FRED W. HERTRICH, III; AND LEWIS ARNO v. WALNUT HALL LIMITED
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RENDERED: MAY 12, 2006; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2005-CA-001022-MR
FRED W. HERTRICH, III;
AND LEWIS ARNO
APPELLANTS
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE JOHN R. ADAMS, JUDGE
ACTION NO. 02-CI-03440
v.
WALNUT HALL LIMITED
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BARBER AND McANULTY, JUDGES; POTTER, SENIOR JUDGE.1
BARBER, JUDGE:
This is the second time this matter has appeared
before our court.
The current appeal deals with the Fayette
Circuit Court’s interpretation of our opinion in the first
appeal.
See:
Walnut Hall Ltd. v. Hertrich, et al., 2004 WL
1487105 (Ky.App. 2004).
1
Following remand, the circuit court
Senior Judge John W. Potter sitting as Special Judge by assignment of the
Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and
KRS 21.580.
entered judgment2 on behalf of Appellee, Margaret N. Jewett d/b/a
Walnut Hall Limited (Walnut Hall).
Appellants, Fred W.
Hertrich, III (Hertrich) and Lewis Arno (Arno), promptly
appealed the judgment claiming the circuit court improperly
interpreted our prior opinion.
To begin, we review the first
appeal that was before our court.
The first appeal was initiated by Walnut Hall arguing
that the circuit court improperly denied its summary judgment
motion while granting Hertrich’s and Arno’s summary judgment
motion.
The relevant facts were as follows:3
Walnut Hall was a standardbred horse farm in Fayette
County.
Hertrich and Arno were partners who owned and bred
horses.
They jointly owned numerous stallion shares.
In early
2002, they entered into negotiations with Walnut Hall to
participate in a stallion syndicate.
The stallion, Western
Shooter, was two years of age at that time and was still racing.
The breeding of the horse was not to begin until he had finished
his racing career at the age of three in December 2002.
Two documents governed the formation, financing, and
operation of the stallion syndicate:
the Syndicate Agreement.
The Purchase Agreement and
Ownership of Western Shooter was
divided into 120 shares costing $40,000.00 each.
2
Under the
Judgment was entered on April 25, 2005.
3
Facts taken from record and Walnut Hall v. Hertrich, et al., 2004 WL 1487105
(Ky.App. 2004).
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terms of the Purchase Agreement, Buyers were required to make a
down payment of $10,000 per share at the time that the Purchase
Agreement was executed.
The down payment was to be followed by
annual payments of $10,000 per share plus interest for the next
three years.
share.
Walnut Hall retained a security interest in each
The Syndicate Agreement appointed Walnut Hall as the
general manager of the syndicate.
The breeding of the horse was
not to begin until he had finished his racing career at the age
of three in December 2002.
Hertrich and Arno decided to purchase two shares in
the syndicate for a total of $80,000.
Alan J. Leavitt,
President and General Manager of Walnut Hall, agreed that
Hertrich and Arno would be permitted to cancel their share
purchase at any time in the year prior to Western Shooter’s
retirement.
This agreement was memorialized in a letter by Mr.
Leavitt dated January 15, 2002.
Upon receipt of this letter,
Hertrich and Arno made their first installment payment of
$20,000 and executed the Syndicate Agreement and Purchase
Agreement on February 8, 2002.
The Purchase Agreement contained a provision requiring
Buyers to maintain equine mortality insurance on the horse for
any unpaid balance owed to Walnut Hall that stated as follows:
11. MORTALITY INSURANCE—The Buyer agrees
that upon Closing he will obtain and
maintain full equine mortality insurance on
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the Horse with the Seller named as loss
payee in an amount no less than the amount
of the unpaid balance. In the event of
death of the Horse, Seller shall be entitled
to receive a sum equal to the unpaid balance
of principal. The aforesaid sum shall be
paid to Seller upon receipt from the
insuring entity or on the next scheduled
principal payment date, whichever is sooner,
notwithstanding any absence of or delay in
payment for any reason by the insurer. In
the event of death and payment by Buyer to
Seller pursuant to the foregoing provision
prior to payment by an insurer, Seller
agrees to assign all right, title and
interest Seller has to the aforesaid
insurance policy to the Buyer. Buyer will
deliver to Seller upon Seller’s request,
either a fully paid policy or policies of
such insurance duly endorsed to reflect
Seller’s security interest therein or a
certificate of such insurance with evidence
of such endorsement. Buyer shall provide to
Seller on the yearly anniversary date of
Closing a certificate from the insurer
evidencing the continuation of such
insurance. Nothing in this Agreement
prohibits the Buyer from obtaining whatever
insurance on the Horse he deems appropriate.
(Emphasis added.)
Western Shooter died unexpectedly in late March 2002.
Hertrich and Arno had not yet obtained the mortality insurance
described in the Purchase Agreement.
On April 2, 2002, Mr. Leavitt sent a letter to
Hertrich and Arno demanding full payment of the remaining
balance due on their shares, which was $60,000.
Hertrich and
Arno responded with a letter dated April 5, 2000, whereby they
cancelled their purchase pursuant to the terms of the January 15
-4-
letter, requested the return of their first installment payment,
and contended that the January 15 letter released them from the
obligation to obtain mortality insurance.
