Curtis v. Kays

• Court: Missouri Court of Appeals
• Writing for the Court: Before CLARK, P.J., LOWENSTEIN, J. and DOWD; CLARK
• Citation: Curtis v. Kays, 670 S.W.2d 887 (Mo. App. 1984)
• Decision Date: 20 March 1984
• Docket Number: No. WD,WD
• Parties: Joyce E. (Kays) CURTIS, Appellant, v. Kenneth M. KAYS, Respondent. 33931.

Page 887

670 S.W.2d 887

Joyce E. (Kays) CURTIS, Appellant, v. Kenneth M. KAYS, Respondent.

No. WD 33931.

Missouri Court of Appeals Western District.

March 20, 1984.

Anne W. Elsberry, Hunter, Chamier, Lee, Elsberry & Brown, Moberly, for appellant.

Cynthia A. Suter, Moberly, for respondent.

Before CLARK, P.J., LOWENSTEIN, J. and DOWD, Special Judge.

CLARK, Presiding Judge.

Joyce E. (Kays) Curtis, the divorced spouse of Kenneth M. Kays, brought suit in equity to set aside a marriage dissolution separation contract on the ground of fraud perpetrated by her then husband in the procurement of the agreement. The trial court found the issues in favor of the husband and the wife appeals. Reversed.

The source of this suit is directly attributable to a marriage separation agreement which listed no values for any of the property set off to the spouses and a hearing in which the trial court approved the agreement as not unconscionable without any evidence of value and the economics of the property division. The case graphically portrays the potential for added expense and litigation when the mandate of § 452.330.1(2), RSMo 1978 is ignored by the trial court and counsel.

The petition for dissolution of the Kays' marriage was filed in May, 1978. After negotiations directly conducted by the spouses themselves and by the attorneys for each, a separation agreement was formalized August 25, 1978. In the division of marital assets, the major items set off to the wife under the agreement were the family home, household goods and an automobile. The husband received his interest in his professional corporation, Radiology, Inc., pension and profit sharing plans and an automobile. The agreement neither mentioned nor assigned any values to the assets described in the agreement.

Only the husband attended the hearing on the dissolution case at which the wife appeared by her attorney. There was no evidence presented to the court as to the value of any marital asset. By its decree, the court ordered the marriage dissolved and approved the separation agreement as not unconscionable. The decree matured to finality and the marital assets were divided in accordance with the separation agreement. Some two years after entry of the decree, the wife obtained information indicative of substantial undervaluation of assets set over to the husband under the agreement and this suit followed.

The wife's claim of fraud focuses on the values of the husband's interest in the professional corporation and the profit sharing plan associated with his participation in that business. The wife contended that the values were misrepresented to her and her attorney. The value details developed on trial of this case were factually uncontested although application of the facts to the ultimate question in the case was disputed.

The husband is a practicing physician who owned an interest in a medical corporation, Radiology, Inc. For the year 1978, he realized an income of $138,000.00 of which $120,000.00 was salary from the corporation. In addition, the corporation contributed on his behalf to pension and profit sharing plans for purposes of income tax deferral. As of June 30, 1978, the vested interest of Dr. Kays in the pension plan was $17,099.34 and the interest in the profit sharing plan was $77,162.97.

When the dissolution petition was filed, the husband was one of four doctors practicing as Radiology, Inc. Each owned an equal share in the business. Soon thereafter however, one of the physicians, Dr. Chalkley, retired and the corporation acquired his shares. On July 1, 1978, prior to the signing of the separation agreement, a successor physician, Dr. Sanders, purchased an interest in the business on an equal basis with Kays and the two other remaining doctors. The price paid by Dr. Sanders was $72,000.00 divided in payments of $24,000.00 each to Kays and the two others. After the transaction, Dr. Kays owned the same proportionate interest in the corporation as he did before the retirement of Dr. Chalkley and he had also realized $24,000.00 in cash.

In the trial of this case, the wife contended she relied on the husband's representation that for marital property division purposes, his interest in Radiology, Inc. was fairly valued at $72,000.00 and his interest in the pension and profit sharing plans was worth no more than $14,326.00. On this basis, she accepted the equity in the home, the household goods and car as reasonably equivalent values looking to an approximately equal division. Instead, she asserted that the value of Radiology, Inc. did not reveal the $24,000.00 paid to Dr. Kays by Dr. Sanders and the pension and profit sharing values were understated by at least $80,000.00. The trial court held that no misrepresentations were made, no fraud was practiced and it also found, ex gratia, that the separation agreement accomplished a fair and equitable division of marital property.

