Court Opinion

ID: 9925335
Source: CourtListenerOpinion
Date Created: 2024-01-19 15:06:34.498114+00
Date Added: 2024-06-11T09:20:00.083373
License: Public Domain

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                        NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals
                             NO. 2022-CA-0143-MR
                                     AND
                             NO. 2022-CA-0180-MR

SARAH WILLIAMS                                 APPELLANT/CROSS-APPELLEE

      APPEAL AND CROSS-APPEAL FROM JEFFERSON CIRCUIT COURT
v.               HONORABLE MARY M. SHAW, JUDGE
                      ACTION NO. 21-CI-006230

H&B DEVELOPMENT, LLC,
AND PRINCETON HURST                         APPELLEES/CROSS-APPELLANTS

                          OPINION
      REVERSING AND REMANDING APPEAL NO. 2022-CA-0143-MR
        AND AFFIRMING CROSS-APPEAL NO. 2022-CA-0180-MR

                                  ** ** ** ** **

BEFORE: COMBS, LAMBERT, AND TAYLOR, JUDGES.

TAYLOR, JUDGE: Sarah Williams brings Appeal No. 2022-CA-0143-MR from a

January 31, 2022, Order of the Jefferson Circuit Court confirming an arbitration

award against H&B Development, LLC, and vacating the arbitration award as to

Princeton Hurst; H&B Development, LLC, and Princeton Hurst bring Cross-
Appeal No. 2022-CA-0180-MR from the same January 31, 2022, Order. We

reverse and remand Appeal No. 2022-CA-0143-MR and affirm Cross-Appeal No.

2022-CA-0180-MR.

                              PRELIMINARY MATTERS

              To begin, as Williams points out in her reply brief, appellees’ brief is

deficient for numerous reasons, the most egregious being appellees’ failure to cite

with specificity to those portions of the record below to support their arguments or

counterstatement of the case on appeal. Kentucky Rules of Civil Procedure (CR)

76.12(4)(d)(iii) and (iv).1 In fact, appellees make no specific references or

citations in their brief to the record below in support of their arguments. This

alone is sufficient justification to strike appellees’ brief and grant Williams’

requested relief. CR 76.12(8); Parker v. Commonwealth, 291 S.W.3d 647, 676

(Ky. 2009).

              However, given our limited review of arbitration awards and

proceedings as set out in Kentucky Revised Statutes (KRS) 417.160 and given that

the record below consists of only 103 pages, we have elected to ignore these

deficiencies and conduct our review pursuant to KRS 417.160. However, we warn

1
  Effective January 1, 2023, the Kentucky Supreme Court implemented the new Kentucky Rules
of Appellate Procedure (RAP) superseding the former rules governing appellate practice set out
in Kentucky Rules of Civil Procedure (CR) 73, 74, 75 and 76. The briefs in this case were filed
prior to the effective date of RAP and are subject to the Civil Rules cited herein.

                                              -2-
counsel that this Court may not be so lenient in the future. See Hamburger v.

Plemmons, 654 S.W.3d 99 (Ky. App. 2022).

                                 BACKGROUND

             In 2016, Princeton Hurst purchased property located at 948 East Oak

Street in Louisville, Kentucky. Shortly after the purchase, Hurst executed a

quitclaim deed transferring the Oak Street property to H&B Development, LLC

(H&B Development). The sole members of H&B Development were Hurst and

Florence Brown. Hurst was an experienced home remodeler as he had purchased,

remodeled, and sold some twenty to thirty residential properties over the preceding

seven years. Hurst was also a licensed realtor and served as the listing agent for

the sale of the Oak Street property.

             In order to prepare for the sale of the Oak Street property, Hurst

executed the Seller Disclosure of Property and Condition Form (Seller Disclosure

Form) on April 1, 2016. Then, on April 7, 2016, Hurst had a termite inspection

conducted that revealed termite damage to support beams, support posts, and floor

joists in the crawlspace and to support beams and support posts in the basement.

On April 21, 2016, Hurst hired a company to repair the termite-damaged joists,

posts, and beams in the basement and another company to treat the active termites.

             On April 25, 2016, a prospective purchaser had the Oak Street

property inspected, and the inspection revealed fire damage to the attic and roof

                                         -3-
structure. Hurst then contacted a former business partner, Smitty Smith, to inspect

the property for fire damage. Smith provided Hurst with a report on May 3, 2016,

that also indicated the roof structure showed signs of fire damage. It is undisputed

that Smith did not enter or inspect the attic.

