Philliр J. MUNDAY and his wife, Francis J. Munday, Appellants, v. MAYFAIR DIAGNOSTIC LABORATORY and Thomas J. Meyer, as Trustee under the James M. Callis Trust and Representative of the partners doing business as Mayfair Diagnostic Laboratory, in the City of Owensboro, Daviess County, Kentucky, Appellees.
No. 91-SC-455-DG
Supreme Court of Kentucky
May 14, 1992
831 S.W.2d 912
Ronald M. Sullivan, Holbrook, Wible, Sullivan & Mountjoy, P.S.C., Owensboro, for appellees.
LAMBERT, Justice.
The issue presented is whether the failure of partners doing business under an assumed name to comply with
A few days prior to the expiration of one year from the date of discovery, appellants brought a civil action for medical negligence against Mayfair Diagnostic Laboratory and Dr. James H. Callis. Prior to bringing suit, appellants had consulted the records in the office of the Secretary of State and in the office of the Daviess County Court Clerk to determine whether Mayfair was a corporation, or a partnership or proprietorship doing business under an assumed name. The records so consulted failed to reveal any filing by Mayfair. It is undisputed that during the relevant time period, Mayfair Diagnostic Laboratory was a partnership and that the partners had failed to comply with
After commencement of their action, appellants learned through discovery that Mayfair was a general partnership consisting of various individuals and family trusts doing business as Mayfair Diagnostic Laboratory. Significantly, discovery alsо revealed that Dr. Callis was not a partner, his interest having been transferred to a family trust several years earlier, and that his only role was as medical director of Mayfair. Appellants amended their complaint and properly joined at least one Mayfair partner, but by this time, approximately sixteen months had passed since the cause of action was discovered and appellants’ individual claims were held to be timе barred. An order of dismissal was entered.
On appeal to the Court of Appeals, the judgment of the trial court was reversed. The Court of Appeals held that a partnership could be sued in its firm name and concluded that since the action was timely filed against Mayfair Diagnostic Laboratory, the trial court erred in dismissal of the action. Mayfair then sought and was granted discretionary review in this Court whereupon we remanded the case to the Court of Appeals for reconsideration in light of our decision in Telamarketing Communications, Inc. v. Liberty Partners, Ky., 798 S.W.2d 462 (1990), which held that a partnership could not sue under an assumed partnership name. In response, and on authority of Telamarketing, the Court of Appeals reversed its earlier decision and held the action to be barred by
For its order of dismissal, the trial court relied on
It is unnecessary to engage in a review of our decisions in Nolph v. Scott, supra, and Telamarketing v. Liberty Partners, supra, for the issue here is whether appellants’ amended complaint, which is conceded to have named at least one Mayfair partner, was timely by virtue of the failure of the partnеrs in Mayfair to comply with the assumed name statute. Said otherwise, are the Mayfair partners entitled to benefit of
The Kentucky General Assembly and this Court have long recognized the value of statutes which “bar stale claims arising out of transactions or occurrences which took place in the distant past.” Armstrong v. Logsdon, Ky., 469 S.W.2d 342, 343 (1971). We have upheld the constitutionality of statutes of limitations despite their arguable conflict with
While the foregoing and numerous other decisions demonstrate a firm commitmеnt to enforcement of statutes of limitations, there are exceptions to the rule. Parties are at liberty to contract for a limitation period less than the period fixed by statute. Johnson v. Calvert Fire Ins. Co., 298 Ky. 669, 183 S.W.2d 941 (1945). Likewise, after a cause of action has accrued, parties may, by agreement, extend the time for filing the action beyond the time in which the limitation would otherwise run. Bankokentucky Co.‘s Receiver v. National Bank of Kentucky‘s Receiver, 281 Ky. 784, 137 S.W.2d 357, 369 (1939). An estoppel may arise to prevent a party from relying on a statute of limitation by virtue of a false representation or fraudulent concealment. Cuppy v. General Accident Fire and Life Assurance Corp., Ky., 378 S.W.2d 629 (1964). And for persons under a legal disability, the running of the statute of limitations ordinarily does not commence until the disability is removed. Gunnels v. Stanley, 296 Ky. 662, 178 S.W.2d 195 (1944). Finally, we have held that as statutes of limitations are in derogation of presumptively valid claims, when doubt exists as to which statute should prevail, the longer period should be applied. Troxell v. Trammell, Ky., 730 S.W.2d 525 (1987).
A claim of equitable estoppel is widely utilized by parties who seek to avoid a statute of limitation defense. Long ago a tolling statute was enacted which provides that a resident of this State who absconds or conceals himself “or by any other indirect means obstructs the prosecution of the action” shall not have benefit of the statute of limitation so long as the obstruction continues.
