Roy W. KESTLER & Susan Kestler, Movants, v. TRANSIT AUTHORITY OF NORTHERN KENTUCKY, Respondent, and CONSOLIDATED FREIGHTWAYS, INC., Movant, v. TRANSIT AUTHORITY OF NORTHERN KENTUCKY, Respondent.
Nos. 87-SC-841-DG, 87-SC-853-DG
Supreme Court of Kentucky
Oct. 6, 1988
Comment (e) to Section 82 states in part:
Where the grantee takes subject to the mortgage, but without assuming the debt it secures, the land is regarded as bearing the principal burden of the mortgage and the mortgagor, is a surety to the extent of the value of the land. (Emphasis added.)
Furthermorе, Section 114 of the Restatement of Security states:
Where a person whom the creditor reasonably believes to be a principal is in fact a surety, or where a principal becomes a surety the creditor is affected by the incidence of suretyship from the time he has knowledgе of it. (Emphasis added.)
The Alveys had knowledge of the fact that Gretchen was in a surety position at the time they executed the subordination agreement and their consent to this changed position was not required to bind them to this suretyship relationship. Cf. Comment (a) to Section 114.
The last requirement to be аble to use the defense is that Gretchen must have had a right of recourse against the debtor Shively Lanes, either on the instrument or outside the instrument. Her right of recourse was outside of the instrument. The deed transferring the property to Shively Lanes provided that the property was subject to the First Lien Note. Upon default of payment on the note by Shively Lanes, Gretchen had a right of recourse against the partnership and could have foreclosed on the property to satisfy her indebtedness on the promissory note.
Gretchen is a party to the instrument entitled to use the unjustifiable impairment of collateral defense, and but for the impairment of collateral by the Alveys, the property was of sufficient value to satisfy her promissory note.
The majority opinion points out that the rationale for disparate treatment between makers and accommodation parties is that makers receive consideration and accommodation parties do not. However, the subordination agreement benefited only Shively Lanes and the Alveys. The Alveys accepted the subordination agreement as part of the refinancing of the property. The Alveys also aсcepted the benefits of this refinancing and should be made to bear its risks. The Alveys could not reasonably have believed that Gretchen was other than a surety.
I would reverse the Court of Appeals.
Michael P. Collins, Florence, Kevin G. Henry, Walter A. Ward and Elizabeth C. Lehrfeld, Clark, Ward & Hopgood, Lexington, for movants.
Robert D. Monfort, Ziegler & Schneider, P.S.C., Covington, for respondent.
STEPHENS, Chief Justice.
On January 17, 1985, Roy W. Kestler was driving a truck owned by his employer, Consolidated Freightways, when he collided with a bus owned by the Transit Authority of Northern Kentucky (TANK), resulting in serious personal injuries. Kestler and his wife filed suit against TANK, the driver of the bus, and the Transit Authority‘s board of directors. TANK moved for summary judgment on the grounds of sovereign immunity. The Campbell Circuit Court granted the motion, dismissing both TANK and its board of directors. On appeal, the summary judgment was affirmed by the Court of Appeals. We granted discretionary review to both Kestler, and his intervening employer, Consolidated Freightways.
The sole issue to be decided is whether TANK may claim the protections of sovereign immunity. We hold that it may not.
§ 231. Suits against the commonwealth. —The General Assembly may, by law, direct in what manner and in what courts suits may be brought against the Commonwealth.
Thus it is clear that the drafters of the Constitution sought to enable the General Assembly, through statute, to eliminate the common law doctrine whenever it deemed necessary. Sovereign immunity would then exist as protection, only until the legislature sought to take it away.
The General Assembly has the discretion, however, to determine whеther the protection should be eliminated entirely, or simply limited to allow claims of a particular kind or for a particular specified amount. The Mass Transit Authorities Enabling Statute,
96A.180. Insurance of authority‘s properties. —An authority shall provide for insurance of its properties, and for workers’ compensation, and for public liability or any other risk or hazard arising from its activities, and may provide for the insuring of its officers or employes against any such risk or hazard, and the expense of оbtaining such insurance, and of paying the premiums therefor from time to time, shall be borne by the authority and be chargeable as an operating expense of the authority. The board of an authority may provide for self insurance and may establish for that purpose such reserves as it deems prudent. (Emphasis added.)
We have held that immunity can be partially waived by the express terms of a statute allowing maintenance of an insurance fund. Dunlap v. University of Kentucky Student Health Services Clinic, Ky., 716 S.W.2d 219 (1986). In Dunlap, the University Student Health Services Clinic was sued by a student-patient for malpractice. The Clinic claimed the protection of sovereign immunity pursuant to
There is no significant difference between Dunlap and the case at bar. Here, we have a comprehensive statutory scheme setting forth the proper establishment and maintenance procedures for mass transit authorities. Within this scheme is a provision mandating either the purchase of liability insuranсe from a private carrier or the establishment of a fund for self insurance. Either way, the statute clearly contemplates a limited waiver of governmental immunity to the extent of the insurance coverage.
Respondent argues that since no funds were specifically set aside for the рayment of claims against the Transit Authority, there was no actual intent to statutorily waive its governmental immunity. We do not agree. It is sufficient that the statute sets forth a mandatory provision of liability insurance against potential claims. The statute under consideration in Dunlap merely allowed for the option of insuring, not a requirement that insurance be provided.
