Howell v. Herald

• Court: Supreme Court of Kentucky
• Writing for the Court: Lambert
• Citation: Howell v. Herald, 197 S.W.3d 505 (Ky. 2006)
• Decision Date: 23 February 2006
• Docket Number: No. 2003-SC-000476-DG.,2003-SC-000476-DG.
• Parties: Louise HOWELL, Appellant, v. Darrell A. HERALD, Executor of the Estate of John R. Turner, Appellee.

197 S.W.3d 505

Louise HOWELL, Appellant, v. Darrell A. HERALD, Executor of the Estate of John R. Turner, Appellee.

No. 2003-SC-000476-DG.

Supreme Court of Kentucky.

February 23, 2006.

As Modified February 24, 2006.

As Modified on Denial of Rehearing

August 24, 2006.

Kif Harward Skidmore, David T. Royse, Stoll, Keenon & Park, LLP, Lexington, Richard E. Fitzpatrick, Fitzpatrick, Osborne, Heaberlin, and Osborne, Prestonsburg, Robert F. Houlihan, Jr., Savage, Elliott, Houlihan, Moore, Mullins & Erdmann, LLP, Lexington, Counsel for Appellant.

Richard C. Ward, Debra H. Dawahare, Mickey T. Webster, Karen J. Greenwell, La Toi Lampkin Mayo, Wyatt, Tarrant & Combs, LLP, Lexington, Counsel for Appellee.

LAMBERT, Chief Justice.

This cause comes before the Court for review of the opinion of the Court of Appeals wherein it adopted, verbatim, the Opinion and Judgment of the Trial Court granting summary judgment to Appellee. We granted discretionary review, oral argument was heard, and for the reasons herein stated, reverse the decision of the Court of Appeals.

John Raymond Turner died in 1998, leaving most of his estate, valued at approximately fifteen million dollars ($15,000,000), to a foundation created in his will. The estate consisted of, among other things, real property in several Kentucky counties and in Florida. In 1996, Turner contemplated transferring some of his real property to his niece, Appellant, Louise Howell (Howell). Turner spoke with George Fletcher (Fletcher), his attorney, about executing deeds and putting them in a lockbox, so that Howell would not know about the deeds until after Turner's death. However, Turner did not authorize preparation of the deeds because he was advised that executing the deeds would be a taxable transfer of ownership and he did not want to pay gift tax. Additionally, Turner wanted to retain control over the property as long as he lived. Attorney Fletcher suggested that a way around this would be to either add a codicil to Turner's will, or to prepare and execute deeds to the property by means of a power of attorney, waiting until close to Turner's death for the actual execution. Turner opted to use the power of attorney means and decided to wait until he was closer to death to proceed with gifting the property to Howell.

Approximately two years later Turner was diagnosed with terminal cancer. On March 4, 1998, while in the hospital and literally on his deathbed, Turner received a visit from Fletcher. Fletcher brought the power of attorney for Turner to sign, which he did, making Fletcher his attorney-in-fact. At that time Turner requested that Fletcher prepare deeds to Howell for certain properties. On March 6, 1998, Fletcher, as Turner's attorney-in-fact, prepared and executed the deeds. By their terms, the deeds conveyed the property to Howell, but retained a life estate in Turner. Fletcher retained possession of the deeds. Turner died two days later on March 8, 1998. After Turner's death, Fletcher contacted Howell so that she could arrange to sign the certificates of consideration on the deeds, thereby making them suitable for recordation. Until contacted by Fletcher after Turner's death, Howell did not have any knowledge of the existence of the deeds.

The executor of Turner's estate¹ offered to purchase some of the property allegedly gifted to Howell. After the offer was rejected, the executor brought suit claiming that the transfers had been procured by fraud. After two years of litigation that suit was settled. Six months later, the executor filed the current suit claiming that the transfer was legally insufficient because Turner did not deliver the deeds to Howell while he was alive. As such, the executor contends that the property should have been included in Turner's estate upon his death. The circuit court held for the executor based upon a failure of delivery of the deeds, and the Court of Appeals affirmed, adopting the circuit court's opinion as its own.

