Court Opinion

ID: 9914052
Source: CourtListenerOpinion
Date Created: 2023-12-29 15:04:41.181073+00
Date Added: 2024-06-11T13:09:58.801453
License: Public Domain

RENDERED: DECEMBER 22, 2023; 10:00 A.M.
                       NOT TO BE PUBLISHED

                 Commonwealth of Kentucky
                           Court of Appeals
                              NO. 2023-CA-0421-MR

THOMAS GAINES, INDIVIDUALLY
AND DERIVATIVELY ON BEHALF
OF GAINES-GENTRY
THOROUGHBREDS, LLC                                                     APPELLANT

                  APPEAL FROM FAYETTE CIRCUIT COURT
v.                HONORABLE THOMAS L. TRAVIS, JUDGE
                         ACTION NO. 18-CI-00091

HAL PRICE HEADLEY, III, AS
ADMINISTRATOR OF THE ESTATE
OF OLIN GENTRY                                                           APPELLEE

                                     OPINION
                                    AFFIRMING

                                   ** ** ** ** **

BEFORE: CETRULO, COMBS, AND EASTON, JUDGES.

CETRULO, JUDGE: Appellant Thomas Gaines (“Gaines”) appeals three orders

dismissing all of his claims against his former business partner for alleged breaches

of contractual fiduciary duties and statutory obligations of good faith and fair

dealing. Finding no error, we affirm the Fayette Circuit Court (“trial court”).
                                    I.      BACKGROUND

               In 2018, Gaines filed a complaint against his co-manager, Olin Gentry

(“Gentry”), at Gaines-Gentry Thoroughbreds, LLC1 (“GGT”). The claims in the

complaint span 17 years, during which the company went through multiple

comprehensive changes in management. In his complaint, Gaines alleged Gentry2

breached his statutory and contractual duties, committed fraud by omission,

misappropriated GGT assets, and concealed “self-serving” transactions.

               In 1994, Gaines’s father first incorporated John R. Gaines

Thoroughbreds, LLC to deal with a wide variety of equine-industry-related

business interests. For purposes of our discussion, after Gaines’s father left the

company, it evolved into GGT with Gaines and Gentry serving as co-managers.

Through the years, the parties signed various contractual agreements: (1) an

employment agreement signed in 1997; (2) a succession agreement signed in 2000;

(3) a settlement agreement signed in 2006; and (4) an operating agreement signed

in 2007. The interpretation of those contracts forms the foundation of this action.

1
  Gaines Gentry Thoroughbreds, LLC, has evolved as a company through the years with various
leadership, ownership, member composition, and structural formation. The company names
have included Gaines-Gentry, LLC; Gaines-T-Breds, LLC; John R. Gaines Thoroughbred, LLC;
and Gaines-Gentry Thoroughbreds, LLC, but for clarity we shall use “GGT” throughout, unless
distinction is necessary.
2
  Shortly after the filing, Gentry passed away and Gaines continued the action against his estate,
represented by Hal Price Headley, III, as administrator of Gentry’s estate.

                                                -2-
                In 1997, Gentry signed an Employment Agreement (“1997

Employment Agreement”) with GGT.3 The 1997 Employment Agreement

imposed upon Gentry fiduciary and reporting obligations. In relevant part, the

contract stated:

                During the Term, [Gentry] shall not engage in any activity
                which is (or has the potential to be) in conflict with the
                interests of [GGT] or [GGT’s] Affiliates or which is
                otherwise inconsistent with the highest fiduciary standards
                and duties (including, but not limited to, the fiduciary duty
                of loyalty generally imposed upon employees, officers,
                and directors of business corporations). In this regard, but
                not by way of limitation of [Gentry’s] general fiduciary
                duties, [Gentry] shall not engage in any paid or unpaid
                work activities which are not for the benefit of [GGT]. . . .
                [Gentry] shall not engage in, invest in, purchase, acquire,
                trade, exchange, sell, syndicate, breed or otherwise
                possess, receive, or otherwise deal in or with respect to any
                equity, creditor, profit, cash flow, distribution,
                compensatory, or other interests in or with respect to any
                equine interests, participations, investments, shares,
                fractional interests, foal sharings, breeding rights,
                commissions or other rights or benefits, whether direct or
                indirect through any one or more corporations,
                partnerships, limited liability companies, trusts, or other
                entities, individuals (whether or not related), third party
                arrangements, or otherwise, except [those equine interests
                approved by the Board and/or currently owned and
                reported]. . . . Furthermore, [Gentry] shall be obligated to
                immediately present to [GGT], and permit [GGT] to take,
                separately or with other, any and all rights, options, or
                other business or investment opportunities with respect to
                equine interests and activities of which [Gentry] has
                knowledge or which are presented to or otherwise come to
                [Gentry’s] attention at any time during the Term.

3
    More specifically, with John R. Gaines Thoroughbreds, LLC.

                                              -3-
             During the relevant timeframe – although the exact dates are unclear

from the record – Gentry solely owned Geneli Thoroughbreds, Inc. (“Geneli”).

The record reflects that Gaines was aware – he claimed “vaguely aware” – of

Gentry’s ownership of Geneli, and Gaines admitted he had received commission

checks from Geneli.

             In 2000, as a condition of becoming President and CEO of GGT,

Gentry signed a Succession Agreement (“2000 Succession Agreement”) which

passed control of GGT to Gaines and Gentry from Gaines’s father. The 2000

Succession Agreement created a management board made up of Gentry, Gaines,

and Gloria (Gaines’s sister), and it repeated (as similarly detailed in the 1997

Employment Agreement), that the three board members must present any business

opportunities which become available to them by reason of their relationship with

the company to the other principals.

