Opinion
2015-SC-000205-DG
08-25-2016
CLYDE HAMMOND, JR. AND TAMMY HAMMOND APPELLANTS v. MONT JACK HAMMOND; DARRELL FRALEY; AND JACQUIE FRALEY APPELLEES
COUNSEL FOR APPELLANTS: Adam Scott O'Bryan Osborne, O'Bryan & Butcher, PLLC COUNSEL FOR APPELLEES: Larry Dean Brown
IMPORTANT NOTICE NOT TO BE PUBLISHED OPINION THIS OPINION IS DESIGNATED "NOT TO BE PUBLISHED." PURSUANT TO THE RULES OF CIVIL PROCEDURE PROMULGATED BY THE SUPREME COURT, CR 76.28(4)(C), THIS OPINION IS NOT TO BE PUBLISHED AND SHALL NOT BE CITED OR USED AS BINDING PRECEDENT IN ANY OTHER CASE IN ANY COURT OF THIS STATE; HOWEVER, UNPUBLISHED KENTUCKY APPELLATE DECISIONS, RENDERED AFTER JANUARY 1, 2003, MAY BE CITED FOR CONSIDERATION BY THE COURT IF THERE IS NO PUBLISHED OPINION THAT WOULD ADEQUATELY ADDRESS THE ISSUE BEFORE THE COURT. OPINIONS CITED FOR CONSIDERATION BY THE COURT SHALL BE SET OUT AS AN UNPUBLISHED DECISION IN THE FILED DOCUMENT AND A COPY OF THE ENTIRE DECISION SHALL BE TENDERED ALONG WITH THE DOCUMENT TO THE COURT AND ALL PARTIES TO THE ACTION. NOT TO BE PUBLISHED ON REVIEW FROM COURT OF APPEALS
CASE NO. 2013-CA-000924-MR
MARTIN CIRCUIT COURT NO. 12-CI-00066
MEMORANDUM OPINION OF THE COURT
REVERSING AND REMANDING
Following a bench trial, the trial court found that the Appellees had no ownership interest in two tracts of real property located in Martin County (the property). The Court of Appeals reversed and remanded, holding that the trial court should have imposed a constructive trust in favor of Mont Jack Hammond (Jack). Clyde Hammond, Jr. (Clyde, Jr.) and his wife, Tammy Hammond (Tammy), the owners of record of the property, argue on appeal that the Court of Appeals erred because there was sufficient evidence to support the trial court's judgment. Having reviewed the record and the arguments of the parties, we reverse the Court of Appeals and reinstate the trial court's judgment.
I. BACKGROUND.
The parties agree the following transfers of the property took place as reflected by various deeds recorded in the Martin County Clerk's office: (1) on March 25, 1971, Homer and Glendine Pack conveyed the property to Mont Hammond (Mont) for $8,000; (2) on February 8, 1984, Mont and his wife, Mabel Hammond (Mabel), conveyed the property to Thomas D. Muncy, as trustee, for the purpose of providing a deed to Mont and Mabel as joint owners with the right of survivorship; (3) on February 8, 1984, Thomas D. Muncy, as trustee, conveyed the property to Mont and Mabel as joint tenants with right of survivorship; (4) on May 6, 1999, Mabel, a widow, conveyed the property to Clyde Hammond, Sr. (Clyde, Sr.), one of her sons. At that time, the parties valued the land at $50,000; and (5) on March 10, 2007, Clyde, Sr. and his wife, Earnestine Hammond, conveyed the property to their son, Clyde, Jr. At that time, the parties valued the land at $117,000.
The parties refer to this as a "straw man" transfer. No value was listed in either the deed to Muncy or the deed from Muncy to the Hammonds.
The parties also agree that Mont and Mabel executed a mortgage in the amount of $5,300 when the Packs conveyed the property to Mont in 1971. Since 1971, Jack, who is one of Mont's and Mabel's sons, has lived on a portion of the property but has paid no property taxes. Jack's daughter, Jacquie, lived on the property from 1978 to 1988. She and her husband, Darrell Farley (Darrell) moved back in with Jack in 2002 in order to care for him, and all three were living on the property at the time of trial. Mont, Mabel, Clyde, Sr., and two of Clyde, Jr.'s daughters have lived on the property, in a separate residence, at various times since 1971.
In 2012, Jack, Jacquie, and Darrell (collectively, the plaintiffs) filed suit against Clyde, Jr. and his wife, Tammy, (collectively, the defendants) seeking title to half of the property. In the alternative, the plaintiffs sought an award of the fair market value of improvements they had made to the property. The defendants filed an answer, denying the plaintiffs' allegations, and a counter-claim seeking a "Judgment of Ejection against the Plaintiff's [sic] causing their physical removal from the premises in question." We note that the defendants did not raise any affirmative defenses in their answer.
