Keeney v. Keeney, 2005-CA-001834-MR.

• Decision Date: 16 March 2007
• Docket Number: No. 2005-CA-001834-MR.,No. 2005-CA-001877-MR.,2005-CA-001834-MR.,2005-CA-001877-MR.
• Citation: 223 S.W.3d 843
• Parties: Milton W. KEENEY; Ruth Keeney; Robert Wayne Keeney, Admin. of the Estate of Winfred D. Keeney; Drusilla K. Weddle; and Fontalla Keeney, Appellants/Cross-Appellees v. Barbara Joanne KEENEY, Appellee/Cross-Appellant.
• Court: Kentucky Court of Appeals

223 S.W.3d 843

Milton W. KEENEY; Ruth Keeney; Robert Wayne Keeney, Admin. of the Estate of Winfred D. Keeney; Drusilla K. Weddle; and Fontalla Keeney, Appellants/Cross-Appellees v. Barbara Joanne KEENEY, Appellee/Cross-Appellant.

No. 2005-CA-001834-MR.

No. 2005-CA-001877-MR.

Court of Appeals of Kentucky.

March 16, 2007.

Discretionary Review Denied by Supreme Court June 13, 2007.

Marcia A. Smith, Corbin, KY, for appellants/cross-appellees.

Dale B. Mitchell, Somerset, KY, for appellee/cross-appellant.

Before ACREE, and TAYLOR, Judges; KNOPF,¹ Senior Judge.

OPINION

ACREE, Judge.

This appeal from a judgment entered by the Pulaski Circuit Court began as Barbara Joanne Keeney's petition for dissolution of her marriage to Milton Keeney. Barbara amended her petition to name as additional defendants Milton's parents, Winfred (now deceased) and Ruth Keeney, and to establish her rights to 6.6629 acres near Nancy, Kentucky, titled in Winfred's and Ruth's names. The parties and trial court refer to this property as the "Nancy property" or, more frequently, the "Barlow property." Having concluded that the findings of the trial court were not clearly erroneous and that it correctly applied the law, we affirm.

Essential to Barbara's claims is the premise that Milton, aided by Winfred and Ruth, intentionally avoided direct ownership of real and/or personal property in his name. The obvious purpose was to avoid, and in fact, to defraud at least one particular creditor who was in a position to execute on any property she could have found belonging to Milton. As it happens, Milton was involved in a two-vehicle accident in the early 1970s when he was 18 years old.² The other driver, Mary Jean Smith, obtained a civil judgment (Smith judgment) against Milton. At the time of the accident, Milton lived at home with his parents, attended community college, did some work on his father's farm, but was not self-supporting. Despite the passage of more than thirty years, the Smith judgment has never been satisfied.

On June 22, 1982, a decade or so after Milton's accident, Barbara and Milton were married. Before and during their marriage, Milton was self-employed. He had begun and continued establishing a business known as K-Bar Trailer Manufacturing Company. He built cattle, horse, and flat bed trailers. Additionally, Milton started a pig farm, but that venture eventually failed.

Barbara worked with her husband on many of his K-Bar ventures. She aided in K-Bar's record keeping and also helped with the pigs at Milton's failed pig farm. The trial court found that "Barbara expended a significant amount of time in labor to upgrade and build the business known as K-Bar."

Not long after their marriage, in February of 1983, and without Barbara's knowledge, Milton and his father attended a real estate auction where they were the successful bidders to purchase the Barlow property. Their winning bid was $61,700. When deposed, neither Milton nor his father could or would testify clearly as to which of them did the actual bidding. The court noted that Milton's testimony on this point was "ambivalent."

Their testimony regarding who paid for the property was hardly less evasive. Milton testified that he went to the auctioneer's office immediately after the auction and paid the down payment for the property using monies from the K-Bar account. However, Winfred contradicted that testimony, stating nothing had been paid for the property on the day of the auction.

Very clear and uncontradicted is the trial court's finding of fact that the purchase price of $61,700 was paid directly from the K-Bar checking account, an account with Mutual Federal Savings and Loan Association (Mutual Federal) and the only checking account Barbara or Milton owned. Barbara testified and introduced into evidence two checks drawn on the K-Bar account and made payable to Samuel Ray Godby, the realtor who conducted the auction. The first check, dated February 12, 1983, was in the amount of $9,255 and contained the notation "15% on Tracts 1-2-3-4 Sam Barlow." The second check, dated March 14, 1983, in the amount of $52,445, bore the notation "Tract #1 Sam Barlow property." Both checks were signed by Milton.

