Boug, LLC v. Shenandoah Holdings, LLC

Court of Appeals of Kentucky·Decided February 28, 2025·No. 2024-CA-0285·Published

Opinion

RENDERED: FEBRUARY 28, 2025; 10:00 A.M.

TO BE PUBLISHED

Commonwealth of Kentucky

Court of Appeals

NO. 2023-CA-1473-MR

BOUG, LLC APPELLANT

APPEAL FROM PULASKI CIRCUIT COURT v. HONORABLE TERESA WHITAKER, JUDGE ACTION NO. 21-CI-00718

SHENANDOAH HOLDINGS, LLC AND A.D. VENTURES, LLC APPELLEES

AND NO. 2024-CA-0285-MR

BOUG, LLC APPELLANT

APPEAL FROM PULASKI CIRCUIT COURT v. HONORABLE TERESA WHITAKER, JUDGE ACTION NO. 21-CI-00718

SHENANDOAH HOLDINGS, LLC AND A.D. VENTURES, LLC APPELLEES

OPINION

AFFIRMING

** ** ** ** **

BEFORE: EASTON, ECKERLE, AND KAREM, JUDGES. EASTON, JUDGE: These two appeals stem from an action to sell1 jointly owned property. The property was sold by judicial sale. By Counterclaim and Crossclaim, one of the property owners claimed a breach of fiduciary duty by her co-owners, her brother and sister. The circuit court dismissed these claims by summary judgment and distributed the proceeds denying any stay by the posting of a supersedeas bond. The summary judgment (No. 2023-CA-1473-MR) and the refusal of a supersedeas bond (No. 2024-CA-0285-MR) are the subject of these appeals. We affirm.

FACTUAL AND PROCEDURAL HISTORY Dr. James Crase practiced medicine for many years. Toward the end of his career, his office was in the Somerset Medical Center (the “SMC Building”), a commercial building where he and other doctors practiced. An opportunity arose to purchase this building, and Dr. Crase wanted to buy it in such a way as to eventually have the title held jointly by a trust in which he and his wife had an

1 Kentucky Revised Statutes (“KRS”) 389A.030. Because the property involved was a commercial building and lot, no one claimed that the property could be physically partitioned without substantial reduction in its value.

interest and also in the name of his three children: Katherine or “Kit,” Karl, and Kim. This was accomplished through a series of transactions.

For this purpose, the children set up Limited Liability Companies or “LLCs.” Each child had a separate, essentially one-asset LLC, owned solely by the respective child. Kit owns BOUG, LLC. Kim owns Shenandoah Holdings, LLC, and Karl owns A.D. Ventures, LLC. We will use the first names of the children in our discussion of this case, as this will make the discussion easier to follow and because the actions complained of are really those of individuals rather than their LLCs, although we recognize the separate legal nature of the LLCs.

Dr. Crase’s wife, Janice Y. Crase, died first followed by Dr. Crase.

As a result, the three children’s LLCs became tenants in common with three equal shares to the property. The children first attempted to lease the SMC Building to commercial tenants. The local rental market changed, and tenants were hard to procure to the point that the SMC Building would become essentially vacant. The children decided to look into selling the SMC Building. Of course, as tenants in common, they would divide the proceeds of any private sale evenly.

The children were not successful in reaching any final agreement to sell the SMC Building. Kim no longer wanted to be a part owner of the SMC Building. She filed the action for sale in circuit court naming her siblings’ LLCs as necessary parties. Kit filed a Counterclaim and Crossclaim against her siblings’

LLCs claiming breach of a fiduciary duty arising from their joint tenancy and specifically based on a refusal to proceed with a prior private offer to buy the SMC Building.

Kim initially moved to dismiss Kit’s Counterclaim under CR2 12.02.

The circuit court denied Kim’s motion to dismiss, and the parties proceeded with discovery. Pursuant to the circuit court’s Summary Judgment and Order of Sale entered in September 2022, the SMC Building was ordered to be sold by the Master Commissioner. The SMC Building was sold by the Master Commissioner in February 2023, and the $700,000 sale proceeds were held in the Master Commissioner’s escrow account.

Kim filed a Motion for Summary Judgment on Kit’s Counterclaim.

Kit responded claiming an issue of material fact existed as to whether Kim and Karl secretly collaborated to attempt to exclude Kit from a profitable transaction involving the SMC Building. Kit also felt that her siblings should have proceeded with a contingent offer Kit had procured.

Kit filed an Affidavit of Ken Ford (“Ford”), who is a local real estate agent. Ford stated that Kit had obtained an offer from investors interested in purchasing the property in the amount of $2,000,000. Kit believes Kim’s rejection of this offer was evidence of the alleged conspiracy between Kim and Karl.

2 Kentucky Rules of Civil Procedure.

The circuit court issued its Summary Judgment Dismissing Kit’s Counterclaim in May 2023. The circuit court held that Kit failed to identify “affirmative evidence in the record of the formation of a fiduciary relationship between” Kit and Kim obligating Kim to act for Kit’s benefit. In December 2023, the circuit court entered its Summary Judgment Dismissing Kit’s Crossclaim against Karl for the same reasons. The circuit court denied Kit’s Motion for Reconsideration of the prior summary judgment in favor of Kim at the same time. Kit filed her timely Notice of Appeal of these summary judgment decisions.

Also in late 2023, Kim and Karl moved the circuit court to enter a final order and distribute the funds held by the Master Commissioner. In response, Kit filed a Motion to Stay Distribution and Notice of Intent to Give Supersedeas Bond. Kit objected to the disbursement of the proceeds from the sale of the SMC Building. She wanted the proceeds belonging to her siblings held to make sure that funds would be available to pay damages if she were to be ultimately successful on her breach of fiduciary duty claims. At that point, the circuit court still had to determine the exact amount held by the Master Commissioner as well as a claim for attorney’s fees and costs of the sale. The circuit court found Kit’s motion to be premature and declined to rule on it at that time.

In a February 6, 2024, Amended Order of Distribution, the circuit court ordered distribution of the sale proceeds and calculated the final allocation of

funds to the parties in the following shares: $257,084.68 to Kim; $219,923.33 to Kit; and $219,923.33 to Karl. The difference in the amounts is due to a permissible award of attorney’s fees and costs, which is not an issue on appeal. This Order was made “final, appealable, and subject to any post-judgment motions filed by the parties to the above action.” But the Order also stated: “Any party who has an objection to this Order may file an exception with the Court (and send a copy of the objection to the Pulaski County Master Commissioner) within ten (10) days of the entry of this Order. Absent a timely filed post-judgment motion or objection, the Master Commissioner shall distribute the funds accordingly.”

On February 12, Kit submitted a Notice of Filing of Bond, attaching a completed AOC3-155 form application for a supersedeas bond, as well as a surety bond in the amount of $34,509.19. On February 13, Kit filed a Motion to Stay Distribution, Approval of Bond, and Exceptions to the [Circuit] Court’s Amended Order requesting the circuit court to approve the supersedeas bond and to approve a stay of the distribution of the funds under RAP4 63. Kim and Karl argued in part that Kit could not request a stay under RAP 63 because an actual Notice of Appeal regarding the circuit court’s Amended Order of Distribution had not been filed.

3 Kentucky Administrative Office of the Courts.

4 Kentucky Rules of Appellate Procedure.

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