Court Opinion

ID: 9925333
Source: CourtListenerOpinion
Date Created: 2024-01-19 15:06:32.847887+00
Date Added: 2024-06-11T09:19:59.879091
License: Public Domain

RENDERED: JANUARY 12, 2024; 10:00 A.M.
                       NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals
                             NO. 2023-CA-0327-MR

TRUST OF LEE O. GASTON, A
KENTUCKY TRUST BY AND
THROUGH LARRY GASTON,
TRUSTEE                                                             APPELLANT

                 APPEAL FROM BULLITT CIRCUIT COURT
v.              HONORABLE JOHN T. ALEXANDER, JUDGE
                        ACTION NO. 20-CI-00721

ANGELENA ETHERTON; JOHN A.
SCHMIDT; KATHLEEN SCHMIDT;
SCHMIDT LAW OFFICE, P.S.C.;
AND STOCK YARDS BANK AND
TRUST COMPANY                                                       APPELLEES

                                   OPINION
                                  AFFIRMING

                                 ** ** ** ** **

BEFORE: ACREE, COMBS, AND ECKERLE, JUDGES.

COMBS, JUDGE: The Trust of Lee O. Gaston, through Larry Gaston, Trustee,

(the Trust), appeals from the summary judgment of the Bullitt Circuit Court
entered in favor of Angelena Etherton and from an order that granted her motion to

quash discovery. After our review, we affirm.

             Lee O. Gaston died in 1990, and his will was duly admitted to

probate. It contained a testamentary Trust created and established for the benefit,

in part, of his widow, Mary K. Gaston. Based upon the Trust terms, the trustee

was to pay Trust income to Mary over her lifetime; disbursements from principal

were authorized as well.

             John A. Schmidt of Schmidt and Etherton Law Offices, P.S.C., was

appointed successor trustee in June 2012. At that point, the corpus of the Trust

consisted of approximately $586,000 held in bank and investment accounts at

Stock Yards Bank as well as a parcel of real estate in Shepherdsville. The real

estate was eventually sold and netted approximately $300,000.

             Mary Gaston was in regular contact with Stock Yards Bank

concerning her requests for disbursements from the Trust. She became dissatisfied

with Schmidt and the bank representatives for their alleged failure to provide a

satisfactory accounting concerning Trust assets.

             In March 2019, Gaston hired counsel to petition the court for an

accounting of the Trust’s assets, distributions, and expenses. Schmidt was

subsequently removed as trustee. He had allegedly transferred nearly $200,000 in

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the Trust’s funds to various bank accounts held in his name and his firm’s name.

He also transferred funds to a joint account held with his wife, Kathleen Schmidt.

             In September 2020, the Trust, through its trustee, filed a civil action

against: Schmidt; his law firm; his wife; Stock Yards Bank; Brenda Elliott (a non-

attorney employee of Schimdt’s firm); and the Appellee, Angelena Etherton, a

practicing attorney. In its complaint, the Trust alleged that John Schmidt breached

his fiduciary duty to the Trust; negligently invested its assets; converted its assets;

and committed other criminal offenses that damaged the Trust. It alleged that

Kathleen Schmidt conspired with her husband to convert the Trust’s assets. It also

claimed that by failing to alert beneficiaries “to Schmidt’s activities,” Stock Yards

Bank breached its duties to the Trust. The Trust charged that Brenda Elliott was

“aware of” and “may have conspired with Schmidt in the financial improprieties

and mismanagement” of client funds. Finally, with respect to Etherton, the Trust

alleged that as a member of the bar and Schmidt’s law firm, she owed a duty to the

firm’s clients. It asserted that Etherton “knew or should have known of the

financial improprieties and mismanagement of [the Trust’s] funds” and that as a

result of her “negligent or intentional acts,” the Trust had been damaged.

However, it did not allege that Etherton converted Trust funds or conspired with

anyone to do so.

                                          -3-
             Etherton answered and denied the allegations made against her.

Etherton specifically denied that she was a current or former member, partner,

and/or shareholder in Schmidt & Etherton Law Offices, P.S.C. She denied that she

failed to comply with her duties, obligations, or any applicable standard of care. In

response to written discovery, the Trust indicated that “Etherton’s role, or lack

thereof, in the enterprise will be clarified through discovery.”

