Opinion
NO. 2013-CA-000575-MR No. 2013-CA-000643-MR
11-21-2014
RICHARD GOSHORN APPELLANT/CROSS-APPELLEE v. DONNA WILSON, INDIVIDUALLY, AND AS EXECUTRIX OF THE ESTATE OF DORTHY GOSHORN, DECEASED; CAROLYN CHAFIN; AND JOHN ENOS APPELLEES/CROSS-APPELLANTS
BRIEF FOR APPELLANT/CROSS-APPELLEE: Jan Kipp Kreutzer Newport, Kentucky BRIEF FOR APPELLEES/CROSS-APPELLANTS: Patrick J. Walsh Newport, Kentucky
NOT TO BE PUBLISHED APPEAL AND CROSS-APPEAL FROM CAMPBELL CIRCUIT COURT
HONORABLE JULIE REINHARDT WARD, JUDGE
ACTION NO. 10-CI-00786
OPINION
AFFIRMING
BEFORE: CAPERTON, CLAYTON, AND NICKELL, JUDGES. CLAYTON, JUDGE: Richard Goshorn appeals from the portion of the Campbell Circuit Court's findings of fact, conclusions of law and judgment entered on March 18, 2013, that denied him an award of prejudgment and postjudgment interest on the value of a life estate received pursuant to Dorothy Goshorn's will.
Additionally, Dorothy's three children, Donna Wilson, Carolyn Chafin, and John Enos, and Donna, as executrix for Dorothy's estate, cross-appeal the portion of the trial court's judgment denying the Estate any "set-offs" for amounts it paid in maintaining the property prior to its sale and any amount Richard would have been obligated to pay for the life estate over his actuarial life expectancy.
After careful consideration, we affirm.
BACKGROUND
This appeal is the second appeal arising from a declaratory action filed by the personal representative and heirs of Dorothy against their stepfather and Dorothy's husband, Richard. Richard and Dorothy were married on June 20, 1981. It was the second marriage for both of them. Prior to the marriage, they signed a prenuptial agreement. In addition, after the marriage, Richard sold his home, and they lived together in Dorothy's home, which became the marital residence. In 2004, Dorothy constructed a will containing a clause that provided upon her death the marital residence would pass to Richard for as long he lived or chose to live in the residence.
Dorothy was diagnosed with Alzheimer's disease in 2007 and required supervision and assistance with daily living. Her care resulted in disagreements between Richard and the children. One consequence of the disagreement was that Richard felt that he had to move out of the marital residence and into a condominium.
The facts leading up to the first appeal are as follows: After Dorothy's death, Richard filed a timely renunciation of the will. Then, Donna, as executrix, and individually, along with her two siblings, filed a cross-claim against Richard, which stated that his renunciation of the will was invalid, and further, any interest he had in Dorothy's residence was extinguished and passed to the estate.
After a trial on the matter, the Campbell Circuit Court issued its findings of fact, conclusions of law, and judgment. It held that the prenuptial agreement was valid and also determined that Richard had vacated the marital residence, and therefore, his life estate was extinguished. Richard appealed the decision.
Our Court, in Goshorn v. Wilson, 372 S.W.3d 436 (Ky. App. 2012), affirmed the trial court's decision regarding the prenuptial agreement but reversed its decision regarding Richard's life estate in the marital residence. In our decision, we concluded that in accord with the will, Richard had a life estate interest in the marital residence. The case was remanded to the trial court with directions that it provide Richard the opportunity to move back into the marital residence, or if the residence had been sold, compute the actuarial value of Richard's life estate interest and award him monetary damages in that amount.
In the case at bar, a hearing was held on February 11, 2013, to decide the remaining issues. In fact, during the pendency of the appeal, the marital residence had been sold for $195,000.00. At the hearing, the parties stipulated to the following facts:
Dorothy died on February 10, 2010.Using these facts and the Kentucky Revenue Cabinet's tables for the computation of a life estate, the parties agreed that the value of Richard's life estate at the time of Dorothy's death was $47,453.64. However, the parties were not able to agree to the amount payable to Richard for the value of his life estate.
Richard was born on June 21, 1928.
Richard was 82 when Dorothy died.
Richard's life expectancy at the date of Dorothy's death was 6.0838 years.
