Blue Skies Racing Stable, LLC v. O'Sullivan Farms, LLC

• Decision Date: 25 July 2014
• Docket Number: NO. 2012-CA-002116-MR,2012-CA-002116-MR
• Parties: BLUE SKIES RACING STABLE, LLC APPELLANT v. O'SULLIVAN FARMS, LLC; and VINERY, LTD APPELLEES
• Court: Kentucky Court of Appeals

BLUE SKIES RACING STABLE, LLC APPELLANT v. O'SULLIVAN FARMS, LLC; andVINERY, LTD APPELLEES

NO. 2012-CA-002116-MR

Commonwealth of Kentucky Court of Appeals

JULY 25, 2014

NOT TO BE PUBLISHED

APPEAL FROM FAYETTE CIRCUIT COURT

HONORABLE PAMELA R. GOODWINE, JUDGE

ACTION NO. 12-CI-03783

OPINION

REVERSING AND REMANDING

BEFORE: MOORE, TAYLOR, AND VANMETER, JUDGES.

MOORE, JUDGE:

Blue Skies Racing Stable, LLC, appeals a judgment of the Fayette Circuit Court dismissing appellee, O'Sullivan Farms, LLC, from its declaratory action. For the reasons stated herein, we reverse the circuit court's judgment and remand for further proceedings.

FACTUAL AND PROCEDURAL HISTORY

This matter is largely a disagreement over who is entitled to a thoroughbred stallion named Limehouse. Appellant, Blue Skies, alleges that it had a valid and binding contract to purchase the controlling interest in the horse from appellee, Vinery, as agent and syndicate manager of Limehouse Syndicate,¹ which would give Blue Skies, among other things, the right to determine where the horse would stand during breeding season; it alleges the syndicate manager, Vinery, was therefore obligated under the terms of the syndicate agreement to transfer the horse to Blue Skies; and, it alleges that Vinery exceeded the bounds of its authority as syndicate manager and breached the terms of the contract by subsequently offering and purporting to sell the controlling interest in Limehouse to another party instead, appellee O'Sullivan Farms.

Thus, when Blue Skies initiated this matter in Fayette Circuit Court on August 17, 2012, Blue Skies sought a judgment declaring that it had an enforceablecontract for the purchase of Limehouse, was entitled to specific performance of its contract, and that Vinery's purported sale of Limehouse to O'Sullivan Farms (which, at the time this action was initiated, had yet to be consummated) was invalid. Blue Skies also sought a temporary injunction to prohibit Vinery and O'Sullivan Farms from removing the horse from where it was being stabled in Kentucky and taking it to West Virginia during the pendency of the litigation. Both Vinery and O'Sullivan Farms opposed Blue Skies' motion for a temporary injunction and alternatively moved to dismiss.

The circuit court held a hearing on Blue Skies' temporary injunction motion on August 30, 2012. Shortly after the hearing, though, Vinery informed the circuit court that it had proceeded to sell Limehouse to O'Sullivan Farms and that O'Sullivan Farms had taken the horse to West Virginia.

Also shortly after the hearing, O'Sullivan Farms renewed its motion to dismiss. Boiled down, O'Sullivan Farms' argument in favor of dismissal was that it was no longer necessary to litigate who owned a controlling interest in Limehouse, or to require O'Sullivan Farms to participate in this litigation any further, because O'Sullivan Farms now owned Limehouse. In support, O'Sullivan Farms contended that it had relied upon certain verbal remarks made by the circuit court and by opposing counsel during the temporary injunction hearing, which it had interpreted to mean that it could have Limehouse if it closed on its contract with Vinery; that it had done so; and, accordingly, it asserted that its ownership of Limehouse was a settled matter.

The specifics of this appeal relate to a December 6, 2012 order of the circuit court² in which the circuit court determined that O'Sullivan Farms was indeed entitled to keep Limehouse. As to why, its order provides only the following explanation:

1. The Court makes findings of fact and conclusions of law consistent with the reasons recited by the Court on the record during the Hearing,[³] which reasons are incorporated herein by reference, and for those reasons, GRANTS Defendant O'Sullivan Farms, LLC's Motion to Dismiss the allegations of the Complaint directed against O'Sullivan Farms, LLC;

2. The Court furthermore OVERRULES the Plaintiff Blue Skies Racing Stable, LLC's Motion to Amend its Complaint against Defendant O'Sullivan Farms, LLC, because of the reasons stated on the record during the Hearing and because granting such Motion would be futile in that Plaintiff may not obtain specific performance against O'Sullivan Farms, LLC;

3. Consistent with the above, and because the Court's Orders herein terminate all allegations and claims against the party, O'Sullivan Farms, LLC, the Court will enter a separate Final Judgment in favor of O'Sullivan Farms, LLC, pursuant to CR 54.02.