             All potential equine transactions and equine-industry-
             related investment or business opportunities which are
             developed by, or become available to, [Gentry], Gloria or
             [Gaines], and any other potential investment or business
             opportunities which become available to [Gentry], Gloria
             or [Gaines], directly or indirectly by reason of his or her
             relationship with [GGT] and its activities, shall be
             presented to [GGT] and the other [members], and [GGT]
             or all three of [Gentry], Gloria or [Gaines], as the cause
             may be, shall have the right and privilege to elect to take
             and pursue such transaction or opportunity, with all
             economic benefits therefrom inuring to the benefit of
             [GGT] . . . . None of [Gentry], Gloria or [Gaines], will be

                                         -4-
             permitted to individually invest or pursue equine
             transactions or equine-industry-related investment or
             business opportunities if [GGT] or the other two
             [members] refuse or fail to take or pursue such transaction
             or opportunity, unless agreed to by all three of them.

             However, Gaines, Gentry, and Gloria were unable to manage GGT as

a cohesive unit, and in 2003 Gaines filed a lawsuit against Gloria seeking to

remove her from GGT. In 2006, Gaines and Gloria reached a settlement (“2006

Settlement Agreement”) that removed Gloria from the company but was silent as

to any management issues.

             In 2007, Gaines, Gentry, and Gaines’s mother, Joan Gaines (“Joan”),

signed a Second Amended Operating Agreement that was backdated to January

2006 (“2006 Operating Agreement”). While both Gaines and Gentry were

designated as “Managers,” Gentry handled the active management of GGT as

operating manager. The 2006 Operating Agreement did not contain language

requiring the members to share equine interests with each other or GGT. In fact,

the 2006 Operating Agreement waived many fiduciary duties and superseded prior

contracts.

             5.7 Fiduciary Duties of Members. To the fullest extent
             permitted by Law, each Member (the “Waiving Member”)
             hereby agrees to (a) waive any fiduciary duties or personal
             liability that any other Member may have to the Company
             or such Waiving Member, whether such duties or liability
             would otherwise arise in such other Member’s capacity as
             a Member, Manager or officer, and (b) eliminate any

                                         -5-
               personal liability any other Member may have to the
               Company or such Waiving Member.

               ...

               19.6 Entire Agreements. This Agreement constitutes the
               entire agreement among the parties hereto with respect to
               the subject matter hereof and supersedes any prior or
               contemporaneous oral or written agreement or
               understanding among the parties hereto with respect to the
               subject matter hereof.

               In his appellant brief, Gaines argues that before filing this complaint,

he requested and received a copy of the 2006 Operating Agreement from GGT’s

legal counsel, Frost Brown Todd, LLC. The copy he received was missing pages

nine and 11; the above fiduciary language of Section 5.7 was on page nine. Other

fully executed copies of this 2006 Operating Agreement – possessed by Gentry and

other GGT business associates4 – contained all the pages.

               In 2014,5 Gaines gained access to GGT’s storage unit and sought to

inventory GGT records in order to prepare for unrelated litigation. As Gaines

4
  In his appellant brief, Gaines states that he “asked [GGT’s] counsel, Frost Brown Todd, LLC,
for a copy of the [2006 Operating Agreement].” However, in his appellee brief, Gentry points
out that Gaines received his copy of this contract from his mother’s trust attorney, not GGT’s
corporate attorney; both the trust attorney and corporate attorney were members of Frost Brown
Todd, LLC, but were not the same individual. Additionally, Gentry states that complete copies
of the contract, without any missing pages, were available to Gaines upon request from the GGT
office manager, GGT’s corporate legal counsel, GGT’s corporate accountant, and/or located in
the GGT storage facility and Gaines’s email.
5
 Gaines cites 2014, 2015, and 2016 throughout this litigation, but for clarity we shall use 2014
consistently. The record suggests Gaines first attained access to the GGT storage unit in 2014,
began organizing in 2015, and found records of various concerning transactions through 2016.

                                               -6-
organized the documents in the storage unit, he discovered multiple payments to

Gentry (and/or Gentry’s company, Geneli) that he claimed were proof of Gentry’s

“self-dealing transactions.” Gentry kept records from his personal company,

Geneli, on the GGT computer system, and apparently in the GGT storage unit.

Although not explicitly stated in the appellate briefs, it appears that Gaines

received access to both GGT and Geneli records at that time. This litigation

resulted from Gaines’s review of those records.

              In January 2018, Gaines filed suit against Gentry alleging nine

improper transactions, requesting both compensatory and punitive damages. The

trial court dismissed all nine transactions through three separate orders: a 2019

order granting summary judgment, in part (“2019 Summary Judgment”); a 2022

order granting summary judgment, in part (“2022 Summary Judgment”); and a

2023 order entered after a bench trial (“2023 Order”). Gaines appeals all three

orders.

