Court Opinion

ID: 4706013
Source: CourtListenerOpinion
Date Created: 2021-07-23 14:06:43.728591+00
Date Added: 2024-06-11T08:06:33.658860
License: Public Domain

RENDERED: JULY 16, 2021; 10:00 A.M.
                        NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals

                             NO. 2020-CA-0331-MR

DMITRIY ZILBERMAN AND JULIA
ZILBERMAN                                                          APPELLANTS

               APPEAL FROM JEFFERSON CIRCUIT COURT
v.            HONORABLE SUSAN SCHULTZ GIBSON, JUDGE
                       ACTION NO. 12-CI-002590

H.W. LOCHNER, INC.; DAVID ORR;
AND KEITH MCDONALD                                                   APPELLEES

                                   OPINION
                                  AFFIRMING

                                  ** ** ** ** **

BEFORE: JONES, LAMBERT, AND L. THOMPSON, JUDGES.

LAMBERT, JUDGE: Dmitriy Zilberman and Julia Zilberman (the Zilbermans)

have appealed from the summary judgment of the Jefferson Circuit Court finding

that defendant H.W. Lochner, Inc. (Lochner), was protected by qualified official

immunity and under the disclosed agency doctrine from their claims related to the
potential purchase of a right-of-way easement for the Kentucky Transportation

Cabinet. We affirm.

            This case has previously been before the Court of Appeals, also an

appeal from the entry of a summary judgment, and we shall rely upon the factual

and procedural background as set forth in that opinion:

                   On May 9, 2012, the Zilbermans filed a complaint
            in the Jefferson Circuit Court against Lochner and the
            Commonwealth of Kentucky, Transportation Cabinet.
            The complaint alleged improper and negligent acts
            surrounding negotiations between the Cabinet, Lochner
            (who acted as agent for the Cabinet in the negotiations),
            and the Zilbermans for the purchase of an easement upon
            the Zilbermans’ real property located in eastern Jefferson
            County. The easement was being acquired in
            conjunction with the construction of a bridge over the
            Ohio River located east of Louisville (referred to as “East
            End Bridge”). In September 2011, after appraising the
            Zilbermans’ property and making an offer that was
            rejected by the Zilbermans, the Commonwealth withdrew
            its offer. Shortly thereafter, the Commonwealth
            downsized the project for the East End Bridge. In
            January 2012, the Zilbermans were notified that their
            property was no longer needed for the bridge
            construction project. This lawsuit followed in Jefferson
            Circuit Court. Lochner and the Transportation Cabinet
            each filed separate answers.

                   In January 2015, the Transportation Cabinet filed a
            motion to dismiss based upon the doctrine of sovereign
            immunity. By summary judgment entered June 3, 2015,
            the circuit court dismissed all claims against the
            Commonwealth. The circuit court specifically concluded
            that the Zilbermans’ “claim that there is a ‘taking’ is not
            supported by the record and fails as a matter of law; . . .
            [the Zilbermans’] claim for bad faith and violations of

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            statutes are barred by sovereign immunity” as to the
            Commonwealth. June 3, 2015, order at 11. The circuit
            court included complete Kentucky Rules of Civil
            Procedure (CR) 54.02 language, but no appeal was taken.

                   On June 26, 2015, Lochner filed a motion for
            summary judgment, and the circuit court granted the
            motion by order entered December 22, 2015. Therein,
            the circuit court determined that Lochner was entitled to
            qualified official immunity, holding that all acts of
            Lochner in the negotiation process on behalf of the
            Cabinet were discretionary and performed in good faith.
            The court further concluded that no “taking” had
            occurred in this case.

Zilberman v. H.W. Lochner, Inc., No. 2016-CA-000108-MR, 2018 WL 1358025,

at *1 (Ky. App. Mar. 16, 2018).

            This Court then analyzed the issue before it – whether summary

judgment was proper – as follows:

                   The Zilbermans contend that the circuit court erred
            by granting summary judgment to Lochner upon the
            basis of qualified official immunity. In particular, the
            Zilbermans allege that qualified official immunity is an
            affirmative defense that must be specifically pleaded in
            the answer to the Complaint. The Zilbermans argue that
            Lochner failed to affirmatively plead qualified official
            immunity in its answer; consequently, the defense was
            waived.