Ordinarily, proof of fraud requires a showing of an affirmative act by the party charged. An exception to this general rule may be found in a party‘s silence when the law imposes a duty to speak or disclose. Such was the case in Security Trust Co. v. Wilson, 307 Ky. 152, 210 S.W.2d 336 (1948), in which it was alleged that a deceased unсle who had served as fiduciary for his niece had converted her property to his own use. The Court emphasized the language in
“The indirect means employed by the uncle in the case at Bar, if it existed, was a failure to speak and advise his niece that he had exchanged her bonds for other bonds and taken the title in his own name.” Id. at 339.
The Court relied on Kurry v. Frost, 204 Ark. 386, 162 S.W.2d 48 (1942), which held that a party who, in violation of the law, left the scene of an automobile accident
“that this fiduciary relationship was such that there was a duty upon the part of the said Curtis to advise the said plaintiff that he had exchanged her bonds and taken the title to the ones exchanged for in his own name; that this concealment constituted a means of obstruction within the meaning of
KRS 413.190 , and that this cоncealment tolled the running of the statute of limitations.” Security Trust Co., 210 S.W.2d at 339-40.
From the foregoing, it may be concluded that while concealment ordinarily requires an affirmative act, where the law imposes a duty of disclosure, a failure of disclosure may constitute concealment under
Returning to the case at bar, we reiterate that the purpose of the assumed name statute is to inform members of the public, including appellants, of the identity of pеrsons doing business under an assumed name. It could not be disputed that for lawful use, including litigation, the statute imposes a duty to provide such information. Thus, appellees’ conduct amounted to a violation of a statute designed to provide appellants information which was essential to the commencement of litigation. We have no doubt that such conduct may be properly regarded as obstruction by indirect means within the purview of
Aрpellees rely in part on a decision of the appellate court of Illinois, Gulley v. Fountalas, 153 Ill. App.3d 100, 106 Ill.Dec. 385, 505 N.E.2d 1176 (1987), which held that failure of a party to comply with the assumed name act is not an exception to the applicable statute of limitation. The court noted, however, that by the terms of the act, in such circumstance, a civil action could be brought against the business under its assumed name and “unknown owners” and permitted judgment and execution against the assets of the business. Unlike its Kentucky counterpart, the Illinois statute provides for a remedy in the event of the failure of business owners to comply with the statute. This provision would appear to recognize the plight of persons desiring to bring litigation against an unidentified business entity and provide an exception to the otherwise applicable rule.
We have not overlooked the language in Hayes v. Providence, supra, which states that the statutory penalty for violation of
In summary, we are of the opinion that appellees’ failure to comply with
STEPHENS, C.J., and COMBS, LEIBSON, SPAIN and WINTERSHEIMER, concur.
LEIBSON, J., files a separate concurring opinion in which COMBS, J., joins.
REYNOLDS, J., dissents by separate opinion.
LEIBSON, Justice, concurring.
I concur in the Majority Opinion as written. There is, however, another reason here, equally valid, why the statute of limitations does not protect the partners in the Mayfair Diagnostic Laboratory against liability.
Thаt reason is because service of summons on the Amended Complaint relates back to the date of the initial Complaint under the principle of “Relation Back of Amendments” stated in
“(2) An amendment changing the party against whom a claim is asserted relates back if the condition of paragraph (1) is satisfied and, within the period provided by law for commencing the action against him, the party to be brought in by amendment (a) has received such notice of the institution of the action that he will not be prejudiced in maintaining his defense on the merits, and (b) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against him.”
The “condition of paragraph (1)” is satisfied when “the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the originаl pleading.”
I recognize that our Cоurt used just such hypertechnical interpretation of this phrase in Nolph v. Scott, Ky., 725 S.W.2d 860 (1987), with two Justices dissenting, and that in doing so we followed the lead of the United States Supreme Court in Schiavone v. Fortune a/k/a Times, Inc., 477 U.S. 21, 106 S.Ct. 2379, 91 L.Ed.2d 18 (1986). But the United States Supreme Court seems bent on destruction on long-standing, fundamental rules of construction that apply to construing the rules of civil procedure in an all-out effort to limit the size of the federal docket, and, this is hardly a persuasive reason for our Court to follow a similar cоurse in Kentucky cases. We have recently firmly rejected just such a response as inappropriate in similar circumstances in Steelvest, Inc. v. Scansteel Service Ctr., Ky., 807 S.W.2d 476 (1991), refusing to follow the lead of the United States Supreme Court in amending the summary judgment rule by judicial fiat to accommodate docket control. We should do the same thing here.