                                     II.     ANALYSIS

              On appeal, Gaines argues the trial court erred in dismissing four of the

nine alleged improper transactions.6 Gaines argues these transactions were “self-

6
  Gaines also listed a fifth improper transaction for appellate review as “[n]umerous payments
made to Gentry’s sister, Kathleen [a GGT employee from 2001-2007], labeled ‘bonus.’” Gaines
implies the bonus checks were inappropriate but ends his argument there, as he also did before
the circuit court. The circuit court, in the 2022 Summary Judgment, stated that “[Gentry] [did]
not assert how these checks [to Kathleen] were wrongful besides the fact that they were written.”
On appeal, Gaines does not – in any way – show how the bonus checks to Kathleen were a “self-

                                               -7-
dealing” payments by Gentry and a breach of his fiduciary duties, and/or breaches

of implied covenants of good faith and fair dealing. Conversely, Gentry asserts

that Gaines’s legal approach in this litigation was to find payments to Gentry (or

Geneli) in the GGT records, claim – without supporting evidence – that the

payments alone proved impropriety, and then attempt to shift the burden to Gentry

to prove the transactions were legitimate.7 Gentry asserts that all the transactions

were properly recorded in the GGT records; all parties had equal access to the

GGT records; and Gaines chose not to review the records until 2014 then assumed,

without proof, that payments to Gentry and/or Geneli were improper. We shall

address each transaction in turn.

       A.      Two September 2007 Payments: Commission from Winstar Farm

               and Thoroughbred Crystal Current Interest

               The 2019 Summary Judgment dismissed these claims.

               In February 2018, Gentry filed a motion to dismiss for failure to state

a claim, but the court considered matters outside the pleadings, thereby treating the

dealing” transaction by Gentry. The mere existence of bonus checks paid to an employee does
not create a standalone argument of impropriety. In fact, Gaines does not discuss – in either his
appellant or reply brief – how the trial court erred by dismissing these bonus-check-inferences
and, therefore, neither shall we.
7
 The trial court appears to share this impression. In the third order in this appeal, the 2023
Order, the trial court stated, “It was apparent from [Gaines’s] testimony that many of the claims
he has raised in this action were based simply on finding evidence of any payment to Gentry and
asserting that such payments were wrongful.”

                                               -8-
motion as one for summary judgment. The appellate standard of review when a

trial court has granted a motion for summary judgment is whether the record, when

examined in its entirety, shows there is “no genuine issue as to any material fact

and that the moving party is entitled to a judgment as a matter of law.” Kentucky

Rule of Civil Procedure (“CR”) 56.03. “The record must be viewed in a light most

favorable to the party opposing the motion for summary judgment and all doubts

are to be resolved in his favor.” Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807

S.W.2d 476, 480 (Ky. 1991) (citation omitted). As “[a]ppellate review of a

summary judgment involves only legal questions and a determination of whether a

disputed material issue of fact exists[,]” our review is de novo. Shelton v. Ky.

Easter Seals Soc’y, Inc., 413 S.W.3d 901, 905 (Ky. 2013) (citation omitted).

             Gaines states in his appellate brief:

             In 2007, [GGT] was involved in negotiating the purchase
             of numerous syndicated stallion shares from various farms
             for a stallion share venture. Shares were acquired from
             Winstar in the Fall of 2007. In September 2007, Gentry
             received a check payable to him, individually, from
             Winstar in the amount of $150,000. The check was
             deposited into Geneli’s account, and referenced in
             Geneli’s records as “miscellaneous.” Gaines was not
             aware of this payment until the check and related
             documents were discovered by him in [GGT’s] records in
             [2014]. [“Winstar Commission”]

             ...

             On September 30, 2007, Gentry wrote a check on his
             Geneli account for $75,000, completed the date, amount

                                          -9-
             and signature in blue ink. In black ink, “Hill ‘n’ Dale
             Farms” was printed as payee, and “CRYSTAL
             CURRENT” was printed on the “For” line. CRYSTAL
             CURRENT was sold less than a year later at auction for
             $3,000,000.00. Gaines’s Verified Complaint alleged his
             belief that the September 30, 2007, check was used by
             Gentry to acquire an ownership interest in CRYSTAL
             CURRENT from Hill ‘n’ Dale Farm. This business
             opportunity belonged solely to [GGT].” [“Crystal Current
             Interest”]

             Gaines argues that Gentry’s failure to adequately report and/or share

the Winstar Commission and Crystal Current Interest with GGT and the other

principals were improper acts of “self-dealing.” However, the trial court

disagreed, finding that the complete version of the 2006 Operating Agreement was

controlling; Paragraph 5.7 of that contract waived fiduciary duties; Gentry did not

act beyond the scope of the controlling contract, and therefore Gentry was entitled

to summary judgment on those claims.

             On appeal, Gaines argues that the 1997 Employment Agreement and

the 2000 Succession Agreement were still binding in 2007 and required Gentry to

present any business opportunities (which become available to him by reason of

his relationship with the company) to the other principals. Further, he asserts that

his copy of the 2006 Operating Agreement – missing Paragraph 5.7 that waived

fiduciary duties – should be controlling, at least for purposes of averting summary

judgment. Conversely, Gentry argues that the trial court was correct to find his

version of the 2006 Operating Agreement – containing Paragraph 5.7 – was

                                        -10-
controlling. Gentry argues that because Paragraph 5.7 waived fiduciary and

reporting duties, Gentry did not act improperly by accepting the Winstar

Commission nor the Crystal Current Interest.

             First, we must consider the pertinent factual findings of the trial court.

“Findings of fact, shall not be set aside unless clearly erroneous, and due regard

shall be given to the opportunity of the trial court to judge the credibility of the

witnesses.” CR 52.01. Findings are not clearly erroneous if they are supported by

substantial evidence. Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003) (citation

omitted).

             The 2019 Summary Judgment stated, “Gaines’ assertion that these

[fiduciary and statutory duties of loyalty] were not waived because the version

provided to him by the company’s counsel did not contain the relevant page is

without merit.” In essence, the trial court made the factual finding that the version

of the 2006 Operating Agreement – with all the pages included – is the authentic,

controlling document.

