Selby v. Selby

• Decision Date: 12 October 2004
• Docket Number: No. WD 63099.,WD 63099.
• Citation: 149 S.W.3d 472
• Parties: Edith Joan SELBY, Appellant, v. John Kirtly SELBY, Respondent.
• Court: Missouri Court of Appeals

149 S.W.3d 472

Edith Joan SELBY, Appellant, v. John Kirtly SELBY, Respondent.

No. WD 63099.

Missouri Court of Appeals, Western District.

October 12, 2004.

Motion for Rehearing and/or Transfer to Supreme Court Denied November 23, 2004.

Susan Ford Robertson, Columbia, MO, for Appellant.

Michael P. Riley, Jefferson City, MO, for Respondent.

Before THOMAS H. NEWTON, P.J., HAROLD L. LOWENSTEIN and RONALD R. HOLLIGER, JJ.

THOMAS H. NEWTON, Presiding Judge.

Mr. John Selby and Ms. Edith Selby filed for divorce. When the trial court characterized the parties' property, it found that a 446-acre farm belonged solely to Mr. Selby. Ms. Selby appealed, claiming that either a portion of the farm was marital property and the trial court should have used the source of funds rule to determine how much was marital property, or that the entire farm had been transmuted into marital property. We find that the trial court misapplied the law and that the evidence did not support its decision because at least a portion of the farm was marital property. We reverse and remand with directions for the trial court to determine how much of the farm is marital property.

I. FACTUAL AND PROCEDURAL BACKGROUND

Mr. and Ms. Selby were married on June 4, 1993. They separated on April 7, 2002, and Ms. Selby filed for divorce on May 7, 2002. Trial was held on March 6, 2003. Both parties came into the marriage with extensive separate property and they accumulated more property during the marriage. The only issue at trial was the division of property.

When they got married, Ms. Selby had her 401(k) and retirement plans from her prior job, a timeshare in Las Vegas, a house and a cabin — which were sold sometime around the marriage and the proceeds were used to buy a condominium in Arizona — and her furniture and a vehicle. Mr. Selby had some farmland and several businesses. He was also part of the Selby Farm Partnership, which was a partnership among him and his three siblings. The partnership bought and sold farmland. Mr. Selby had considerable debt at the time of the marriage. Ms. Selby claims that they used her 401(k) plan to obtain borrowing power; Mr. Selby claims that he was buying farms without her prior to the marriage.

Early in the marriage the parties established revocable trusts with each as the beneficiary of the other. These were created because both parties had children from prior marriages, and they wanted to provide for them after their deaths. Ms. Selby testified that she never had an understanding that the way that the property was divided between the trusts would affect the division of property if the parties were to divorce. Ms. Selby's understanding was that any joint property would be described in only one trust, generally Mr. Selby's, in order to save them money. Mr. Elton Fay (their local attorney) testified that he put Mr. Selby's property into his trust and put Ms. Selby's property into hers because both provided that whenever one of them died, the survivor got the benefit and then the principal would go to their respective children. Mr. Fay also testified that he did not know of any tax advantage that would be derived from any particular division of property between the trusts.

Duplexes and Selby Dock Service

When the parties married, Mr. Selby was operating Selby Dock Service, Inc. at the Lake of the Ozarks. At that time, Ms. Selby took early retirement and moved out to the Lake to work at her husband's business full-time. They lived on property that was owned by the Dock Service, which paid all of the expenses. Mr. Selby drew an income from the business. Ms. Selby testified that while she ran the Dock Service, Mr. Selby was able to run a boat floater business.

After the marriage, a portion of the land owned by the Dock Service was surveyed off and two duplexes were built on it. Ms. Selby suggested building the duplexes and was more involved in the building and the leasing than Mr. Selby. Ms. Selby testified that they borrowed money to finance building the duplexes. She also testified that it was her understanding that the duplexes were titled in both of their names because they borrowed money on the duplexes in both their names. Mr. Selby testified that the duplexes were always in his name and that there was never a mortgage on them. He testified that the duplexes paid for themselves.¹ Ms. Selby presented a document that purported to be a statement of loan principal and interest and testified that the parties definitely had a loan on the duplexes and that her handwritten note on the document said that the duplexes were paid in full on October 27, 1999. Mr. Selby denied that there was a loan and did not identify the document. The duplexes were in Mr. Selby's trust before they were sold. At one point the trust stated that one duplex would go to Mr. Selby's children and the other would go to Ms. Selby's children, but that had changed by the time of the dissolution. Ms. Selby's name does not appear anywhere in the chain of title. The duplexes were sold a few months before the divorce, realizing approximately $155,000 in equity. That money was being held in an escrow account pending the resolution of the divorce. Both parties claimed that they were entitled to those proceeds: Ms. Selby claimed a half interest and Mr. Selby claimed entitlement to all of the proceeds.