Despite the fact that the funds to purchase the Barlow property came from Milton and Barbara's K-Bar checking account, the property was deeded to Winfred and Ruth. When Winfred was asked, "[H]ow did Mr. Barlow get paid for that property?" he responded, "I couldn't tell you exactly[.]" He later changed his story, however, and said the property was paid for by the rent he received from Barbara and Milton but, he added, "Barb didn't know nothing about our deal[.]"

The "deal" to which Winfred referred several times in his deposition included, according to Winfred, making arrangements with Mutual Federal "for Milt to do business and live and make a living[.]" That deal, which existed throughout Barbara's marriage to Milton, involved a series of property acquisitions, loans and mortgages designed to avoid public records that would identify Milton as a property owner.

On December 10, 1982, two months before the auction, Winfred and Ruth executed a mortgage with Mutual Federal on a different parcel of real estate (referred to in the record as the "Naomi property") to "serve as collateral for any promissory notes executed by Milton W. Keeney, not to exceed Fifty Thousand . . . Dollars[.]" Winfred indicated in his deposition that the proceeds from one or more of these promissory notes was the source of the funds deposited into the K-Bar account to pay for the Barlow property.

On March 14, 1983, the date Milton made the final payment to purchase the property, Winfred and Ruth executed a mortgage on the Barlow property in favor of Mutual Federal. The mortgage indicates it secured payment of a $52,000 note with a maturity date of six months. Because the note is not in the record, we do not know who actually signed the note and became obligated to repay the loan. Winfred did not recall signing the note and we cannot assume that he or Ruth did sign it. The record reflects that Mutual Federal, obviously aware of at least part of the "deal," had an arrangement with Milton and his parents that allowed Milton to borrow money on the strength of the security of real estate titled to his parents. Evidence of this arrangement can be found in Milton's parents' mortgage of the Naomi property for Milton's benefit in December 1982. It can also be found in a November 6, 1985, note signed only by Milton in the amount of $89,960, secured by another mortgage on the Naomi property, in the same amount, also dated November 6, 1985, executed only by Winfred and Ruth. We do know from Winfred's testimony that neither Winfred nor Ruth paid any amount toward satisfaction of any of the notes secured by these various mortgages.

As indicated, Winfred testified that the property was paid for by Milton's and Barbara's rent payments. He also testified, however, that he never personally saw any rent payments. Milton and Barbara made payment directly to Mutual Federal. More accurately then, Milton and Barbara paid off the mortgages that were used as security for the amounts Milton borrowed to pay for the Barlow property. In fact, while Winfred credited his son for paying off the mortgages with Mutual Federal, he believed "Barbara carried the money up there" to the bank.

In addition to paying off the mortgages, Barbara and Milton also made improvements to the property. Soon after the property was purchased, Barbara and Milton began remodeling the residence located there. The record reflects and the trial court found that Barbara and her family did much of the remodeling work themselves. Additionally, the trial court found that many independent contractors were paid from the K-Bar account for a variety of home improvement services they performed. When the property was adequately remodeled, Barbara and Milton moved in.

Milton never told Barbara exactly how the Barlow property was acquired. Barbara only learned of the auction when David Burnette told her that he had bid against Milton for the Barlow property and lost. The trial court quoted Barbara's testimony that "she was informed by David Burnette that Milton had bought the Barlow property at Nancy." When she confronted Milton about the purchase, he never contradicted David Burnette's characterization of the acquisition. Quite to the contrary, for thirteen years Milton spoke of the property as "theirs" and behaved in a manner that reinforced Barbara's belief that they owned the property as husband and wife. Barbara testified that Milton never told her about his parents' involvement in buying the property prior to her filing for divorce. Winfred's testimony that, "She didn't know nothing about our deal," supports Barbara's contention.

Barbara and Milton separated in January 1995. She filed for divorce on April 17, 1995. It was not until then that Milton represented to Barbara that his parents actually owned the Barlow property. On July 12, 1995, Barbara filed her first Amended Petition for Dissolution of Marriage joining Winfred and Ruth in the action. Barbara alleged that Winfred and Ruth placed the Barlow property in their names to help Milton avoid execution of the Smith judgment against any asset Milton beneficially owned. She asked that the court impress a trust upon the property for the use and benefit of herself and Milton.

In her Petition, Barbara also claimed she was entitled to one-half the proceeds from Milton's recent sale of K-Bar's inventory. On May 2, 1995, approximately two weeks after Barbara filed for divorce, Winfred wrote a check to Mutual Federal in the amount of $12,423.45. This amount satisfied one of the notes Milton had executed. Winfred indicated on the check that it was for "K-Bar Inventory." The transaction conveying the inventory from Milton to Winfred and Ruth was memorialized by a "Contract and Bill of Sale" also dated ...