Court Opinion

ID: 7802012
Source: CourtListenerOpinion
Date Created: 2022-08-19 14:05:37.018622+00
Date Added: 2024-06-11T16:29:22.884502
License: Public Domain

RENDERED: AUGUST 12, 2022; 10:00 A.M.
                        NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals

                             NO. 2021-CA-0380-MR

GARY JOY, INDIVIDUALLY AS
SOLE SHAREHOLDER OF JOY &
ASSOCIATES, INC.; AND JOY &
ASSOCIATES, INC.                                                   APPELLANTS

                APPEAL FROM JEFFERSON CIRCUIT COURT
v.               HONORABLE AUDRA J. ECKERLE, JUDGE
                ACTION NOS. 17-CI-002914 AND 17-CI-006786

LOWELL WAINWRIGHT;
LAURENCE ZIELKE; AND ZIELKE
LAW FIRM PLLC                                                        APPELLEES

                                    OPINION
                                   AFFIRMING

                                  ** ** ** ** **

BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND GOODWINE, JUDGES.

GOODWINE, JUDGE: Gary Joy, individually as sole shareholder of Joy &

Associates, Inc. and Joy & Associates, Inc. (collectively “Joy”) appeal from the

Jefferson Circuit Court’s grant of summary judgment on Joy’s claim for wrongful

use of civil proceedings in favor of Lowell Wainwright (“Wainwright”); Laurence
Zielke; and Zielke Law Firm PLLC (collectively “Zielke”). After careful review,

finding no error, we affirm.

             The Jefferson Circuit Court summarized the facts and procedural

history as follows:

                    This case is a wrongful use of civil proceedings
             action that has its genesis in the parties [sic] failed
             investment in a retail shopping center (hereinafter,
             “Crossroads Plaza”) and the various crossclaims that
             were filed after the shopping center’s mortgage holder
             moved to foreclose. The dispute began when Plaintiffs,
             Gary Joy, Individually, and as Sole Member of Joy &
             Associates, L.L.C. (hereinafter, collectively, “Joy”), who
             previously served as the sole member of Crossroads
             Plaza, began seeking additional investors. He eventually
             approached Wainwright, his neighbor, with an offer to
             become a member of the business in exchange for an
             investment. Wainwright then sought information from
             Scott Conway (hereinafter, “Conway”), the president of
             First Citizens Bank (hereinafter, “FCB”), which held a
             mortgage on Crossroads Plaza. Apparently satisfied with
             the information he received from Conway and the
             representations made by Joy during their negotiations,
             Wainwright agreed to become a member and provided
             his required investment with proceeds he received from a
             loan issued by FCB. In August 2010, Wainwright and
             Joy executed a formal, Operating Agreement. (See
             Def.’s Mo. to Dismiss, Ex. B, p. 4.)

                    Sometime thereafter, Joy used a portion of
             Wainwright’s investment on expenditures related to a
             different shopping center he owned, the Shops at Pleasant
             Grove (hereinafter, “Pleasant Grove”). This sum
             included payments to cover the interest due on a loan
             Crossroads Plaza’s [sic] received from Pleasant Grove.
             Although it is undisputed that using the funds in this way
             was permitted under the Operating Agreement, it

                                        -2-
allegedly conflicted with a previous oral promise that
Wainwright’s investment would be used solely for
Crossroad Plaza’s tenant improvements.

       In Spring of 2011, FCB changed the terms of the
mortgage payments from interest only to principal plus
interest. Joy and Wainwright then began negotiating
with FCB to obtain a more manageable obligation.
These efforts were unsuccessful, and the loans defaulted.
In December 2011, Wainwright held a meeting with Joy
in which he disclosed his plans to sue FCB. (See Def.’s
Reply, Ex. A.) According to Wainwright, he also
informed Joy that he might name him as a defendant after
he had “see[n] all the numbers.” (Id.)

      On January 5, 2012, FCB filed a foreclosure action
against Joy and Wainwright. On January 23, 2012,
Wainwright counterclaimed, alleging Conway
misrepresented Crossroads Plaza’s financial condition
and failed to disclose that funds from his investment
would be used to pay off its debts.

       Discovery commenced, and Wainwright informed
Joy that he knew Joy “didn’t do anything wrong,” but
had to add him as a defendant to “get to the bank, nothing
more.” (See Pl.’s Sur-reply, Ex. A Joy Aff. ¶ 7.)
Wainwright also informed Joy’s business counsel that he
had to add Joy as a defendant to “strengthen their [sic]
case against the bank.” (See Sur-reply, Ex. B, Adams
Aff. ¶ 6.)

