Lewis Lp Gas, Inc. v. Lambert

• Citation: 113 S.W.3d 171
• Decision Date: 21 August 2003
• Docket Number: No. 2002-SC-0582-MR.,2002-SC-0582-MR.
• Parties: LEWIS LP GAS, INC; Aileen B. Lewis; and James Randolph Lewis, Appellants, v. Debra H. LAMBERT, Special Judge for the Family Court of the 27th Judicial Circuit, Appellee, and Janie Greer Lewis, Real Party in Interest.
• Court: United States State Supreme Court (Kentucky)

113 S.W.3d 171

LEWIS LP GAS, INC; Aileen B. Lewis; and James Randolph Lewis, Appellants, v. Debra H. LAMBERT, Special Judge for the Family Court of the 27th Judicial Circuit, Appellee, and Janie Greer Lewis, Real Party in Interest.

No. 2002-SC-0582-MR.

Supreme Court of Kentucky.

August 21, 2003.

James T. Gilbert, Coy, Gilbert & Gilbert, Richmond, Counsel for Appellants, Lewis LP Gas, Inc. and Aileen B. Lewis.

Franklin Stivers, London, Counsel for Appellant, James Randolph Lewis.

Debra H. Lambert, Special Judge for the Family Court of the 27th Judicial Circuit, Mt. Vernon, pro se Appellee.

David F. Broderick, Steven O. Thornton, Paul Kevin Hackworth, Broderick &amp Thornton, Bowling Green, Counsel for Real Part in Interest, Janie Greer Lewis.

KELLER, Justice.

I. INTRODUCTION

In a dissolution proceeding between Janie Greer Lewis ("Janie Lewis") and James Randolph Lewis ("Randy Lewis"), the trial court entered an order restraining Lewis LP Gas, Inc. ("Lewis LP Gas") from selling its primary asset, an interest in Ferrellgas LP ("Ferrellgas"). Lewis LP Gas is a family corporation in which Randy Lewis is the majority stockholder and Aileen B. Lewis ("Aileen Lewis"), Randy Lewis's mother, is the minority stockholder. Neither Lewis LP Gas nor Aileen Lewis is a party to the dissolution action.¹ Seeking relief from the trial court's order, Appellants filed a petition for a writ of prohibition from the Court of Appeals. After being denied relief by the Court of Appeals, Appellants appealed to this Court as a matter-of-right.² After a review of the record, we conclude: (1) that Appellants have standing to seek a writ of prohibition against the trial court, and (2) that Appellants have demonstrated their entitlement to a writ of prohibition against the trial court because it was acting without jurisdiction in restraining Lewis LP Gas, and it has no adequate remedy by appeal. Accordingly, we reverse the Court of Appeals's order and remand this case for entry of an order granting the writ sought.

II. BACKGROUND

The underlying case in the present appeal is a dissolution action filed in Laurel Circuit Court between Janie Lewis and Randy Lewis. Randy Lewis is president of Lewis LP Gas, a family corporation formerly engaged in the sale of bottled propane gas. Together, Randy Lewis and Aileen Lewis, his mother, are the sole shareholders of Lewis LP Gas (holding, respectfully, 85.88% and 14.12% of the shares). In October 1997, Lewis LP Gas sold its assets to Ferrellgas in exchange for a limited partnership interest in that company. This transaction resulted in the shares of Ferrellgas becoming the primary asset of Lewis LP Gas.

On September 10, 2001, the trial court entered a Status Quo Order³ in the dissolution action. The order required the court's permission before the parties could alienate their property. The order provides in pertinent part:

[T]he Court orders that except as may be necessary to pay reasonable living expenses, neither party shall sell, encumber, gift, bequeath, or in any manner transfer, convey, or dissipate any property, cash, stocks or other assets currently in their possession or control to another person, company, legal entity or family member without first obtaining an order from this court giving them permission to do so or filing with the court an agreed order signed by both parties or their attorneys.

Janie Lewis subsequently moved the trial court to hold Randy Lewis in contempt for violating the status quo order by attempting to sell some of Lewis LP Gas's shares of Ferrellgas, and she asked the trial court to order that neither Lewis LP Gas nor Randy Lewis individually be permitted to transfer stock pursuant to the terms of the previously entered order. Randy Lewis responded by arguing that the status quo order did not apply to the stock shares in question because they were his non-marital property.

After a March 1, 2002 hearing on the issue, the trial court entered an order restraining the sale of Lewis LP Gas' shares of Ferrellgas:

It is ordered, as to the Motion for a Restraining Order against Respondent, James Randolph Lewis, that he is restrained from conducting any further stock sales in the matter and any involvement in a sale of the shares of stock in Ferrellgas owned by Lewis LP Gas, Inc., and that he is not to sell or convert the Ferrellgas stock in any way or encumber them in any way without obtaining permission of the Court.⁴

Appellants' request for an injunction bond was denied by the trial court.

