Chaney v. Armitage ( 2017 )

No. 115,9771
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
TERSA A. CHANEY,
Appellee,
v.
JEFFREY D. ARMITAGE and JERALD D. ARMITAGE, Co-Trustees of
THE DON A. ARMITAGE REVOCABLE TRUST
(In the Matter of the Estate of Don A. Armitage, Deceased),
Appellants.
SYLLABUS BY THE COURT
1.
A judgment creditor can record an unpaid judgment as a lien on the real estate of
the judgment debtor within the county in which judgment is rendered. Generally, a
judgment lien gives the judgment lien creditor a right to force the sale of the property to
collect the judgment unless the property is specifically exempted from levy, attachment,
or execution by another statutory provision. Kansas' homestead exemption, which
protects homes from forced sale, is one of those exemptions and precludes a judgment
lien from attaching to homestead property.
2.
Once it has been established that a homestead interest in property exists, there is a
presumption that the homestead continues until the contrary is shown. The burden of
proof is on the party attempting to defeat that interest to show by positive and clear
1
REPORTER'S NOTE: Previously filed as an unpublished opinion, the Supreme Court
granted a motion to publish pursuant to Rule 7.04 (2017 Kan. S. Ct. R. 45). The
published version was filed with the Clerk of the Appellate Courts on September 14,
2017.
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evidence that the homestead interest has been destroyed or abandoned. The standard of
proof to show the homestead interest is destroyed or abandoned requires a showing that
the owner has been removed from the property and has no intent to return.
3.
Property held by a self-settled, revocable trust is available to satisfy the settlor's
creditors the same as if the property was held by an individual; thus, Kansas' homestead
exemption precludes a judgment lien from attaching to homestead property held by a
self-settled, revocable trust unless the homestead interest is destroyed or abandoned.
4.
After the death of a settlor, and subject to the settlor's right to direct the source
from which liabilities will be paid, the property of a trust that was revocable at the
settlor's death is subject to claims of the settlor's creditors.
5.
A debtor's right to an exemption is a personal one which does not survive the
death of the person in whose favor it exists.
Appeal from Montgomery District Court; GARY R. HOUSE, judge. Opinion filed May 19, 2017.
Affirmed.
John R. Horst, of John R. Horst, P.A., of Caney, for appellants.
Joseph H. Cassell, of Eron Law, P.A., of Wichita, for appellee.
Before GREEN, P.J., STANDRIDGE and GARDNER, JJ.
STANDRIDGE, J.: Prior to his death, Don A. Armitage conveyed his homestead to
the Don A. Armitage Revocable Living Trust (the Trust). Armitage named his sons,
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Jeffrey D. Armitage and Jerald D. Armitage (the defendants) as the beneficiaries and
successor co-trustees of the Trust. Tersa A. Chaney later obtained a money judgment
against Armitage. After Armitage's health required him to move from his homestead to a
care facility, Chaney attempted to enforce her judgment against Armitage by filing an
application for writ of special execution against the homestead. The district court issued
the writ, directing the sheriff to levy execution on the homestead. Armitage died shortly
thereafter, leaving no spouse or children living at the homestead. The defendants moved
to set aside and vacate the writ of special execution on grounds that the homestead was
exempt from Chaney's judgment lien. The district court denied their motion, concluding
that the homestead was subject to summary execution to satisfy Chaney's judgment
because the homestead exemption expired upon Armitage's death.
FACTS
The relevant facts are undisputed. On April 22, 2010, Armitage created the Trust
for the purpose of holding certain real and personal property. Armitage signed the
instrument as both the grantor and trustee, and he named the defendants as the
beneficiaries and successor co-trustees of the Trust. The Trust provided, in relevant part,
that upon Armitage's death, the trustees "shall pay from the trust estate all of the just
debts and expenses" of the grantor and that "said trust shall terminate and all assets
remaining therein shall be paid and distributed" in equal shares to the defendants.