      On November 29, 2012, Joy admitted in a
deposition that the possibility of using Wainwright’s
investment to make the interest payments owed to
Pleasant Grove was not discussed before Wainwright
obtained his loan from FCB. (Id., Ex. C, Joy Dep. 113:
13-20.) But he explained that using the funds in this
way, and the possibility of Wainwright becoming an
equity investor in Pleasant Grove, was discussed
sometime after Wainwright invested in Crossroads Plaza.

                           -3-
(Id. 113:21-115:1.) Joy testified that he
“wholeheartedly” believed Wainwright understood a
portion of his investment would go towards Pleasant
Grove. (Id. 187:21.) But he conceded that such an
agreement was never put into writing. (Id., 187:23-25.)
On January 2, 2013, Wainwright filed a crossclaim
against Joy, alleging fraud, breach of fiduciary duty, and
conversion.

       On April 19, 2013, the Bullitt Circuit Court
granted FCB’s motion for summary judgment on its
claims against Wainwright and his fraud claims against
the bank. (See Def.’s Mo. to Dismiss, Ex. B.) The Court
determined that there was no evidence that FCB or
Conway failed to disclose any fact they had a duty to
disclose. (Id.) On March 3, 2016, Joy moved for
summary judgment on Wainwright’s crossclaims,
arguing Wainwright’s [sic] could not prove the reliance
necessary to prevail on fraud. (Id., Ex. A.) He pointed to
statements in Wainwright’s deposition in which he
discussed reliance on representations made by Conway.
(Id.) The Bullitt Circuit Court denied the motion,
pointing to statements in Wainwright’s deposition in
which he alleged Joy was “complicit” in Conway’s
withholding of material facts about Crossroad Plaza.
(Id.) The Bullitt Circuit Court held that these statements
created an issue of material fact concerning Wainwright’s
reliance on Joy’s alleged misrepresentations. (Id.)

       The case proceeded to trial and the Bullitt Circuit
Court entered a directed verdict in Joy’s favor, finding
that there was no evidence Joy acted outside the terms of
the parties’ Operating Agreement. (See Def.’s Mo. to
Dismiss, Ex. D.) The Bullitt Circuit Court acknowledged
that there was evidence Joy breached a promise to use
Wainwright’s investment solely for tenant improvements,
but concluded that such a representation could not
provide a valid basis for fraud because it conflicted with
the terms of the parties’ subsequent contract. (Id.)
Wainwright did not appeal this judgment.

                            -4-
                    On June 8, 2017, Joy sued Wainwright for
             wrongful use of civil proceedings and abuse of process,
             alleging that Wainwright knowingly pursued a baseless
             crossclaim to improve his case against FCB. Wainwright
             then moved to dismiss. Relying on the doctrine of res
             judicata, Wainwright argued that the Bullitt Circuit
             Court’s Order denying Joy’s motion for summary
             judgment precluded a finding that he lacked probable
             cause or acted with improper purpose. Joy responded
             that an Order denying summary judgment did not invoke
             res judicata. He contended that there were genuine issues
             of material fact regarding Wainwright’s motive and
             purpose in pursuing his crossclaim in light of evidence he
             sued Joy merely to “get to the bank.” (See Pl.’s Resp., p.
             12.)

                   Wainwright replied that he had probable cause to
             pursue fraud claims against Joy after Joy admitted in his
             deposition that he used funds from Wainwright’s
             investment to cover expenses associated with Pleasant
             Grove. Joy sur-replied that this testimony did not
             provide probable cause because the record showed that
             Wainwright learned of, and consented to, expenditures on
             behalf of Pleasant Grove prior to his deposition.

Record (“R.”) at 554-58.

             On October 12, 2017, the circuit court denied Wainwright’s motion

for summary judgment. The court found there was a genuine issue of fact as to

whether Wainwright filed his crossclaim against Joy merely to improve his

position against FCB.

             On July 13, 2018, the circuit court dismissed the abuse of process

claim as time barred and struck the malicious prosecution claim for lack of clarity.

                                         -5-
The only remaining claim against Wainwright and Zielke was wrongful use of civil

proceedings.

               On May 20, 2020, Wainwright moved for summary judgment. Zielke

moved for summary judgment the next day. “Wainwright argued he [was] entitled

to summary judgment because Joy [could not] prove the essential element of

probable cause as he was entitled to act on Zielke’s advice.” R. at 2019.