Because the trial court's order restricts Lewis LP Gas's ability to manage its business, Appellants sought a writ in the Court of Appeals to prohibit the trial court from enforcing its order against Lewis LP Gas. After the Court of Appeals denied them the relief sought, Appellants appealed to this Court.

III. ANALYSIS

A. STANDING

Before addressing the merits of Appellants' arguments regarding the writ, however, we must first resolve whether Appellants have standing to seek such relief. In Courier-Journal v. McDonald,⁵ this Court's predecessor stated:

The relief sought is that the order in the wrongful-death suit be vacated, as void. The petitioners herein were not parties to that suit, so they could not have moved directly in the circuit court to have the order vacated. Since they could not have had the order vacated by proceeding directly in the circuit court, obviously they have no standing to ask this court to direct that the order be vacated. The general rule is stated to be that mandamus will not lie to courts or judges at the instance of strangers to the proceedings. 55 C.J.S. Mandamus, § 49, p. 84.⁶

The McDonald Court relied upon the general rule as then stated in Corpus Juris Secundum that the writ of mandamus remedy is unavailable to "strangers to the proceedings." Lewis LP Gas and Aileen Lewis can hardly be characterized as "strangers" to these proceedings, however, because the trial court's order directly and substantially affects them by involving Lewis LP Gas. Additionally, the current version of Corpus Juris Secundum now incorporates at Mandamus § 42 the principle of law that "[o]rdinarily any person having an interest in the subject matter of the petition is entitled to institute mandamus proceedings."⁷ And, the commentary to § 42 explains:

A petitioner for mandamus relief must have standing just as any other litigant must, and must meet statutory standing requirements. Ordinarily any person having an interest in the subject matter of the petition is entitled to institute mandamus proceedings, but an officious intermeddler may not seek mandamus in a matter with which he is not concerned.⁸

While neither Lewis LP Gas nor Aileen Lewis is an actual party to the underlying dissolution action, they are clearly not "officious intermeddler[s]." The subject matter of the trial court's order sub judice is the shares of Ferrellgas owned by Lewis LP Gas. Thus, Lewis LP Gas has a legitimate interest in the subject matter of these proceedings. Aileen Lewis has an interest in seeing that her investment as a shareholder of Lewis LP Gas is protected. Appellants argue forcefully that the trial court's order has shackled the corporation's ability to engage in prudent business decisions concerning the sale of its principal asset. Moreover, we observe that the failure to recognize Lewis LP Gas's standing to pursue such relief may also implicate rights of due process that uphold the premise that "a person should not be bound by an injunction decree unless she has had her day in court."⁹ Accordingly, we find that Lewis LP Gas and Aileen Lewis have standing to seek a writ of prohibition against the trial court.

B. WANT OF JURISDICTION AND INADEQUATE REMEDY BY APPEAL

Due to the extraordinary nature of its relief—interlocutory intervention by an appellate court,¹⁰ the writ of prohibition remedy is reserved for exceptional circumstances¹¹ and therefore should be granted only upon a showing that "(1) the lower court is proceeding or is about to proceed outside its jurisdiction and there is no adequate remedy by appeal, or (2) the lower court is about to act incorrectly, although within its jurisdiction, and there exists no adequate remedy by appeal or otherwise and great injustice and irreparable injury would result."¹²

Appellants argue that a writ of prohibition is appropriate in this case under the first criterion because (1) the trial court acted outside its jurisdiction by restraining a non-party, Lewis LP Gas, from engaging in normal business decisions with regard to the purchase and sale of its assets, and (2) the corporation has no adequate remedy by appeal. Appellants also stress that irreparable injury may occur if it is prohibited from selling its Ferrellgas shares, which are volatile in value.

Appellee responds that the trial court has jurisdiction over Lewis LP Gas because the corporation is Randy's "alter ego."¹³ Thus, Appellee asserts that the trial court could pierce the corporate veil to obtain jurisdiction over Lewis LP Gas.¹⁴ Although we agree that the alter-ego rule may confer jurisdiction over a corporation under certain circumstances, we disagree that it is applicable here. The alter-ego doctrine is reserved for situations in which incorporation is accomplished to invoke fraudulent protection against personal liability.¹⁵ "[T]he elements thereof have been defined as follows: (1) that the corporation is not only influenced by the owners, but also that there is such unity of ownership and interest that their separateness has ceased; and (2) that the facts are such that an adherence to the normal attributes, viz[.], treatment as a separate entity, of separate corporate existence would sanction a fraud or promote injustice."¹⁶ In sum, under the alter-ego theory, assets "owned" by the corporation are inseparable from those controlled by its owner.¹⁷ That is not the case here. Lewis LP Gas was incorporated as a family business and continues as such. Although the...