We note that the initial complaint named Clyde Jason Hammond (Jason) and his wife Ashley as defendants. The plaintiffs alleged in their initial complaint that Jason and his wife were claiming that they owned the land by virtue of an unrecorded deed from Clyde, Jr. Jason and his wife filed a motion to dismiss noting that Clyde, Jr. owned the land. Thereafter, the plaintiffs amended their complaint naming Clyde, Jr. and his wife, Tammy, as defendants.
Two weeks before trial, the defendants filed a motion to amend their answer and counter-claim. In the proffered amended answer, the defendants asserted, for the first time, that the plaintiffs' claims were barred in pertinent part by the statute of limitations. The court denied the defendants' motion; however, it did not do so until a month after the trial and approximately three weeks after it entered its judgment.
We summarize the trial testimony below.
A. Jack's Testimony.
At trial, Jack, who was difficult to understand, testified that he was living in Ohio in 1971 when he became ill. He filed for disability and returned home to Martin County so that family members could care for him. According to Jack, Mont made arrangements for them to purchase the property from the Packs with Jack providing approximately $3,000 as a down payment on the $8,000 purchase price, with the rest secured by the above referenced mortgage. Only Mont's name appeared on the deed; however, Jack believed that Mont would, at some point, convey half of the property to him. Jack testified that he made four to five monthly loan payments, stopping when Mont received a black lung award sufficient to pay off the balance. However, Jack had no receipts reflecting those monthly payments or his payment of $3,000 toward the purchase price. Furthermore, Jack was unable to produce anything in writing to support his claim that Mont intended to convey half of the property to him.
Following the purchase of the property, Jack tore down an existing "shanty" and replaced it with a house. He also put in a well and built a pump house and garage. At some point, Mont and Mabel built a house on another portion of the property. The two houses were divided by a line of trees, which Jack said marked the boundary between his part of the property and Mont's and Mabel's part.
Jack testified that he maintained the property and put in a garden. We note that the testimony regarding maintenance, like much of Jack's testimony, was somewhat confusing. At various points, Jack indicated that he was the only one who maintained the property while at other points he indicated that others may have done so as well. Furthermore, it is unclear from Jack's testimony whether he maintained both tracts or only the portion of the property he believed was his.
Finally, Jack testified that he knew Mabel had conveyed the property to Clyde, Sr. in order to protect it from any potential Medicaid lien should she need to go into a nursing home. Jack did not assert any claim to ownership to the property at that time because he believed he already owned it, regardless of what the deed said.
B. Jacquie's Testimony.
Jacquie testified that she lived with her father for the first 18 years of her life. She left in 1998, when Mabel told her to either marry Darrell, her then boyfriend, or move. In 2002, Jacquie and Darrell returned to live with and care for Jack. In 2008, Jacquie, Darrell, and Darrell's friends began making renovations to the house, replacing siding, the roof, windows, and floors. They also added an 1,100 square foot addition to the house. Jacquie did not have any documentation with her that would have shown the cost of the materials to make these renovations, but she estimated they spent $40,000. Jacquie testified that she believed Jack owned the portion of the property on his side of the tree line, and he did most of the maintenance on that part of the property.
She also testified that Tammy had told her that Clyde, Jr. and she were going to deed Jacquie and Darrell the house. However, instead of presenting Jacquie with a deed, Clyde, Jr. presented her with a lease, which she refused to sign. Jacquie noted that Jack's name was not on the lease, and she questioned why she would sign a lease with Clyde, Jr. when she believed Jack owned the property.
C. Billy Ray Hammond's (Billy Ray) Testimony.
Billy Ray - Jack's and Clyde, Sr.'s brother - testified that he believes Jack paid half of the purchase price for the property. According to Billy Ray, there was a house on the property when Mont and Jack purchased it, and Jack has added to and improved that house.
In the early 1980s, Billy Ray helped build an addition on Mont's and Mabel's house. At some point during the construction, Mont and Billy Ray "walked the property," and Mont pointed out what part of the property belonged to Jack. According to Billy Ray, the tree line was the dividing line between what Jack owned and what Mont and Mabel owned, and Jack maintained his part of the property.
Billy Ray did not know why Mabel conveyed the property to Clyde, Sr., but he testified that Clyde, Sr. spent a significant amount of time caring for Mont and Mabel.
