Digenis v. Young
| Decision Date | 04 August 2017 |
| Docket Number | NO. 2014-CA-001749-MR,NO. 2014-CA-001086-MR,NO. 2014-CA-001122-MR,NO. 2015-CA-000036-MR,2014-CA-001086-MR,2014-CA-001122-MR,2014-CA-001749-MR,2015-CA-000036-MR |
| Parties | ALEXANDER GEORGE DIGENIS APPELLANT v. JENNIFER YVONNE YOUNG (f/k/a DIGENIS); MARY JANICE LINTNER; and LYNCH, COX, GILMAN & GOODMAN, PSC APPELLEES AND JENNIFER YVONNE YOUNG (f/k/a DIGENIS) CROSS-APPELLANT v. ALEXANDER GEORGE DIGENIS CROSS-APPELLEE AND JENNIFER YVONNE YOUNG (f/k/a DIGENIS) APPELLANT v. ALEXANDER GEORGE DIGENIS APPELLEE |
| Court | Kentucky Court of Appeals |
NOT TO BE PUBLISHED
APPEAL FROM JEFFERSON CIRCUIT COURT
Three days before Alex Digenis and Jenny Young married on October 13, 2007, they executed a 65-page prenuptial agreement. Alex's net worth was several million dollars; Jenny's was a fraction of that; and the overarching purpose of their agreement was asset protection—a means of keeping their property separate. To that end, their agreement contained a broad and extensive list of assets Alex and Jenny agreed would remain separate from the marital estate, including but not limited to: (1) $184,000 of equity Alex had in his house; (2)Alex's and Jenny's respective incomes; (3) any assets Alex or Jenny purchased with their respective incomes during marriage; and (4) any appreciation of, or income generated by, their separate assets. Their agreement provided any separate property, or property purchased with separate funds, could never be considered a gift to the other spouse (irrespective of record ownership) unless "a written memorandum of the party making the lifetime gift specifically stat[ed] the intent of the party to gift separate property to the other party[.]"1 Their agreement further provided that they could only acquire jointly owned, marital property by executing an express agreement to that effect with regard to a particular asset, or through theexpenditure of funds from a designated joint bank account into which Alex and Jenny were each obligated to contribute a minimum annual sum of $30,000.
A few years later, Alex then experienced what he would come to describe as "financial Armageddon."2 Much of what happened and is continuing to happen is chronicled in a pair of cases, KMC Real Estate Investors, LLC v. RL BB Financial, LLC, 2012 WL 1980387, 868 N.E. 873 (Table) (Ind. Ct. App. 2012), and Buridi v. Leasing Group Pool II, LLC, 447 S.W.3d 157 (Ky. App. 2014). In sum, Alex was one of the approximately thirty physicians comprising the membership of "Kentuckiana Investors, LLC" (KI), an entity whose purpose it was to invest in the construction of a new medical center in Clark County, Indiana. Between May and June of 2009, Alex and his fellow KI members individually executed personal guarantees—guarantees they collectively failed to read or consult with legal counsel to understand3—and effectively agreed to become jointly and severally liable for payment (not merely collection) of the medical center's millions of dollars of mortgage and lease obligations. In late 2009, the medical center began to fail. It defaulted on the balance of its obligations in 2010, and it later filed for Chapter 11 bankruptcy protection. Its numerous creditors then looked to the individual KI members for payment.
This turn of events and the ensuing litigation prompted several of the KI members to declare bankruptcy.4 Alex, however, testified he did not want to declare bankruptcy; he was willing to "pay his share;" but, despite being jointly liable, he did not "want to have to pay everybody else's." Accordingly, Alex engaged in what he testified were "asset protection maneuvers" designed to "leverage" favorable personal settlements with KI's creditors.
To begin, Alex and Jenny had been making regular weekly payments from their joint marital account (described in their agreement) on the mortgage that existed on Alex's house for about a year after their marriage.5 Alex used his separate funds to pay off the balance of the mortgage in 2008. But, Alex took a new mortgage in December 2009, and deposited the mortgage funds into his separate JP Morgan Chase bank account. He then invested this sum—along with approximately $1.75 million of his separate funds—into an LLC he subsequently created; and he assigned his ownership interest in the LLC to a family trust he created thereafter. During a December 5, 2012 hearing before the family court, Alex explained:
Alex emphasized that the LLC and family trust were "protection vehicles" for the funds discussed above, and that he created them in the early months of 2010 when he was "in the throes of this process of being sued and being exposed to debt collection" from several of KI's creditors.
Alex also enlisted Jenny and his father, George Digenis, to participate in his asset protection maneuvers. Jenny and George each invested $10,000 in Alex's LLC. As to why, Jenny testified:
Alex was very clear when he set up that trust, he said this needs to be an unbreakable trust. It needs to be very clear that other investors like you and my dad have put your own money into this trust so, to help make it irrevocable or unbreakable, that it's not just his investment. He said so that money needs to be traceable to your income and your accounts only so that it's not, basically, him writing me a check for $10,000 and me turning around and investing it in his LLC.
What Alex ultimately came to regard as his most maneuverable asset protection vehicle, however, was his prenuptial agreement with Jenny. As discussed above, their prenuptial agreement provided in substance that Alex could place any or all of his separate property under Jenny's name; but, absent a separate written memorandum stating it was Alex's intention to make a gift of the property to Jenny, Jenny could never claim a beneficial interest in the property. Beginning in 2010, KI creditors had begun garnishing Alex's salary and attaching his separate bank accounts. Thus, Alex began using the prenuptial agreement for a different kind of asset protection—a means of using Jenny's name to keep his separate property hidden from third parties. He testified:
For example, in March 2010, Alex executed a new deed to the home in which he and Jenny resided, changing his sole ownership of the home to a joint ownership with Jenny as tenants by the entirety. As Alex understood it, the March 2010 deed was merely an "asset protection maneuver;"6 the record change of ownership did not affect his interest in the home at all; and it remained his sole property.
Alex directed Jenny to open an account at PNC Bank in the late months of 2011, in her name only. At that point in time, their joint marital account (described in their agreement) had been subjected to attachments from creditors and Alex wanted an alternative, safer location to deposit his share of separate funds for joint marital expenses. Thereafter, Alex and Jenny reduced their joint accountto a zero balance; and, between October and November of 2011, Alex regularly endorsed his paychecks for Jenny to deposit into Jenny's PNC Bank account.
Alex...
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