This appeal followed. Additional details relating to this matter will be discussed as they become relevant within the context of our analysis, below.

STANDARD OF REVIEW

When findings of fact and conclusions of law are warranted (as in the case of a judgment resulting from a bench trial or an order granting or denying injunctive relief, for example), a mere reference to a recorded hearing, such as the reference that the circuit court incorporated into its December 6, 2012 order, does not satisfy the mandates of Kentucky Rules of Civil Procedure (CR) 52.01.⁴ However, the circuit court's use of "findings of fact and conclusions of law" in its order was unnecessary because its order was designed to address a motion to dismiss that O'Sullivan Farms filed pursuant to CR 12.02(f); in resolving such a motion, findings of fact and conclusions of law are not warranted. See CR 52.01. The standard of review of a dismissal of a complaint pursuant to CR 12.02(f) for failure to state a claim is as follows:

The court should not grant the motion unless it appears the pleading party would not be entitled to relief under any set of facts which could be proved in support of his claim. In making this decision, the circuit court is not required to make any factual determination; rather, the question is purely a matter of law. Stated another way, the court must ask if the facts alleged in the complaint can be proved, would the plaintiff be entitled to relief?

James v. Wilson, 95 S.W.3d 875, 883-84 (Ky. App. 2002) (internal quotation and footnote omitted).

ANALYSIS

The first step toward resolving this appeal is deciphering the underpinnings of the circuit court's order. Therefore, we have reviewed the November 16, 2012 hearing referred to in the circuit court's order and have transcribed the portion of it that appears to explain the circuit court's reasoning:

. . .

THE COURT: [A]t the time we were here at the motion for temporary injunction, a lot came out about the merits of the case and the facts of the case, and the two competing offers, if you will, for contracts, if you will, and the whole point of the plaintiff's motion was that they had a binding contract with Vinery for the purchase of this horse and therefore they wanted the horse or wanted it to remain in Kentucky, that, that O'Sullivan shouldn't get it, it shouldn't go to West Virginia, it shouldn't be moved, that it's our horse, we bought and paid for it, basically, was the argument. And, Vinery made their argument and I made my, I found at that point there was no, um, I found that again these were competing offers, that I hadn't made a determination on the actual merits, but I did find that there was no, um, binding contract because I said there was no meeting of the minds. I said how could there be a meeting of the minds when there's two offers out there to purchase this particular horse? And I think it was Mr. Meuser [co-counsel for Blue Skies] who represented that whatever you decide here is going to determine basically the outcome of the case. The, at the conclusion of that, Vinery then proceeds to close on the sale of the horse to O'Sullivan, so they no longer have ownership of this horse. The ownership of this horse has been sold pursuant to what O'Sullivan and Vinery believe is a valid contract, they purchased it, and now the horse is in West Virginia. And just like I said in August, if in fact Blue Skies has been damaged, and this was the basis of my overruling the motion for injunctive relief, was that there was a monetary remedy at law, that being damages that Vinery would owe you if in fact, um, Blue Skies proceeded on the merits. And so the argument that youcan seek specific performance from O'Sullivan to bring us back the horse would mean I would then have to void a valid sale that has taken place, when, which would I think require something more than just a suit by Blue Skies versus Vinery, and so I think the basis of the comment that was made about we'll do whatever you order us to do meant that if that horse was moved to West Virginia, there had been no sale at that point or a change in ownership and it was determined subsequently that if in fact Blue Skies won on the merits, and so I can't, I don't know how I would, at the conclusion of this lawsuit, void a sale between Vinery and O'Sullivan when, like I said before, your remedy or Blue Skies' remedy is monetary damages if there is a breach.

BLUE SKIES' COUNSEL: Okay, I can address that. There was never any intention on [O'Sullivan's] part to take the horse to West Virginia without closing on it first. That was never going to happen. I mean, they were going to close on the horse before they ever took it. So, the fact that they have closed on it after the temporary injunction hearing is something that they did at their peril because they were aware that we were seeking specific performance. And, on the specific performance, whether we can get that, we can get specific performance. There's two issues here. First is your decision that we weren't entitled to injunctive relief doesn't preclude us from prevailing on the merits of the claims that we asserted in our complaint. One of those claims was specific performance. And, I understand Mr. Meuser's statement at the hearing, but everyone will recall I also said I kind of disagree with Mr. Meuser, and that was kind of a joke after the hearing that I said I disagree with Mr. Meuser because we have to remember the standard for every stage of the litigation. And what they're...