             By mid-July 2022 -- nearly two years after the litigation was

commenced, the Trust had propounded no discovery to Etherton. And so she filed

a motion for summary judgment. Etherton argued that there had never been a basis

to include her as a party to the civil action against Schmidt and the others. She

contended that she was entitled to judgment as a matter of law because the Trust

could not show that she owed any duty to it -- and much less that she breached a

duty. Attached to her memorandum in support of the motion were the responses of

the Trust to her requests to admit, in which the Trust admitted that Etherton had

never served as trustee nor had she provided legal services to the Trust. She also

explained that in response to discovery propounded to Schmidt, it was disclosed

that Schmidt had been the sole shareholder of the firm and that there had never

been a profit-sharing arrangement of any kind.

            The Trust responded to Etherton’s motion for summary judgment the

following day with a notice to take her deposition.

                                          -4-
             Etherton filed a motion to quash the deposition and to stay discovery

pending resolution of her motion for summary judgment. She observed that this

first discovery effort came only after she had filed her dispositive motion. She

contended that her deposition was scheduled merely to delay adjudication of her

motion and to harass and cause her to incur unnecessary expense. She noted that

in the nearly two years since the action had been filed, this was the first deposition

scheduled with respect to any claim against any party. Finally, she asserted that

no amount of discovery would alter the fact that she was entitled to judgment as a

matter of law.

             The Trust responded. It argued that Etherton owed it an ethical

obligation; that she was “responsible for Schmidt’s conduct”; and that she was not

shielded from liability simply because the law practice operated as a professional

services corporation. The Trust also contended that summary judgment was

premature because it had not been given ample opportunity to complete its

discovery. It argued that it was:

             entitled to learn what Etherton knew and when; the
             details of her handling of firm bank account information;
             what she saw and heard during field visits with [an
             auditor of the Administrative Office of the Courts];
             whether she ever reported Schmidt to the Bar or law
             enforcement; and the extent of her relationship with [a
             particular Stock Yard’s Bank executive].

                                          -5-
             By an order entered on November 16, 2022, the Bullitt Circuit Court

granted the motion for summary judgment. Its order included a comprehensive

analysis of the issues. The trial court concluded, in part, as follows (citations

excluded):

             Duty “presents a question of law.” Its existence is
             indispensable to a successful negligence or malpractice
             action. The Trust has failed to establish a genuine issue
             of material fact as to whether Etherton owed a duty in
             this matter. It cannot proceed with a legal malpractice
             claim or a claim for breach of fiduciary duty without
             establishing that Etherton owed it a duty. It is undisputed
             that Etherton was never the trustee and Etherton never
             represented the Trust. [Moreover, under] Kentucky law,
             Etherton cannot be held personally liable for Schmidt’s
             alleged acts merely because she was a law partner of
             Schmidt or a shareholder, director, or officer of the PSC.

             By an order entered on February 20, 2022, the circuit court made its

summary judgment final and appealable. The Trust filed a motion to alter, amend,

or vacate, which was denied. This appeal followed.

             On appeal, the Trust argues that the trial court erred by failing to

allow it to conduct discovery and by failing to conclude that Etherton had a

fiduciary duty to “[p]rotect the [T]rust from Schmidt” -- and that the breach of the

alleged duty is actionable. It also contends that the court erred by concluding that

the business organization of the firm shielded her from personal liability for her

bad acts. Finally, the Trust argues that the trial court abused its discretion by

                                          -6-
concluding that there was no just reason for delay and by designating its summary

judgment as final and appealable. We disagree with each of these arguments.

                CR1 56.03 provides that summary judgment should be granted only

where the evidence shows that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of law. Whether summary

judgment is appropriate is a legal question involving no findings of fact. Benton v.

Boyd & Boyd, PLLC, 387 S.W.3d. 341 (Ky. App. 2012). Consequently, we review

the trial court’s grant of summary judgment de novo. Coomer v. CSX Transp.,

Inc., 319 S.W.3d 366 (Ky. 2010).

                In order to survive a motion for summary judgment, the nonmoving

party must present “at least some affirmative evidence showing the existence of a

genuine issue of material fact.” Benton, 387 S.W.3d. at 343 (quoting City of

Florence v. Chipman, 38 S.W.3d 387, 390 (Ky. 2001)). Accordingly, summary

judgment is proper only after a party has been given ample opportunity to complete

discovery and then fails to offer controverting evidence. Pendleton Bros. Vending,

Inc. v. Com. Finance & Administration Cabinet, 758 S.W.2d 24, 29 (Ky. 1988)

(citing Hartford Insurance Group v. Citizens Fidelity Bank & Trust Co., 579

S.W.2d 628 (Ky. App. 1979)). The movant does not have to show that a party

1
    Kentucky Rules of Civil Procedure.

                                         -7-
opposing summary judgment actually completed discovery but only that there was

sufficient opportunity to do so. Suter v. Mazyck, 226 S.W.3d 837 (Ky. App. 2007).