             The Court notes that, if page 11, which contains Paragraph
             5.7, were removed from the contract, the language and
             ordering of the provisions would be nonsensical. First, the
             pages are numbered, so it would be immediately apparent
             to a reasonable person, particularly an experienced
             businessman such as Gaines, that there are contractual
             provisions missing. Further, at the bottom of page 10 is
             Paragraph 5.4, and at the top of page 12 is Paragraph 8.3.
             Even assuming that page 11 of Gaines’ contract were
             missing, no reasonable person would conclude that the

                                          -11-
             contract was intentionally drafted that way or that the
             provisions on the missing page somehow would be
             inapplicable or irrelevant. Thus, in the Court’s view, there
             is only one reasonable conclusion that can be reached: that
             the version of the [2006 Operating Agreement] as tendered
             by Gentry [with all the pages included] is the authentic and
             controlling document, and Gaines’ assertion to the
             contrary cannot stand. The fiduciary duty of loyalty is
             waived in that [2006 Operating Agreement.]

             On appeal, Gaines argues that due to the standard of review on

summary judgment – viewing the record in a light most favorable to the party

opposing the motion for summary judgment and all doubts being resolved in his

favor, Steelvest, 807 S.W.2d at 480 (citation omitted) – the trial court erred by not

accepting his version of the 2006 Operating Agreement as controlling. However,

we do not agree. The standard of review described in Steelvest does not remove

the trial court’s ability to make a factual finding when only one reasonable

conclusion exists. “If reasonable minds cannot differ or . . . when only one

reasonable conclusion can be reached, the litigation may still be terminated.”

Dishman v. C & R Asphalt, LLC, 460 S.W.3d 341, 347-48 (Ky. App. 2014)

(quoting Shelton, 413 S.W.3d at 916). Moreover, the summary judgment standard

is to be applied in a practical sense, not absolute.

             Summary judgment is appropriate when “‘as a matter of
             law, it appears that it would be impossible for the
             respondent to produce evidence at the trial warranting a
             judgment in his favor and against the movant.’” [Steelvest,
             807 S.W.2d at 483)] (quoting Paintsville Hospital Co. v.
             Rose, 683 S.W.2d 255, 256 (Ky. 1985)). In using the word

                                          -12-
              “impossible” in Steelvest, we have acknowledged that it
              “is used in a practical sense, not in an absolute sense.”
              Perkins v. Hausladen, 828 S.W.2d 652, 654 (Ky. 1992).

O’Bryan v. Cave, 202 S.W.3d 585, 587 (Ky. 2006).

              As such, the summary judgment standard of review does not mandate

that Gaines’s version of the 2006 Operating Agreement be accepted as controlling,

when to do so – as determined by the trial court – is unreasonable. Dishman, 460

S.W.3d at 347-48. The trial court’s factual finding – that the complete version of

the 2006 Operating Agreement, including Paragraph 5.7, was the proper, legal

version of the contract – was based on substantial evidence and therefore was not

clearly erroneous. As such, we are bound by that finding. However, Gaines

argues – even accepting that factual finding – Gentry still acted improperly based

on other contractual8 and statutory grounds.

              Gaines argues Paragraph 5.7 did not supersede or rescind the fiduciary

duties imposed on Gentry in the 1997 Employment Agreement and 2000

Succession Agreement because the boilerplate integration provision in the 2006

8
  In part, Gaines argues Paragraph 5.7 is ambiguous because it is inconsistent with Paragraph
14.3 and 18.2 of the same document. The 2019 Summary Judgment did not discuss this issue
factually or legally. The court speaks through its orders, see Kindred Nursing Centers Limited
Partnership v. Sloan, 329 S.W.3d 347, 349 (Ky. App. 2010), and our appellate review is limited
to those matters which were addressed by the lower trial, Fischer v. Fischer, 197 S.W.3d 98, 102
(Ky. 2006) (citing Combs v. Knott County Fiscal Court, 141 S.W.2d 859, 860 (Ky. 1940)). If
Gaines wished additional findings as to ambiguity or inconsistency, he was required to motion
for additional findings before the trial court. See Eiland v. Ferrell, 937 S.W.2d 713, 716 (Ky.
1997) (citing CR 52.04). Therefore, we need not analyze this ambiguity argument regarding
Paragraph 14.3 and 18.2.

                                             -13-
Operating Agreement only supersedes those agreements “with respect to the

[same] subject matter.” Gaines argues that since the 2006 Operating Agreement

deals with different subject matters than the 1997 Employment Agreement and

2000 Succession Agreement, those prior contracts were still binding at the time

Gentry received the Winstar Commission and Crystal Current Interest. Yet, we

find this argument to be without merit.

             As stated, we are bound by the finding that the complete 2006

Operation Agreement is the applicable version of the contract; therefore, we

include Paragraph 5.7 in our analysis. Paragraph 5.7 clearly, explicitly waives

fiduciary duties. “Where the contract’s language is clear and unambiguous, the

agreement is to be given effect according to its terms, and ‘a court will interpret the

contract’s terms by assigning language its ordinary meaning and without resort to

extrinsic evidence.’” Vorherr v. Coldiron, 525 S.W.3d 532, 543 (Ky. App. 2017)

(quoting Frear v. P.T.A. Indus., Inc., 103 S.W.3d 99, 106 (Ky. 2003)).