That same day, Armitage conveyed to the Trust by quit claim deed certain real
estate located in Montgomery County, Kansas. On October 13, 2013, Armitage filed a
Declaration of Homestead, which described this real estate as his homestead.
On April 8, 2014, the Montgomery County District Court entered a judgment in
case No. 11 CV 33I against Armitage and in favor of Chaney in the amount of
$180,372.69.
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On May 31, 2015, Armitage was required to move from his homestead to a care
facility due to his failing mental and physical health. In an attempt to enforce her
judgment against Armitage, Chaney filed an application for writ of special execution
against Armitage's homestead. On June 9, 2015, the district court issued the writ and
directed the sheriff to levy execution on the homestead.
On July 11, 2015, Armitage died. At the time of his death, Armitage was single
and no children or other family were living at the homestead. The defendants filed a
petition for probate of Armitage's will in case No. 2015 PR 25C. The will was admitted
to probate, and the defendants were appointed co-executors of Armitage's will. Chaney
filed a petition for allowance and classification of demand, seeking to obtain her
judgment from Armitage's estate. The inventory and valuation of Armitage's estate
reflected probate assets in the amount of $1,048.40. Chaney and the defendants filed a
joint motion requesting consolidation of case No. 11 CV 33I and case No. 2015 PR 25C.
The district court granted the motion and ordered that the cases be consolidated.
Pursuant to the terms of the Trust, the defendants were named the successor co-
trustees of the Trust and they were also named as substitute defendants in case No. 11 CV
33I. The defendants filed a motion to set aside and vacate the writ of special execution,
alleging that no judgment lien could ever attach to Armitage's homestead.
Following a hearing on the matter, the district court denied the defendants' motion.
Specifically, the court held that Chaney's judgment lien did not attach to the property
during Armitage's lifetime because it was protected by the homestead exemption. The
court further held that the exemption expired upon Armitage's death on July 11, 2015,
because no spouse or children resided on the property at that time. As a result, the court
concluded that all assets of the Trust, including the homestead property, were subject to
summary execution to satisfy Chaney's judgment pursuant to K.S.A. 58a-505(a)(3).
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The defendants moved to alter or amend the district court's decision. They alleged,
in part, that (1) Chaney's judgment could not attach to the homestead property upon
Armitage's death because title immediately vested in the defendants as Trust
beneficiaries, (2) making homestead property subject to creditor claims under K.S.A.
58a-505(a)(3) impairs the homestead owner's constitutional right to alienate or transfer
the homestead free of claims of general creditors, and (3) the homestead property was
still exempt because Jeffrey had occupied the property as of late August 2015 and
intended to make it his homestead.
The district court denied the defendants' motion and reaffirmed its prior holding
that Chaney's judgment lien attached to the homestead property upon Armitage's death.
Specifically, the court ruled that the property ceased to be a homestead at Armitage's
death and that the exemption had not survived because Jeffrey's occupancy was not
continuous. The district court further ruled that K.S.A. 58a-505(a)(3) did not impair
Armitage's constitutional right to alienate or transfer the homestead property free and
clear of the judgment lien that existed during his lifetime.
ANALYSIS
On appeal, the defendants argue the district court erred by denying their motion to
set aside and vacate Chaney's writ of special execution. Specifically, they allege that (1) a
creditor's judgment lien cannot ever attach to homestead property even after the death of
a homestead owner and (2) allowing a judgment lien to attach to homestead property
under K.S.A. 58a-505(a)(3) is contrary to a homestead owner's constitutional right to
alienate or transfer homestead rights free of the claims of general creditors.
Resolution of these issues involves the interpretation of the homestead provisions
contained in the Kansas Constitution and statutes. Issues involving constitutional or
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statutory interpretation are questions of law over which an appellate court has unlimited
review. Padron v. Lopez, 289 Kan. 1089, 1097, 220 P.3d 345 (2009). To the extent that
resolution of the defendants' claims involves the interpretation of trust provisions, the
interpretation and legal effect of written instruments also involve matters of law over
which we exercise independent review. Hamel v. Hamel, 296 Kan. 1060, 1068, 299 P.3d
278 (2013).
