This appeal from a judgment entered by the Pulaski Circuit Court began as Barbara Joanne Keeneys petition

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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 [joined] * * * 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.’’ * * *

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. * * * 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. * * *

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. * * * 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. * * *

***

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.

***

The [trial] court concluded Barbara was unaware that the Barlow property was placed in the name of Winfred and Ruth. To the contrary, the court found that Barbara ‘‘was informed … that Milton had bought the Barlow property at Nancy’’ and that the property was paid for with funds from the K-Bar checking account controlled by Milton. The trial court ruled ‘‘as a matter of law that clear and convincing evidence [was] presented warranting the imposition of a constructive trust on the ‘Nancy or Barlow Property.’’’ The court also ordered the property to be sold and the proceeds divided equally between Barbara and Milton. * * *

***

In summary, the Appellants * * * assert the trial court erred because ‘‘a constructive trust must result from an act of fraud, or, in the absence of fraud, must grow out of a fiduciary relationship.’’ [Citation.] We reiterate what our predecessor court said in response to that argument.

***

The rule perhaps is best stated in [citation], wherein, after citing authorities, the Court said:

These texts and authorities state the rule to be that a constructive trust is created by equity regardless of any actual or presumed intention of the parties to create a trust where the legal title to property is obtained through fraud, misrepresentation, concealment, undue influence or taking advantage of one’s weakness or necessities, or through similar means or circumstances rendering it unconscionable for the holder of the legal title to retain the property.

When legal title to property has been acquired or held under such circumstances that the holder of that legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee. [Citation.] Constructive trusts are created by the courts ‘‘in respect of property which has been acquired by fraud, or where, though acquired originally without fraud, it is against equity that it should be retained by him who holds it.’’ [Citations.] ‘‘The fraud may occur in any form of unconscionable conduct; taking advantage of one’s weaknesses or necessities, or in any way violating equity in good conscience.’’ [Citations.] In fact, a court exercising its equitable power may impress a constructive trust upon one who obtains legal title, ‘‘not only by fraud or by violation of confidence or of fiduciary relationship, but in any other unconscientious manner, so that he cannot equitably retain the property which really belongs to another[.]’’ [Citation.]

It is true, * * * that Kentucky courts have required the party seeking the imposition of a trust to establish a ‘‘confidential relationship’’ with the party upon whom the trust is to be imposed. *** Furthermore, ‘‘[t]he tendency of the courts is to construe the term ‘confidence’ or ‘confidential relationship’ liberally in favor of the confider and against the confidant, for the purpose of raising a constructive trust on a violation or betrayal thereof.’’ [Citation.]

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A careful review of this matter indicates there is no reason to believe that the circuit court was clearly erroneous in any of its findings of fact. The collaboration of Milton and his parents to avoid execution of the Smith judgment unquestionably falls in that category of behavior described variously in our case law as ‘‘unconscientious,’’ ‘‘unconscionable,’’ and ‘‘violating equity in good conscience.’’ * * * Winfred’s and Ruth’s efforts to hide Milton’s beneficial ownership of property from Mary Smith had an obvious and even greater dispossessory effect on Barbara than it had on its target.

Even if defrauding Barbara of her beneficial interest was not Winfred’s and Ruth’s original intention, it became so when she decided to divorce their son. Their retention of the property thus deprived Barbara of her beneficial ownership of the marital residence. [Citation.]

In this case, the trial court found that Winfred and Ruth placed the Barlow property in their names to conceal the identity of the beneficial owners; that Barbara and Milton were the beneficial owners of the subject property; that Barbara and Milton paid for the property; and that Winfred (or Winfred’s estate) and Ruth would be unjustly enriched by retaining it. We cannot say that the circuit court’s creation of a constructive trust, or its finding of any of the underlying facts necessary to support it, are clearly erroneous.

***

Affirmed.

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Smith and Roberson Business Law

ISBN: 978-0538473637

15th Edition

Authors: Richard A. Mann, Barry S. Roberts

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