             Here, Paragraph 5.7 of the controlling 2006 Operating Agreement

“waive[d] any fiduciary duties or personal liability that any other Member may

have to [GGT.]” Prior contracts created fiduciary duties among the parties; the

controlling 2006 Operation Agreement eliminated those duties; thus, the subject

matters are overlapping as to fiduciary duties. Just because the 1997 Employment

Agreement, 2000 Succession Agreement, and 2006 Operating Agreement might

                                          -14-
not overlap 100% on other subject matter, does not somehow create an assumption

that these contracts are unenforceable or inconsistent as a whole. The Paragraph

5.7 waiver language is clear, concise, and controlling on the fiduciary subject.

             We additionally note, the 2006 Operating Agreement supersedes prior

contracts because the plain language of the contract clearly states such an intent.

             19.6 Entire Agreements. This Agreement constitutes the
             entire agreement among the parties hereto with respect to
             the subject matter hereof and supersedes any prior or
             contemporaneous oral or written agreement or
             understanding among the parties hereto with respect to the
             subject matter hereof.

             Again, when a contract is clear, we are bound to interpret the contract

using its ordinary meaning. Id.

             Next, Gaines argues the 2006 Operating Agreement is invalid because

it was induced by fraudulent omission. Gaines asserts he “did not and could not

learn of [the Winstar Commission and Crystal Current Interest] transactions until

December [2014], when he began to review [GGT] documents previously kept in

the storage unit.” Gaines argues Gentry had a duty to disclose these “prior

instances of self-dealing to Gentry” before signing the 2006 Operating Agreement,

and because Gentry did not properly and adequately disclose those dealings, the

2006 Operating Agreement is not valid. However, he leaves this argument

unsupported.

                                         -15-
               In order for a plaintiff to succeed on a claim of fraudulent omission,

he must prove “a) that the defendants had a duty to disclose [a material] fact; b)

that defendants failed to disclose that fact; c) that the defendants’ failure to disclose

the material fact induced the plaintiff to act; and d) that the plaintiff suffered actual

damages.” Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636,

641 (Ky. App. 2003) (citing Smith v. Gen. Motors Corp., 979 S.W.2d 127 (Ky.

App. 1998)). According to Gaines, both the Winstar Commission and Crystal

Current Interest transactions occurred in September 2007. Although the 2006

Operating Agreement was backdated to January 2006, it was signed by the parties

in October 2007. Even if – assuming for purposes of this limited discussion –

Gentry had a duty to disclose, Gaines does not show, in any way, how Gentry

“failed to disclose” the Winstar Commission and Crystal Current Interest. He does

not explain how Gentry recording the transactions in the Geneli and/or GGT books

was not “disclosure.” Gaines admits that his review of the GGT records revealed

these payments; it is unclear why he “could not learn” about the transactions until

December 2014.

               Simply, Gaines, as a manager, had access to the GGT records at all

times,9 and when he finally looked at the books, he saw the transactions.

9
  Gaines asserts that he did not have a key to the GGT storage unit, but rather, had to convince an
employee of the storage facility to allow him access. However, he does not argue that he
requested access and/or a key but was denied by Gentry or any other employee of GGT.

                                               -16-
Moreover, it is unclear why Gaines did not check the company books prior to

signing a new operating agreement. Gaines does not explain how Gentry’s alleged

failure to disclose the transactions induced him to act. If the new operating

agreement was signing away fiduciary duties, it is unclear how business

transactions – occurring almost simultaneously in time to the contract signing –

would convince Gaines not to sign a contract that did away with fiduciary duties.

Asked another way, if he was signing away fiduciary duties in October 2007,

would transactions occurring (possibly without recognition of fiduciary duties) in

September 2007, have swayed him from signing? Gaines fails to address these

elements or concerns on appeal. In short, Gaines fails to establish fraud by

omission.

               Next, Gaines argues Gentry breached his statutory10 good faith and

fair dealing obligations by usurping GGT’s business opportunities. Although our

review is de novo, the trial court’s conclusions concisely addressed the matter.

               “In every contract, there is an implied covenant of good
               faith and fair dealing.” [Ballard v. 1400 Willow Council
               of Co-Owners, Inc., 430 S.W.3d 229, 241 (Ky. 2013)
               (quoting Ranier v. Mt. Sterling Nat’l Bank, 812 S.W.2d
               154, 156 (Ky. 1991)).] This is a “separate concept” to that
               of a fiduciary duty; the covenant “merely requires the
10
   Kentucky Revised Statute (“KRS”) 275.003(7) states, “[e]ach member and manager and any
other party to an operating agreement shall discharge all duties and exercise all rights
consistently with the obligation of good faith and fair dealing. The obligation of good faith and
fair dealing may not be eliminated in the operating agreement, but it may prescribe the standards
by which the performance of the obligation is to be measured provided the standards are not
manifestly unreasonable.”

                                              -17-
             parties to ‘deal fairly’ with one another and does not
             encompass the often more onerous burden that requires a
             party to place the interest of the other party before his own,
             often attributed to a fiduciary duty.” [Id. at 241-42
             (quoting In re Sallee, 286 F.2d 878, 891-92 (6th Cir.
             2002))].

             Gaines alleges that Gentry engaged in self-dealing and/or
             other business ventures in violation of the terms of the
             [2006 Operating Agreement] that harmed both him and
             GGT. However, since the fiduciary duty of loyalty was
             waived in that Agreement, Gentry was not required to
             “place the interest of [Gaines] before his own,” and there
             [were] no allegations that Gentry otherwise failed to “deal
             fairly” with Gaines. In the Court’s view, Gaines’[s] claims
             that Gentry took GGT opportunities for himself and
             derived benefits therefrom are not applicable under the
             implied covenant of good faith and fair dealing.

