Suzanne Wheeler v. Katharine Layton ( 2021 )

RENDERED: JANUARY 15, 2021; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2018-CA-1748-MR
SUZANNE WHEELER AND
JACKSON DAY WHEELER,
THROUGH HIS GUARDIAN APPELLANTS
APPEAL FROM FAYETTE CIRCUIT COURT
v. HONORABLE THOMAS L. TRAVIS, JUDGE
ACTION NO. 18-CI-01998
KATHARINE LAYTON APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: COMBS, DIXON, AND TAYLOR, JUDGES.
TAYLOR, JUDGE: Suzanne Wheeler and Jackson Day Wheeler, through his
guardian, appeal from the Fayette Circuit Court’s August 22, 2018, Order
dismissing Katharine Layton as a party to their lawsuit against the Estate of
Matthew Layton (the Estate) and Katharine Layton for alleged claims arising upon
Matthew Layton’s death. The Wheelers’ motion to alter, amend, or vacate was
denied by Order entered November 8, 2018.1 For reasons that follow, we affirm.
BACKGROUND
Suzanne filed the complaint in this action on May 31, 2018, against
the Estate and its co-executrixes, individually, along with Katharine, individually.
The crux of the complaint seeks to dispute the disallowance of Suzanne’s claims
against the Estate pursuant to Kentucky Revised Statutes (KRS) 396.055.
Although not artfully drafted, the complaint also attempts to assert individual
claims against Katharine in regards to 1) a $70,000 check payable to Suzanne
drawn on Matthew and Katharine’s joint checking account that had not been
delivered to Suzanne at the time of Matthew’s death; and 2) certain real property,
owned jointly by Matthew and Katharine located at 1803 Cantrill Drive in
Lexington, Kentucky, that Suzanne is asserting an ownership interest therein by
virtue of a disputed holographic will. The holographic will is being litigated in a
separate proceeding in Fayette Circuit Court.
The Order entered on August 22, 2018, dismissed Suzanne’s
complaint against Katharine only, not the Estate. Upon appeal, Suzanne named
1
Jackson Day Wheeler’s status in this case is not explained in the complaint and we can identify
no claim or basis of a claim by Jackson against Katharine Layton. Accordingly, we will only
reference Suzanne Wheeler as appellant in this Opinion.
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Katharine as a party, along with the Estate and its executrixes, individually. By
Order entered by this Court on March 20, 2019, the Estate and its executrixes were
dismissed as parties to the appeal. We emphasize the only issues in this appeal are
limited exclusively to the dismissal of claims against Katharine.2 In order to fully
address the issues on appeal before this Court as pertains to Katharine, a brief
review of her marital dissolution with Matthew is warranted, along with a brief
summary of relevant probate proceedings in Fayette District Court.
Matthew and Katharine had been married fourteen years at the time of
their divorce. A divorce decree was entered by the Fayette Family Court on March
30, 2017.3 On that same date, a Separation and Property Settlement Agreement
(Settlement Agreement) between the parties was filed with the court. In relevant
part, the agreement provides as follows:
4. BANK ACCOUNTS. [Katharine] and
[Matthew] have divided their bank accounts to their
mutual satisfaction. Further, neither party shall make any
claim against funds presently or hereafter in control of
the other.
2
The circuit court’s ruling disposed of all claims asserted by Suzanne against Katharine. The
November 8, 2018, Order made the August 22, 2018, Order final and appealable pursuant to
Kentucky Rules of Civil Procedure 54.02 as pertains to those claims. The claims asserted
against the other parties were not resolved nor final and appealable. See Watson v. Best Fin.
Servs., Inc., 245 S.W.3d 722, 726 (Ky. 2008).
3
The parties have not cited to where the Decree of Dissolution of marriage was filed in the
record on appeal. Accordingly, we have taken judicial notice of the family court docket in
Action No. 17-CI-00713 that the Decree of Dissolution was entered by the Fayette Family Court
on March 30, 2017. See Kentucky Rules of Evidence 201(b)(2); Polley v. Allen, 132 S.W.3d
223, 225-26 (Ky. App. 2004).
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....
8. REAL PROPERTY. It is agreed between the
parties that [Matthew] shall take sole possession of 1803
Cantrill, Lexington[,] Kentucky to own as his own
property in fee simple. [Katharine] shall execute a quit
claim [sic] deed concerning said property within a
reasonable time after the decree has been entered. . . .
That inconsideration [sic] of the foregoing, the parties
agree that [Matthew] shall pay [Katharine] a total of
ONE HUNDRED THOUSAND DOLLARS
($100,000.00) for her marital share of the property.
The payments shall be as follows. [Matthew] agrees
to pay [Katharine] a lump sum amount of ($30,000.00)
THIRTY THOUSAND DOLLARS within a reasonable
time of refinancing the marital home in his name.