               On May 14, 2016, Sarah Williams submitted an offer to purchase the

Oak Street property. Williams was provided the Seller Disclosure Form that Hurst

had signed on April 1, 2016. Despite a provision in the Seller Disclosure Form to

the contrary, Hurst did not update the information or otherwise inform Williams of

the termite or fire damage that Hurst learned of after he signed the Seller

Disclosure Form. Hurst and Williams subsequently executed a Residential Sales

Contract (Sales Contract) on May 14, 2016. The Sales Contract, which was a

standardized form provided by the Greater Louisville Association of Realtors, Inc.

(GLAR), contained an arbitration clause in Paragraph 24.2

2
 The Sales Contract utilized by the parties, prepared by the Greater Louisville Association of
Realtors, Inc., contained the following arbitration clause in Paragraph 24:

               MEDIATION/BINDING ARBITRATION: Notice of Demand
               for Mediation must be made within 365 days after the party raising
               the claims knew, or should have known, of the existence of said
               claims. Any dispute or claim (including, without limitation, claims
               of fraud, misrepresentation, warranty and/or negligence) of Seller,
               Buyer, brokers, agents or any of them for a sum greater than the
               limits of small claims court jurisdiction arising out of this Contract
               or breach thereof or arising out of or relating to the physical
               condition of the property covered by this Contract shall first be
               submitted to mediation and arbitration in accordance with the
               guidelines of the Greater Louisville Association of REALTORS,
               Inc. Copies of these guidelines are available at the Greater

                                                -4-
               After closing upon the sale of the Oak Street property, Williams

discovered the termite damage and fire damage that had not been disclosed to her

prior to the closing. Williams initiated arbitration proceedings on July 7, 2021,

against H&B Development and Hurst pursuant to Paragraph 24 of the Sales

Contract.3 Following a hearing, the arbitrator issued Findings of Fact, Conclusions

of Law and Award on October 29, 2021. Therein, the arbitrator concluded: Hurst

“breached” the April 1, 2016, Seller Disclosure Form and the May 14, 2016, Sales

Contract; Hurst knew or should have known that the Oak Street property had

extensive fire damage in the attic and termite damage to the sill plates, joists, and

support beams in the basement; Hurst defrauded Williams because Hurst knew or

should have known there was extensive fire damage in the attic; and Hurst made

material misrepresentations to Williams about the Oak Street property and

               Louisville Association of REALTORS, Inc. Disputes shall include
               (among other things) issues relating to representations made by
               Buyer, Seller, or any broker or agent, or other person or entity in
               connection with the sale and purchase of the property covered by
               this Contract. Any agreement signed by the parties pursuant to the
               mediation conference shall be binding.

Sales Contract at 6.
3
 Sarah Williams also named Florence Brown and Home MD Inspection Services, LLC, (Home
MD) as respondents in the arbitration proceeding. Home MD had inspected the property at
Williams’ request. Williams and Home MD apparently reached a settlement agreement, and
Home MD was dismissed as a party. As to Brown, the arbitrator concluded there was not
sufficient evidence produced “to establish [Brown’s] culpability for the actions of her business
associate, Mr. [Princeton] Hurst.” Findings of Fact, Conclusions of Law and Award at 6. No
award was made against Brown.

                                               -5-
fraudulently induced her to enter into the Sales Contract. The arbitrator likewise

determined that due to the false and fraudulent information Hurst provided in the

Seller Disclosure Form, Williams was also entitled to recover attorney’s fees,

costs, arbitrator’s fees and expenses. The arbitrator awarded Williams $86,867.25

against H&B Development and Hurst “jointly and severally.”4 October 29, 2021,

Findings of Fact, Conclusions of Law and Award at 9.

              After the arbitration award, the parties entered into discussions about

whether H&B Development and/or Hurst would satisfy the arbitration award.

Williams learned that H&B Development had been administratively dissolved in

2018 and had no assets.5 Hurst refused to pay the award.

              On November 2, 2021, Williams filed a Complaint for Enforcement of

Arbitration Award in the Jefferson Circuit Court against H&B Development and

Hurst pursuant to KRS 417.150. In the complaint, Williams sought enforcement of

the arbitration award and recovery of her attorney’s fees and costs associated with

the enforcement. Williams subsequently filed a Motion to Confirm Arbitration

Award and Enter Final Judgment. By Order entered January 31, 2022, Williams’

4
  Williams sought an apportionment of liability as to Home MD; however, the arbitrator made no
ruling on that issue.
5
 Whether by design or coincidence, Hurst failed to file the LLC’s 2018 Annual Report with the
Kentucky Secretary of State, which triggered the administrative dissolution of H&B
Development, LLC, on October 16, 2018. The LLC has not been reinstated by the Secretary of
State.