Wainwright’s argument was based on two pieces of evidence: (1) his affidavit

stating he made a full and fair disclosure to Zielke of all facts about his potential

claims against Joy in the Bullitt Circuit Court proceedings; and Zielke’s September

13, 2017 email to Wainwright informing him he had an advice of counsel defense

to Joy’s wrongful use of civil proceedings claim, if the court did not dismiss the

claim. Zielke also moved for summary judgment arguing there was probable

cause and no evidence of malice. In response, Joy argued Wainwright lacked

probable cause to support his crossclaim and filed it for an improper purpose. But

Joy submitted no evidence to support his position.

               On March 5, 2021, the circuit court entered an order granting

summary judgment for Wainwright and Zielke. The court found there was no

factual dispute over Wainwright’s advice of counsel defense, and that Wainwright

and Zielke had probable cause to file the crossclaim. As to the lack of

malice/improper purpose, the circuit court agreed with Zielke’s argument and

                                          -6-
found “the only evidence of an alleged improper purpose Joy . . . identified is an

inference of malice stemming from the alleged absence of probable cause in

initiating and continuing” the crossclaim. R. at 2028. These are two separate

elements of wrongful use of civil proceedings. Thus, the court granted summary

judgment for Wainwright and Zielke. This appeal followed.

                On appeal, Joy argues: (1) summary judgment was premature and (2)

there were genuine issues of material fact as to probable cause and improper

purpose.

                First, Joy argues summary judgment was premature because he had

not yet deposed Wainwright and Zielke when the circuit court granted summary

judgment. We review a circuit court’s “determination that a sufficient amount of

time has passed and that it can properly take up the summary judgment motion for

a ruling . . . for an abuse of discretion.” Blankenship v. Collier, 302 S.W.3d 665,

668 (Ky. 2010). “It is not necessary to show that the respondent has actually

completed discovery, but only that respondent has had an opportunity to do so.”

Hartford Ins. Group v. Citizens Fid. Bank & Tr. Co., 579 S.W.2d 628, 630 (Ky.

App. 1979) (citing CR1 56.03).

                Joy filed this action in 2017, and the circuit court’s summary

judgment order was entered in 2021. Wainwright moved for summary judgment

1
    Kentucky Rules of Civil Procedure.

                                           -7-
on the last day the parties could file dispositive motions per the court’s pretrial

order. Although Wainwright sought a protective order staying his deposition until

the circuit court ruled on his summary judgment motion, the circuit court denied

his request. Joy took no further action to depose Wainwright or Zielke until the

court heard oral argument on Wainwright’s and Zielke’s motion for summary

judgment five months later. Thus, the circuit court did not abuse its discretion in

ruling on Wainwright’s and Zielke’s motions for summary judgment.

             Next, Joy argues the circuit court erred in granting summary judgment

because there were genuine issues of material fact as to probable cause and

improper purpose. We review the circuit court’s grant of summary judgment under

the following standard:

                     “The proper standard of review on appeal when a
             trial judge has granted a motion for summary judgment is
             whether the record, when examined in its entirety, shows
             there is no genuine issue of material fact and the moving
             party is entitled to a judgment as a matter of law.”
             Hammons v. Hammons, 327 S.W.3d 444, 448 (Ky.
             2010). “Because summary judgment does not require
             findings of fact but only an examination of the record to
             determine whether material issues of fact exist, we
             generally review the grant of summary judgment without
             deference to either the trial counsel’s assessment of the
             record or its legal conclusions.” Id. (citing Malone v.
             Kentucky Farm Bureau Mut. Ins. Co., 287 S.W.3d 656,
             658 (Ky. 2009)).

Stilger v. Flint, 391 S.W.3d 751, 753 (Ky. 2013). In sum, we review de novo.

                                          -8-
Keaton v. G.C. Williams Funeral Home, Inc., 436 S.W.3d 538, 542 (Ky. App.

2013).

             In a claim for wrongful use of civil proceedings, a plaintiff must prove

all the following:

             1) the institution or continuation of original judicial
             proceedings, 2) by, or at the insistence of, the plaintiff, 3)
             the termination of such proceedings in defendant’s favor,
             4) a wrongful purpose in the institution or continuation of
             such proceeding, 5) lack of probable cause for the
             proceeding, and 6) the suffering of damage as a result of
             the proceeding.

Adkins v. Wrightway Readymix, L.L.C., 499 S.W.3d 286, 289-90 (Ky. App. 2016)

(citing D’Angelo v. Mussler, 290 S.W.3d 75, 79 (Ky. App. 2009)).

