Foxworthy v. Norstam Veneers, Inc.

• Decision Date: 26 September 1991
• Docket Number: No. 89-SC-853-DG,89-SC-853-DG
• Citation: 816 S.W.2d 907
• Parties: S. Drew FOXWORTHY and Mark Lea, Movants, v. NORSTAM VENEERS, INC., Respondent.
• Court: United States State Supreme Court — District of Kentucky

Page 907

816 S.W.2d 907

S. Drew FOXWORTHY and Mark Lea, Movants, v. NORSTAM VENEERS, INC., Respondent.

No. 89-SC-853-DG.

Supreme Court of Kentucky.

Sept. 26, 1991.

As Amended Nov. 12, 1991.

John R. Leathers, Gregory C. Shields, Frost & Jacobs, Lexington, for movants.

John G. Crutchfield, MacKenzie & Peden, P.S.C., Louisville, for respondent.

LEIBSON, Justice.

Movants, Foxworthy and Lea (plaintiffs in the trial court and appellants in the Court of Appeals), filed suit in Jefferson Circuit Court against respondent, Norstam Veneers, Inc. (a defendant in the trial court and the appellee in the Court of Appeals), alleging breach of contract in failing to perform an "Agreement" dated March 18, 1988 to negotiate the sale of the business and assets of Norstam and a "Letter of Intent" dated June 22, 1988 extending the "terms and conditions of the agreement ... until July 13, 1988." In the Letter of Intent the parties "agree[d] to negotiate a definitive agreement for the sale of the assets" for "the sum of $1,000,000.00," and with the execution of the Letter of Intent movants paid respondent $10,000 "as a good faith payment."

The Complaint also named as an additional defendant, Kenneth J. Staugas, president of the respondent corporation, alleging Staugas interfered with respondents' contractual relations.

In March 1989, the trial court sustained a Motion for Summary Judgment against movants and in favor of Norstam, which was not then final and appealable, presumably because the complaint against Staugas for intentional interference with contractual relations was still pending. Then, on June 13, 1989, this summary judgment against movants was amended to specify it was "final and appealable." ¹ The final and appealable judgment of June 13, 1989, also provided that the movants should delay the filing of the notice of appeal for at least 15 days from the date of the hearing in order to allow time for the remaining defendant, Staugas, to first file his Answer to the first Amended Complaint.

Movants' counsel mailed the original and a copy of the Notice of Appeal from Lexington, Ky., to the clerk of the Jefferson Circuit Court on July 6, 1989, but failed to include with it payment of the filing fee as required by CR 73.02(1)(b). Counsel for movants admits this oversight, advising that counsel inadvertently assumed, negligently but innocently, that a secretary had included the necessary check. Counsel assumes full responsibility for the mistake but sees no legitimate reason why the clients should be punished for counsel's inadvertence when it was promptly corrected when called to counsel's attention and the opponent has suffered no resulting prejudice.

The Jefferson Circuit Clerk's office compounded counsel's mistake by filing the Notice of Appeal rather than returning it. The clerk's office stamped "received" on the original, which was then entered on the docket sheet as filed ("FLD"), and also on the copy provided by movants' counsel to be returned in a self-addressed envelope. Had the clerk's personnel noted the mistake and returned the Notice of Appeal (or called counsel about it) there was ample time to correct the deficiency by providing the filing fee within the 30 day period allowed by CR 73.02(1)(a). Norstam's counsel discovered the mistake and called it to the clerk's attention, and the clerk in turn notified movants' counsel, who promptly supplied the missing check, but, of course, by then more than 30 days had elapsed since the trial court had entered the Order making the summary judgment against movants final and appealable.

Citing Manly v. Manly, Ky., 669 S.W.2d 537 (1984), the Court of Appeals dismissed the movants' appeal. We have accepted discretionary review to consider whether the decision in Manly is still valid in light of the subsequent amendment of CR 73.02 in 1985, the purpose of which was to effect a fundamental change in the way the rule of appellate practice shall be enforced from a policy of strict compliance to one of substantial compliance, and in light of the subsequent decisions of our Court in Bush v. O'Daniel, Ky., 700 S.W.2d 402 (1985), Ready v. Jamison, Ky., 705 S.W.2d 479 (1986), Crossley v. Anheuser-Busch, Inc., Ky., 747 S.W.2d 600 (1988) and City of Devondale v. Stallings, Ky., 795 S.W.2d 954 (1990). For reasons that will be stated we reverse the Court of Appeals and remand the case to that court with orders to set aside the order of dismissal and proceed with the appeal.

The question is what happens when, despite the language in CR 73.02(1)(b) directing the filing fee shall be "paid to the clerk of the circuit court at the time the Notice of Appeal ... is filed, and the notice shall not be docketed or noted as filed until such payment is made," nevertheless, through inadvertence, the filing fee is not paid in advance, the clerk files the Notice of Appeal anyway, and then the filing fee is paid after the 30 day period for filing a Notice of Appeal has elapsed. Manly holds that if the filing fee is not paid at the time the notice of appeal is filed the notice of appeal is "a nullity." The 1985 amendment to CR 73 specifies by its terms that while failure to timely file a notice of appeal, notice of cross-appeal still "shall result in a dismissal":

"The failure of any party to comply with other rules relating to appeals ... does not affect the validity of the appeal ..., but is ground only for such action as the appellate court deems appropriate,...." CR 73.02(2). [Emphasis added.]

Movants ask us to contrast the facts in this litigation with the situation presented in Manly v. Manly, supra. In Manly, the appellant waited until the last day to file the Notice of Appeal and then hand carried it to the clerk's office, putting it through a stamping machine and placing it in a box for filing, with no interaction with court personnel. In Manly, the clerk acquiesced in the filing fee being paid after the deadline, and counsel was aware from the beginning that the filing fee had not been paid in timely fashion. In the present litigation the Notice of Appeal was served by mail a full week before the expiration of the filing deadline, at which time the notice was mailed to the clerk's office where the clerk's personnel received it and made the error of filing it rather than rejecting it as required by CR 73.02(1)(a). Had the clerk's office returned the Notice of Appeal rather than filing it, an innocent mistake, made by assuming the secretary had mailed a check to cover the filing fee with the Notice of Appeal, could have been timely corrected.

Movants maintain there is a factual difference between this case and Manly that should be of critical importance, this being that their counsel made an innocent mistake in assuming that the check for the filing fee was mailed to the clerk with the Notice of Appeal, whereas Manly represents deliberate oversight. It is not clear that Manly's counsel was engaged in deliberate oversight, but even if it were, this distinction could only make a difference in the severity of an appropriate sanction. It cannot make a difference in the result, dismissal, if failing to pay the filing fee in advance is automatically fatal. So the threshold question remains whether failing to pay the filing fee is still fatal, automatically, as we held in Manly, given the change of the rule to say, specifically, that only "[t]he failure of a party to file notice of appeal within the time specified [30 days] ... shall result in dismissal," and "[t]he failure of any party to comply with other rules ... does not affect the validity of the appeal ..., but is ground only for such action as the appellate court deems appropriate," which means sanctions are permitted instead of dismissal when the error is corrected and the opponent is not prejudiced by the mistake. CR 73.02(2). If, as Manly holds, notice of appeal is a "nullity" unless a filing fee has been paid, there is no recourse, because, as contrasted with introducing a policy of substantial compliance permitting sanctions other than automatic dismissal for violation of all "other rules relating to appeals," the one thing that was not changed when CR 73 was amended is that failing to file the notice...