The opinion
RENDERED: MAY 8, 2026; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2025-CA-0388-MR
SUZETTE SEWELL-SCHEUERMANN APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE BRIAN C. EDWARDS, JUDGE
ACTION NO. 13-CI-006719
MICHAEL SCALISE; AL HUBER;
ANNE BRAUN; GARY VOGEL;
JOANNE BADER; JONATHAN
LEACHMAN; JUDY SCHWENKER;
MARK STEVENS; STEVE MILLER;
AND VINCE OSBOURN APPELLEES
OPINION
AFFIRMING IN PART, REVERSING IN PART,
AND REMANDING
** ** ** ** **
BEFORE: THOMPSON, CHIEF JUDGE; L. JONES AND MCNEILL, JUDGES.
MCNEILL, JUDGE: Suzette Sewell-Scheuermann (“Sewell”) appeals from the
Jefferson Circuit Court’s determination that City of Audubon Park (“City”)
officials were not personally liable for misappropriating surplus sanitation revenue
in violation of KRS1 92.330 and KRS 92.340, and Section 180 of the Kentucky
Constitution.2 For the reasons below, we affirm in part, reverse in part, and
remand for further proceedings.
BACKGROUND
From fiscal year 2007-2008 to fiscal year 2013-2014, the City’s
mayor and city council approved annual ordinances setting a monthly assessment
for the specific purpose of paying for trash collection and recycling (“sanitation
funds”). However, the revenue produced by the assessment was substantially more
than the cost of the City’s contract for these services. The surplus was placed in
the City’s general fund and spent on other City expenses.
Sewell filed this action as a “taxpayer for the use and benefit of the
City” against Mayor Michael Scalise and City Council members Al Huber, Anne
Braun, Gary Vogel, Joanne Bader, Jonathan Leachman, Judy Schwenker, Mark
Stevens, Steve Miller, and Vince Osbourn (collectively “Defendants”). The
complaint alleged that Defendants had violated KRS 92.330 and KRS 92.340 by
spending the surplus sanitation funds on “budget items unrelated to sanitation
1
Kentucky Revised Statutes.
2
While Sewell’s complaint cites Section 180 of the Kentucky Constitution, as our Supreme
Court noted in a previous appeal, “her claim is more narrowly focused on [the] two statutes[.]”
Scalise v. Sewell-Scheuermann, 566 S.W.3d 539, 546 (Ky. 2018). Therefore, while we
acknowledge the constitutional basis for her claim, we will focus our analysis on her arguments
concerning KRS 92.330 and KRS 92.340.
-2-
services.” The circuit court dismissed the complaint, finding that the City had
suffered no damage. Our Court reversed, holding Defendants had violated the
plain language of KRS 92.330 and were therefore jointly and severally liable to the
City for the sanitation funds spent on non-sanitation expenses.
On discretionary review, the Supreme Court affirmed in part and
reversed in part, holding that while Sewell had stated a valid cause of action,
Defendants’ liability was not absolute if they could prove that the excess sanitation
funds were spent on “valid City obligations.” Scalise v. Sewell-Scheuermann, 566
S.W.3d 539, 541 (Ky. 2018). Citing City of Newport v. McLane, 256 Ky. 803, 77
S.W.2d 27, 29 (1934), City of Newport v. Rawlings, 289 Ky. 203, 158 S.W.2d 12,
14 (1941), and Daily v. Smith’s Adm’x, 297 Ky. 689, 180 S.W.2d 861 (1944), the
Court acknowledged that a judicially-created “offset defense” had developed from
this line of cases where city officials who spent money raised for one purpose on a
different purpose could be “relieved of liability to the extent that they could
establish the propriety of the other municipal expenditures.” Scalise, 566 S.W.3d
at 549. Although the Court declined to allow the judicially-created offset defense
going forward, it explained its appeal from a policy standpoint as follows:
Recognizing that a taxpayer has stated a valid cause of
action when taxes levied for one purpose have been
expended for another purpose, while continuing to
acknowledge the possibility of offset, places the burden
on those acting on behalf of a city to account for excess
funds to the satisfaction of a court. They must establish
-3-
that all of the expenditures were for valid municipal
obligations and, to the extent the expenditures were not,
they are held personally accountable. The offset defense
provides a shield of sorts from absolute liability, but it
does not relieve the challenged parties from defending
their actions in a court of law, an expensive and time-
consuming proposition. For city officials who have acted
in good faith, if erroneously, the offset defense prevents a
scenario where they personally shoulder significant
liability even though the excess funds were spent for
proper municipal obligations—such as public safety
(police) and public works (road crews)—that benefit all
taxpayers.