D. Joe Hammond's (Joe) Testimony.
Joe - another of Jack's and Clyde, Sr.'s brothers - testified that, after Jack's illness, Mont and Mabel wanted him to return to Kentucky. Mont approached Homer Pack about purchasing the property and Homer agreed to sell it to Mont for $8,000. According to Joe, Mont did not have enough money to purchase the property so Jack, who had gotten a disability award, paid $4,000 toward the purchase price. Joe believes that Jack made the monthly loan payments until Mont received his black lung award.
In 1999, Mabel conveyed the property to Clyde, Sr. in order to protect it from any potential Medicaid liens. Sometime thereafter, Joe prepared paperwork so that Clyde, Sr. could re-convey the property to Mabel but Clyde, Sr. would not sign the deed. Joe testified that he did not have that paperwork with him but that he could probably get it. E. Clyde, Sr.'s Testimony.
Clyde, Sr. testified that he lived with Mont and Mabel for approximately 18 years and cared for them. According to Clyde, Sr., Mabel conveyed the property to him in 1999, saying that "the kids would be sorry" that they did not visit or care for her and Mont. He also testified that Mabel told him not to convey any of the property to Jack because, "When he drank he'd sell it to get some more booze," and that Mabel never asked him to re-convey the property to her. Mont and Mabel both told Clyde, Sr. that Jack should be permitted to live on the property until he died, and Clyde, Sr. told Jack that. Mont also told Clyde, Sr. that he had paid back the $3,000 Jack put up as a down payment on the property. Finally, Clyde, Sr. testified that he gave the property to Clyde, Jr. and his wife. F. Clyde, Jr.'s Testimony.
Clyde, Jr. testified that Mont, Mabel, and Clyde, Sr. permitted Jack to live on the property even though he had no ownership interest in it, an arrangement' Clyde, Jr. is willing to continue. According to Clyde, Jr., he had never heard Jack claim any ownership interest in the property until he received the complaint. Clyde, Jr. admitted that Jack maintained a portion of the property; however, he stated that he, Clyde, Sr., Mont, and other family members also contributed to maintaining the property. Clyde, Jr. did not pay anything for the property but has paid all of the property taxes since he acquired it.
G. Tammy's Testimony.
Tammy testified that she did not tell Jacquie that she and Clyde, Jr. were going to deed a part of the property to Jacquie and Darrell. What Tammy told Jacquie was that she was "praying on" whether to let Jacquie and Darrell stay on the property.
H. Thelma Cook's Testimony.
Finally, Thelma Cook, who knows both Tammy and Jacquie, testified that Tammy said she was going to deed the property to Jacquie and Darrell for Christmas.
I. The Trial Court's Judgment.
Based on the preceding, the trial court determined, in pertinent part, that the plaintiffs had not established "the factual elements of a constructive trust." The court also determined that the suit was time barred because the plaintiffs waited 41 years to file suit.
J. The Court of Appeals' Opinion.
The Court of Appeals reversed the trial court, finding that there was sufficient evidence to support the imposition of a constructive trust. The Court also found that, because the trial court had denied the defendants' motion to amend their answer to assert the statute of limitations as a defense, its reliance on that defense was misplaced.
II. STANDARD OF REVIEW.
The findings of fact by the trial court following a bench trial "shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." Kentucky Rule of Civil Procedure (CR) 52.01; Lawson v. Loid, 896 S.W.2d 1, 3 (Ky. 1995), as modified on denial of reh'g (May 11, 1995).
III. ANALYSIS.
Initially, we note that we agree with the Court of Appeals that the trial court erred when it based its judgment, in part, on the statute of limitations. As noted above, the trial court denied the defendants' motion to amend their answer to assert that affirmative defense, and the court should not have relied on or cited to that defense in its judgment. However, the trial court did not rely solely on the statute of limitations in finding for the defendants. Therefore, we determine whether the court's judgment was clearly erroneous in light of its other findings and without regard to the statute of limitations.
The trial court rendered its judgment on April 2, 2013. However, the court did not deny the defendants' motion to amend until April 24, 2013, more than three weeks after it issued its judgment. The timing of the judgment and the order denying the motion to amend may explain the court's recitation of the statute of limitations in its judgment. Nonetheless, because the trial court denied the motion to amend, it should not have relied on the statute of limitations in its judgment, regardless of the timing.