The fair market value of the marital home at the time of Dorothy's death was $195,000.00.
Richard argued that prejudgment and postjudgment interest should be paid to him increasing the value of the life estate to $66,648.95. Dorothy's children contended that Richard should have to reimburse the Estate for the amount it paid for taxes, repairs, and insurance on the home during its control of the property. Besides this amount, they also maintained that Richard should have to pay anticipated taxes and insurance on the house for the time period of his calculated life expectancy, that is, approximately six years.
On March 8, 2013, the trial court entered its findings of fact, conclusions of law, and order. The trial court concluded that the Estate was not entitled to any set-offs from the value of the life estate. The trial court held that Richard was not entitled to prejudgment interest since the parties had not agreed to the life estate's monetary value, and therefore, the claim was unliquidated, and ineligible for prejudgment interest. Further, the trial court determined that since no judgment had been entered until the hearing to value the life estate, Richard was not entitled to postjudgment interest under Kentucky Revised Statutes (KRS) 360.040. Thus, the trial court held that neither side prevailed on these issues and ordered the Estate to pay Richard $47,453.64. Richard now appeals from this decision, and Dorothy's children cross-appeal.
On appeal, Richard maintains that he is entitled to both prejudgment and postjudgment interest on the life estate. On cross-appeal, the Estate and Dorothy's three children claim that the Estate is entitled to a set-off against the value of Richard's life estate for the expenses that he would have been obligated to pay if had lived on the premises for his six years of life expectancy.
STANDARD OF REVIEW
The appellate standard of review in cases tried before a court without a jury is well established. "Findings of fact shall not be set aside unless clearly erroneous[.]" Kentucky Rules of Civil Procedure (CR) 52.01. Factual findings are not considered clearly erroneous if they are "supported by substantial evidence." Gosney v. Glenn, 163 S.W.3d 894, 898 (Ky. App. 2005)(citations omitted). Appellate review of legal determinations and conclusions from the bench are reviewed de novo. Id.
With these standards in mind, we examine the issues.
ANALYSIS
The two issues before us are whether Richard is entitled to prejudgment and/or postjudgment interest on the present value of his life estate and whether the Estate is entitled to a set-off against the value of Richard's life estate for real estate taxes, insurance premiums, and maintenance expenses that he would have been obligated to pay if he had lived on the premises for the approximate six-year life expectancy.
Prejudgment and Postjudgment Interest
Richard notes that his interest in the marital residence vested when Dorothy's will was probated. Goshorn, 372 S.W.3d at 440. He maintains that once it vested, he was entitled, pursuant to KRS 360.040, to prejudgment interest on the present value of the life estate. Consequently, he opines that prejudgment interest should be paid to him from the date of Dorothy's death to present time.
First, the statutory guideline in KRS 360.040 requires that a claim for unliquidated damages be reduced to a judgment before prejudgment interest may accrue. In the case at bar, no judgment had been entered which established the amount of damages until the decision under appeal, the trial court's March 8, 2013 judgment. Even the Court of Appeals' decision did not set an amount of damages but only directed that Richard be given access to the marital residence or, if not possible, that he be awarded the present value of the marital estate.
Moreover, to receive prejudgment interest, the debt must have been liquidated. Here, the amount was inchoate. Kentucky law defines a liquidated debt, for purposes of prejudgment interest, as the amount agreed to by the parties or fixed by operation of law. Nucor Corp. v. General Elec. Co., 812 S.W.2d 136, 141 (Ky. 1991). Since no judgment or liquidated debt existed prior to the current trial court's decision, we concur with its conclusion that Richard is not entitled to prejudgment interest.
Richard also claims that this case is similar to cases were judgments are rendered, property of the losing party is sold to satisfy the judgment, and the judgment is subsequently reversed. Under this analogy, Richard contends that to restore him to the position he would have had if he had not been deprived by an erroneous judgment requires that, pursuant to Hayes v. Griffith, 9 Ky.L.Rptr. 65, 85 Ky. 375, 3 S.W. 431 (Ky. App. 1887), he is entitled to the value of the property as determined by its sale price, the rental price up to the date of sale, and interest following the sale of the property. We disagree, and believe that the proper method of valuation for the present value of Richard's life estate was correctly enunciated in Goshorn.