K.S.A. 60-2202(a) provides that "[a]ny judgment . . . shall be a lien on the real
estate of the judgment debtor within the county in which judgment is rendered." Chaney's
judgment was rendered in Montgomery County, where Armitage owned his homestead
property. Generally, a judgment lien will "attach" to the debtor's real estate when the
judgment is rendered, which gives the judgment lien creditor a right to force the sale of
the property to collect the judgment. See Deutsche Bank Nat'l Trust Co. v. Rooney, 39
Kan. App. 2d 913, 914, 186 P.3d 820 (2008). But Kansas' homestead exemption, which
protects homes from forced sale, precludes a judgment lien from attaching to homestead
property. See 39 Kan. App. 2d at 915 ("[L]ongstanding caselaw supports the proposition
that judgment liens do not attach to or affect homestead property.").
Kansas' homestead exemption "was established for the benefit of the family and
society 'to protect the family from destitution, and society from the danger of her citizens
becoming paupers.'" Redmond v. Kester, 284 Kan. 209, 212, 159 P.3d 1004 (2007)
(quoting Morris v. Ward, 5 Kan. 239, 244 [1869]). Article 15, § 9 of the Kansas
Constitution provides, in pertinent part:
"A homestead to the extent of one hundred and sixty acres of farming land, or of
one acre within the limits of an incorporated town or city, occupied as a residence by the
family of the owner, together with all the improvements on the same, shall be exempted
from forced sale under any process of law, and shall not be alienated without the joint
consent of husband and wife, when that relation exists."
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In addition, our legislature has enacted several statutory provisions relating to the
homestead exemption. See K.S.A. 59-401 et seq. (probate code); K.S.A. 60-2301 et seq.
(code of civil procedure). Relevant to the probate proceedings in this case, K.S.A. 59-401
states:
"A homestead to the extent of 160 acres of land lying without, or of one acre
lying within, the limits of an incorporated city, or a manufactured home or mobile home,
occupied by the decedent and family, at the time of the owner's death, as a residence, and
continued to be so occupied by the surviving spouse and children, after such death,
together with all the improvements on the same, shall be wholly exempt from distribution
under any of the laws of this state, and from the payment of the debts of the decedent, but
it shall not be exempt from sale for taxes thereon, or for the payment of obligations
contracted for the purchase thereof, or for the erection of improvements thereon, or for
the payment of any lien given thereon by the joint consent of husband and wife. The title
to the homestead property of a decedent shall pass the same as the title to other property
of the decedent."
Once it has been established that a homestead interest in property exists, there is a
presumption that the homestead continues until the contrary is shown. The burden of
proof is on the party attempting to defeat that interest to show by positive and clear
evidence that the homestead has been abandoned. Two tests must be met before a
homestead interest may be destroyed or abandoned: (1) There must be a removal from
the property and (2) there must be an intent not to return. In re Estate of Phillippe, 23
Kan. App. 2d 436, 438, 933 P.2d 151 (1997) (quoting In re Estate of Fink, 4 Kan. App.
2d 523, 527-28, 609 P.2d 211 [1980]).
The district court held that Chaney's judgment lien did not attach to Armitage's
homestead property during his lifetime because he resided there until he entered the care
facility on May 15, 2015, and always intended to return to the homestead property until
his death on July 11, 2015. The fact that Armitage had conveyed the homestead property
to the Trust did not change his ability to claim the homestead exemption while he was
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still living. Although K.S.A. 58a-505(a)(1) provides that during the lifetime of the settlor,
the property of a revocable trust is subject to the claims of the settlor's creditor, the statute
contains no language excluding the property held by the trust from the application of the
exemptions found in K.S.A. 2016 Supp. 60-2301. Therefore, the property held by a self-
settled, revocable trust is available to satisfy the settlor's creditors unless the property is
specifically exempted from levy, attachment, or execution by another statutory provision.