             Gaines argues that “subterfuge and evasions” act as a breach of the

statutory requirement of good faith and fair dealing, but he does not then point to

any acts of “subterfuge” or “evasion” by Gentry. In fact, the trial court specifically

stated that there were “no allegations that Gentry otherwise failed to ‘deal fairly’

with Gaines.” On appeal, Gaines alleges that Gentry “concealed” the Winstar

Commission and/or the Crystal Current Interest transactions, but as already

discussed, it is unclear how (or if) Gentry “concealed” the transactions. Gentry

recorded the transactions and placed record of the transactions in the company

books. Gaines does not contest those facts. In short, Gaines does not support this

argument and we are not at liberty, nor of the inclination, to create an argument

where none exists.

                                         -18-
             Lastly, Gaines argues Paragraph 5.7 did not bar equitable remedies

requested by Gaines. Gaines argues he was due the equitable remedy of

disgorgement for “amounts received by Gentry from [GGT] while he was

breaching his contractual and fiduciary duties to [GGT], and of proceeds Gentry

received through any entity or partnership (including Geneli) in any way related to

the equine industry.” However, Gaines does not support these overarching

requests; he argues that such remedies are not legally barred, but he does not

support the argument that such remedies are appropriate. Fundamentally, Gaines

seeks equitable relief for breaches of duty, yet he proved no such breach;

accordingly, we need not discuss the requested relief.

             Therefore, Gentry was entitled to summary judgment on both the

Winstar Commission and Crystal Current Interest transaction claims.

      B.     2001 Consulting Payment

             The 2022 Summary Judgment dismissed this claim.

             Again, the appellate standard of review when a trial court has granted

a motion for summary judgment is whether there is “genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of

law.” CR 56.03. The record must be viewed in a light most favorable to Gaines,

see Steelvest, 807 S.W.2d at 480 (citation omitted), and our review is de novo,

Shelton, 413 S.W.3d at 905 (citation omitted).

                                        -19-
               Gaines argues that Gentry’s failure to report and/or share a March

2001 Consulting Payment with GGT and the other principals was another improper

act of “self-dealing.”11 Gaines states in his appellate brief:

               A $150,000 handwritten check was written from [GGT’s]
               account to Gentry’s wholly-owned company, Geneli. The
               check was signed by Gentry and stamped with a signature
               stamp for Gaines’s signature that was kept in [GGT’s]
               office and under Gentry’s control. A Geneli deposit slip
               was created with “Consulting G-G” handwritten on the
               slip. The check was then deposited into Geneli’s bank
               account. [GGT] did not owe this money to Geneli or to
               Gentry, and Gaines was unaware of this payment until he
               discovered the relevant documents in [GGT’s] records in
               [2014]. [“Consulting Payment”]

               KRS 413.090(2) limits breach of contract claims to a 15-year statute

of limitations. This action was filed in 2018, 17 years after Gentry received and

recorded the payment in the GGT books. KRS 413.190(2) allows limitations to be

tolled if the defendant “obstructs the prosecution of the action[.]” However, the

11
   Gaines’s appellant brief states no discovery took place on the Winstar Commission and Crystal
Current Interest transactions (“[N]o discovery ever took place on Gentry’s secret commission
from WINSTAR or the secret interest in CRYSTAL CURRENT”), but that discovery did occur
for the Consulting Payment and Marino Marini Commission (“Following discovery, both parties
moved for summary judgment.”). And yet, in his reply brief, Gaines seems to argue that he was
not allowed sufficient time for discovery. “The Circuit Court dismissed the bulk of Gaines’s
claims before any discovery could be conducted. Gaines did not have the opportunity to identify
material issues of fact as to those claims, or as to the applicability of KRS 413.190(2) to them.”
However, it is unclear what/which of the transaction(s) on appeal he is referring to in his reply
brief. It appears – due to his reference to the statute of limitations – that he is referring to the
Consulting Payment in his reply brief, but that would be inconsistent with his appellant brief that
both parties moved for summary judgment after discovery was conducted. Also, Gaines does not
state that he moved for additional time for discovery before the trial court. As a result,
discovery, or the lack thereof, was not effectively argued before this Court and will not be
addressed further.

                                               -20-
limitations period begins when a plaintiff “should have discovered his cause of

action by reasonable diligence.” Emberton v. GMRI, Inc., 299 S.W.3d 565, 575

(Ky. 2009) (citation omitted).

             Gaines argues the trial court erred because, “[a]lthough the

concealment contemplated by the statute [KRS 413.190(2)] usually constitutes

some ‘affirmative act,’ an important exception to that requirement exists where a

party remains silent when the duty to speak or disclose is imposed by law upon that

person[,]” citing Emberton, 299 S.W.3d at 573. However, accepting that

supposition as true, Gaines does not show how Gentry failed in his duty to speak or

disclose the Consulting Payment. Gaines does not show that Gentry “remained

silent”; to the contrary, his actions spoke volumes. The Consulting Payment was

recorded in multiple places in GGT’s general ledger as payment for consulting fees

to Geneli, a business which was known to Gaines and from which Gaines had

received commission checks. Gaines does not show how “reasonable diligence”

could not have discovered the transaction in 2001.

