Worley v. Columbia Gas of Kentucky, Inc., 73-1204

• Decision Date: 27 December 1973
• Docket Number: No. 73-1204,73-1205,73-1207.,73-1204
• Citation: 491 F.2d 256
• Parties: Emmett C. WORLEY, Plaintiff-Appellee, v. COLUMBIA GAS OF KENTUCKY, INC., Kentucky Gas Transmission Corporation, Defendants-Appellants. Emmett C. WORLEY, Plaintiff-Cross-Appellant, v. COLUMBIA GAS OF KENTUCKY, INC., et al., Defendants-Cross-Appellees. Emmett C. WORLEY, Plaintiff-Appellee, v. MUTUAL PIPELINE CONTRACTORS, INC., et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

491 F.2d 256 (1973)

Emmett C. WORLEY, Plaintiff-Appellee, v. COLUMBIA GAS OF KENTUCKY, INC., Kentucky Gas Transmission Corporation, Defendants-Appellants.

Emmett C. WORLEY, Plaintiff-Cross-Appellant, v. COLUMBIA GAS OF KENTUCKY, INC., et al., Defendants-Cross-Appellees.

Emmett C. WORLEY, Plaintiff-Appellee, v. MUTUAL PIPELINE CONTRACTORS, INC., et al., Defendants-Appellants.

Nos. 73-1204, 73-1205, 73-1207.

United States Court of Appeals, Sixth Circuit.

Argued October 3, 1973.

Decided December 27, 1973.

Rehearing Denied February 1, 1974.

Joseph L. Arnold, Lexington, Ky., and Thomas E. Morgan and H. Raymond Andrews, Jr., Charleston, W. Va., on brief, for Kentucky Gas Transmission Corporation and Columbia Gas of Kentucky, Inc. Arthur L. Brooks, Lexington, Ky., and Leslie W. Morris, II, Stoll, Keenon & Park, Lexington, Ky., on brief, for Mutual Pipeline Contractors, Inc., John T. Dix and Chester Nowicke.

David C. Graves, Jr., Lexington, Ky., on brief, for Emmett C. Worley.

Before WEICK, EDWARDS and CELEBREZZE, Circuit Judges.

WEICK, Circuit Judge.

Mutual Pipeline Contractors, Inc. (hereinafter referred to as Mutual), John T. Dix and Chester Nowicke (Mutual's principal officers), Columbia Gas of Kentucky, Inc. (hereinafter referred to as Columbia Gas), and Kentucky Gas Transmission Corporation (hereinafter referred to as Kentucky Gas Transmission), have appealed from a judgment entered in the District Court against them in favor of the plaintiff Worley, in the amount of $800,000, on a complaint charging the defendants with conspiring to maliciously prosecute plaintiff Worley for the offense of issuing checks drawn on a bank, which checks were not paid because of lack of sufficient funds. In the testimony these checks were referred to as cold checks.

Motions were made by defendants for a directed verdict at the close of plaintiff's evidence, and were renewed at the close of all the evidence, and were denied by the Court. The Court submitted the issues to the jury which returned a verdict against all defendants, in the sum of $750,000 for compensatory, and $750,000 for punitive damages. The Court denied defendants' motions for judgments notwithstanding the verdicts, but granted their motions for new trials unless Worley agreed to a remittitur of $700,000 in the punitive damage award. Worley agreed and judgment was entered on the verdict in the amount of $800,000.

The principal error assigned by the appellants is that the Court should have directed a verdict in their favor. Worley appealed from the order of remittitur, although he had consented to it without protest.

Kentucky Gas Transmission is a Delaware corporation, authorized to do business in Kentucky. Columbia Gas is a Kentucky corporation, and is a public utility, subject to the jurisdiction of the Kentucky Public Service Commission, and is engaged in selling gas at retail in the Commonwealth of Kentucky.

The case arose out of the Kentucky Gas Transmission pipeline construction project in Brachin, Lewis and Mason Counties in Kentucky, in 1969. The prime contractor for construction of the pipeline was Mutual, whose major responsibility was to dig ditches for the pipe. Mutual awarded a subcontract to Worley, doing business as Inland Pipeline Construction Company, to do the work of bending, laying and welding the pipe furnished by Kentucky Gas.

The contract provided that Mutual was to be paid twice a month by Kentucky Gas, based on estimates prepared at the middle and end of each month. Worley was to receive payment from Mutual on a fixed price per foot. Worley's total expected payment for the contract was to be $158,000; he was also to be paid for extra work done beyond the terms of the contract. Worley needed funds to commence operations, and Mutual arranged to and did advance to him about $25,000, in two installments.

Problems immediately arose over welds made by Worley's employees, which welds were rejected by Kentucky Gas inspectors. Worley's position was that these rejects were due to faulty pipe; Kentucky Gas contended that the fault was in improper welding.

