Calvert Investments, Inc. v. Louisville & Jefferson County Metropolitan Sewer Dist.
| Decision Date | 14 March 1991 |
| Docket Number | Nos. 90-SC-191-D,90-SC-198-DG,s. 90-SC-191-D |
| Citation | 805 S.W.2d 133 |
| Court | United States State Supreme Court — District of Kentucky |
| Parties | CALVERT INVESTMENTS, INC., Appellant, v. LOUISVILLE & JEFFERSON COUNTY METROPOLITAN SEWER DISTRICT, and its following Board Members, Gerald Neal, Sandy Metts, Walter Fuelling, Phillip J. Anderson, Charles Martin, Charles Schnell, Tim Firkins, Marvin Kessinger, Gordon R. Garner; Louisville & Jefferson County Board of Health, and its Director of Division of Environmental Health, Clark Bledsoe; Commonwealth of Kentucky Natural Resources and Environmental Protection Cabinet and its Secretary, Appellants. LOUISVILLE & JEFFERSON COUNTY BOARD OF HEALTH and The Director of Environmental Health, Clark Bledsoe, Appellants, v. CALVERT INVESTMENTS, INC.; Louisville & Jefferson County Metropolitan Sewer District, Gerald Neal, Sandy Metts, Phillip J. Anderson, Walter Fuelling, Charles Martin, Charles Schnell, Tim Firkins, Marvin Kessinger, Gordon R. Garner, and Natural Resources & Environmental Protection Cabinet, Appellees. |
Glenn A. Cohen, Borowitz & Goldsmith, Louisville, for Calvert Investments.
Fred M. Goldberg, Edward L. Schoenbaechler, Goldberg & Simpson, P.S.C., Louisville, for Board of Health and Bledsoe.
Michael W. Lowe, Frank Gates Simpson, III, Laurence J. Zielke, Pedley, Ross, Zielke, Gordinier & Porter, Louisville, for Sewer Dist. and its Bd.
Dennis J. Conniff, Dept. of Law, Frankfort, for Natural Resources.
From 1967 to 1985 Calvert Investments, Inc., ("Calvert") owned and operated a private sanitary sewage treatment facility known as the Minor Lane Heights Sewage Treatment Facility. In 1983, Calvert reached an agreement with the City of Minor Lane Heights ("City") for the sale of this facility. Calvert alleges that ultimately the City refused to make this purchase, and thereafter the Commonwealth of Kentucky's Natural Resources and Environmental Protection Cabinet would not renew Calvert's operating permit.
Calvert sued the City for breach of contract. Calvert's suit also named: (1) Louisville & Jefferson County Metropolitan Sewer District ("MSD") and its Board Members, (2) Louisville & Jefferson County Board of Health ("Board of Health") and its Director of the Division of Environmental Health, and (3) Commonwealth of Kentucky, Natural Resources and Environmental Protection Cabinet ("NREPC") and its Secretary, alleging these three governmental agencies tortiously conspired to deprive Calvert of its business interests and tortiously interfered with Calvert's contract with the City.
The trial court dismissed the claims against MSD, the Board of Health, and NREPC, and the officers of these agencies named in the Complaint, on grounds of sovereign immunity. The Kentucky Court of Appeals:
1) Affirmed as to NREPC which Calvert concedes is an agency of state government (contending simply that state sovereign immunity does not extend to intentional torts);
2) Affirmed as to MSD citing as controlling authority Louisville & Jefferson Co. Metro. Sewer Dist. v. Simpson, Ky., 730 S.W.2d 939 (1987), cert. denied 484 U.S. 964, 108 S.Ct. 453, 98 L.Ed.2d 393 (1987); and
3) Reversed as to the Board of Health citing as controlling authority Stephenson v. Louisville & Jefferson Co. Bd. of Health, Ky., 389 S.W.2d 637 (1965).
Thus, the Court of Appeals has held that MSD enjoys the protection of state sovereign immunity in this case, but the Board of Health is subject to municipal liability.
Both sides to this controversy, as did the Court of Appeals, recognize that MSD and the Board of Health are public corporations substantially identical in character insofar as classifying them for purposes of sovereign immunity versus municipal liability, and that MSD v. Simpson and Stephenson v. Board of Health are conflicting authority. The Court of Appeals decided as it did, and properly so, on the premise it is "an intermediate appellate court ... bound to follow" Supreme Court decisions even though the holdings are "conflicting" and the conflict is unresolved. Both sides sought discretionary review where the Court of Appeals' decision was adverse to them. We have accepted discretionary review primarily to resolve this conflict.