Scalise, 566 S.W.3d at 552. The Court remanded the case back to the circuit court
for Defendants to “establish how the excess revenue was spent so that the factual
issue of the validity of those expenditures can be determined.” Id. at 553.
After limited discovery, both parties filed cross-motions for summary
judgment. Defendants argued that Sewell’s claims were barred by qualified
official immunity and the Kentucky Claims Against Local Government Act
(“CALGA”), KRS 65.200 et seq. Alternatively, they claimed they had proven that
all excess sanitation funds were spent on valid government obligations, thus the
offset defense applied. Ultimately, the circuit court granted Defendants’ motion
and denied Sewell’s, holding that Defendants had shown that the expenditures
were made toward valid City obligations. It did not address Defendants’ immunity
claims. This appeal followed.
-4-
STANDARD OF REVIEW
“The 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) (citing CR3 56.03). “The record
must be viewed in a light most favorable to the party opposing the motion for
summary judgment and all doubts are to be resolved in his favor.” Steelvest, Inc. v.
Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). “Appellate
review of a summary judgment involves only legal questions and a determination
of whether a disputed material issue of fact exists. So we operate under a de novo
standard of review with no need to defer to the trial court’s decision.” Muncie v.
Wiesemann, 548 S.W.3d 877, 879 (Ky. 2018) (citation omitted).
ANALYSIS
On appeal, Sewell challenges the circuit court’s grant of summary
judgment based upon the offset defense. Specifically, she argues the offset defense
does not apply because Defendants (1) did not act in good faith and (2) did not
prove that the excess sanitation funds were spent on valid City obligations.
Defendants respond that they met their burden of proof for the offset defense and
reassert their immunity defenses. We will first address Defendants’ immunity
3
Kentucky Rules of Civil Procedure.
-5-
arguments, because an asserted immunity defense is a threshold question. See
Breathitt Cnty. Bd. of Educ. v. Prater, 292 S.W.3d 883, 886 (Ky. 2009) (internal
quotation marks and citation omitted) (“[I]mmunity entitles its possessor to be free
from the burdens of defending the action, not merely . . . from liability.”).
Defendants claim they are entitled to qualified official immunity as
city officials because spending decisions are discretionary and they acted in good
faith. “Qualified official immunity applies only where the act performed by the
official or employee is one that is discretionary in nature.” Haney v. Monsky, 311
S.W.3d 235, 240 (Ky. 2010), as corrected (May 7, 2010) (citation omitted).
“Discretionary acts are, generally speaking, those involving the exercise of
discretion and judgment, or personal deliberation, decision, and judgment.” Id.
(internal quotation marks and citation omitted). “On the other hand, ministerial
acts or functions—for which there are no immunity—are those that require only
obedience to the orders of others, or when the officer’s duty is absolute, certain,
and imperative, involving merely execution of a specific act arising from fixed and
designated facts.” Id. (internal quotation marks and citation omitted). A
ministerial act is one the employee must perform “without regard to his or her own
judgment or opinion concerning the propriety of the act to be performed.” Bryant
v. Louisville Metro Hous. Auth., 568 S.W.3d 839, 851 (Ky. 2019) (citation
omitted).
-6-
“[T]he question of immunity is one of law that involves no disputed
facts.” Meinhart v. Louisville Metro Government, 627 S.W.3d 824, 830 (Ky.