                   In Kentucky, the law is well-settled that qualified
            official immunity constitutes an affirmative defense
            under CR 8.03 that must be specifically pleaded. Yanero
            v. Davis, 65 S.W.3d 510 (Ky. 2011); Jerauld ex rel.
            Robinson v. Kroger, 353 S.W.3d 636 (Ky. App. 2011).
            An affirmative defense must ordinarily be set forth in a
            pleading (as opposed to a motion) and must be stated so

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as to give fair notice of the defense asserted. Vogler v.
Salem Primitive Baptist, 415 S.W.2d 72 (Ky. 1967).
And, the failure to do so constitutes waiver of the
affirmative defense. Id.

      In its December 22, 2015, order, the circuit court
concluded that qualified official immunity was not an
affirmative defense:

      [The Zilbermans] argue that, since Lochner
      did not specifically plead the affirmative
      defense of “qualified official immunity,”
      said affirmative defense is waived. CR 8.03
      provides, pertinently:

             In pleading to a preceding
             pleading, a party shall set forth
             affirmatively accord and
             satisfaction, arbitration and
             award, assumption of risk,
             contributory negligence,
             discharge in bankruptcy,
             duress, estoppel, failure of
             consideration, fraud, illegality,
             injury by fellow servant, laches,
             license, payment, release, res
             judicata, statute of frauds,
             statute of limitations, waiver,
             and any other matter
             constituting an avoidance or
             affirmative defense. . . .

      As is evident from the above discussion of
      sovereign immunity, governmental
      immunity and qualified official immunity, it
      was not necessary for Lochner to
      affirmatively plead such “immunity” as an
      “affirmative defense.” Likewise, “qualified
      official immunity immunity” [sic] is not one
      of the enumerated “affirmative defenses”

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      CR 8.03 requires to be pleaded. Thus, [the
      Zilbermans’] argument is without merit.

December 22, 2015, order at 14.

       Based upon our review of the record and
applicable law, we believe the circuit court committed an
error of law by concluding that qualified official
immunity was not an affirmative defense that must be
affirmatively pleaded pursuant to CR 8.03. To the
contrary, qualified official immunity is an affirmative
defense that must be [pled]. Robinson, 353 S.W.3d at
639. However, Lochner maintains that official qualified
immunity was affirmatively set forth in its answer, which
reads as follows:

      25. Lochner affirmatively states and alleges
      that the claims of [the Zilbermans’] herein
      are barred by applicable statutes, limitations
      and immunity.

Lochner Answer at 4.

       From the above, Lochner clearly did not
specifically allege the defense of qualified official
immunity in its answer. Rather, Lochner generally
alleged certain defenses and stated entitlement to
“immunity” presumably as an affirmative defense under
CR 8.03. In such instances we believe the circuit court
must examine the general language contained in the
answer and determine whether Lochner gave sufficiently
fair notice to preserve the affirmative defense. Cf.
Sheffer v. Chromalloy Mining, 578 S.W.2d 594 (Ky.
App. 1979). In this case, the circuit court failed to
address this issue below. As the circuit court failed to
address and determine whether Lochner gave fair notice
of the affirmative defense of qualified official immunity,
we vacate and remand for the circuit court to make such
determination. If the circuit court determines the defense

                           -5-
              was not sufficiently pleaded, the defense shall be waived
              and the case shall proceed accordingly.

                     We deem any other contentions of error as moot at
              this time.

Zilberman, 2018 WL 1358025, at *1-3 (footnotes omitted).

              Once the matter returned to the circuit court, the Zilbermans refiled

their motion for leave to file a first amended complaint on June 5, 2019, against

Lochner and two Transportation Cabinet employees, David Orr and Keith

McDonald.1 Lochner objected to the motion, noting that the Zilbermans had not

raised any different factual allegations and that the court had already found that

their claims lacked merit. The court granted the motion by order entered August 7,

2019, noting that Lochner did not have standing to make any arguments on behalf

of Orr and McDonald, as they were employees of the Transportation Cabinet, and

that governmental immunity and statute of limitations defenses must be

affirmatively raised in an answer.2 Lochner filed an answer to the first amended

complaint, and it specifically pled that the Zilbermans’ claims against it were

1
 The record reflects that the Zilbermans moved to file the first amended complaint on July 1,
2015, and tendered the identical amended complaint with the motion.
2
  In August 2019, Orr and McDonald moved to be dismissed from the Zilbermans’ action on
statute of limitations and immunity grounds. The Zilbermans objected, and the circuit court
denied the motion by order entered November 13, 2019, holding that the claims (other than the
federal constitutional claims) against Orr and McDonald related back and were timely filed, and
that genuine issues of material fact remained as to whether they were entitled to immunity. This
ruling is not presently before the Court.

