Eichberger v. Reid, 86-SC-508-DG
| Decision Date | 30 April 1987 |
| Docket Number | No. 86-SC-508-DG,86-SC-508-DG |
| Parties | Marvin EICHBERGER, Appellant, v. Dr. Ben REID, Appellee. |
| Court | United States State Supreme Court — District of Kentucky |
William A. Miller, Louisville, for appellant.
J. Michael Smither, Louisville, for appellee.
Except for one point which we will discuss later in this opinion, the facts, the issue and the law applicable to this case are all set out fairly and adequately in the opinion rendered by the Kentucky Court of Appeals, as follows:
"HOWARD, JUDGE. In this case, the question presented is whether one partner can recover in indemnity from the other partner his portion of amounts paid in damages to third party purchasers of a partnership asset for misrepresentations made by the second partner.
This action was brought by the purchasers of an apartment complex owned by the appellant and the appellee. The claim was that the appellant, who managed the sale of the complex, knowingly failed to disclose to the purchasers defects in a boiler system.
The appellee filed a cross-claim for indemnification for any amounts he may be required to pay as a judgment to the purchasers. The appellee sought indemnification on the grounds that he was not involved at all in the negotiations for the sale of the property.
The appellant answered the cross-claim by claiming he was acting as an agent for a partnership between himself and the appellee, and that the sale of the property was a partnership transaction made with the knowledge and acquiescence of the appellee. Subsequently, the appellee amended his cross-claim, stating that if a partnership with the appellant did exist, the appellant breached his fiduciary obligations to the partnership.
Before trial, the appellant and the appellee stipulated that a partnership existed between them, and agreed that the question of indemnification would be reserved until after trial on the purchasers' complaint.
A verdict was returned for the purchasers in the sum of $27,799.87. Following entry of the judgment, the trial court ruled that the appellee was entitled to indemnification from the appellant. From that ruling, this appeal is brought.
The appellant argues initially, that statutory law dictates that a partner cannot receive indemnification from another partner for a judgment against the partnership.
KRS 362.229(1) provides that each partner shall be jointly and severally liable for violations of statutes, including KRS 362.210, the wrongful acts of a partner. KRS 362.235(1) provides in pertinent part that '[e]ach partner .... must contribute toward the losses whether of capital or otherwise, sustained by the partnership according to its share in the profits.'
We think these statutes both speak to a partner's liability to a third party and simply do not address the question of indemnification between partners.
In Brown Hotel Co. v. Pittsburgh Fuel Co., 311 Ky. 396, 224 S.W.2d 165 (1949), a hotel sought indemnification from a fuel company for damages the parties paid, jointly and severally, to satisfy a judgment in a negligence suit. The Court stated that a party exposed to liability, and compelled to pay damages for the negligent or tortious acts of another, cannot receive indemnity if there is equal fault among the parties. Id. [224 S.W.2d] at 166. The court determined that the fuel company, not hotel company was the negligent party.
The Court in Brown Hotel Co. v. Pittsburgh Fuel Co. [224 S.W.2d], at 168, further stated Therefore, the hotel was entitled to indemnity from the fuel company.
The courts have further held that the right of indemnity is a 'jural right' which existed prior to the adoption of the Kentucky Constitution and therefore, the legislature could not abolish it. Kentucky Utilities Company v. Jackson County Rural Electric Cooperative Corporation, Ky., 438 S.W.2d 788 (1968); Union Carbide Corporation v. Sweco, Inc., Ky.App., 610 S.W.2d 932 (1980). Thus, if indemnity is held to apply to the partners in a partnership under the common law, and if KRS 362.235 could be construed as an attempted statutory prohibition of such indemnity, then clearly the case law would prohibit the statute from having such an effect.
The question becomes only whether the common law rule of indemnity applies to partners in a partnership.
[I]t is generally agreed that there may be indemnity in favor of one who is held responsible...
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