On August 26, 2002, Hertrich and Arno filed suit in
Fayette Circuit Court, seeking the refund of their $20,000 down
payment.
Walnut Hall filed suit two days later.
were consolidated.
judgment.
The two cases
Each party filed a motion for summary
As stated earlier, the court granted summary judgment
for Hertrich and Arno only.
We now turn to our opinion from the
first appeal.
An appellate court need not defer to the trial court’s
decision on summary judgment and will review the issue de novo
because only legal questions and no factual findings are
involved.
Hallahan v. The Courier Journal, 138 S.W.3d 699, 705
(Ky.App. 2004).
As such, our court properly reviewed the
construction of the contract de novo, because it was a matter of
law.
Pearson ex rel. Trent v. National Feeding Systems, Inc.,
90 S.W.3d 46, 49 (Ky. 2002).
We concluded that the terms of the January 15 letter
could not be interpreted to excuse Hertrich and Arno from their
obligation to procure insurance under the Purchase Agreement.4
The documents at issue (i.e. Purchase Agreement, Syndicate
Agreement, and January 15, 2002 letter) were wholly separate,
4
Walnut Hall Ltd. v. Hertrich, et al., 2004 WL 1487105, 4 (Ky.App. 2004).
-5-
addressing discrete aspects of the transaction and containing
separate sets of rights and obligations with respect to those
varying interests.5
As such, when Hertrich and Arno attempted on
April 5, 2002, to exercise their right to cancel their shares
after Western Shooter’s death, they did not absolve themselves
of the obligation to procure the mortality insurance.6
That
obligation had already been incurred by them on February 8,
2002, when they executed the Purchase Agreement.7
We agreed with
Walnut Hall that Hertrich and Arno committed a material breach
of the contract in failing to procure the mortality insurance
and therefore, they were not entitled to enforce the refund
provision.8
We then vacated and remanded for entry of a judgment
consistent with our opinion.
Hertrich and Arno filed a Motion for Discretionary
Review with the Kentucky Supreme Court, but said motion was
denied March 9, 2005.
Hertrich and Arno correctly state in
their brief that the “law of the case” doctrine became
applicable to their case following the denial and the circuit
court was bound to abide by our opinion.
See Ranier v. Kiger
Insurance, Inc., 998 S.W.2d 515, 518 (Ky.App. 1999).
5
Walnut Hall Ltd. v. Hertrich, et al., 2004 WL 1487105, 6 (Ky.App. 2004).
6
Id.
7
Id.
8
Id.
-6-
Upon remand, the Fayette Circuit Court, having
considered the briefs and argument of the parties, entered a
Judgment, which ordered three things: 1) it set aside the
summary judgment in favor of Hertrich and Alto entered April 10,
2003, 2) it ordered Hertrich and Arno to reimburse Walnut Hall
$20,000,9 and 3) it entered judgment on the counterclaim of
Walnut Hall in the amount of $60,000.10
Hertrich and Arno now
argue that the circuit court’s award of $60,000 to Walnut Hall
was an incorrect interpretation of our prior opinion.
We
disagree.
The first opinion clearly stated that Hertrich and
Arno were obligated to purchase the mortality insurance for the
remainder of the purchase price (i.e. $60,000) upon execution of
the Purchase Agreement.
breach.
Their failure to do so resulted in a
It did not relieve them of their obligation to Walnut
Hall for monies due under the contract.
As stated earlier, our
opinion clearly stated,
When Hertrich and Arno attempted on April 5,
2002, to exercise their right to cancel
their shares after Western Shooter’s death,
they did not absolve themselves of their
obligation to procure the mortality
insurance. That obligation had already been
9
Walnut Hall had already refunded Hertrich and Arno their $20,000 down
payment in accordance with the April 10, 2003 summary judgment order.
10
Walnut Hall was also awarded costs plus interest on the judgments.
-7-
incurred by them on February 8, 2002, when
they executed the Purchase Agreement.11
Moreover, the mortality insurance provision stated
that “in the event of death of the Horse, Seller shall be
entitled to receive a sum equal to the unpaid balance of
principal.”
We believe the only logical conclusion to reach
from our first opinion was that Hertrich and Arno became
personally liable to Walnut Hall under the terms of the Purchase
Agreement for their unpaid portion of the purchase price (i.e.
$60,000) when they failed to procure any equine mortality
insurance before Western Shooter died.
order supports this conclusion.
The circuit court’s
Hence, we affirm.
There are many other instances where we have
instructed a court upon remand to enter a judgment consistent
with our opinion rather than specifically telling it what to
order.
See, e.g., Renfro Valley Folks, Inc. v. City of Mt.
Vernon, 872 S.W.2d 472, 476 (Ky.App. 1994) and Laurel
Explosives, Inc. v. First National Bank & Trust Co. of Corbin,
801 S.W.2d 336, 338 (Ky.App 1990).
We have faith in the lower
courts that they are competent to interpret our opinions and
enter appropriate judgments.
We believe our faith was not
misplaced when we remanded this matter back to the circuit
11
Walnut Hall Ltd. v. Hertrich, et al., 2004 WL 1487105, 6 (Ky.App. 2004).
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court.
Based on the foregoing, we affirm the judgment of the
Fayette Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
David A. Franklin
Jason Rapp
Lexington, Kentucky
Frank T. Becker
Lexington, Kentucky
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