MILLS (DARRELL), ET AL. VS. MILLS (DON), ET AL.
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RENDERED: NOVEMBER 25, 2009; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-000686-MR
&
NO. 2008-CA-000810-MR
DARRELL MILLS AND
JENNIE MILLS
v.
APPELLANTS/CROSS-APPELLEES
APPEAL AND CROSS-APPEAL FROM LAUREL CIRCUIT COURT
HONORABLE RODERICK MESSER, JUDGE
ACTION NO. 04-CI-01118
DON MILLS AND
ALYDIA JANE MILLS
APPELLEES/CROSS-APPELLANTS
OPINION
AFFIRMING
** ** ** ** **
BEFORE: KELLER, MOORE, AND TAYLOR, JUDGES.
KELLER, JUDGE: Darrell and Jennie Mills (Darrell and Jennie respectively),
appeal from the final judgment of the Laurel Circuit Court awarding Don and
Alydia Mills (Don and Alydia respectively), rents following the sale of property
Darrell, Don, and Alydia owned as tenants in common. Don and Alydia cross-
appeal from the circuit court’s finding that the rents were unliquidated damages.
For the reasons set forth below, we affirm.
FACTS
In 1985, Darrell, Don, and Alydia purchased a lot in Laurel County as
tenants in common.1 Following the purchase, three buildings were constructed on
the property. At the time, Darrel and Don co-owned and operated Prestige Marble
Products, Inc. (Prestige), which occupied the largest of those buildings (the
Prestige Building). One of the two smaller buildings contained three apartments,
which were rented to third parties, and the other was used for storage. During all
times at issue tenants in the apartments paid rent to Prestige, and Prestige paid the
mortgage, taxes on the real estate, and for all utilities.
In late 1999, the Mills brothers moved Prestige to another location. In
2000, Jennie opened Fabric World & Quilting (Fabric World), in the Prestige
building. Jennie and Darrell testified that, before opening Fabric World, Jennie
made improvements to the Prestige building which included painting and installing
lighting, air conditioning, heaters, and wallboard. However, neither Jennie nor
Darrell could produce any contemporaneous documentation supporting the
amounts expended to make those improvements.
In July 2004, Don sold his shares in Prestige to Darrell. In October
2004, Don and Alydia filed suit alleging that they had not received any rent from
1
We note that the deed listed Don and Alydia as tenants in common with right of survivorship
and that the parties are not contesting on appeal the trial court’s finding that Darrell had a fifty
percent ownership interest and Don and Alydia had a fifty percent ownership interest.
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Fabric World. Don and Alydia asked the court to order a sale of the property and
disposition of the proceeds from that sale, taking into account their claim for rent.
On November 22, 2004, Darrell and Jennie filed an answer and counter-claim,
asking for reimbursement for the improvements they made to the Prestige building.
On November 26, 2004, approximately one month after Don and Alydia filed their
complaint, the Prestige building, which was not insured, was damaged in a fire. A
contractor testified at trial that it would cost $25,585.15 to repair the fire damage to
the building. It does not appear that any repairs were made and, on September 9,
2005, the property was sold at auction for $205,000. After deducting expenses
associated with the auction, $201,583.32 remained for distribution. The parties
could not agree on how to distribute the proceeds from the sale; therefore, the court
conducted a bench trial on December 13, 2007. We note that, in 2007, Don and
Alydia amended their complaint to add a demand for a portion of the rent collected
by Darrell and Jennie from the tenants in the apartments.
At trial, Darrell and Jennie testified that Darrell provided financing for
Fabric World but neither could produce any documentation to support how much
financing Darrell had provided. Both agreed that Jennie was listed as the sole
proprietor of Fabric World.
As to rents, Darrell testified that neither Don nor Alydia asked for rent
from him, Jennie, or Fabric World for its use of the space in the Prestige building.
Darrell also testified that neither Don nor Alydia asked for any share of the rent
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collected by Prestige from the tenants of the apartments. Don testified that he did
ask for rent, but that neither he nor Alydia received any payments.
Darrell testified that Don had keys to the premises, stored personal
property on the premises, had access to the property, and often visited the property.
Don contested the accuracy of this testimony, stating that he had only limited
access to the property after Fabric World moved into the Prestige building and that
he tried to stay away from the property.
Finally, at trial, D.L. Lynch (Lynch), testified regarding the amount of
rent Fabric World should have paid.