[Matthew] shall also pay a lump sum amount of TEN
THOUSAND DOLLARS ($10,000.00) by or before
January 31, 2018. [Matthew] shall pay the remaining
amount in monthly payments to [Katharine] to be paid by
the first day of each month in an amount not less than
FOUR HUNDRED DOLLARS ($400.00). . . .
Record on Appeal at 74-76 (Appellant’s Brief 2-4, Ex. 5). The family court
approved the agreement and incorporated it by reference into the decree.
On June 5, 2017, Matthew committed suicide at his residence. At the
residence, authorities discovered a check made out to Suzanne for $70,000, drawn
upon a joint checking account Matthew maintained with Katharine. Also
discovered was a purported holographic will which stated in its entirety: “I want
my house and vehicles to go to Suzie Wheeler.” It is uncontested that at the time
of his death, Matthew owed Katharine almost $60,000 of the $100,000 promised to
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her under the Settlement Agreement for the Cantrill Drive property (hereafter the
“residence”) and that Katharine had not executed a quitclaim deed to Matthew for
the residence.
At some point after Matthew’s death, Katharine closed the joint
checking account upon which the $70,000 check payable to Suzanne was drawn.
The $70,000 check was never delivered to Suzanne and was not cashed. In August
2017, the Fayette District Court probated a typewritten self-proving will executed
by Matthew on August 17, 1993. Under the terms of this will, Matthew
bequeathed his estate to his parents.
In November 2017, Katharine filed a claim in the district court
probate action seeking to recover the remainder of Matthew’s $100,000 obligation
to her for her ownership interest in the residence. In December 2017, the co-
executrixes of the Estate, Matthew’s mother and sister, filed an emergency motion
in district court asking permission to sell Matthew’s vehicles and the residence.
Katharine filed a response stating that she owned the residence but did not object
to its sale, provided her roughly $60,000 claim was paid at closing. Suzanne
objected to the sale, asserting the residence and vehicles were hers via Matthew’s
holographic will. The district court granted the Estate’s motion to sell the property
in December 2017.
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In February 2018, Suzanne filed claims in the district court probate
action against the Estate. At their core, her claims asked the Estate to honor the
$70,000 check written on the joint account and to award her the residence and
Matthew’s vehicles under the holographic will. Meanwhile, in March 2018, the
residence was sold, with both Katharine and the co-executrixes of the Estate
signing as grantors.
The Estate’s co-executrixes disallowed Suzanne’s claims in April
2018, stating she was “not due any monies or other property, whether real or
personal, from the Estate of Matthew Houston Layton, Deceased.” Record on
Appeal at 37. Suzanne then filed this action in the Fayette Circuit Court on May
31, 2018, against the Estate; its two co-executrixes, individually; and Katharine.
Katharine immediately filed a motion to dismiss the complaint against
her, arguing that upon Matthew’s death, she was the surviving owner of the
checking account and residence as a matter of law. The Estate and co-executrixes
also moved for partial summary judgment. In August 2018, the circuit court
granted Katharine’s motion to dismiss, treating the motion as one for summary
judgment due to consideration of matters outside the pleadings. Kentucky Rules of
Civil Procedure (CR) 12.02 and CR 56. The Estate and co-executrixes’ motion
was “SUSTAINED in part and OVERRULED in part.”
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As concerns the claims against Katharine, the circuit court concluded
she was the legal owner of both the bank account and residence upon Matthew’s
death, and thus there was no legal basis for any claim by Suzanne against
Katharine. Upon denying Suzanne’s motion to alter, amend, or vacate, this appeal
followed.
STANDARD OF REVIEW
As noted, the circuit court treated Katharine’s motion to dismiss under
CR 12.02 as one for summary judgment under CR 56.03. Accordingly, the
standard of review upon appeal of an order granting summary judgment is
“whether the trial court correctly found that there were no genuine issues as to any
material fact and that the moving party was entitled to judgment as a matter of
law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996) (citing CR 56.03).
Upon a motion for summary judgment, all facts and inferences in the record are
viewed in a light most favorable to the nonmoving party and “all doubts are to be
resolved in his favor.” Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d
476, 480 (Ky. 1991). Thus, if there are no factual issues, a summary judgment
looks only to questions of law and we review a trial court’s decision to grant
summary judgment de novo. Brown v. Griffin, 505 S.W.3d 777, 781 (Ky. App.
2016); see also Blackstone Mining Co. v. Travelers Ins. Co., 351 S.W.3d 193, 198
(Ky. 2010).