In addition to finding that the recorded transfers of the property took place, the trial court made the following findings of fact: there is no deed conveying the property or any portion of the property to Jack, Jacquie, or Darrell; there is a deed conveying the property to Clyde, Jr.; there is no written agreement between Mont and Jack regarding the conveyance of any part of the property; Jack made improvements on the property by either reconstructing or constructing a residence; Darrell and Jacquie made improvements to the property by remodeling and adding to the residence; there are no documents that support what Darrell, Jack, and Jacquie expended making improvements; and there are no documents to support Jack's claim that he paid a portion of the purchase price for the property. Having made those findings, the court determined that: the plaintiffs had failed to establish title by adverse possession; the doctrines of promissory estoppel, equitable estoppel, detrimental reliance, and constructive trust did not apply; and the plaintiffs failed to provide sufficient proof to establish the value of the improvements they had made.
Jack appealed to the Court of Appeals, arguing that the trial court should have imposed a constructive trust. The Court of Appeals, citing primarily to the evidence favorable to Jack's position, agreed. The issue before us is whether the Court of Appeals substituted its factual findings for those of the trial court. Having reviewed this record, it is clear to us that is precisely what the Court of Appeals did.
Jack also argued that the trial court erroneously relied on the statute of limitations in its judgment. As previously noted, we agree with the Court of Appeals's ruling on that issue. Therefore, we do not further address it. --------
The trial court and the Court of Appeals primarily relied on Kaplon v. Chase, 690 S.W.2d 761 (Ky. App. 1985) in making their determinations about whether to impose a constructive trust. That reliance is somewhat misplaced because, having found that Kaplon had waived the issue, the Court's pronouncements regarding constructive trusts were dicta. Having noted the preceding, we agree with the Court of Appeals in Kaplon that imposition of a constructive trust is an equitable remedy to provide "relief from fraud or breach of confidence." Id. at 763, citing O'Bryan v. Bickett, 419 S.W.2d 726 (Ky. 1967). We also agree that fraud "may occur in any form of unconscionable conduct; taking advantage of one's weaknesses or necessities, or in any way violating equity in good conscience." Id., citing St. Louis and S.F.R. Co. v. Spiller, 274 U.S. 304 (1927). The party asking the court to impose a constructive trust need not show actual fraud but can succeed if the court determines that "it is against equity that [the property] should be retained by him who holds it." Hull v. Simon, 278 Ky. 442, 128 S.W.2d 954 (1939).
The trial court herein found that the plaintiffs did not present sufficient proof to support the imposition of a constructive trust. In particular, the court noted that the plaintiffs had not produced: any records to support Jack's testimony that he paid $3,000 toward the purchase of the property; any written agreement between Mont and Jack providing for the transfer of the property; any documentary evidence that Jack made several mortgage payments; and no documentary evidence regarding what funds were expended to build the residence. Faced with that lack of documentation, the court implicitly, if not explicitly, did not find the plaintiffs' evidence to be sufficiently credible to meet their burden of proof.
The Court of Appeals, in reversing the trial court, cited to evidence that supported the plaintiffs' position: Jack had limited education; Jack's parents wanted him to move onto the property so they could care for him; the mortgage in the amount of $5,300 was proof of Jack's assertion that he paid at least $2,700 toward the purchase price, as was Billy Ray's testimony; and Jack had made improvements to the property. That evidence could have supported the imposition of a constructive trust and, if that was the only evidence, the trial court may have been compelled to do so.
However, there was evidence to the contrary, which supported the trial court's refusal to impose a constructive trust. Clyde, Jr. testified that Jack had never asserted an ownership interest in the property, and that Jack had never paid any property taxes. Clyde, Sr. testified that: Mont had returned the $3,000 Jack provided for the down payment; Mabel told him not to convey the property to Jack; and Mont and Mabel said that they were letting Jack live on the property and Clyde, Sr. should continue to do so. Finally, Jacquie testified that Mabel made her leave the property in 1988, evidence that Mabel had the right to control who was on the property; and that Tammy promised to deed the property to Jacquie and Darrell - additional evidence that Tammy and Clyde, Jr. owned the property.
The trial court, faced with the preceding contradictory evidence, did what it was mandated to do, it weighed that evidence and made a finding in favor of one of the parties. The Court of Appeals, on the other hand, did what it was not entitled to do. It re-weighed the evidence and determined that the trial court found in favor of the "wrong" party. We empathize with Jack and, had we been in the trial court's position might have held differently. However, there was sufficient evidence of substance to support the trial court's judgment, and the Court of Appeals impermissibly substituted its findings for the trial court's. Therefore, we reverse the Court of Appeals and remand for reinstatement of the trial court's judgment.
All sitting. All concur. COUNSEL FOR APPELLANTS: Adam Scott O'Bryan
Osborne, O'Bryan & Butcher, PLLC COUNSEL FOR APPELLEES: Larry Dean Brown