McDaniel v. Jones

• Decision Date: 24 March 1984
• Docket Number: No. 55569,55569
• Court: Kansas Supreme Court
• Parties: Gene A. McDANIEL and Joyce N. McDaniel Plaintiffs-Appellees/Cross-Appellants, v. Robert C. JONES and Dona Jones, Defendants-Appellants/Cross-Appellees, v. UNITED STATES of America, Intervenor-Appellee/Cross Appellant.

Page 682

679 P.2d 682

235 Kan. 93

Gene A. McDANIEL and Joyce N. McDaniel Plaintiffs-Appellees/Cross-Appellants, v. Robert C. JONES and Dona Jones, Defendants-Appellants/Cross-Appellees, v. UNITED STATES of America, Intervenor-Appellee/Cross Appellant.

No. 55569.

Supreme Court of Kansas.

March 24, 1984.

Syllabus by the Court

1. The general rule, subject to certain exceptions, is that a party to litigation who has acquiesced in the judgment of the trial court either by assuming the burden of such judgment or by accepting the benefits thereof will be deemed to have acquiesced in such judgment and may not thereafter adopt an inconsistent position and appeal from such judgment.

2. Where a judgment or decree involves distinct and severable matters, demands or issues, an acceptance of the burdens or benefits of one or more parts thereof will not prevent an appeal as to the remaining contested matters, demands or issues.

3. When a party to an appeal has paid or otherwise assumed the burden of any portion of a judgment rendered against such party including the payment of costs, such party will not be deemed to have acquiesced in the judgment so long as the issues on appeal cannot affect the payment made or burdens assumed and such payment or burden is not involved in the issues on appeal. Likewise, any party to an appeal who accepts such payment shall not be deemed to have acquiesced in the judgment so long as the issues on appeal do not affect the obligation for the payment of or the right to receive such portion of the judgment.

4. Under K.S.A. 60-224(a ) the right to intervene in an action depends on the concurrence of three factors: (1) timely application, (2) a substantial interest in the subject matter, and (3) lack of adequate representation of the intervenor's interests.

5. K.S.A. 60-224(a ) should be liberally construed in favor of intervention.

6. Actual notice of the pendency of an action is required before an interested party must take steps to intervene.

7. The interests of the existing parties and the party seeking intervention need not be wholly adverse before there is a basis for concluding that existing representation of a different interest may be inadequate.

8. Where spouses have joint federal tax liability and the federal tax assessment was made against both spouses, the homestead interest of the taxpayers cannot defeat foreclosure of the federal tax liens.

9. A district court has limited equitable discretion in determining whether the homestead interest of a nondelinquent taxpayer in jointly owned property should be foreclosed upon to satisfy the federal tax liability of a deliquent taxpayer in proceedings to force the foreclosure of the property under 26 U.S.C. § 7403 (1976). The court should consider the government's interest in prompt and certain collection of deliquent taxes and the possibility that innocent third parties will be unduly harmed by that effort.

10. In an action to quiet title to residential property, the record on appeal is examined and it is held: (1) the plaintiffs acquiesced in the judgment of the lower court by causing the property to be foreclosed and sold to satisfy their judgment, thereby losing their right to appeal; (2) the trial court did not err in holding the deed purporting to convey the property from the plaintiffs to the parents of the defendant was void; (3) intervention by the United States was proper; (4) the defendants were not deprived of their procedural due process right to present evidence of their equitable defenses to foreclosure; (5) the trial court did not abuse its discretion in refusing to bar foreclosure to satisfy federal tax liens against the defendants; (6) the trial court did not err in considering an updated statement of expenses submitted by the plaintiffs in rendering its decision; (7) the trial court erred in awarding the plaintiffs a "risk factor" judgment under the facts and circumstances presented in this case; and (8) the equitable mortgage awarded the plaintiffs for unreimbursed mortgage payments, real estate taxes and insurance premiums has priority over the federal tax liens of the United States.

Rod L. Richardson, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, Overland Park, argued the cause and was on the briefs, for defendants-appellants/cross-appellees.

Lonnie A. Hamilton, Olathe, argued the cause, and Craig W. Huntley, Olathe, was with him on the briefs, for plaintiffs-appellees/cross-appellants.