Respondent further contends that
44.072. Legislative intent as to soverеign immunity in negligence claims. —It is the intention of the general assembly to provide the means to enable a person negligently injured by the Commonwealth, any of its cabinets, departments, bureaus or agencies, or any of its officers, agents or employes while acting within the scope of their emplоyment by the Commonwealth or any of its cabinets, departments, bureaus or agencies to be able to assert their just claims as herein provided. The Commonwealth thereby waives the sovereign immunity defense only in the limited situations as herein set forth. It is further the intention of the general assembly to otherwise еxpressly preserve the sovereign immunity of the Commonwealth, any of its cabinets, departments, bureaus or agencies or any of its officers, agents or employes while acting in the scope of their employment by the Commonwealth or any of its cabinets, departments, bureaus or agenciеs in all other situations except where sovereign immunity is specifically and expressly waived as set forth by statute. The board of claims shall have exclusive jurisdiction to hear claims for damages, except as otherwise specifically set forth by statute, against the Commonwealth, its cabinets, departments, bureaus, agencies or any of its officers, agents or employes while acting within the scope of their employment by the Commonwealth, its cabinets, departments, bureaus or agencies.
Therefore, the sovereign immunity of the Commonwealth is preserved unless specifically and еxpressly waived by statute. It is not necessary to examine the merits of respondent‘s claim, because
We therefore hold, that the provision of the Mass Transit Authorities Enabling Statute which requires liability insurance,
WINTERSHEIMER, J., concurs.
LEIBSON, J., concurs in a separate concurring opinion in which LAMBERT, J., joins.
VANCE, J., dissents in a separate dissenting opinion and is joined by GANT and STEPHENSON, JJ.
I concur in the Majority Opinion so far as it goes, but it does not go far enоugh.
This is a plain, old, garden-variety motor vehicle collision, occurring on the streets of this Commonwealth between a truck and a bus. It so happens that the bus company operating this particular bus, rather than being privately owned, is a municipal corporation organized pursuant to
The idea that such a bus company should enjoy sovereign immunity would have been viewed as ludicrous by our constitutional forbearers who authored the Kentucky Constitution,
The principle that public corporations organized in this fashion are municipal corporations is one of longstanding. Rash v. Louisville & Jefferson County Met. S. Dist., 309 Ky. 442, 217 S.W.2d 232, 236 (1949). Louisville Metro. Sewer Dist. v. Simpson, Ky., 730 S.W.2d 939 (1987) is an aberration of this principle, confusing sovereign immunity with the formеr concept of municipal immunity in the exercise of a governmental function.1 The idea that a bus company operating in Northern Kentucky, whether a private or public corporation, should be immune from responsibility for injuries tortiously inflicted on others using the public highways, that it should be protected by state sovereign immunity, is an alien philosophy unsuited to the jurisprudence of government in a responsible democracy.
The Board of Claims Act provides limited relief through an administrative agency for citizens injured by the negligent acts of state agencies. It authorizes payments from the State Treasury for injuries negligently inflicted by persons “acting within the scope of their employment by the Commonwealth or any of its cabinеts, departments, bureaus or agencies.” The concept of relief in the Board of Claims Act is coextensive with the concept of state sovereign immunity. The Act does not cover the liability of TANK, or indeed of any other local entity or municipal corporation. If we afford such loсal entities the privilege of state sovereign immunity, the result is a large body of public corporations providing the same services and conducting the usual activities of private corporations which are licensed to inflict injury upon the public with impunity. This is not a result mandated by the Kentucky Constitution, but thе meaning we ascribe to it. It is our Court, not the Kentucky Constitution, that arbitrarily and unreasonably extends sovereign immunity to public corporations simply because their existence is authorized by state statute.
On the contrary, the idea that a victim in a case such as the present one would have no rеcourse anywhere, were it not for a statute requiring TANK to “provide for insurance” (
The Dissenting Opinion by Justice Vance comments prematurely on the meaning and effect of
“The board of claims shall have exclusive jurisdiction to hear claims . . . against the Commonwealth . . . or any of its officers, agents or employes while acting within the scoрe of their employment. . . .”
This seemingly seeks to extend state sovereign immunity to employees. In Happy v. Erwin, Ky., 330 S.W.2d 412 (1959), in an earlier, happier age of enlightenment, striking down a statute professing to extend the immunity enjoyed by the governmental agency to the personal liability of its employees, we stated:
“Clearly the stаtute violates §§ 14 and 54 of the Kentucky Constitution” (and would violate § 241 if death were involved.) 330 S.W.2d at 413.
Happy v. Erwin holds that “these two sections” (
There are questions regarding the meaning, the effect, and the constitutionality of newly enacted
LAMBERT, J., joins in this concurring opinion.
VANCE, Justice, dissenting.
I respectfully dissent because I bеlieve there can be no implied waiver of sovereign immunity by the Commonwealth. The waiver must be specific and express.
In Dunlap v. University of Kentucky Student Health Services Clinic, Ky., 716 S.W.2d 219 (1986), a majority of this court held that the enactment of a statute providing for a fund from which the University could satisfy claims or judgments against the University showed (by implication) an intention of the General Assembly to waive the doctrine of sovereign immunity.
The majority in Dunlap was completely wrong in its assessment of the legislative intention, and the General Assembly, at its first opportunity, told us so by the enactment of
Sovereign immunity is not specifically or expressly waived by the statute under consideration here. The majority continues to attribute to the General Assembly an implied intention to waive sovereign immunity in the face of the explicit declaration by the General Assembly that waiver is not intended unless it is specifically and expressly waived.
The majority disregards
I believe
We should not persist in a confrontation with the General Assembly about an implication which might be drawn from language used in a statute when the General Assembly has expressly stated no such implication was intended.
GANT and STEPHENSON, JJ., join in this dissenting opinion.