As the purported gift of real property to Howell was inter vivos, Turner's will having contrary provisions, we will first address the requirements of a valid gift, for unless the elements are satisfied, there is no need to consider any other elements that may be peculiar to real property. An inter vivos gift is a "voluntary transfer of property by one living person to another living person, without any valuable consideration, which is perfected and becomes absolute during the lifetime of the parties."² In Gernert v. Liberty Nat. Bank & Trust Co. of Louisville³ we enunciated the elements of a valid inter vivos gift as follows: "(a) [t]hat there must be a competent donor; (b) an intention on his part to make the gift; (c) a donee capable to take it; (d) the gift must be complete, with nothing left undone; (e) the property must be delivered and go into effect at once, and (f) the gift must be irrevocable."⁴ If any of the elements of the gift are absent or incomplete, then the gift will fail. Furthermore, "since gifts of this character [intervivos] [sic] furnish a ready means for the perpetration of fraud, the evidence necessary to establish all of the essentials to complete them must be clear and convincing."⁵ The elements necessary for a valid inter vivos gift apply equally to gifts of personal property and real property.⁶

In the case at bar, elements (a), (b), and (c) have been fulfilled. There was deposition testimony by Turner's secretary of more than 20 years that Turner was of sound mind when he executed the power of attorney. Additionally, Fletcher attested to Turner's mental well being during the execution of the power of attorney, and there was no evidence that he was not competent. Howell was a natural object of Turner's affection, and there was ample evidence to establish that it was his wish to provide these gifts to her. Furthermore, Howell was alive and well, and fully capable of taking the gifts. With respect to element (b), the donor's intention, it is apparent from the record that Turner cared deeply for his niece, and the testimony of several witnesses buttressed this fact. Furthermore, the uncontroverted facts show that Turner sought counsel to facilitate making his wish of gifting this property to Howell a reality. The process may have been beset with legal complications, but we have no difficulty concluding that Turner's intention was clear.

Now we turn to the more difficult and interesting issue in this appeal. Throughout this litigation the effectiveness of the delivery of the gift has been contested vociferously by the parties. In another context, it might be necessary to separately analyze the Gernert elements supra, (d), (e), and (f), but under the facts presented here, completeness, delivery, and irrevocability are so interwoven that separate treatment of each would be repetitive. As such, whether there was the required delivery will be treated as exemplary of the three contested elements and dispositive of the case.

For a gift to be delivered, it must be shown that the owner parted with dominion and control over the gift.⁷ Delivery is defined in Black's Law Dictionary⁸ as "the formal act of transferring or conveying something, such as a deed; the giving or yielding possession or control of something to another." While actual delivery of the gift is preferred, constructive or symbolic delivery may be adequate depending on the facts of the case.⁹ The distinction between symbolic and constructive delivery is occasionally misunderstood. A clear explanation is as follows:

A delivery is symbolic, when instead of the thing itself, some other object is handed over in its name and stead. A delivery is constructive, when in place of actual manual transfer the donor delivers to the donee the means of obtaining possession and control of the subject matter, or in some other manner relinquishes to the donee power and dominion over it.¹⁰

Our case law has long recognized constructive delivery as a means of gifting. ¹¹ In Kirby v. Hulette¹² we recognized that, "it is not essential that there must be an actual manual delivery of the deed to the grantee."¹³ The case at bar deals with constructive delivery (no actual physical delivery to Howell), and symbolic delivery (using a deed as the means of conveyance). This opinion will focus on the lack of actual physical delivery, and whether the facts of this case permit a finding of constructive delivery.

The deed itself has not been questioned, nor has the procedure of using a deed to gift real property been called into doubt. Symbolic delivery therefore does not warrant a discussion, as it is uncontested that a deed is a proper means of conveying real property.

Howell asserts that the intention of the grantor to presently transfer ownership is the controlling factor in determining whether constructive delivery has occurred. To this end, she cites several Kentucky cases dealing with the inter vivos delivery of gifts. We agree with Appellant that when a gift is constructively delivered, the intent of the grantor to part with dominion and control is the ultimate factor in determining whether the gift was complete. This position is well articulated in the following quotation from Tiffany on real property.

Accordingly, it is generally agreed that delivery does not necessarily involve any manual transfer of the instrument, and provided an intention is indicated that the deed shall take effect, the fact that the grantor retains possession of the instrument is immaterial.

....

Generally speaking, then, it may be said that a valid delivery of a deed requires that either the grantor part with control over the instrument, the right to recall it or alter any of its provisions, or, if the grantor retains the instrument in his possession, that he by word or deed disclose an unmistakable intention to pass presently the interest which the deed purports to convey and thus deprive himself of control over that deed.¹⁴

This position, which has been...