             Wrongful use of civil proceedings is a disfavored tort as “the law

should and does protect [plaintiffs] when they commence a civil or criminal action

in good faith and upon reasonable grounds.” D’Angelo, 290 S.W.3d at 79 (quoting

Prewitt v. Sexton, 777 S.W.2d 891, 895 (Ky. 1989)). Thus, “one must strictly

comply with the prerequisites of maintaining an action for wrongful use of civil

proceedings.” Id.

             In D’Angelo, this Court thoroughly addressed the element of probable

cause. Whether there was probable cause to support the action is a question of law

for the trial court to decide, and “[t]he jury’s role is limited to adjudicating the

facts necessary to enable the court to determine the existence, or lack, of probable

                                           -9-
cause.” Id. at 80 (citing RESTATEMENT (SECOND) OF TORTS § 681B(1)(c)). The

burden is on the plaintiff to “prove that the proceeding was initiated or continued

without probable cause.” Id. Furthermore, the level of probable cause required in

a civil action is less than is required in a criminal action:

             [W]hen the proceedings are civil, while the person
             initiating them cannot have a reasonable belief in the
             existence of the facts on which the proceedings are based
             if he knows that the alleged facts are not true and his
             claim is based on false testimony, it is enough if their
             existence is not certain but he believes that he can
             establish their existence to the satisfaction of court and
             jury. In a word, the initiator of private civil proceedings
             need not have the same degree of certainty as to the
             relevant facts that is required of a private prosecutor or
             criminal proceedings. In many cases civil proceedings,
             to be effective, must be begun before all of the relevant
             facts can be ascertained to a reasonable degree of
             certainty. To put the initiator of civil proceedings to a
             greater risk of liability would put an undesirable burden
             upon those whose rights cannot be otherwise effectively
             enforced.

Id. (quoting RESTATEMENT (SECOND) OF TORTS § 675, comment (d)).

             One mode of proving probable cause is relying on the advice of

counsel defense. Garcia v. Whitaker, 400 S.W.3d 270, 275 (Ky. 2013). For this

defense to apply, “[t]he allegations upon which the advising counsel acted must be

truthful and complete.” Id. Additionally, “[w]e have held that where reliance is

placed upon advice of counsel, if there is a dispute on conflicting evidence about

                                          -10-
the existence of a material fact disclosed, the question of full and fair disclosure is

one for the jury.” Id. at 276 (quoting Reid v. True, 302 S.W.2d 847 (Ky. 1957)).

             Joy argues there are issues of fact about Wainwright’s actual reliance

on Zielke’s advice. Joy asserts Wainwright’s affidavit was self-serving, and it

provides no detail about the full and fair disclosure he allegedly made to Zielke.

Joy also argues Zielke’s email to Wainwright that an advice of counsel defense

was available is not dispositive. Joy argues the evidence shows Wainwright

intended to sue Joy before FCB foreclosed in order to bolster the claims he thought

he had against the bank.

             The circuit court found Joy failed to submit “any affirmative evidence

through testimony or deposition that indicates that Wainwright did not rely upon

his counsel when bringing the cross-claim.” R. at 2023. Joy’s argument on appeal

is based on the chronology of events that gave rise to the Bullitt Circuit Court

action and those proceedings. Joy failed to discover evidence about any material

fact Wainwright disclosed to Zielke. Thus, the circuit court correctly found

Wainwright had probable cause for his crossclaim based on the advice of counsel

defense. Because Wainwright had probable cause to support his crossclaim, we

need not address whether he and Zielke acted with an improper purpose.

             For all these reasons, we affirm the judgment of the Jefferson Circuit

Court.

                                          -11-
           ALL CONCUR.

BRIEFS FOR APPELLANTS:     BRIEF FOR APPELLEE
                           LOWELL WAINWRIGHT:
Glenn A. Cohen
Lynn M. Watson             Donald Killian Brown
Louisville, Kentucky       Jeri Barclay Poppe
                           Louisville, Kentucky
ORAL ARGUMENT FOR
APPELLANTS:                ORAL ARGUMENT FOR
                           APPELLEE LOWELL
Lynn M. Watson             WAINWRIGHT:
Louisville, Kentucky
                           Jeri Barclay Poppe
                           Louisville, Kentucky

                           BRIEF FOR APPELLEES
                           LAWRENCE ZIELKE AND
                           ZIELKE LAW FIRM PLLC:

                           J. Allan Cobb
                           Andrea R. Hunt
                           Louisville, Kentucky

                           ORAL ARGUMENT FOR
                           APPELLEES LAWRENCE ZIELKE
                           AND ZIELKE LAW FIRM PLLC:

                           J. Allan Cobb
                           Louisville, Kentucky

                         -12-