The trial court, after making some corrections in its findings based on
the parties’ motions to alter, amend, or vacate, found in pertinent part that: (1)
Jennie was the sole owner of Fabric World; (2) Fabric World occupied 6,000
square feet of space in the Prestige building; (3) Jennie paid no rent for use of that
space; (4) Don and Alydia asked Jennie for rent; (5) based on Lynch’s testimony
the value of the rent was $1,200.00 per month; (6) Jennie owed $56,400.00 in rent;
and (7) Darrell collected $13,175.00 in rent from the apartments. Based on those
findings, the trial court concluded that Don and Alydia were entitled to half of the
value of the rent Jennie should have paid and half of the value of the rent Darrell
collected from the tenants of the apartments. Furthermore, the trial court
determined that the rent due from Jennie was unliquidated damages but that the
rent collected from the tenants was liquidated damages.
STANDARD OF REVIEW
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Findings of fact by the trial court following a bench trial “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.” Kentucky Rule of Civil
Procedure (CR) 52.01; see also Patmon v. Hobbs, 280 S.W.3d 589, 593 (Ky. App.
2009). We review issues related to questions of law de novo. Carroll v. Meredith,
59 S.W.3d 484, 489 (Ky. App. 2001). With these standards in mind, we will
analyze the issues raised by Darrell and Jennie herein.
ANALYSIS
Darrell and Jennie make several arguments with regard to the trial
court’s award to Don and Alydia of rent from the apartments and of rent owed by
Jennie. We will address these arguments separately, although not necessarily in
the order argued. We will then address Don and Alydia’s argument regarding the
trial court’s characterization of the rent owed by Jennie as unliquidated damages.
Before directly addressing the arguments of the parties, we first note
the following. As noted above, the trial court found that Jennie was the sole owner
and operator of Fabric World; that Don and Alydia requested rent from Jennie
and/or Fabric World; and that Jennie had no ownership interest in the real property.
Those findings of fact are supported by evidence of substance and are not clearly
erroneous. Therefore, we accept them as correct and reject any arguments by
Darrell and Jennie to the contrary. Having determined the preceding, we turn our
attention to the arguments of the parties.
1. Entitlement to Rent from Apartments
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Darrell and Jennie argue that Don and Alydia had no entitlement to
any of the rent from the apartments because: (1) they abandoned the premises; (2)
any such rents were generated through the efforts of Darrell and Jennie; and (3)
that Darrell and Jennie took no actions that could be construed as an ouster of Don
and Alydia, absent which Darrell and Jennie had no obligation to pay rent or
account to Don and Alydia. We disagree.
In support of their arguments, Darrell and Jennie cite to Howell v.
Bach, 580 S.W.2d 711 (Ky. App. 1978). In Howell, cotenants entered into an
agreement to lease mineral rights to a third party in exchange for payment of
twenty cents a ton for all coal mined on the leasehold. Without the knowledge of
the other cotenants, the Howells entered into a separate and secret agreement with
the third party to receive an additional five cents per ton. This Court found that the
Howells were liable to their cotenants for the additional amount. In doing so, this
Court held that:
“the law will not permit one co-tenant, where all must
act in unison, to obtain a secret profit to the disadvantage
of his co-tenants. . . .” Such a principle is consistent with
our common law rule requiring a cotenant to account for
rents and profits. The secret profit he is able to obtain as
a result of an agreement made by all of the cotenants
acting together, in effect, gives him an extra profit from
all of the interests in the property, not just from his own.
But for the joint act of all he would have no secret profit.
This profit is obtained to the detriment of his cotenants
who are unaware that a lessee, purchaser, etc., is in fact
willing to pay more for the interests he seeks. Such
secret profits are not countenanced by our law.
Id. at 713. (Emphasis in original) (internal citation omitted).
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According to Darrell and Jennie, because there was no evidence that
the parties acted in unison or that there were any secret profits, Don and Alydia
were not entitled to any share of the rent from the apartments. Darrell and Jennie
may be correct with regard to the absence of joint action and secret profits;
however, their argument misconstrues the holding in Howell. In Howell, this Court
held that, when cotenants must act in unison in order to derive income from
property, some of the cotenants cannot act unilaterally to obtain greater income to
the exclusion of the other cotenants. Id. This Court did not hold that this is the
only instance wherein cotenants are entitled to share in income generated from
their jointly held property. In fact, this Court noted “that the common law in this
jurisdiction is that one is liable to his cotenants for any rents and profits he collects
from the joint property.” Id. at 712. The holding with regard to acting in unison
and obtaining secret profits did nothing to alter that basic common law rule, which
applies to this case. Therefore, we are not persuaded by Darrell and Jennie’s
“acting in unison/secret profits” argument.