Terry L. Fredricks, of Dept. of Justice, Tax Div., Washington, D.C., argued the cause, and Jim J. Marquez, U.S. Atty., Janice M. Karlin, Asst. U.S. Atty., Topeka, and Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup and Wynette J. Hewett, of Dept. of Justice, Tax Div., Washington, D.C., were with him on the brief, for intervenor-appellee/cross-appellant.

SCHROEDER, Chief Justice:

This is an action to quiet title to residential property located in Johnson County, Kansas. The district court quieted title in the property in the name of Robert and Dona Jones (defendants), subject to existing mortgages, liens and other encumbrances on the property. These include a judgment lien in favor of Gene and Joyce McDaniel (plaintiffs) and tax liens in favor of the United States of America (intervenor). The court further ordered the property be foreclosed to satisfy these liens. Each of these parties has appealed from parts of the judgment.

The facts involved span a period of over twenty years. In 1959 the defendants purchased a home located at 8900 Delmar in Prairie Village, Kansas, for $61,000. Part of the purchase price was paid in cash and the remainder was financed through two mortgages. Beginning in 1963 the defendants began to encounter financial difficulties. They fell behind in making payments to one of the mortgagees and tax liens were filed against them by the federal government for unpaid income taxes. In August 1963 the mortgagee instituted foreclosure proceedings against the property. The property was foreclosed upon and was sold at a sheriff's sale in November 1963. The defendants were unable to obtain refinancing to redeem the property due to the outstanding tax liens and other financial problems. In early 1964 Mr. Jones sought assistance from Mr. McDaniel, his law partner, in obtaining refinancing for the property. McDaniel was aware of the defendants' financial problems and was concerned about his law partner losing his home. Jones and McDaniel entered into an oral agreement that the property would be conveyed to McDaniel to enable him to secure a loan to redeem the property. Jones and his family would continue to live in the house and pay all expenses for the property for which McDaniel would be liable as record title owner, including the mortgage, insurance and tax payments.

McDaniel subsequently obtained a mortgage on the property of approximately $40,000 from Mission State Bank. McDaniel was the sole obligor on the mortgage. The proceeds of the mortgage were used to redeem the property for the Joneses by paying off the two prior mortgages and the defendants' various tax liabilities secured by liens against the property. Jones paid the fees and costs incurred in obtaining the mortgage. The warranty deed conveying the property from the defendants to McDaniel and the mortgage held by Mission State Bank were recorded in 1964. In October of that year Mission State Bank assigned the mortgage to Prudential Insurance Company. At that time the president of the bank wrote Jones notifying him that "your loan" was sold to Prudential.

Subsequently the defendants made payments on the mortgage directly to Prudential, and maintained insurance on the property listing Prudential as the loss payee. They also paid for repairs and improvements to the house. In 1965 both McDaniel and Jones submitted financial statements to a bank in connection with attempts to obtain financing for their partnership. Jones listed the residence at 8900 Delmar as an asset with the $40,000 mortgage thereon as a liability. McDaniel did not list the property as an asset nor the mortgage as a liability.

During 1966 Prudential was required to advance funds for the payment of taxes on the property when the defendants were late in making such payments. In early 1967 Prudential declared the mortgage in default and indicated it would commence foreclosure proceedings. McDaniel and Jones attempted to reinstate the mortgage in accordance with the terms of a demand letter sent by Prudential which required payment of the amount then due and execution of an affidavit setting forth the interests of the defendants in the property. A check drawn on the trust account of the Jones and McDaniel law firm for the amount due was returned by Prudential for failure to furnish the requested affidavit. A foreclosure action was filed by Prudential against McDaniel, the defendants and the United States. (Additional tax liens had been filed against the defendants since 1964.) Subsequently, Jones forwarded an affidavit to Prudential's counsel stating "[t]hat he occupies the premises at 8900 Delmar, Prairie Village, Kansas, not under any lease agreement, purchase contract or mortgage assumption agreement, but by virtue of oral agreement between the affiant and Gene A. McDaniel, the owner of the fee interest in said property." This affidavit was rejected by Prudential. McDaniel and Jones later received a letter from Prudential setting forth five specific requirements for reinstatement, including execution of an affidavit prepared by Prudential's counsel. This affidavit states McDaniel is the fee title owner of the real estate and further reads:

"[T]hat affiant [McDaniel] does not live or reside on the real estate above described, but that Robert C. Jones and Donna Jones, his wife, are in possession thereof as month-to-month tenants of affiant as lessor; that said tenants, Robert C. Jones and Donna Jones, occupy the said real estate under an oral month-to- ...