                                             -6-
motion was granted in part and denied in part. Therein, the circuit court confirmed

the arbitration award against H&B Development; however, the court vacated the

arbitration award against Hurst individually. The circuit court reasoned that “the

arbitrator never had jurisdiction over [Hurst] in his individual capacity.” January

31, 2022, Order at 2. The circuit court further held that it would “not disturb the

[arbitrator’s] award as to comparative fault and apportionment.” January 31, 2022,

Order at 3. These appeals follow.

                            STANDARD OF REVIEW

             In Kentucky, an appellate court’s review of an arbitration award is

very limited as set forth in KRS 417.160. See Dutschke v. Jim Russell Realtors,

Inc., 281 S.W.3d 817, 825-26 (Ky. App. 2008). The grounds for vacating an

arbitration award under the Kentucky Uniform Arbitration Act (Act) as set forth in

KRS 417.160 are:

             (1) Upon application of a party, the court shall vacate an
             award where:

                 (a) The award was procured by corruption, fraud or
                 other undue means;

                 (b) There was evident partiality by an arbitrator
                 appointed as a neutral or corruption in any of the
                 arbitrators or misconduct prejudicing the rights of
                 any party;

                 (c) The arbitrators exceeded their powers;

                                         -7-
                 (d) The arbitrators refused to postpone the hearing
                 upon sufficient cause being shown therefor or refused
                 to hear evidence material to the controversy or
                 otherwise so conducted the hearing, contrary to the
                 provisions of KRS 417.090, as to prejudice
                 substantially the rights of a party; or

                 (e) There was no arbitration agreement and the issue
                 was not adversely determined in proceedings
                 under KRS 417.060 and the party did not participate
                 in the arbitration hearing without raising the
                 objection; but the fact that the relief was such that it
                 could not or would not be granted by a court is not
                 ground for vacating or refusing to confirm the award.

In 3D Enterprises Contracting Corporation v. Lexington -Fayette Urban County

Government, 134 S.W.3d 558, 562-63 (Ky. 2004), the Kentucky Supreme Court

held that an arbitration award may only be set aside by a court pursuant to those

grounds listed in the Act as stated in this opinion. And, any claim that the

arbitrator misapplied the law of damages or failed to properly resolve the facts of

the case is not subject to review by the courts. Conagra Poultry Co. v. Grissom

Transp., Inc., 186 S.W.3d 243, 245 (Ky. App. 2006). We will now address the

circuit court’s ruling in both the appeal and cross-appeal in accordance with this

standard of review.

                        APPEAL NO. 2022-CA-0143-MR

             The sole issue raised by Williams is that the trial court erred by

vacating the arbitration award as to Hurst based upon the court’s determination that

“the arbitrator did not have jurisdiction over Hurst individually.” Williams’ Brief

                                         -8-
at 7. In other words, Williams argues the circuit court erroneously determined that

Hurst signed the Sales Contract in his capacity as a real estate agent and as an

agent for H&B Development, but that he did not sign it in his individual capacity.

             Based on our review of the circuit court’s reasoning to vacate the

award against Hurst and the argument set out in appellee’s brief, the basis for

vacating the award was due to the arbitrator exceeding his powers as set out in

KRS 417.160(1)(c). In determining whether the arbitrator exceeded his powers, a

court’s review is limited to whether the arbitrator acted beyond the material terms

of the contract in making his ruling. 3D Enterprises Cont. Corp., 134 S.W.3d at

561. And, in determining whether the arbitrator exceeded his powers, a court must

determine whether the issues presented were covered by the contract. Id.

             The parties agree that the controlling terms of the Sales Contract

regarding Hurst’s liability are set out in Paragraph 24 therein. Relevant to our

review, the applicable material terms from Paragraph 24 are as follows:

             Any dispute or claim (including, without limitation,
             claims of fraud, misrepresentation, warranty and/or
             negligence) of Seller, Buyer, brokers, agents or any of
             them for a sum greater than the limits of small claims
             court jurisdiction arising out of this Contract or breach
             thereof or arising out of or relating to the physical
             condition of the property covered by this Contract shall
             first be submitted to mediation and arbitration in
             accordance with the guidelines of the Greater Louisville
             Association of REALTORS, Inc. . . . Disputes shall
             include (among other things) issues relating to
             representations made by Buyer, Seller, or any broker or

                                         -9-
             agent, or other person or entity in connection with the
             sale and purchase of the property covered by this
             Contract. . . .

