:
    "It may be that this allegation, scant though it is, is sufficient to entitle the plaintiff to prove, if he *Page 365 
can, that there was an undisputed claim due Fayette county greater than $10,000.00 in each case, which sum was accepted in settlement of the litigation. If it could be shown that Bradley and Rodes were owing the county more than the amount which they paid and that the difference between what they were owing and what they paid was admittedly due by them, and the fiscal court at the time it made the compromise knew that it was accepting a less sum than was admittedly due, it would tend to show a lack of good faith on the part of the fiscal court."
Even if it be conceded that this is a correct proposition of law, it is not perceived how it has any application to this case. A careful scrutiny of the entire paragraph will disclose no fact from which it can be even remotely inferred that there was an undisputed claim due Fayette county greater than $10,000.00, or that the fiscal court knowingly settled for a less sum than Bradley admitted to be due.
(2) Respecting allegation No. 2, the court uses this language:
    "There is no allegation that this offer was brought to the attention of the fiscal court and yet it is evidence, if true, that Rodes and Bradley admitted that they were owing the county more than they paid it and that might tend to show lack of good faith on the part of the fiscal court, although it could have little weight unless it should be shown that the fiscal court, at the time it made the settlement, knew that Rodes and Bradley were willing to pay more than was accepted by the court."
It must not be overlooked that we have not yet reached the proof, but are dealing with the question whether the pleading is sufficient to charge bad faith on the part of the fiscal court. A fact not alleged can not be proved, and surely we have not reached the point where the sufficiency of a pleading on demurrer may be bolstered up by evidence which the pleader will not be permitted to introduce. So far as I have been able to ascertain, this is the first time that it has ever been held that an offer to compromise at a certain sum was admissible for the purpose of showing liability to that amount. But, aside from this, as the alleged first offer of $20,000.00 was not made to the fiscal court, but was made to *Page 366 
plaintiff, and there was no averment that the fiscal court knew of the offer, it necessarily follows that the allegation was wholly insufficient to charge the fiscal court with bad faith.
(3) Taking up allegations No. 3 and No. 4, it will be seen that the court concedes that allegation No. 3 is insufficient, but holds allegation No. 4 sufficient. Clearly, there is no difference between an allegation that the compromise "was a scheme to shield Bradley from having to disclose the excess and account therefor," and the allegation that the compromise was made "for the purpose of enabling Bradley to conceal and evade his liability." Therefore, allegation No. 4 is simply a restatement in different language of allegation No. 3, and, if one is insufficient, the other is insufficient. But I do not care to rest the case on what is conceded. If the allegations in question are not general averments, the word "general" has lost its meaning, and all the decisions of this and every other court in the land are incorrect. Neither allegation contains any facts or circumstances from which the court could determine that the compromise "was a scheme to shield Bradley from disclosing the excess," or "was made for the purpose of enabling him to conceal and evade his liability." Surely the allegation that the compromise "was a scheme to shield Bradley and his surety from having to disclose the excess in controversy and account therefor," or the allegation that the compromise was made "for the purpose of aiding said Bradley and said company to conceal and evade their liability to said Fayette county and her taxpayers," is no stronger than if the pleader had alleged that the compromise "was a scheme to defraud Fayette county and her taxpayers," or "was made for the purpose of defrauding Fayette county and her taxpayers," and we have uniformly held such allegations insufficient. Jasper v. Hamilton, supra; Loesser v. Loesser, supra;
Machen v. Bernheim, supra; Star Milling Co. v. Board of Councilmen, supra. In the first mentioned case the allegation 'that the defendant fraudulently misrepresented and concealed the nature and goodness of the conflicting claims, and the condition of his own claim," was held too general, and therefore insufficient. In Loesser v. Loesser, appellant attacked a partnership settlement on the ground of fraud. He alleged in substance:
    "That appellee failed to make the proper entries in the books of the sales made by him of the firm *Page 367 
property, and that, instead of a loss, they had made profits amounting to sixteen thousand dollars, to one-half of which the appellant was entitled; that he relied on the books and the honesty of his partner when he made the settlement and executed his receipt, but he was deceived by the representations made by his partner, and induced to execute the receipt by reason of his fraud; that the entries of sales and the proceeds of sales were made exclusively on the representations of his partner; that said representations were false and fraudulent; that their business house was in Owensboro, and the sales were made in Louisville, Carrollton, Cincinnati, New York, Philadelphia and other distant points, to parties with whom the transactions were had by appellee, and the latter rendered false accounts of sales, etc., making thereby false entries in the books of the firm, and imposing on appellant by his fraudulent conduct; that they kept limited and imperfect accounts at best, and the books, etc., of the firm had been mutilated, and the pages torn out by appellee, so as to make them unintelligible; that he had found among some waste papers thrown aside by appellee the memoranda of the settlement  showing their purchases to have been about $170,000.00, and the amount of sales something less."
In an opinion by Judge Pryor the court held that the foregoing allegations, although much stronger than those involved in this case, amounted only to a general charge of fraud, and, no specific acts of fraud being alleged, the pleading was insufficient. In reaching this conclusion the court stated, in substance, that, if a partner attacking a settlement could rely on a general charge of fraud, it would necessitate an investigation by the chancellor of the entire partnership accounts, which he had no right to require. For the same reason the general charge that the compromise was made to conceal and evade liability, without any facts to sustain it, would require the court to investigate the entire transaction for the purpose of determining whether the compromise was made to conceal and evade liability.
Perhaps the best test for determining whether or not a pleading states facts or a mere conclusion is to ascertain whether a witness would be permitted to testify in the language of the allegation. Suppose a witness should *Page 368 
undertake to testify that the compromise "was a scheme to shield Bradley and his surety from having to answer and disclose the excess in controversy and account therefor," or that the compromise was made "for the purpose of aiding said Bradley and said company to conceal and evade their liability to Fayette county and her taxpayers," is there a court in any English speaking country that would not exclude the answer on the ground that it was a mere conclusion of the witness? And, if the answer is a conclusion of the witness, is not the same statement in a pleading a conclusion of the pleader?
The court characterizes the allegations in question as "meager" and "scant." This is an undeserved compliment. In law they amount to nothing. But even if worthy of being denominated "meager" and "scant," they can not be held sufficient without violating the rule that on demurrer a pleading is strictly construed against the pleader, Woodruff v. Shea, 152 Ky. 657,153 S.W. 1005, and the further rule that the particular facts and circumstances constituting the fraud must beclearly alleged. 9 Encyclopedia of Pleading 
Practice, 687.
In the companion case of Shipp v. Rodes, the allegations of the reply and amendments attacking the settlement are, if anything, more general and indefinite than those in the Bradley case, and need not be set out at length, nor separately discussed.
Being firmly of the opinion that, under the law as repeatedly announced by this court, the judge of the Fayette circuit court could not have reached any other conclusion than that the replies and amendments in each case were clearly insufficient to charge fraud or bad faith on the part of the fiscal court, I have felt impelled to dissent, and to express my views somewhat at length.