MSD and the Board of Health are special districts established and structured by statutes enacted by the General Assembly to carry out a limited public purpose in a local area. The question is whether their tortious acts, if proved, partake of constitutionally protected state sovereign immunity or should be classified as the activities of a municipal corporation. Common law tort immunity was repudiated for municipal corporations, whether the activity is governmental or proprietary in nature, in Haney v. City of Lexington, Ky., 386 S.W.2d 738 (1965), a principle reaffirmed in Gas Service Co., Inc. v. City of London, Ky., 687 S.W.2d 144 (1985).
Stephenson v. Louisville & Jefferson Co. Bd. of Health, supra, following close on the heels of Haney, was a negligence action for personal injuries suffered by a hospital patient. The trial court had dismissed the action against the Board of Health following "the law ... with respect to governmental immunity," as it existed before Haney. In Stephenson v. Board of Health, we state this law "has since been significantly changed" with the advent of Haney wherein "we repudiated the doctrine of governmental immunity as it applied to municipal corporations." Stephenson, 389 S.W.2d at 638. Stephenson then applied Haney as follows:
"The Louisville and Jefferson County Board of Health was created by KRS 212.350. It was designated 'a body politic and corporate', with power to 'sue and be sued'....
... It seems clear that the Board of Health is a municipal corporation. 37 Am.Jur., Municipal Corporations, Section 3 (page 618). In this respect it is in the same category as the Louisville and Jefferson County Metropolitan Sewer District and the Louisville and Jefferson County Air Board. See Rash v. Louisville & Jefferson County Met. S. Dist., 309 Ky. 442, 217 S.W.2d 232; [etc.].... Since it is such a governmental unit, it falls squarely under the decision in Haney v. City of Lexington, Ky., 386 S.W.2d 738 (decided May 22, 1964), and consequently cannot claim governmental immunity.
....
The doctrine of state immunity from suit, decided in Foley Construction Co. v. Ward, Ky., 375 S.W.2d 392, for obvious reasons does not apply. See Gnau v. Louisville & Jefferson County Metropolitan Sewer District, Ky., 346 S.W.2d 754." Id. at 638.
Twenty-two years later in MSD v. Simpson, supra, a narrow majority of this Court, without citing Stephenson or overruling its holding, reached the opposite result. Three separate Dissenting Opinions called attention to this anomaly.
In addition to Stephenson v. Board of Health, quoted above, and also within a year of the Haney case, our Court decided Louisville & Jefferson Co. Metropolitan Sewer District v. Kirk, Ky., 390 S.W.2d 182 (1965). Kirk alleged damage to his residence caused by MSD's negligence in failing to properly maintain the sewer beneath his home, in breach of its easement contract. The trial court dismissed based on sovereign immunity, and our Court reversed. Kirk's Complaint stated theories of liability sounding in both tort and contract, but this makes no difference because "[s]overeign immunity applied to breach of contract cases on the same footing as tort cases until the 1966 Act waiving its application." Kentucky Center for the Arts v. Berns, Ky., 801 S.W.2d 327, 330 (1990), citing Cullinan v. Jefferson County, Ky., 418 S.W.2d 407 (1967).
Rash v. Louisville & Jefferson County Met. S. Dist., 309 Ky. 442, 217 S.W.2d 232 (1949), quoted from in the Stephenson case, as stated above, is the landmark case examining the constitutional basis for the General Assembly to establish this type of governmental agency, a Sewer District or a Board of Health. The status of such agencies is defined in Rash as "distinct municipal corporations." (Emphasis added.) Id., 217 S.W.2d at 236. We explain:
Thus, these three cases, the Rash case defining MSD as a municipal corporation, the Kirk case specifying that "the doctrine of immunity ... was abolished in Kentucky, insofar as it attaches to a public agency such as appellant (MSD)," and the Stephenson case holding "[t]he doctrine of state immunity from suit ... does not apply" to such entities, would foreclose any further claim of immunity in present circumstances as frivolous but for the MSD v. Simpson decision. The rationale of MSD v. Simpson is that the liability of a municipal corporation extends only to a city and "whatever the District may be, it is not a city." Id. at 940. This statement extends the cloak of sovereign immunity to every public corporation that is not a city without regard to whether it is an arm of state government. Its holding is in conflict with prior cases, cited above, which should have been controlling. In our most recent case on this subject, Kentucky Center for the Arts Corp. v. Berns, supra, we state:
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