See Redmond, 284 Kan. at 218 (holding that debtor may claim homestead exemption in
residence which was transferred prior to bankruptcy by debtor to a revocable trust). Thus,
during Armitage's lifetime, he could claim a homestead exemption in the property
conveyed to the Trust.
But the district court held that upon Armitage's death, the property lost its
homestead exemption and was subject to execution to satisfy Chaney's judgment pursuant
to K.S.A. 58a-505(a)(3). This statute allows a creditor to reach revocable trust assets after
a settlor's death:
"After the death of a settlor, and subject to the settlor's right to direct the source
from which liabilities will be paid, the property of a trust that was revocable at the
settlor's death is subject to claims of the settlor's creditors, costs of administration of the
settlor's estate, the expenses of the settlor's funeral and disposal of remains, the
homestead, homestead allowance, the elective share rights of the surviving spouse
pursuant to K.S.A. 59-6a209, and amendments thereto, and statutory allowance to a
surviving spouse and children to the extent the settlor's probate estate is inadequate to
satisfy those claims, costs, expenses, and allowances." K.S.A. 58a-505(a)(3).
The defendants argue that K.S.A. 58a-505(a)(3) should not permit Chaney's
judgment to attach to the homestead property because the judgment was against Armitage
individually and not the Trust. The defendants claim that pursuant to the terms of the
Trust, Armitage's beneficial interest in the Trust terminated upon his death and title to the
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homestead property immediately vested in the defendants, who, as trust beneficiaries, had
contingent remainder interests in title to the homestead property.
The defendants' argument lacks merit. First, accepting the defendants' claim that
their contingent remainder interests in the homestead property automatically vested upon
Armitage's death would result in all trust assets automatically vesting in every beneficiary
of every self-settled trust in Kansas. Such a result would render K.S.A. 58a-505(a)(3)
meaningless, as no creditor would ever be entitled to payment for any claims against a
settlor. We presume the legislature does not intend to enact meaningless legislation. See
In re Marriage of Traster, 301 Kan. 88, 98, 339 P.3d 778 (2014).
Additionally, Commerce Bank, N.A. v. Bolander, 44 Kan. App. 2d 1, 239 P.3d 83(2007)—a case relied on by Chaney—is instructive. In Bolander, a bank brought an
action against a settlor's estate and revocable trust seeking the balance owed on a
promissory note the settlor executed before her death. The district court granted summary
judgment in favor of the bank and ruled that the bank could attach assets in the trust,
which included an individual retirement account (IRA), to satisfy its judgment for the
promissory note. 44 Kan. App. 2d at 4-6. On appeal, a panel of this court affirmed the
district court. The panel discussed the nature of a revocable living trust:
"A revocable living trust, such as the trust in this case, is a trust established during the
settlor's lifetime in which the settlor reserves the right to alter, amend, or revoke the trust
and may retain the right during his or her lifetime to direct the disposition of principal
and income. At the death of the settlor, the trust assets are disposed of in accordance with
the terms of the trust document." 44 Kan. App. 2d at 13.
The panel also considered the legislature's intent when it enacted K.S.A. 58a-
505(a)(3) and determined that allowing a creditor, after a settlor's death, to reach assets
that were protected by the trust during the settlor's life
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"promotes a valid public policy that a person ought not to be able to shelter his or her
assets from creditors in a discretionary trust of which he or she is the beneficiary and thus
be able to enjoy all the benefits of ownership of the property without any of the burdens."