Subsequently, Mr. Selby sold the Dock Service to Ms. Selby's son, Scott Walker, for $126,000, which money went into the farmhouse that was built on the 446-acre farm. A portion of that purchase price came from Ms. Selby, who had given some money to each of her children, and the rest came from Mr. Walker. Ms. Selby claimed that the terms of the sale were not that favorable because there was an agreement that Mr. Walker would work at the Dock Service until Mr. Selby retired, which was over seven years, and would then eventually buy the Dock Service. Mr. Selby testified that $126,000 was not a fair price, but that there was a side deal whereby Mr. Selby would get all the proceeds from the sale of the duplexes as part of the overall sale price.

Arizona Condominium

In 1994, Ms. Selby bought a condominium in Arizona with money from the sale of her two homes. That money had been in a money market account that was in her name only. Ms. Selby testified that when she bought the first condominium she put it in both of the parties' names, even though she paid for it. She stated that Mr. Fay recommended that she switch it to just her name since it was going to her children. Then, when she sold that condominium and bought a second one with the proceeds, she put it in her name only. The condominium was in her trust. She testified that she also paid all of the maintenance fees and other costs that went into the condominium. Mr. Selby testified that some of his money went into the condominium as well. But he agreed that the condominium should go to her in the property division.

446-Acre Farm and Farmhouse

The 446-acre farm that is the main issue in this case comes primarily from Mr. Selby's family or from the partnership. Ms. Selby testified that Mr. Selby had 111 acres before the marriage. She also testified that she is willing to relinquish any claim to about 46 acres that he had before the marriage. She claims that the other 288 acres were acquired during the marriage and that she is entitled to an interest in half.

Mr. Selby bought farmland during the marriage. He testified that most of the land was bought on behalf of the partnership and that it was not in his name. He also testified that he purchased 102 acres with Ms. Selby. Some money was borrowed to make these various purchases, but it is not clear from the transcript whether money was borrowed for the partnership property or whether money was borrowed for the 102 acres that they bought together or for both. Mr. Stephen Smith, Ms. Selby's expert witness, also said that 102 acres were acquired after the marriage. All of the farm property was placed into Mr. Selby's trust. Ms. Selby testified that she transferred and surrendered her interest in the land so that it could go into the trust on the advice of Mr. Fay. She stated that she did not surrender her marital interest in the land and was not aware that she had done so.

Ms. Selby also testified that there was a debt on the properties that Mr. Selby owned and that she assisted in paying on the debt during the marriage. She testified that they paid the taxes on the total 446 acres. There is a lease on the farm and Mr. Selby testified that the lease paid for the debt on the farm. Ms. Selby testified that she had not paid anything on the farm debt in years because the lease pays the debt, but claimed that some of the debt had earlier been paid down by money from a joint account for the Dock Service. Mr. Selby testified that he paid all of the taxes and insurance on the property.

In 1998 the partnership dissolved. As part of the dissolution of the partnership, all of the property that was owned by the partnership and the siblings was redistributed between the four of them, through a Farm Exchange Agreement. Ms. Selby was involved in helping Mr. Fay with the dissolution and the agreement although the extent of her involvement was disputed at trial. Mr. Fay testified that under Missouri law, when property is taken out of a partnership, the spouses of the partners must sign a document stating that they are releasing their marital rights. He testified that Ms. Selby signed the agreement to consent to her marital interests being transferred in the exchange agreement. Ms. Selby testified that she did not understand this to mean that she had no marital interest in property that Mr. Selby acquired during marriage if their marriage was to terminate. She also testified that she signed the agreement because she felt that she was half owner of the land and that she was agreeing to an exchange of the farmland. Mr. Fay was not able to remember whether he explained to...