Lastly, Richard asserts that the Court of Appeals' opinion was a final judgment, and as such, he was entitled to postjudgment interest from that point forward. Nonetheless, Richard's argument does not address the legal requirement that for interest to be paid, the court must establish a liquidated debt. The Court did not value Richard's life estate, but rather, following the guidance of the Goshorn Court, the parties agreed to a value for the life estate, $47, 453.64, and the trial court ordered that the Estate pay Richard this amount.
In sum, we hold that the trial court correctly determined that Richard was not entitled to either prejudgment or postjudgment interest. When our Court decided that Richard was entitled to a life estate in the marital residence, no enforceable liquidated amount existed upon which interest could have accrued. Here, no valid liquidated claim established by a judgment existed until the trial court set the value of the life estate at $47,453.64.
Set-off of expenses
On cross-appeal, Donna argues that under Kentucky law a life tenant is obligated to pay real estate taxes, insurance, and maintenance associated with a property for which he holds a life tenancy. Adams v. Adams, 371 S.W.2d 637 (Ky. 1963).
Relying on the trial court's findings and the parties' agreement at the February 11, 2013 hearing, the Estate provides the following expenses for the life estate:
| Real Estate Taxes (2010 - 2015) | $20,355.41 |
| Homeowners' Insurance (2010 - 2015) | 3,918.00 |
| Maintenance & repair | 1,324.00 |
| Utility expenses | 1,916.83 |
| Total | $27,514.24 |
According to the Estate's reasoning, $27,514.24 should be deducted from the $47,453.64 life estate value, and it should pay Richard $19,939.40 for the present value of the life estate.
The facts in this case, however, are distinguishable from Adams since Richard never had possession of the marital residence, and hence, was never a life tenant. Our Court's recognition of Richard's right to a life estate and restoration of it to him merely gave him the expectancy of the life tenancy but not the responsibilities of a life tenant. Therefore, Richard is not responsible for any expenses during the time period that his life estate was denied to him since he did not have the privilege of possession.
The Estate's contention that our Court meant to restore Richard to the position he would have been under Dorothy's will is accurate to a point. If the marital residence had not been sold, Richard could have been restored to the position that he had under the will, albeit not with the time for which he was denied possession. In the case at hand, however, Richard could not be restored to his rights under the will since the property had been sold. This rationale underpins our Court's additional instruction that if the residence had already been sold, then Richard was to be compensated by the value of the life estate.
Further, the Estate maintains that Richard should be responsible for all expenses over a period of six years based on his life expectancy at the time of Dorothy's death. Again, notably, Richard never had the use of the life estate since initially he was denied possession and eventually the Estate sold the property. The only valid use for the "six-year" life expectancy figure was to determine the value of the life estate. Without the sale of the property, the six-year life expectancy factor has no meaning or relevance.
Richard, if he chose, would have been able to live in the marital residence for the entire length of his life. Actuarially, his life expectancy is six years, but his actual life span is unknown. In essence, the six-year life expectancy is only meaningful in terms of ascertaining a present value for the life estate. Thus, the six-year expectancy is only relevant to establish the value of the life estate - it has no relevance to establishing any expenses for non-use of the life estate.
Clearly, if Richard had been able to live in the marital residence, he would have been responsible for the aforementioned expenses. But Richard never had the benefit of the marital residence after Dorothy's death. Rather, the Estate controlled it and ultimately sold it. Because the Estate had the privilege of ownership during the pendency of this action, the trial court appropriately decided that it was responsible for the expenses incurred during this time period.
Moreover, the "six-year" life expectancy figure is only relevant for the establishment of the life estate's value. It is meaningless for the establishment of expenses for an uncertain period of life tenancy. Nor does the Estate provide any statutory or case law to support its position. Hence, we conclude that the trial court appropriately denied the motion for a set-off for these expenses against the present value of Richard's life estate.
CONCLUSION
The decision of the Campbell Circuit Court is affirmed.
ALL CONCUR. BRIEF FOR APPELLANT/CROSS-APPELLEE: Jan Kipp Kreutzer
Newport, Kentucky
BRIEF FOR APPELLEES/CROSS-APPELLANTS: Patrick J. Walsh
Newport, Kentucky