Originally, Worley was to be paid by Mutual after the estimate procedure with Kentucky Gas had been completed; however, because of the reject problem, a pattern developed in which Mutual was assisting in meeting Worley's payroll by making advances to Worley, often before payment by Kentucky Gas on the estimates.

On August 14, 1969 Worley opened a bank account with First Security National Bank and Trust Company in Lexington. Prior to this time Worley had been meeting his payroll on an account which he had with an Iowa bank.

Worley contended that Mutual, through Dix, promised him that he could write payroll checks as he saw fit, and that Mutual had made arrangements with First Security National Bank in Lexington, to cover such checks. Dix denied making any such promise. In addition, Gerald Hodges, the bank official responsible for such arrangements, testified that he had no knowledge of any such authorization.

Mutual gave as the reason for their ceasing advances that they thought their prior advances reached the point where they were approaching Worley's total expected payment on the project. Indeed, Mutual claimed it had already paid Worley $60,000 beyond the contract price.

In August and September, 1969, Worley and other Inland officers issued 150 payroll checks totaling $34,000, which checks were dishonored by the bank for insufficient funds. Eleven of these checks were issued in August, the remainder in September. On September 10, 1969 the bank sent Worley a notice informing him of his balance and listing the returned checks. An additional notice was sent on September 12, 1969.

On September 13, 1969 Oral Curtis, a sawmill operator, personally contacted Worley concerning a lumber bill for $2,600, on which payment was overdue; thereupon Worley paid him with two checks post-dated September 27, 1969 and October 11, 1969, because Worley knew he had insufficient funds to cover such checks as of September 13th, the date of actual issuance.

More payroll checks were issued on September 13, 14, 15, 16, 17, and 18. Of the 150 checks written, some were signed by Worley himself, some were signed by his employee, Richard Given, and some were signed by his employee and son-in-law, Douglas Hammock. Most of the checks were for labor; some checks were for material furnished to Worley.

When Dix became aware of Worley's actions, he consulted an attorney, John H. Clarke, Jr., in Maysville, Kentucky, a town near the project site. Clarke advised Dix that under Kentucky law the payees of the cold checks issued by Worley could obtain mechanic's liens against the project, which liens Mutual would eventually have to pay off.

Clarke set up a procedure to pay off the checks in return for releases to prevent subsequent lien claims. Clarke began this payment program on September 18. On the preceding day Roy Clark, Patrick Sappington and Tommy Coker (all employees of Worley) brought their payroll checks to Clarke's office. Clarke told these men that in his opinion an offense had been committed and that they were entitled to obtain warrants. Sappington and Coker were willing to sign complaints, and Clarke took them to the courthouse.

The County Attorney presented the affidavits for warrants, sworn by these two men, to Mason Circuit Judge John A. Breslin, who issued warrants for Worley's arrest based on these two counts. On the same day a local merchant, Clyde Barbour, who had cashed sixteen payroll checks for Worley's employees, sought warrants. Judge Breslin also issued arrest warrants on affidavits signed by Barbour relating to these sixteen cheeks. There was no evidence that any of the defendants had anything to do with Barbour's pressing of charges against Worley.

Worley had been spending most of his time in Aberdeen, Ohio, but came into Kentucky on September 18th for a meeting of project participants, to discuss results of examination of the pipe. While at this meeting Worley was arrested and lodged in the Mason County jail, on the eighteen arrest warrants obtained by Sappington, Coker and Barbour. Worley claimed that the meeting was a subterfuge to get him into the state and county. Roy Clark, one of Worley's employees, testified that he had told Worley about the outstanding warrants on the very day they were issued, September 17th.

Worley was in jail from 3:00 p. m. on September 18, 1969 until 10:00 a. m. on September 20, 1969 when a preliminary hearing was held. Worley was bound over to the county grand jury on all eighteen warrants considered by the Judge on September 17th.

On September 22, 1969 the grand jury was in session. On this same day two other employees of Worley, James C. Lykins and Howard Moore, Jr., came to Clarke's office to obtain payment of cold checks issued to them on September 6, which they had been unable to cash at the bank. Following discussions with Clarke, Moore and Lykins went before the grand jury. Moore testified that he understood he would get his check cashed by Clarke regardless of whether or not he appeared before the grand jury.

The grand jury returned two indictments on the checks of Moore and Lykins. Worley was arraigned on these charges on September 22, 1969, but was released on his own recognizance, and spent no time in jail under these indictments.

On September 25, 1969 J. C. Penney Co. obtained two warrants for Worley's arrest for issuing cold checks.

Trial on Moore's and Lykins' charges was set for September 11, 1970. The indictment as to Moore was dismissed because the prosecuting attorney could not obtain Moore's presence. The indictment on the Lykins matter was tried to a jury and the defendant, Worley, was found not guilty.

No disposition has been made concerning the warrants which were obtained by Sappington, Coker and Barbour. These matters are still pending before the grand jury.

There are pending civil actions in other courts arising out of...