                                              -6-
barred by the doctrines of qualified official immunity and disclosed agency, among

other defenses.

             On December 31, 2019, Lochner filed a renewed motion for summary

judgment, again seeking dismissal of all claims against it for several reasons. It

argued that: 1) its first answer gave the Zilbermans sufficiently fair notice to

preserve their intent to rely upon the defense of qualified official immunity; 2) any

defect in the original answer was rendered moot by its answer to the superseding

first amended complaint, which specifically pled qualified official immunity as a

defense; 3) it could not be liable based upon the disclosed agency doctrine as its

alleged actions were taken within the scope of authority of the Transportation

Cabinet; 4) because there was no taking, there was no legal basis for a civil right of

recovery under Section 2 of the Kentucky Constitution; 5) the real estate statutes

relied upon by the Zilbermans applied to individuals, not corporate entities; 6) the

Zilbermans’ alleged injuries were not the direct and proximate result of licensure

or non-licensure as Kentucky Revised Statutes (KRS) 446.070 required; and 7)

KRS 446.070 was not applicable to alleged violations of federal statutes or rules.

Lochner first addressed the fair notice issue pursuant to this Court’s direction on

remand, arguing that the Zilbermans knew from the beginning that the Cabinet and

Lochner were both pleading immunity defenses and responded to this issue in their

pleadings.

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             In their response, the Zilbermans addressed Ms. Taylor’s dislike of

Mr. Zilberman and that she had been acting in a ministerial role. They also

addressed that Lochner, in its first answer, argued that it was entitled to the full

scope of sovereign immunity, not qualified official immunity, meaning that

Lochner had waived this defense. They also argued that properly pleading this

affirmative defense in the answer to the first amended complaint did not render its

prior waiver moot. The Zilbermans went on to address their real estate licensing,

bad faith, and constitutional claims. They asserted that, because disputed issues of

fact remained for a trier of fact to decide and Lochner was not entitled to

immunity, the motion should be denied.

             In reply, Lochner argued that the Zilbermans had not presented any

affirmative evidence of any actionable wrong, breach of legal duty, any incurred

legal damages, or a factual or causal nexus between any damages and the alleged

act of bad faith by Lochner. Furthermore, the Zilbermans did not attempt to

address whether they had sufficiently fair notice of Lochner’s qualified immunity

defense but rather argued that it was waived as not specifically pled. Nor did they

address the disclosed agency doctrine defense.

             By order entered February 4, 2020, the circuit court granted Lochner’s

motion for summary judgment. It concluded that Lochner adequately pled the

defense of qualified official immunity in its answer to the original complaint and

                                          -8-
that, therefore, this affirmative defense was preserved and not waived. It also

concluded that, “[the Zilbermans] had fair notice of the defense [and] suffered no

prejudice from the wording of Lochner’s initial pleading. Additionally, [the

Zilbermans] were afforded and made full use of the opportunity to rebut the

defense prior to this [c]ourt’s determination of summary judgment.” The court

then held that the proper pleading of the qualified official immunity issue was

rendered moot due to the filing of the first amended complaint and Lochner’s

answer, which specifically pled this defense. The first amended complaint

superseded the original complaint as the Zilbermans did not adopt the original

complaint by reference in the first amended complaint. The court went on to hold

that Lochner was entitled to qualified official immunity, found in a footnote that

Ms. Taylor’s actions did not arise to the level of bad faith, and found no merit in

the Zilbermans’ statutory or constitutional claims.

             Finally, the circuit court addressed Lochner’s disclosed agency

doctrine defense, stating that “it appears that Lochner is immune from all liability

to [the Zilbermans] under the disclosed agency doctrine[,]” citing to Pannell v.