We find Darrell and Jennie’s argument with regard to ouster to be
equally unpersuasive. In support of this argument, Darrell and Jennie cite Martin
v. Martin, 878 S.W.2d 30 (Ky. App. 1994), for the proposition that cotenants are
only entitled to receive a portion of rental income if there has been an ouster. We
have reviewed Martin and do not read it as supporting the preceding proposition.
In fact, we believe that Martin, if anything, favors Don and Alydia.
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In Martin, Garis and Peggy Martin (Garis and Peggy), owned a parcel
of land as tenants in common with Charles and Mary Martin (Charles and Mary).
Charles built a mobile home park on a portion of the property. Garis and Peggy
moved their mobile home into that park and refused to pay rent. The trial court
ordered an accounting and ordered Garis and Peggy to pay rent to Charles and
Mary. This Court reversed, holding that, absent an ouster, one cotenant cannot be
held liable to pay rent to another cotenant.
As to this issue, Don and Alydia did not seek to collect rent from their
cotenant, Darrell; they sought to collect from Darrell their proportionate share of
the rent he collected from third parties. Therefore, whether an ouster occurred is
irrelevant. Furthermore, as noted by this Court in Martin, “[t]he prevailing view is
that an occupying cotenant must account for outside rental income received for use
of the land, offset by credits for maintenance and other appropriate expenses.” Id.
at 31. (Emphasis in original). The trial court, in awarding Don and Alydia half of
the rent collected by Darrell from the “outside” tenants of the apartments, simply
followed the dictates of Martin. For the foregoing reasons, we discern no error in
the trial court’s award of half of the rent from the apartments to Don and Alydia.
2. Rent from Jennie
As noted above, the trial court found that Jennie was the sole owner
and operator of Fabric World and that she had no ownership interest in the real
estate. Jennie, as owner and operator of Fabric World, was not a cotenant, but an
“outside” tenant just as the tenants in the apartments were. Therefore, the analysis
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that applies to Don and Alydia’s entitlement to rent from the apartments, also
applies to their entitlement to rent from Jennie. We will not reiterate that analysis.
However, that does not end our analysis of this issue, because Darrell
and Jennie also challenge the trial court’s finding of the fair market rental value of
the Prestige building as occupied by Fabric World. Other than reiterating their
arguments regarding ouster and the holding in Howell v. Bach, it appears that
Darrell and Jennie are arguing that the trial court’s determination of fair market
rental value was not supported by evidence of substance. Furthermore, it appears
that Darrell and Jennie are arguing that, because Don stored personal property on
the site and did not pay rent and because there was no evidence regarding the fair
market rental value of the two smaller buildings, he and Alydia are foreclosed from
recovering rent from Jennie.
As to the adequacy of the evidence, Lynch testified at length
regarding the fair market rental value of the Prestige building. Darrell and Jennie
are correct that Lynch based his opinions on measurements of the building that
differed from theirs. However, whether Lynch used the correct measurements is a
matter of fact left to the sound discretion of the trial court. Furthermore, the
existence of two different measurements goes to the weight to be afforded Lynch’s
testimony, not its sufficiency. The trial court was free to rely on Lynch’s
testimony, which it chose to do. We discern no error in the court’s choice,
particularly when Darrell and Jennie offered no evidence of fair market rental
value to the contrary.
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Darrell and Jennie also argue that Lynch’s testimony was not
substantial evidence because he determined fair market rental value based on the
pre-fire condition of the Prestige building. However, because Don and Alydia
were claiming entitlement to rent attributable to “pre-fire” occupancy of the
Prestige Building by Fabric World, that was the correct timeframe within which to
determine value. Any determination of fair market rental value after the fire would
have been irrelevant because Fabric World did not occupy the Prestige building
after the fire.
We also are not persuaded by the argument that Don’s failure to pay
rent foreclosed a claim for rent from Jennie. As noted above, this Court held in
Martin that one cotenant can occupy a portion of jointly owned real estate rent free
absent an ouster of the other cotenants. There is no evidence that Don’s use of a
portion of the property interfered with Darrell’s use of the property, let alone that
Don’s use of the property acted as an ouster for Darrell. Therefore, Darrell had no
right to claim rent from Don, and Don’s failure to pay what he did not owe could
have no impact on his right to entitlement to rent from Jennie.