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ANALYSIS
We begin by noting that our review is limited to only those matters
raised below that pertain to claims against Katharine. Thus, based on our review
of the complaint and the orders on appeal, our review looks only to issues raised
regarding the joint bank account and the residence located at 1803 Cantrill Drive in
Lexington. We will not address matters pertaining to the holographic will, claims
against the Estate, the divorce Settlement Agreement, and any other matters
regarding the administration of the Estate. Those matters are not properly before
this Court in this appeal. We further note that Suzanne raises several arguments on
appeal that Katharine has violated the Separation Agreement entered into by
Katharine and Matthew in their divorce. We decline to review those arguments for
two reasons. First, Suzanne did not raise these arguments regarding the purported
violation of the Separation Agreement before the circuit court nor are they
referenced in the complaint. It has been the long-standing rule in Kentucky that
appellate courts are without authority to review issues not raised before or decided
by a trial court below. Reg’l Jail Auth. v. Tackett, 770 S.W.2d 225, 228 (Ky.
1989).
Second, and equally important, Suzanne was not a party to the
Settlement Agreement and she has no standing to assert a claim thereunder, unless
she could establish that she is a third-party beneficiary, which was not raised below
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nor presented on appeal. Third parties may not seek to enforce a contract unless it
was intended to benefit them directly (which Suzanne has not shown.) See, e.g.,
Presnell Const. Mgrs., Inc. v. EH Const., LLC, 134 S.W.3d 575, 579 (Ky. 2004);
see also KRS 403.180(5). Our review proceeds accordingly.
A. The Joint Bank Account and $70,000 Check
The circuit court concluded that the bank account was a jointly owned
account by Matthew and Katharine with the right of survivorship. The court held
that the survivor, Katharine, was entitled to ownership of the account upon the
death of Matthew. We agree.
For many years in Kentucky, the common law permitted joint bank
accounts to be created with survivorship rights. See, e.g., Bishop v. Bishop’s Ex’x,
170 S.W.2d 1, 2 (Ky. 1943). In 1976, the General Assembly enacted KRS
391.315(1)(a), which provides in relevant part that “[s]ums remaining on deposit at
the death of a party to a joint account belong to the surviving party or parties to the
account as against the estate of the decedent unless there is clear and convincing
written evidence of a different intention at the time the account is created.” KRS
391.315(1)(b) stresses the importance of the terms under which the account is
opened and governed, providing in pertinent part that “[i]n transferring or releasing
joint account funds subsequent to the date of death of one (1) or more of the named
joint account holders, a financial institution or other appropriate third party may
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rely conclusively on the form and terms of the account to pay in accordance with
paragraph (a) of this subsection.”
Here, the Central Bank and Trust Company Deposit Account Rules
and Regulations for the joint account specifically provided that “the account will
be a joint account with right of survivorship” and that “[u]pon the death of any
joint tenant, the balance of the account shall belong to the survivor(s), and any
surviving joint tenant will have complete withdrawal rights to the balance of the
account (subject to the requirements of applicable probate law).” Record on
Appeal at 70. Thus, there is no evidence in the record on appeal to overcome the
presumption in KRS 391.315(1)(a) that the account was a joint account with right
of survivorship. Consequently, Katharine could legally close the account as the
sole owner upon Matthew’s death.
As concerns the $70,000 check, it is undisputed that the check was not
delivered to Suzanne nor cashed prior to Matthew’s death. There is no evidence
that Matthew was indebted to Suzanne at the time of his death. One can only
presume that the check was contemplated as a gift. In Kentucky, a check which is
not delivered to the drawee before the drawer’s death is an incomplete gift. See,
e.g., Griffin v. Louisville Trust Co., 226 S.W.2d 786, 787 (Ky. 1950) (“On this
appeal all parties admit that the check is not valid as a gift because until a check is
either paid or accepted by the drawee, it is incomplete as a gift and the death of the
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drawer operates as a revocation of the check.”); 1 KENTUCKY PRACTICE, PROBATE
PRACTICE & PROCEDURE § 667 Checks (2020) (“If a drawer delivers a check and
dies before it is paid or accepted, there seems to be no theory under which the
payee takes an interest if the check is without consideration. The check fails as a
gift of the deposit for lack of delivery[.]”) (footnotes omitted). Therefore,
Katharine had no legal obligation to honor the $70,000 check. To the extent
Suzanne claims to be entitled to $70,000 for assistance she gave to Matthew, or for
a prior indebtedness, her claim would lie against the Estate, not Katharine.
B. Residence at 1803 Cantrill Drive
Katharine and Matthew acquired this real property while married, by
deed dated October 5, 2010. Record on Appeal at 102. Under Kentucky law, their
ownership constituted a tenancy by the entirety, which is created by the legal unity
of a husband and wife. Hoffmann v. Newell, 60 S.W.2d 607, 609 (Ky. 1932).