             During his deposition, GGT accountant Louis Fister (“Fister”) stated

that the 2001 GGT general ledger contained check 7863 paid to Geneli and

recorded as a consulting payment. Fister also identified the Consulting Payment

on an audited financial statement his company prepared for GGT. Fister testified

that the related party payable identified on the financial statement was the same

                                        -21-
transaction identified in the general ledger. In his deposition, Gaines concedes that

the 2001 audited financial statements, which were prepared primarily for his

benefit, showed the Consulting Payment.

             Nevertheless, Gaines argues that the statute of limitations was tolled

by Gentry’s “concealment” of the Consulting Payment. The trial court disagreed,

finding “no evidence of concealment”:

             The record shows that the payment was duly documented
             in the general ledger, and [GGT’s] record keeper knew of
             the transaction and recorded it. Therefore, there is no
             evidence of concealment of this payment. The Court finds
             the tolling argument put forth by [Gaines] invalid because
             [Gaines] had full access to the books, records, and
             accounts and did a full financial audit of the company in
             2007, where he had unrestricted access to all relevant
             financial information. Any impropriety could have been
             discovered during that financial audit. Further, Gentry
             met his duty of disclosure by accurately reporting each of
             the transactions and ensuring they were logged.

             Here, the trial court concluded that, assuming he had a duty to

disclose, Gentry accurately documented the payment and included it in the

financial statements – prepared for Gaines – for 2001. The trial court’s factual

finding of no concealment was not clear error as it was supported by substantial

evidence. Additionally, Gaines does not substantiate his claim that Gentry’s

actions, or inaction, tolled the statute of limitations applicable here. As such, this

claim is barred by the statute of limitations and was properly dismissed by the trial

court.

                                         -22-
      C.     2003 Commission Payment from Sale of Marino Marini

             After a bench trial, the 2023 Order dismissed this claim.

             Similarly, to our standard of review above, our appellate review on

this issue follows CR 52.01 for factual findings and de novo for legal arguments.

             Under CR 52.01, the trial court is required to make
             specific findings of fact and state separately its
             conclusions of law relied upon to render the court’s
             judgment. Further, those findings of fact, shall not be set
             aside unless clearly erroneous, and due regard shall be
             given to the opportunity of the trial court to judge the
             credibility of the witnesses. CR 52.01. In fact, judging
             the credibility of witnesses and weighing evidence are
             tasks within the exclusive province of the trial court.

             If the trial judge’s findings of fact in the underlying action
             are not clearly erroneous, i.e., are supported by substantial
             evidence, then the appellate court’s role is confined to
             determining whether those facts support the trial judge’s
             legal conclusion. However, while deferential to the lower
             court’s factual findings, appellate review of legal
             determinations and conclusions from a bench trial is de
             novo.

Barber v. Bradley, 505 S.W.3d 749, 754 (Ky. 2016) (internal quotation marks and

citations omitted).

             Gaines states in his appellant brief:

             In July 2003, Gentry became involved in the sale of
             MARINO MARINI by an agent in Ireland to a California
             farm for $1,000,000. In August 2003, Gentry received a
             check for $50,000, drawn on an Irish bank, payable to him
             personally. [O]n September 16, 2003, he completed a
             Geneli deposit slip and wrote “Marino Marini
             Commission,” then deposited it into Geneli’s account.

                                         -23-
             Gaines was not aware of this payment until the check and
             related documents were discovered by him in [2014].
             [“Marino Marini Commission”]

             Gaines argues that Gentry’s failure to report and/or share his Marino

Marini Commission with GGT and the other principals was a fourth improper act

of “self-dealing.” Unlike the other alleged “improper” transactions, this took place

– in August 2003 – before fiduciary duties were waived in the 2006 Operation

Agreement, and within the judiciable window (i.e., less than the applicable 15-

years required to initiate the statute of limitations). Also, unlike the other claims,

the trial court did not dismiss this transaction controversy through summary

judgment.

             Instead, in January 2023 the trial court held a bench trial. Shortly

thereafter, the court entered its 2023 Order dismissing Gaines’s fourth and final

claim. Key to this dismissal is the trial court’s fact-finding and again, Gaines’s

failure to support his claim. The court stated,

             At the bench trial, [Gaines] introduced exhibits
             documenting the MARINO MARINI sale and the
             commission payment of $50,000 to Geneli and testified on
             direct that he did not receive any commission payment
             from the sale of MARINO MARINI. However, on cross-
             examination and consistent with [] Gaines’s deposition on
             September 22, 2021, he testified that he simply “did not
             recall” whether he received compensation for the sale of
             MARINO MARINI. Furthermore, in a separate lawsuit in
             2015, [] Gaines likewise testified that he did not recall
             whether he received a commission payment for the sale of
             MARINO MARINI.

                                         -24-
             [Gaines] offered no other affirmative evidence or
             testimony at the trial of this matter to prove that, nearly 20
             years ago, GGT or its members did not receive the
             commission payment from [] Gentry for the [Marino
             Marini Commission].

             It was apparent from [Gaines’s] testimony that many of
             the claims he has raised in this action were based simply
             on finding evidence of any payment to Gentry and
             asserting that such payments were wrongful. An example
             is the $50,000 payment to a trust for the benefit of Gentry,
             which [Gaines] avowed was not owed to Gentry and was
             misappropriated. As testified by Mr. Fister and reflected
             on [Gentry’s] exhibit 1, the payment was a profit
             distribution from [GGT] and identical checks were written
             to the other members, including [] Gaines, on the same
             date. When shown the distribution check payable to him,
             Gaines conceded his error and testified that he “was not
             aware he received the check.” Yes he had received it, and
             a simple investigation of the company’s records or a brief
             consultation [with] the company’s CPA could have
             confirmed that.