2021). “[E]xamining the pertinent rule, policy, or regulation governing the
challenged conduct is all that is necessary to make the characterization.” Id.
Thus, our first task is to classify Defendants’ challenged conduct as discretionary
or ministerial.
Sewell contends Defendants violated KRS 92.330 and KRS 92.340 by
spending surplus sanitation funds on non-sanitation expenses. These statutes
provide in relevant part:
All taxes and license fees levied or imposed by cities of
the home rule class shall be levied or imposed by
ordinance. The purpose for which each tax is levied or
license fee imposed shall be specified in the ordinance,
and the revenue therefrom shall be expended for no other
purpose than that for which the tax was levied or the
license fee imposed.
KRS 92.330.
If, in any city of the home rule class, any city tax revenue
is expended for a purpose other than that for which the
tax was levied or the license fee imposed, each officer,
agent or employee who, by a refusal to act, could have
prevented the expenditure, and the members of the city
legislative body who voted for the expenditure, shall be
jointly and severally liable to the city for the amount so
expended. . . . [A]ny taxpayer may prosecute such action
for the use and benefit of the city.
KRS 92.340.
-7-
Defendants’ duty under KRS 92.330 is ministerial because it involved
“merely [the] execution of a specific act arising from fixed and designated facts.”
Yanero v. Davis, 65 S.W.3d 510, 522 (Ky. 2001). The statute clearly mandates
that “revenues . . . shall be expended for no other purpose than that for which the
tax was levied[.]” Defendants are required to follow the law regardless of their
“opinion concerning the propriety of the act to be performed.” Bryant, 568 S.W.3d
at 851.
While Defendants argue they were required to make a judgment call
in a legally uncertain environment, citing our Supreme Court’s language in Scalise
that the offset defense had created a “gray area” in the law, that phrase did not
occur in the context of qualified official immunity. In fact, the “gray area” referred
to was the judicially-created offset defense itself, which the Court held had
departed from the black and white language of the statute, indicating that the
statute’s language is clear, and that Defendants’ duty was “absolute, certain, and
imperative[.]” Yanero, 65 S.W.3d at 522. Indeed, if Defendants were immune
from claims under KRS 92.330 and KRS 92.340, the statutes would be rendered
meaningless. As such, they are not entitled to qualified official immunity.
Defendants also argue they are immune from liability under CALGA.
We disagree. First, we seriously question whether CALGA applies to Defendants.
KRS 65.2001(1) states that CALGA applies to “[e]very action in tort against any
-8-
local government in this Commonwealth . . . .” (Emphasis added.)4 Here, Sewell’s
claims are against Defendants in their individual capacities. She has stated no
claim against the City. In fact, her claim is on behalf of the City.
Regardless, CALGA immunity only applies to discretionary actions.
See KRS 65.2003(3) (“Nothing contained in this subsection shall be construed to
exempt a local government from liability for negligence arising out of acts or
omissions of its employees in carrying out their ministerial duties.”). As we have
determined that Defendants’ compliance with KRS 92.330 is a ministerial action,
CALGA affords no protection.
Turning to the issues on appeal, Sewell argues that Defendants do not
qualify for the offset defense because they failed to act in good faith and spent
sanitation funds for invalid purposes. In Scalise, 566 S.W.3d 539, our Supreme
Court found that the offset defense was available to Defendants in this case if they
could “establish that the tax revenue was spent for valid City obligations.” Id. at
541. In explaining the offset defense, the Court said: “For city officials who have
acted in good faith, if erroneously, the offset defense prevents a scenario where
they personally shoulder significant liability even though the excess funds were
4
The statute defines local government as “any city incorporated under the law of this
Commonwealth, the offices and agencies thereof, any county government or fiscal court, any
special district or special taxing district created or controlled by a local government.” KRS
65.200(3). Employees, agents, or officers are not included in the definition.