             By signing below, the agents, on behalf of themselves
             and their brokers, agree to be bound by this paragraph 24,
             but are not parties to this Contract for any other purpose.
             This paragraph 24 shall survive the closing.

Sales Contract at 6.

             The clear and plain language of this contractual provision provides

that claims for fraud and misrepresentation that arise under the contract can be

brought by a seller, buyer, or agent against the other, which are subject to

arbitration. The claims against Hurst for fraud and misrepresentation are clearly

contemplated under the agreement and subject to review by the arbitrator. Under

Paragraph 24, we do not see the relevance of Hurst’s capacity as the arbitrator had

the authority to consider fraud and misrepresentation claims against Hurst as a

signator to the Sales Contract. The circuit court clearly erred in finding the

arbitrator exceeded his powers and did not have “jurisdiction” over Hurst.

             Notwithstanding, a review of the Sales Contract reveals that Hurst

signed the document in three different places. First, on page six of the Sales

Contract, Hurst signed in his capacity as the listing real estate agent for the seller,

H&B Development. Second, Hurst signed on page seven of the Sales Contract in

his capacity as member of H&B Development. Third, on page eight of the Sales

Contract, Hurst merely signed his name individually, as the seller, accepting

                                          -10-
Williams’ counteroffer dated May 14, 2016, which consummated the final

agreement. In other words, Hurst signed the Sales Contract in three capacities; as

the listing real estate agent, as a member of H&B Development, and in his

individual capacity.

             Additionally, we acknowledge that an officer or agent of a corporation

is not personally liable for his or her actions on behalf of the corporation. Young v.

Vista Homes, Inc., 243 S.W.3d 352, 363 (Ky. App. 2007). However, an exception

to this general rule exists. Thereunder, a corporate officer or agent “is personally

liable for a tort committed by him although he was acting for the corporation.”

Henkin, Inc. v. Berea Bank & Trust Co., 566 S.W.2d 420, 425 (Ky. App. 1978);

Young, 243 S.W.3d at 363; 19 C.J.S. Corporations § 632 (2023).

             In this case, the arbitrator found that Hurst committed fraud by

making material misrepresentations to Williams and fraudulently inducing her to

enter into the Sales Contract. The arbitrator had the authority to resolve these

issues in the arbitration and the circuit court had no authority on appeal to address

the merits of the arbitrator’s findings, conclusions, and award. See 3D Enterprises

Cont. Corp., 134 S.W.3d at 561.

             Thus, the circuit court exceeded its authority and erred as a matter of

law in vacating the arbitration award against Hurst. We, therefore, reverse the

                                         -11-
circuit court’s order and remand for the court to confirm the arbitration award

against Hurst, individually.

                   CROSS-APPEAL NO. 2022-CA-0180-MR

             H&B Development and Hurst contend in their cross-appeal that the

trial court erred by refusing to apportion fault between H&B Development, Hurst,

and Home MD, Inspection Services, LLC (Home MD). As previously noted,

Home MD apparently reached a settlement agreement with Williams and was

dismissed as a party before the final hearing was conducted by the arbitrator.

Again, H&B Development and Hurst seemingly assert that the arbitrator’s failure

to make a ruling upon apportionment was not a legal error, but rather was

attributed to the arbitrator exceeding his power. Labeling the arbitrator’s refusal to

apportion fault as the arbitrator exceeding his power is merely an attempt to bring

an issue of law under the purview of the circuit court’s very limited scope of

review. An arbitrator’s resolution of factual disputes or application of the law are

generally not subject to review by the courts. Conagra Poultry Co., 186 S.W.3d at

245. Accordingly, the arbitrator’s decision upon the issue of apportionment was

not reviewable by the circuit court. The arguments raised on cross-appeal are thus

without merit and we affirm the circuit court’s ruling thereon.     For the foregoing

reasons, we reverse and remand Appeal No. 2022-CA-0143-MR for proceedings

consistent with this Opinion and affirm Cross-Appeal No. 2022-CA-0180-MR.

                                         -12-
           ALL CONCUR.

BRIEFS FOR APPELLANT/CROSS-     BRIEF FOR APPELLEES/CROSS-
APPELLEE:                       APPELLANTS:

Scott P. Zoppoth                Stuart Alexander
Louisville, Kentucky            Louisville, Kentucky

                              -13-