Finally, Darrell and Jennie argue that, based on CR 8.01(2), Don and
Alydia were required to set forth the amount they were claiming in unliquidated
damages relative to the amount of rent attributable to Fabric World’s use of the
Prestige building. We have reviewed the record and note that Don and Alydia
stated in their complaint that they were seeking rent from Darrell and Jennie for
their occupancy of the property but did not specify a dollar amount. In their
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response to interrogatories, Don and Alydia stated that they were seeking “[f]ifty
[sic] of fair market value of the real estate as valued before the fire, insurance
premiums paid on the apartments, court costs, attorney’s fees, one-half of rent
collected since July 15, 2004 by the defendants.” This response does not include
the amount Don and Alydia claimed as rent from Jennie, and Don and Alydia did
not amend this response prior to trial.
In their opening statement, Darrell and Jennie noted Don and Alydia’s
response to interrogatories and stated that Don and Alydia should be limited to the
amounts they listed in their response to interrogatories. However, Darrell and
Jennie did not specifically object or make a motion in limine seeking to prevent
Don and Alydia from introducing into evidence a dollar amount related to rent
from Jennie. Furthermore, Darrell and Jennie did not object to or move to strike
Lynch’s testimony during trial regarding the fair market rental value of the
property. Finally, we note that, in their motion to alter, amend, or vacate, Darrell
and Jennie did not argue that Lynch’s testimony or the trial court’s finding
regarding fair market rental value violated CR 8.02.
“The function of the Court of Appeals is to review possible errors
made by the trial court, but if the trial court had no opportunity to rule on the
question, there is no alleged error for this court to review.” Kaplon v. Chase, 690
S.W.2d 761, 763 (Ky. App. 1985). As noted above, Darrell and Jennie did not
specifically raise this issue before the trial court; therefore, it is not preserved for
our review and we will not further address it.
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3. Don and Alydia’s Cross-Appeal
Don and Alydia argue that the trial court incorrectly characterized the
amount of rent owed by Jennie as unliquidated damages, thus depriving them of
pre-judgment interest.
The longstanding rule in this state is that prejudgment
interest is awarded as a matter of right on a liquidated
demand, and is a matter within the discretion of the trial
court or jury on unliquidated demands.
...
Liquidated claims are ‘of such a nature that the amount is
capable of ascertainment by mere computation, can be
established with reasonable certainty, can be ascertained
in accordance with fixed rules of evidence and known
standards of value, or can be determined by reference to
well-established market values.’
3D Enters. Contracting Corp. v. Louisville and Jefferson County Metropo. Sewer
Dist., 174 S.W.3d 440, 450 (Ky. 2005)(citing 22 Am. Jur. 2d Damages § 469
(2004))(internal citation omitted).
The trial court determined the amount of the fair market rental value
of the space occupied by Fabric World based on Lynch’s testimony. Lynch
testified that he calculated the total square footage and, based on his experience
leasing similar property, he opined that a fair market rental value would be $3.00
per square foot for one portion of the building and $5.00 per square foot for
another portion. In determining the fair market rental value, Lynch took into
consideration rents for properties he owned and/or managed, rents for similar
properties near the one in question, the location of the property, and his years of
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experience. Although this Court does not doubt Lynch’s expertise, the values he
generated were not based on known standards of value or well-established market
values which could be easily ascertained or computed. They were based on his
opinions of fair market value, which is defined as “the price that a seller is willing
to accept and a buyer is willing to pay on the open market and in an arm’s length
transaction.” Black’s Law Dictionary 1587 (8th ed. 2004). While fair market
value may be easily established in hindsight, as with the rents Darrell had already
collected from the tenants of the apartments, it is not so easily established
otherwise. As noted above, a number of factors, including to a substantial degree
Lynch’s experience and his opinion based on that experience, went into the
calculation of fair market rental value. Those factors are, by their nature, not
subject to easy ascertainment or simple computation. Therefore, we discern no
error in the trial court’s determination that the fair market rental value of the space
occupied by Fabric World was not liquidated damages.
CONCLUSION
For the reasons set forth above, we affirm the trial court’s judgment as
to issues raised by the parties in their appeal and cross-appeal.
ALL CONCUR.
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BRIEFS FOR APPELLANTS/
CROSS-APPELLEES:
BRIEF FOR APPELLEES/CROSSAPPELLANTS:
Scott M. Webster
London, Kentucky
Robert Stivers
London, Kentucky
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