44 Kan. App. 2d at 13.
Notably, the panel held that the statutory exemptions surrounding an IRA or its benefits
to the settlor are personal to the settlor, are not transferable, and disappear upon the death
of the settlor:
"'The right to an exemption exists solely by virtue of express constitutional or
statutory provisions. Accordingly, any determination of persons or classes of persons
who may claim exemptions in any particular state must be directed to that state's
constitution and statutes and, unless the debtor claiming an exemption is one of the
persons or classes of persons therein named, his claim cannot prevail, because a debtor's
right to an exemption is a personal one which does not survive the death of the person in
whose favor it exists.'" 44 Kan. App. 2d at 15 (quoting 31 Am. Jur. 2d, Exemptions § 238
[2002]).
In the present case, the defendants could not claim a homestead exemption under
the relevant constitutional and statutory provisions. Armitage's property no longer
qualified as a homestead upon his death because it was not "occupied by the decedent and
family, at the time of the owner's death" and did not "continue[] to be so occupied by the
surviving spouse and children, after such death." See K.S.A. 59-401; see also Kan. Const.
Art. 15, § 9 (defining homestead as land "occupied as a residence by the family of the
owner"). The record reflects that Armitage lived alone on the property and passed away
on July 11, 2015. Jeffrey did not move onto the property until late August 2015. The
defendants do not dispute these facts or otherwise allege, as they did below, that Jeffrey's
occupation was sufficiently continuous to maintain the exempt character of the
homestead property.
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The defendants acknowledge the holding in Bolander, but attempt to distinguish it
on grounds that it addressed a statutory exemption, rather than a constitutional exemption
like the one at issue here. They allege that making homestead property subject to claims
under K.S.A. 58a-505(a)(3) impairs a homestead owner's constitutional right to alienate
or transfer the homestead free of creditors' claims. The defendants' argument is based on
a theory that the constitutional right to alienate or transfer the homestead free of creditors'
claims need not be exercised by the owner during his or her lifetime. They assert that so
long as there is a free and voluntary transfer of some interest in the homestead, the time at
which the transfer becomes effective is irrelevant. The defendants suggest that like a
transfer on death deed, which passes directly to beneficiaries free of general creditors'
claims, the quit claim deed Armitage executed to the Trust transferred some interest in
the homestead property to the defendants, which should be protected under the
constitutional right to alienate the homestead free of creditor claims.
The defendants' argument is unpersuasive. In Citizens State Bank & Trust Co. v.
Grollmes, No. 63,499, 1989 WL 98658 (Kan. App. 1989) (unpublished opinion), this
court recognized a homestead owner's right to convey homestead property free and clear
of the claims of general creditors. In that case, the bank obtained a judgment against the
decedent during the decedent's lifetime. Prior to his death, the decedent conveyed
homestead property to his daughters. After the decedent's death, the bank attempted to
attach the property in satisfaction of its judgment. A panel of this court affirmed the
district court's ruling dissolving the writ of attachment after concluding that the decedent
had the ability under Kansas law to convey the homestead free and clear of the judgment.
K.S.A. 58a-505(a)(3) did not impair Armitage's ability to transfer his homestead
property during his lifetime. Armitage had the ability under Kansas law to convey the
homestead property directly to the defendants, but he did not elect to do so. Instead,
Armitage named his revocable trust as the beneficiary of the homestead property.
Armitage's power to amend or revoke the Trust died with him. The language of the Trust
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provided that upon Armitage's death, the trustees were required to "pay from the trust
estate all of the just debts and expenses" of the grantor and that "said trust shall terminate
and all assets remaining therein shall be paid and distributed" in equal shares to the
defendants. The defendants could not claim the homestead exemption upon Armitage's
death because they were not occupying the homestead at the time of his death or
continuously thereafter. See K.S.A. 59-401. As a result, the homestead property became
part of the Trust assets. The legislature has determined that assets in a revocable trust are
subject to the claims of creditors at the death of the settlor. See K.S.A. 58a-505(a)(3). The
district court correctly determined that the homestead property was subject to execution
to satisfy Chaney's judgment. As such, the court properly denied the defendants' motion
to set aside and vacate the writ of special execution.
Affirmed.
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