Presumably, this was the parties’ marital residence until their divorce on March 30,
2017. The circuit court, as well as the district court below, held that Katharine
obtained title to the property in fee simple upon Matthew’s death based upon the
survivorship provisions set out in the deed, relying in part on KRS 381.050.4
4
The deed expressly provided for survivorship rights between the parties. See Kentucky
Revised Statutes (KRS) 381.050(1).
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Unfortunately, neither the courts below nor the parties to this appeal
have addressed the correct and applicable legal authority that determines title to
real property under the facts of this case.5 In Kentucky, a divorce affects real
property owned jointly by a husband and wife as tenants by the entirety as follows:
It is axiomatic that dissolution of the tenants’ marriage
terminates or destroys an essential element of the
tenancy—spousal unity. As a result, a decree of
dissolution, by operation of law, terminates a tenancy by
the entirety and the concomitant right of survivorship to
the entire estate.
....
Thus, when a marriage has been dissolved and the former
husband and wife continue to hold legal title to realty,
they hold that property as tenants in common.
Nelson v. Mahurin, 994 S.W.2d 10, 14-15 (Ky. App. 1998) (quotation marks and
citations omitted).6
5
Courts may, sua sponte, consider applicable legal authority at any stage of the proceedings,
even if not cited by the parties or court below. Community Fin. Servs. Bank v. Stamper, 586
S.W.3d 737, 741 (Ky. 2019). When the facts reveal a fundamental basis for a decision not
presented by the parties, appellate courts are duty bound to address the issue to avoid a
misleading application of the law. Mitchell v. Hadl, 816 S.W.2d 183, 185 (Ky. 1991).
6
This conclusion is not in conflict with KRS 381.050(2), which provides that when a husband
and wife own property via tenancy by the entirety, “no provision of the will of the husband or
wife shall be construed to defeat such right to the entirety by survivorship of the surviving
spouse.” Matthew Layton’s will did not alter the tenancy by the entirety; the divorce did.
Moreover, divorce is the act of a court, not the divorcing spouses. Nelson v. Mahurin, 994
S.W.2d 10, 14-15 (Ky. App. 1998) (“Divorce is not an act of the parties. It is an act of the law
. . . . That act of the law creates a new legal status, both for the husband and for the wife.”)
(citation omitted).
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The circuit court erred by concluding the residence passed to
Katharine in fee simple at Matthew’s death by survivorship inherent to a tenancy
by the entirety. Legally, Matthew and Katharine continued joint ownership of the
residence as tenants in common after their divorce. See Nelson, 994 S.W.2d at 15.
Upon Matthew’s death, his one-half ownership interest passed to his heirs at law or
beneficiaries under his will. Slone v. Casey, 194 S.W.3d 336, 337 (Ky. App.
2006); see also KRS 381.120. And, at his death, Katharine retained her one-half
ownership interest in the property as a tenant in common.
However, nothing prevents a husband and wife from agreeing to hold
title to real property as joint tenants with a right of survivorship after their divorce,
presuming their intent was clearly expressed in an agreement or conveyance.
Nelson, 994 S.W.2d at 15. Whether such an intent occurred in the Settlement
Agreement below is not an issue on appeal and will not be addressed by this Court.
Again, as previously noted, Suzanne lacks standing to assert any claims under the
Settlement Agreement as she was not a party thereto nor may she assert claims for
alleged violations thereof in this case. Of course, if the lower courts below
conclude that the holographic will is valid and enforceable, then Suzanne could
arguably succeed to Matthew’s one-half ownership interest in the residence or its
proceeds.
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CONCLUSION
Though we disagree with the circuit court’s legal analysis regarding
the ownership of the residence upon Matthew’s death, we nonetheless agree with
the court’s grant of summary judgment for Katharine, dismissing the claims
asserted by Suzanne against her. This Court may affirm a lower court for reasons
justifiable under the facts and law, even if we reach the same result for different
reasons. Goetz v. Asset Acceptance, LLC, 513 S.W.3d 342, 344-45 (Ky. App.
2016). Our ruling only disposes of any claims asserted by Suzanne against
Katharine as set out in the complaint. We note that the Estate has not cross-
appealed in this case or otherwise challenged the rulings of the circuit court as
concerns the bank account, check, and residence. Also, the Estate sought and
obtained its dismissal as a party to this appeal. Thus, our ruling on the bank
account, check, and residence shall be binding on all parties below.
For the foregoing reasons, the August 22, 2018, Order of the Fayette
Circuit Court dismissing Suzanne’s complaint is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANTS: BRIEF FOR APPELLEE:
Dustin C. Beard Jessica K. Winters
D. Lyle McQuinn Lexington, Kentucky
Matthew S. Goeing
Lexington, Kentucky
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