-9-
spent for proper municipal obligation . . . .” Id. at 552. The circuit court construed
this language as requiring Defendants to prove two things: (1) that they acted in
good faith and (2) that the expenditures were for valid city obligations.5
Sewell first contends that Defendants did not act in good faith as a
matter of law. Noting that the Supreme Court in Scalise did not define “good
faith,” Sewell relies on definitions from Kentucky qualified official immunity
cases. In that context, “[g]ood faith has often been defined by identifying the
circumstances in which qualified immunity is not available, namely, when bad
faith is shown.” Benningfield v. Fields, 584 S.W.3d 731, 740 (Ky. 2019).
Citing Yanero, 65 S.W.3d at 523, she argues that “‘bad faith’ can be
predicated on a violation of a constitutional, statutory, or other clearly established
right[.]” However, Sewell is quick to concede that this could not be what the
Supreme Court in Scalise meant by “good faith,” as it was clearly aware that
Defendants had violated KRS 92.330 and yet ruled the offset defense was
potentially available to them. So, in a line of reasoning that is taxing to follow, she
contends that
[Scalise’s] requirement [that] the Defendants acted [sic]
in good faith to be eligible for an offset defense must
5
The Supreme Court’s only specific instruction on remand was that Defendants “must establish
how the excess revenue was spent so that the factual issue of the validity of those expenditures
can be determined.” Scalise, 566 S.W.3d at 553. However, the opinion seems to suggest that
city officials are required to act in good faith when expending excess tax revenues to qualify for
the offset defense. For purposes of appeal, we will assume that good faith is a requirement of the
offset defense, since the circuit court and both parties treated it as such.
-10-
necessarily include proof negating the Defendants’ facial
violation of the statutes. Otherwise, based on Yanero
(and similar cases), the Defendants’ bad faith in failing to
follow the statutes would have already ended their
potential offset defense.
Sewell insists that to prove good faith, Defendants must show that they “relied on
case law establishing the offset defense when they illegally taxed their citizens.”
In support of this reliance requirement, she cites Yanero and Bryant v. Pulaski
County Detention Center, 330 S.W.3d 461, 466 (Ky. 2011), as modified (Feb. 25,
2011), as well as Kentucky case law on estoppel and the prospective application of
statutes.
We disagree with Sewell’s reading of Scalise and other cited
authorities. A more reasonable way to reconcile the Supreme Court’s recognition
of the applicability of the offset defense to Defendants with a requirement of good
faith is to consider another definition of the term. “‘[G]ood faith’ most often exists
in the absence of ‘bad faith[.]’” Rowan Cnty. v. Sloas, 201 S.W.3d 469, 481 (Ky.
2006), as corrected (Sept. 26, 2006). While “‘bad faith’ can be predicated on a
violation of a constitutional, statutory, or other clearly established right[,]” Yanero,
65 S.W.3d at 523, it can also be found where “the officer or employee willfully or
maliciously intended to harm the plaintiff or acted with a corrupt motive.” Id.
(citation omitted). This understanding of bad faith seems more appropriate in the
-11-
context of Scalise. Thus, we interpret the Supreme Court’s use of “good faith” in
Scalise as meaning a lack of malice or corrupt motive.
And here, there is no evidence that Defendants acted maliciously or
with a corrupt motive in expending the excess sanitation funds. There is no
evidence that Defendants were appropriating funds for their own benefit or
personal gain. According to deposition testimony from Arthur Henson, who
audited the City’s finances, the excess sanitation funds were commingled with the
City’s general fund and spent on other City expenditures, such as the police
department, public works, administration, and debt repayment. Further, defendant
and former Mayor Michael Scalise testified that he was unaware of KRS 92.330
and KRS 92.340 and would not have spent the excess funds on non-sanitation
expenses had he known better. And while Sewell argues that genuine issues of fact
remain concerning good faith, her argument rests on her belief that good faith
requires Defendants to show they were aware of the offset defense and relied on it
in their decisions concerning the excess sanitation funds. She cites no evidence of
malice, corrupt motives, or willful intention to misuse taxpayer funds.