The hypertechnical construction to which I refer is interpreting the phrase, “within the period provided by law for commencing the action against him,” as meaning the party must have actual notice that suit has been filed by the last day of the time period stated in the statute of limitations. This ignores the fact that an action is commenced under
Under the facts of this case, when Dr. James H. Callis, the Director of the Mayfair Diagnostic Laboratory, was served on June 4, 1986, he had notice of the action, and all of the partners in the Mayfair Diagnostic Laboratory also had notice of the filing of this action. The Complaint is served with the summons. Further, the record includes correspоndence between appellants’ attorneys, the Mayfair Diagnostic Laboratory and Dr. Callis, as well as Dr. Edwin Hanekamp who was an unknown partner in this Laboratory and also delivered Francis Munday‘s baby, overwhelming proof that the parties sued had notice of this claim from and after September 12, 1985, long before the statute of limitations was an issue. It would be grossly unjust in cases such as this to permit parties fully knowledgeable about the claim agаinst them to stonewall the efforts to discuss settlement of the matter out of court, stand silent on the true nature of the legal entities involved, and then hide behind the statute of limitations. This is not an approach we should encourage by overreading
In my dissent in Nolph v. Scott, supra, I refer to three well-reasoned United States Circuit Court “decisions with fact situations more in point than the Schiavone case,” which we should follow in applying the “community of interests” test to decide an issue of relation back in cases such as this, commenting:
“All of the above authorities would apply the rule of relation back of amendments provided in
CR 15.03 to the present situation because there is such a community of interests between Dr. Nolph [the party named in the amended pleading] and the originally named defendants that it is patently unreasonable to insulate him from their notice of the lawsuit.As stated in Travelers Indemnity Co. v. United States, the ‘purpose of the federal rules [is not] furthered by denying the addition of a party who has a close identity of interest with the old party when the added party will not be prejudiced. The ends of justice are not served when forfeiture of just claims because of technical rules is allowed.’ 382 F.2d at 106.” 725 S.W.2d at 863. Emphasis original.
Referring to these same authorities, Bertelsman and Philipps, Kentucky Practice, 4th ed., Civil Rule 15.03, p. 329, states:
“The difficulty can be solved in part at least by a liberal interpretation of this requirement. Thus, it has been held that the ‘period by law for the commencemеnt of the action’ includes a reasonable time for the service of process. Under this interpretation the amendment substituting the newly named defendant relates back to the commencement of the action, if service on the newly named defendant would have been timely had he been correctly named in the first instance.... Under the interpretations the courts have given
CR 3 , such a reasonable time can be a period of several months, if the plaintiff‘s attorney is diligent in attempting to effect proper service.”
Here the attorney was diligent. Service was effected in four days.
The stated purpose of the Civil Rules calls for their “interpretation [to] promote ends of justice,” and “to facilitate decisions on the merits, rather than determinations on technicalities.” Bertelsman and Philipps, Kentucky Practice, supra, Rule 1, pp. 3-4. No purpose is served by permitting parties with full knowledge thаt a claim has been made against them to evade answering to that claim simply because the summons was not actually served until one day after the period stated in the statute of limitations.
COMBS, J., joins this concurring opinion.
REYNOLDS, Justice, dissenting.
I respectfully dissent. The majority, with acknowledgement that numerous deci
At issue is whether thе failure of partners operating a business under an assumed name to comply with
“There is nothing inherently vicious in doing business under an assumed name. Such manner of doing business was lawful before the statute was passed.... The statute being penal in its nature and in derogation of the common law, it should not be construed so as to include within its purview cases which do not clearly come within it....
An examination of the statute discloses two very pertinent facts: (a) It expressly imposes for its nonobservance the rather light penalty of a fine between the limits of $25 and $100, or imprisonment from 10 to 30 days, or both; (b) it does not expressly impose any further penalty or consequence. This is a potent indication of a legislative purpose that the penalty expressed should be exclusive....”
The same rationale applies to this case and leads to an unalterable conclusion that failure to comply with the assumed name statute does not prohibit a person from asserting a statute of limitation defense when it is applicable.
There is no appearance, in this record, of an act or conduct which, in point of fact, has misled or deceived a plaintiff or obstructed or prevented him from instituting his suit. It appears to be of no consequence that the decision gratuitously condones a party‘s unexplainable laxity.
No one disputes that statutes of limitation may work hardships, but the services which they render as a whole outweigh the injuries inflicted upon the unwary. In all events, the broadening of exceptions to the statute is a legislative and not a judicial function since they derive their force alone from statutory enactment. See Lingar v. Harlan Fuel Co., 298 Ky. 216, 182 S.W.2d 657 (1944).
There is no conduct to bring the partner within the provisions of
A partner, in Kentucky, cannot be sued, and a partner of the appellee, Mayfair Diagnostic Laboratory, was not joined as a defendant until 16 months after the cause of action was first discovered. Under our holding in Nolph v. Scott, Ky., 725 S.W.2d 860 (1987), which cited with approval Schiavone v. Fortune, a/k/a Time, Inc., 477 U.S. 21, 106 S.Ct. 2379, 91 L.Ed.2d 18 (1986), it was said that “the linchpin is notice and notice within the limitation period, and the notice required is notice of the action or notice of the lawsuit.” The relation back provisions of