In the first and dispositive point of this appeal the wife contends the decision by the trial court is erroneous because it is not supported by substantial evidence and is against the weight of the evidence. It is, of course, axiomatic in a court tried case that the appellate court defers to the trial court's determination of credibility of witnesses and must affirm the judgment if it is supported by substantial evidence, is not against the weight of the evidence and does not erroneously declare or apply the law. Structural Systems, Inc. v. Borg-Warner Health Products, Inc., 654 S.W.2d 300 (Mo.App.1983). We look, therefore, to the findings entered by the trial court on the issues of the major asset items mentioned above.

The dispute as to the value of the husband's interest in the professional corporation centered on the retirement of Dr. Chalkley, the entry into the corporation of the new shareholder, Dr. Sanders, and the cash payment of $24,000.00 each to Kays and the two other existing shareholders. It was generally agreed by all the witnesses that Dr. Kays' one-fourth interest in Radiology, Inc. after entry of Dr. Sanders was fairly measured by the amount which Sanders had paid for a one-fourth interest, $72,000.00. That figure, however, took no account of the $24,000.00 payment to Kays. The wife thus contended the true value of her husband's interest in Radiology, Inc. was not $72,000.00, the basis used in the property division, but $96,000.00. She also asserted that the fact of the $24,000.00 payment had been concealed.

The findings by the trial court do not disagree with this analysis and confirm that the valuation of the asset for marital asset distribution calculation was accepted at $72,000.00 and the $24,000.00 payment was not taken into account. The court made no finding as to the wife's claim that she lacked knowledge of the payment at the time the property settlement was negotiated and that receipt of the funds was concealed by the husband. Instead, the trial court found, in effect, that disclosure was irrelevant because, "the $24,000.00 defendant received in the summer of 1978 as a result of Dr. Sanders buying an interest in Radiology, Inc., was received as marital income and was disbursed by defendant for benefit of plaintiff and the rest of the family, including defendant." What the judgment appears to hold is, notwithstanding the wife's ignorance of the $24,000.00 asset, she has no complaint of fraud in negotiation of the property settlement because the husband spent the money for family purposes.

The law recognizes a cause of action to set aside a property settlement agreement executed prior to and in contemplation of divorce where the claim is made that the agreement was procured through fraud. Troxell v. Troxell, 563 S.W.2d 135, 145 (Mo.App.1978). The elements of a cause of action to set aside a property settlement agreement on the grounds of fraud are the same as in any other case based on fraud: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of the falsity; (5) his intent that the statement should be acted upon by the other party in the manner contemplated; (6) that party's ignorance of the falsity; (7) reliance on the truth; (8) the right to rely thereon; and (9) injury. Alexander v. Sagehorn, 600 S.W.2d 198, 200 (Mo.App.1980).

The overwhelming weight of the evidence established that appellant wife was unaware of the $24,000.00 payment and that this value was not taken into account in the division of marital assets. The trial court implicitly so found when it justified the omission of the fund on the ground the money was spent for the family's benefit. The evidence further proved, without any substantial controversy, that the husband did not disclose the payment by Sanders, but instead, represented to the wife that the Sanders transaction did not affect the $72,000.00 valuation of his interest in the business. The husband was fully aware of the payment received by him at the time the property division was under discussion and he was also aware that the wife was relying on him and his attorney to make disclosure of the assets figuring in the property division. The elements of a fraud case, set out above, were proved by substantial, credible evidence and the trial court erred when it ruled to the contrary.

Although the judgment by the trial court contained an express finding on the issue of fraudulent misrepresentations, the judgment as to the Radiology, Inc., property interest was actually grounded on the conclusion that the $24,000.00 fund was irrelevant to marital property division because of the manner in which the money was spent. It is to be noted that the substantial portion of the fund was intact when the property division was agreed and thus, this is not a case of an asset dissipated and not accountable for division.

The legal theory purportedly underlying the decision by the trial court would hold that a claim for rescission of a contract procured by fraud may be defeated if the...