Sewell also contends that Defendants failed to prove that excess
sanitation funds were spent on valid city obligations. To address Sewell’s
argument, we must first consider what is meant by the term “valid city obligation.”
In Scalise, the Supreme Court held that Defendants could avoid liability via the
-12-
offset defense if they could “establish that the [sanitation] revenue was spent for
valid City obligations.” Scalise, 566 S.W.3d at 541. As examples of valid city
obligations, the court explicitly mentioned “public safety (police) and public works
(road crews)[.]” Id. at 552. It also indicated that valid city obligations are things
that “benefit all taxpayers.” Id. Conversely, an invalid expenditure causes a
financial loss to the city. See id. at 548 (quoting Daily, 180 S.W.2d at 864, which
approved the offset defense where “the city lost nothing in the transaction. Should
judgment be collected against the officials personally, the city would be ahead by
that amount. Its debts would all have been paid and the recovery would be only
profit . . . .”).
Having established what constitutes a valid city obligation, we turn to
Sewell’s argument that Defendants failed to properly account for excess sanitation
funds. The circuit court ruled that Defendants had proved that the excess
sanitation funds were spent on valid city obligations, citing the testimony of
auditor Arthur Henson, who said the funds were deposited into the City’s general
fund and spent on other City expenditures, such as the police department, public
works, administration, and debt repayment. Sewell criticizes this evidence,
arguing that Henson did not analyze each individual expense to determine its
validity and contends that Defendants bore the burden of proving every dollar of
excess sanitation revenue was spent on valid city obligations.
-13-
She cites Scalise’s directive that “[o]n remand, the Defendants must
establish how the excess revenue was spent so that the factual issue of the validity
of those expenditures can be determined[]” to argue that what constitutes a valid
city obligation is a question of fact for the jury and not proper for summary
judgment. Id. at 553. However, the opinion also states that Defendants must
“account for [the] excess funds to the satisfaction of a court.” Id. at 552. We
believe the question of whether the excess sanitation funds were spent on valid city
expenditures was a proper consideration on summary judgment.
Summary judgment is proper where “the pleadings, depositions,
answers to interrogatories, stipulations, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” CR 56.03.
Here, Arthur Henson’s deposition testimony established that the excess sanitation
funds were deposited with the City’s general fund and spent on general City
expenditures such as the police department, public works, administration, and debt
repayment. His audits did not reveal any invalid or inappropriate expenditures,
and he opined that excess sanitation funds were spent on items and services that
benefited the City’s citizens.
We find this testimony sufficient to satisfy Defendants’ burden under
Scalise to show that the excess sanitation funds were spent on valid city
-14-
obligations. Scalise explicitly mentioned public safety and public works as
examples of proper municipal obligations. There is no evidence that any of the
City’s general fund (where the excess sanitation funds were kept) was spent on
anything that did not benefit the taxpayers generally, except for one expenditure,
which we will discuss below. Further, we do not believe that Scalise requires that
Defendants account for every single dollar expended. The uncontradicted
testimony of an independent auditor is sufficient to establish that the funds were
spent on valid city obligations.
Because Defendants met their initial burden on summary judgment, it
was up to Sewell to present “at least some affirmative evidence showing that there
is a genuine issue of material fact for trial.” Steelvest, 807 S.W.2d at 482. Sewell
identifies four areas of spending that she argues violate Kentucky law and are
therefore not valid city obligations. We address each in turn.