             The trial court did not err by concluding that the Trust had been

afforded ample opportunity to complete discovery. Promptly after the complaint

was filed, Etherton served written discovery upon the Trust, and it responded to

those discovery requests. However, the Trust did not propound discovery to

Etherton. It did not issue a subpoena pertaining to Etherton, a subpoena duces

tecum, or written discovery; nor did it schedule a deposition. It took absolutely no

steps to pursue its claim against her. It was only after Etherton filed her motion for

summary judgment nearly two years later that the Trust indicated that it would

undertake some discovery.

             As the trial court noted, the Trust’s claim against Etherton was not

legally or factually complex. Our rules of civil procedure provide that the many

methods of discovery may be employed in any sequence. CR 26.04. Moreover,

the fact that a party is conducting discovery does not operate to delay any other

party’s efforts to engage in discovery. Id. If the Trust had proof that a genuine

issue of material fact existed, it was incumbent upon it to tender that proof to the

court. The Trust claimed that if given the opportunity, it would produce evidence

in support of its claim against Etherton. However, it did not demonstrate why the

evidence had not been presented, nor did it file an affidavit pursuant to the

                                          -8-
provisions of CR 56.06 for a continuance to obtain it. Under these circumstances,

the trial court did not err either by staying the Trust’s belated effort to schedule a

deposition or by concluding that the Trust had a reasonable opportunity to develop

and complete discovery.

             Where the Trust utterly failed to present affirmative evidence to show

the existence of a genuine issue of material fact, Etherton, who never served as

trustee or provided any legal services to the Trust, was entitled to judgment as a

matter of law. The trial court correctly rejected the Trust’s bare, conclusory

assertion that Etherton’s ethical duties under Kentucky’s Rules of Professional

Conduct imposed upon her an actionable, fiduciary relationship with the Trust as if

she were the absolute guarantor of the legal services provided. The court properly

rejected the Trust’s claim that Etherton’s role as a partner or executive officer of

the firm alone rendered her culpable in Schmidt’s activities. Its conclusion was

correct as a matter of law.

             Finally, the trial court did not abuse its discretion by granting

Etherton’s motion to make its order final and appealable. In any case involving

multiple claims or multiple parties, the trial court is authorized by our rules of civil

procedure to make an order immediately appealable. CR 54.02. Because the trial

court is the tribunal most familiar with the case, this decision lies firmly within its

discretion. Watson v. Best Financial Services, Inc., 245 S.W.3d 722 (Ky. 2008).

                                          -9-
               In the exercise of its discretion, the trial court must balance the

traditional policy against piecemeal appeals and the practical requirements of the

matter before it. Commonwealth Bank & Trust Co. v. Young, 361 S.W.3d 344 (Ky.

App. 2012). It is required to consider whether the order being certified is

sufficiently important and severable to entitle a party to immediate appellate

review. Id.

               Where the Trust failed to present affirmative evidence to indicate that

Etherton breached any duty she owed to it, the issues remaining before the trial

court pertained solely to the liability of other parties. Those claims are decidedly

different -- both factually and legally -- from the claim resolved by the trial court’s

summary judgment in favor of Etherton. The claim asserted against Etherton is

distinct and severable. Moreover, it was critically important to Etherton that the

matter be finally decided. Once the court determined that she could not be held

responsible for the claim asserted against her, she was properly dismissed from the

proceedings.

              Under these circumstances, the trial court clearly did not abuse its

discretion by concluding that there was no just cause for delay and by making its

judgment final and appealable.

               We affirm the order and judgment of the Bullitt Circuit Court.

                                           -10-
           ALL CONCUR.

BRIEFS FOR APPELLANT:      BRIEF FOR APPELLEE
                           ANGELENA ETHERTON:
Laura E. Landenwich
Candace L. Curtis          Michelle L. Duncan
Louisville, Kentucky       Crystal D. King
                           Louisville, Kentucky

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