EDWIN G. MIDDLETON, JR.; CHARLES G. MIDDLETON, III, AS CO-EXECUTOR OF THE ESTATE OF HUNTLEY L. MIDDLETON; AND CATHY REAGAN, AS CO-EXECUTOR OF THE ESTATE OF HUNTLEY L. MIDDLETON APPELLANTS
JAMES J. SAMPEY; NANCY LAMPTON; HARDSCUFFLE INC., AND ITS SUBSIDIARY AMERICAN LIFE AND ACCIDENT INSURANCE COMPANY OF KENTUCKY APPELLEES
FROM JEFFERSON CIRCUIT COURT HONORABLE OLU A. STEVENS, JUDGE
ACTION NO. 14-CI-006587
FOR APPELLANTS: Charles G. Middleton, III Louisville,
FOR APPELLEE Nancy Lampton: John S. Reed Michael W. Oyler
FOR APPELLEE James J. Sampey: Donald J. Kelly Michelle D.
Wyrick Louisville, Kentucky.
FOR APPELLEES Hardscuffle, Inc. and American Life and
Accident Insurance Company of Kentucky: Jessica P. Corley
Charles W. Cox Atlanta, Georgia.
BEFORE: CLAYTON, DIXON, AND D. LAMBERT, JUDGES.
G. Middleton, Jr., and the estate of Huntley L.
Middleton appeal from an order of the
Jefferson Circuit Court dismissing their claims against James
J. Sampey, Nancy Lampton, Hardscuffle, Inc., and its
subsidiary American Life and Accident Insurance Company of
Kentucky. We affirm.
and American Life are closely held family corporations.
American Life was incorporated in 1906 and engaged in the
business of writing insurance policies. In 1990, American
Life acquired Hardscuffle, which owned and operated a
313-acre farm in Oldham County, Kentucky. Lampton, the
granddaughter of American Life's founder, has been the
chairman and a director of both companies for many years.
Appellants and Lampton are first-cousins, and Appellants are
the remaindermen beneficiaries of four trusts
("Middleton Trusts") that own stock in the
companies. Sampey was a long-time
officer and director in the companies, and he was the trustee
of the Middleton Trusts from 1992-2009.
August 1999, American Life and Hardscuffle entered into a
share exchange agreement, wherein American Life would become
the wholly owned subsidiary of Hardscuffle. Appellants'
mother, Mary Jane Lampton Peabody, was a member of the
American Life board of directors, and she remained on the
board after the share exchange. A private placement
memorandum was distributed to American Life's
shareholders detailing the terms of the agreement, indicating
the board of directors supported the exchange, and advising
shareholders of their dissenters' rights. The memorandum
further advised shareholders that all stock options
previously granted to executive officers, including Lampton
and Sampey, would be converted into options for Hardscuffle
stock. In January 2000, Lampton and
Sampey executed a shareholders' voting agreement to vote
their personal shares as a block.
years after the share exchange, Appellants filed a
shareholder derivative action against Lampton and other board
members alleging mismanagement of the companies. In July
2013, the Jefferson Circuit Court dismissed the derivative
action without prejudice due to Appellants' failure to
establish they made a pre-suit demand on the board of
directors or that a demand would have been futile. In
December 2014, Appellants filed a second lawsuit asserting
direct claims against Lampton alleging she violated her
fiduciary duties as a director of the companies. Appellants
also asserted a claim against Sampey for breach of trust,
contending he failed to disclose his voting agreement with
Lampton, which was a conflict of interest and detrimental to
the Middleton Trusts.
the Appellees moved to dismiss pursuant to CR 12.02(f),
alleging Appellants' claims were time-barred, Appellants
lacked standing, and the claims were precluded by collateral
estoppel. The circuit court granted dismissal, and this
review of the court's order indicates it considered
matters outside the pleadings in reaching its decision on the
motion to dismiss. A trial court is free to consider matters
outside the pleadings; however, doing so converts the request
for dismissal into a motion for summary judgment. CR 12.02;
McCray v. City of Lake Louisvilla, 332 S.W.2d 837,
840 (Ky. 1960). Accordingly, "[t]he standard of review
on appeal of a summary judgment is whether the trial court
correctly found that there were no genuine issues as to any
material fact and that the moving party was entitled to
judgment as a matter of law." Scifres v. Kraft,
916 S.W.2d 779, 781 (Ky. App. 1996).
instances where a trial court is correct in its ruling, an
appellate court, which has de novo review on questions of
law, can affirm, even though it may cite other legal reasons
than those stated by the trial court. The trial court in that
instance reached the correct result, and thus will not be
reversed." Fischer v. Fischer, 348 S.W.3d 582,
589-90 (Ky. 2011). In the case at bar, the court's order
addressed the issues of standing and collateral ...