First, she argues the City used future tax year revenue to pay current
tax year expenses in contravention of KRS 91A.030 and Section 157(b) of the
Kentucky Constitution. Sewell claims that City of Newport established that
spending future tax revenue on current city expenses is not a valid city obligation,
citing the following language:
We deem it proper to add that it will be competent
for the commissioners and their sureties to plead the facts
showing the debts and claims, to the payment of which
any portion of the $79,067.70 was applied, were such as
-15-
the departments to which same was apportioned by the
resolution had the authority to incur and to show by clear
and convincing evidence that when the sum paid thereon,
out of the $79,067.70, is added to the other debts and
liabilities paid out of the taxes levied for that year, the
aggregate did not exceed the levy and estimated taxes
thereunder for the year 1931, and to the extent that all
debts and claims so paid for the year 1931 do not exceed
the total estimated taxes for that year, they will be
entitled to offset that portion of the claims and debts paid
out of the $79,067.70 which, when so added to the other
paid claims and debts, do not in the aggregate exceed the
estimated taxes levied for the year 1931, against their
liability for the $79,067.70, but no more.
City of Newport, 77 S.W.2d at 33.
We disagree with Sewell’s reading of this quote. It states that city
officials are liable for any expenditures beyond the total estimated taxes for a fiscal
year. Here, there is no evidence that City expenditures exceeded the estimated
taxes for any given fiscal year. Therefore, to the extent that spending future tax
revenue on current expenses is improper, it is not relevant to the question of what
constitutes a valid city obligation under Scalise.
Similarly, we are unpersuaded by Sewell’s contention that failing to
deposit excess sanitation revenue into a separate sanitation fund in violation of
KRS 91A.020 constitutes an invalid city obligation. As an obvious reason,
operating on a fund basis is not an expenditure. Again, assuming this practice is
improper, it does not render otherwise valid city obligations invalid.
-16-
As a third example of invalid expenditure, Sewell cites “lavish
spending” by the City but provides no examples. “[C]onclusory allegations based
on suspicion and conjecture are not sufficient to create an issue of fact to defeat
summary judgment.” Henninger v. Brewster, 357 S.W.3d 920, 929 (Ky. App.
2012) (internal quotation marks and citations omitted). Therefore, we need not
address this argument further.
Finally, Sewell claims that retirement expenses paid under an illegal
contract are not valid city obligations. Between January 2012 and February 2014,
the City paid retirement benefits to two former employees pursuant to an
agreement. Ultimately, it was held that the contract between the City and former
employees was prohibited by KRS 65.156(6) and, therefore, void. Reesor v. City
of Audubon Park, 2015-CA-001185-MR, 2017 WL 2615871, at *7 (Ky. App. Jun.
16, 2017). Sewell contends that using excess sanitation funds to pay for invalid
retirement benefits is not a valid city obligation. We agree. Scalise suggests that
valid city obligations are those that do not result in damage to the city. See Scalise,
566 S.W.3d at 548 (quoting Rawlings, 158 S.W.2d at 15). Further, it cited
approvingly from Daily, 180 S.W.2d at 864, which implied that invalid city
obligations are those where a city suffers a loss without gaining an associated
benefit.
-17-
Paying retirement benefits under a void contract damaged the City. It
did not recoup any of the funds from the former employees, resulting in a loss.
Because the City had no obligation to pay the retirement benefits under an illegal
contract, they were not valid city expenses. However, based on the available
evidence, we cannot determine if any excess sanitation funds were used for this
purpose. Defendants had the burden of proving how the excess funds were spent.
Therefore, we find that a genuine issue of material fact remains as to whether
excess sanitation funds were used to pay invalid retirement benefits. We thus
reverse the summary judgment on this limited issue and remand for further
proceedings. To the extent Defendants can prove that no sanitation funds were
paid out as retirement benefits, they may move again for summary judgment.
CONCLUSION
Wherefore, the Jefferson Circuit Court’s judgment is reversed as to
the limited issue of whether excess sanitation funds were used to pay invalid
retirement benefits, and we remand the case for further proceedings. We affirm the
Jefferson Circuit Court’s judgment on all other issues.
ALL CONCUR.
-18-
BRIEF FOR APPELLANT: BRIEF FOR APPELLEES:
C. Dean Furman, Jr. Matthew C. Hess
Louisville, Kentucky Elizabethtown, Kentucky
-19-