             Immediately after this testimony, [] Gaines conceded that
             this same failure to recall receiving a check was the basis
             for his claim regarding MARINO MARINI. [Gentry]
             presented testimony by Louis Fister, CPA, an accountant
             who had performed services for both GGT and Geneli and
             who authenticated records from 2004 to 2005 indicating
             payments for commission and other equine-related
             services from Geneli to [] Gaines. Fister testified that he
             did not provide accounting services to Geneli in 2003 and
             did not have documents or knowledge proving or
             disproving the payment of a commission-related
             MARINO MARINI to [Gaines].

             Again, “due regard shall be given to the opportunity of the trial court

to judge the credibility of the witnesses.” CR 52.01. “In fact, judging the

                                         -25-
credibility of witnesses and weighing evidence are tasks within the exclusive

province of the trial court.” Barber, 505 S.W.3d at 754.

             Gaines did not provide any accounting records for 2003, the year of

the Marino Marini Commission, nor did he present any evidence to establish

payment or the absence thereof. After making similar accusations that proved to

be inaccurate guesses, it was reasonable for the court to (1) make note of an

absence of accounting evidence and (2) call into question Gaines’s testimonial

credibility. The trial court’s factual findings were deliberate and well-reasoned.

Based on Gaines’s own admissions on the stand and failure to produce any other

witness or evidence supporting his allegation, there is no basis to conclude that the

trial court’s findings of fact are clearly erroneous, and therefore we accept these

facts.

             Under Kentucky law, to prevail on a breach of contract claim, Gaines

needed to prove “(1) the existence of a contract; (2) breach of the contract; and (3)

damages flowing from the breach of contract.” See Brown & Brown of Ky., Inc. v.

Walker, 652 S.W.3d 624, 631 (Ky. App. 2022) (citation omitted). Here, element

one was met; element two was not met; and, subsequently, element three need not

be discussed.

             The parties agree that the 2000 Succession Agreement – with its duty

to report and share equine business opportunities with each other – was

                                         -26-
contractually binding in 2003, but Gaines was unable to establish breach of the

2000 Succession Agreement. Essentially, Gaines did not show he was not paid.

Gaines attempts to shift the burden to Gentry to prove Gentry shared the Marino

Marini Commission,12 but such a burden shift is not consistent with Kentucky law.

CR 43.01 requires “[t]he party holding the affirmative of an issue must produce the

evidence to prove it.” See CertainTeed Corp. v. Dexter, 330 S.W.3d 64, 73 (Ky.

2010) (stating the party bringing the breach of contract claim bears the burden of

proving the elements) and Morrison v. Trailmobile Trailers, Inc., 526 S.W.2d 822,

824 (Ky. 1975) (“CR 43.01 place[s] the burden and risk of non-persuasion on the

appellant as to the issues upon which the trial court made findings.”).

               While we owe no deference to the trial court’s legal conclusions in

this de novo review, we appreciate the trial court’s clarity in explaining the issue.

               Kentucky Courts have recognized the rule of equal
               probabilities. [Texaco, Inc. v. Standard, 536 S.W.2d 136,
               138 (Ky. 1975).] Further, the kind of speculation that is
               not allowable occurs when the probabilities of an event’s
               having happened in one or two or more ways are equal,

12
  The trial court stated that “[Gaines] offered no accounting records of either his own or GGT in
support of this [Marino Marini Commission] claim.” On appeal, Gaines seems to argue in his
reply brief that his exhibits during the bench trial were such accounting records, but they are not.
These exhibits are examples of individual transactions (that were reported around the time of the
Marino Marini Commission receipt) and fall quite short of a full accounting for the time frame in
question. Exhibit 1 is illegible. Exhibit 2 was a bill of sale for Marino Marini signed only by the
“purchaser,” Rancho San Miguel (not signed by Gentry). Exhibit 3 is a copy of a check to Randy
Gullatt for $50,000 on August 1, 2003. Exhibit 4 is a copy of a check to Gentry for $50,000 on
August 1, 2003. Exhibit 5 is a Geneli bank statement dated September 13, 2003, to October 15,
2003, showing a deposit of $50,000 on September 16 and a wire transfer credit of $100,000 on
October 3.

                                               -27-
             and there is no evidence as to which way it happened.”
             [Schuster v. Steedley, 406 S.W.2d 387, 390 (Ky.
             1966) . . . .] This is how the Court views this case and the
             issue subject to the bench trial. Mr. Gaines’ claim could
             be or might be true, i.e., that he did not receive his share
             of the commission. The opposite is equally true. The
             evidence presented by Gaines at trial does not compel a
             conclusion that more likely than not, he did not get his
             share of the commission.

             Gaines failed to show that Gentry breached the terms of the 2000

Succession Agreement by not bringing the Marino Marini opportunity to GGT or

providing GGT (or Gaines) with a share of the commission. As such, he did not

establish an essential element of his claim, and therefore, the trial court properly

dismissed the claim.

                               III.   CONCLUSION

             The trial court did not err when it granted Gentry’s two motions for

summary judgment and dismissed Gaines’s fourth and final claim after a bench

trial. As such, the orders of the Fayette Circuit Court are AFFIRMED.

             ALL CONCUR.

 BRIEFS FOR APPELLANT:                      BRIEF FOR APPELLEE:

Michael D. Meuser                          John H. Dwyer, Jr.
Elizabeth C. Woodford                      Louisville, Kentucky
Lexington, Kentucky

                                         -28-