Shannon, 425 S.W.3d 58 (Ky. 2014). The court agreed with Lochner that its

actions were taken as the agent of the Transportation Cabinet and were authorized

and/or ratified by that Cabinet. Because the record reflected that Lochner’s actions

were authorized by the Transportation Cabinet and were taken within the scope of

                                         -9-
its disclosed agency, the court concluded that Lochner could not be held liable for

actions it took on behalf of the Transportation Cabinet as there was no evidence

that the actions were improper or in bad faith. Therefore, it ruled that Lochner was

entitled to summary judgment because it was protected by the doctrines of both

qualified official immunity and disclosed agency. This appeal now follows.

             On appeal, the Zilbermans raise three issues, specifically listing these

issues on the first page of their brief as follows:

             1) In ruling on the Motion for Summary Judgment filed
                by [Lochner], did the trial court err in determining
                that Lochner had pled the affirmative defense of
                qualified official immunity with the requisite
                specificity to be entitled to immunity from suit or was
                said defense waived by its failure to do so?

             2) If said affirmative defense was waived, can a
                previously-waived defense be revived simply by filing
                a responsive pleading to an Amended Complaint?

             3) Does KRS 324.010, et seq. allow a private entity to
                receive a fee for acting as an agent for another entity
                to acquire interests in real estate without a license or
                did Lochner violate said statute and 23 [Code of
                Federal Regulations] § 710.201?

These are the same issues the Zilbermans listed in their prehearing statement.

             In its brief, Lochner argues that the issues the Zilbermans address in

their brief are moot as they did not contest or preserve the other independent

grounds for summary judgment ruled upon by the circuit court. Specifically, the

circuit court concluded that Lochner was entitled to a judgment as a matter of law

                                          -10-
based upon both qualified official immunity as well as the doctrine of disclosed

agency. It addressed the application of the disclosed agency doctrine on pages 18

and 19 of its order before concluding that this doctrine also barred the Zilbermans’

claims against Lochner. The Supreme Court of Kentucky described this doctrine

as follows:

                     And it is the universal law of agency that when an
              agent acts with authority in a transaction with a third
              party, and the third party is aware of the agency, the
              transaction is between the principal and the third party.
              See Restatement (Third) Of Agency § 6.01 (2006). In
              such circumstances, the agent is not liable. Id. The agent
              of a business entity (or any agent, for that matter) can be
              personally liable only when he or she purports to be an
              agent but actually acts without authority. When that
              happens, responsibility for the transaction falls back to
              the agent and does not bind the principal.

Pannell, 425 S.W.3d at 81.

              The Zilbermans did not address the doctrine of disclosed agency in

their initial brief and allotted one sentence to it in the reply brief: “Moreover,

because the trial court’s ruling with respect to disclosed agency rests on the same

shaky ground as its ruling on qualified immunity – both flow of necessity from its

finding that no bad faith was evident – it is indistinguishable from said ruling and

is therefore also in error.” That one sentence in a reply brief, let alone the failures

to address the issue in the initial brief or list it as an issue in the prehearing

statement, is not enough to preserve the circuit court’s ruling on this issue for our

                                           -11-
review. While the Zilbermans have certainly addressed the issue of bad faith based

upon Ms. Taylor’s actions, that does not excuse them from failing to raise this

particular issue and preserve it for our review. Furthermore, the Zilbermans never

addressed the fair notice issue as directed by this Court in the previous opinion or

contested the circuit court’s ruling that they had fair notice of Lochner’s qualified

official immunity defense.

             Therefore, we agree with Lochner that the issues the Zilbermans

raised are moot as the circuit court’s judgment must be affirmed on alternate

grounds that are not before this Court for review. Accordingly, we shall not

address any of the arguments the Zilbermans raised in their brief, nor shall we

consider the propriety of the circuit court’s ruling as a whole.

             For the foregoing reasons, the summary judgment of the Jefferson

Circuit Court is affirmed.

             ALL CONCUR.

 BRIEFS FOR APPELLANTS:                    BRIEF FOR APPELLEE H.W.
                                           LOCHNER, INC.:
 C. Dodd Harris IV
 Lee Harris Donahue                        Michael T. Davis
 Louisville, Kentucky                      Lexington, Kentucky

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