Anne M. Talley v. Daniel J. Paisley

CORRECTED: AUGUST 31, 2017
RENDERED: AUGUST 24, 2017
TO BE PUBLISHED
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ANNE M. TALLEY APPELLANT
ON REVIEW FROM COURT OF APPEALS
V. CASE NO. 2014-CA-00590
FAYETTE CIRCUIT COURT NO. 13-CI-01952
DANIEL J . PAI~SLEY - _ APPELLEE
OPINION OF THE COURT BY JUSTICE VANMETER
AFFIRMING
A cotenant of real property, including one who holds as a joint tenant
with right of survivorship, is entitled to contribution from other cotenants With
respect to his or her payment of any liens, taxes or other encumbrances on the
property. Following such contribution, any proceeds to the property are shared
by the cotenants in proportion to their respective ownership interest in the
property. The issue we resolve in this case is whether the Court of Appeals
erred in reversing the Fayette Circuit Court’s judgment that Daniel Paisley and
Anne Talley were to share equally in the proceeds of sale of their jointly owned
real property based on their respective ownership percentages and irrespective
of Paisley’s discharge of mortgage liens encumbering the property. We hold
that the Court of Appeals did not err and therefore remand this matter to the
trial court for further proceedings
FACTUAL AND PROCEDURAL BACKGROUND.
Paisley and Talley never married, but cohabitated for fifteen years. In
2004, they purchased a tract of land on Lakewood Drive in Lexington in order
to build a residence together. At that time, Talley was married to someone else.
Paisley Was divorced and owned another residence in his own name. Talley
also owned a residence, which she sold, and used the proceeds from that sale
($120,000) as the down payment for the Lakewood Drive property. The parties
initially placed the Lakewood Drive property in Paisley’s name because Talley
was still legally married, Talley and her husband divorced in October 2006.
Soon after that divorce, the parties placed the Lakewood Drive property
in their joint names with right of survivorship. At that point, according to
- Paisley-, he had paid $109,942 in construction and loan costs, and Talley had
paid the initial down payment on the property. Also in November 2006, two
mortgages were taken out on the property, one in the amount of $225,000 and
the other $250,000. Talley and Paisley were co-mortgagors and co-makers of
the notes.
Paisley sold his residence in July 2007, and used $200,000 of the
proceeds to pay down the .$250,000 mortgage on the Lakewood residence, In
December 2009, he paid off the balance of that mortgage, He also paid
$19,119 down on the $225,000 mortgage, and $3,052 to close a construction
loan in November 2006. From 2007 until March 2014, Paisley made all the
2
mortgage payments in full. According to Paisley, he never demanded payment
from Talley because he believed she would have the funds to contribute her
share to the residence after her former husband paid her $350,000 as part of
their divorce settlement
Paisley and Talley’s relationship eventually ended. Paisley moved out of
the Lakewood residence in January 2013, although he continued to make the
mortgage and insurance payments He filed a complaint several months later,
pursuant to KRS 389A.030, seeking to sell the residence and divide the equity
in proportion to the parties’ contributions, and specifying that Talley should be
solely responsible for the expenses associated with the house while she resided
there alone.
The house eventually sold for $715,000. The net equity in the residence
was $477,397. Paisley proposed that these proceeds be divided based on the
parties’ proportionate contribution and to reflect the fact that he had
contributed more to the residence. By his calculation, Talley had contributed
$120,000 and he had contributed $383,921. Therefore, Paisley proposed to
receive $369,500 from the proceeds, and for Talley to receive $106,500.1
Following a bench trial, the trial court found that the parties did not have
an agreement regarding disposition of the property in the event their
relationship ended, and ordered the equity in the residence to be divided
equally between them. The trial court found the evidence insufficient to rebut
1 The parties’ total contribution was $503,921. Of this Paisley contributed
76.2% (383,921/503,921), and Talley COntributed 23.8% (120,000/503,92 1).
3
a presumption of equality and accordingly divided the sale proceeds equally.
The trial court largely based its decision on its finding that the parties never
had an agreement, written or verbal, about division of the Lakewood property if
their relationship ended. The court emphasized that if it had found that such
an agreement existed and considered the contributions of the parties as Paisley
requested, it would be required to consider both parties’ contributions relative
to the specific facts of this case. The trial court cited no case law in support of
its terse legal conclusion.
Paisley appealed to the Court of Appeals, which reversed the trial court’s
decision. The Court of Appeals declined to disturb the trial court’s finding that
the parties had no agreement about what would happen to the property if their
relationship ended, since the parties’ testimony supported that finding.
However, it held that as a matter of law, Paisley was entitled to be
proportionately reimbursed by Talley for payments he made during their joint
tenancy. As a result, the Court of Appeals remanded the case to the trial court
to determine the amount to which he is entitled. Talley petitioned this Court
for discretionary review, which we granted.
ANALYSIS.
In an appeal from a bench trial without a jury, the trial court’s findings
of fact “shall not be set aside unless clearly erroneous, and due regard shall be
given to the opportunity of the trial judge to judge the credibility of the
witnesses.” CR2 52.01. “If the trial judge’s findings of fact in the underlying
action are not clearly erroneous, i.e., are supported by substantial evidence,
then the appellate court’s role is confined to determining whether those facts
support the trial judge’s legal conclusion.” Commonwealth v. Deloney, 20
S.W.3d 471, 473 - 74 (Ky. 2000). However, while deferential to the lower
court’s factual findings, appellate review of legal determinations and
conclusions from a bench trial is de novo. ' Sawyer v. Beller, 384 S.W.3d 107,
110 (Ky. 2012).
Property held jointly with right of survivorship “is an estate held by two
or more people who (in the case where the estate is held by only two) are not
husband and wife. Each is jointly entitled to the enjoyment of the estate So
long as all live; however, the interest of a joint tenant, at his or her death,
passes to the survivor.” Sanderson v. Saxon, 834 S.W.2d 676, 678 (Ky. 1992)
(citations omitted). With respect to the sale or division of property held in joint
tenancy, KR83 389A.030(4) provides that “[i]f a sale of all or any part of the real
estate shall be ordered, the [trial] court shall refer the matter to the master
commissioner or appoint a commissioner to conduct a public sale and convey
the property upon terms of sale and disposition of the net proceeds as may
have been determined by the court.”
Talley argues that property held in joint tenancy is presumed to be held
equally and, therefore, equal division of the sale proceeds is appropriate in this
2 Kentucky Rules of Civil Procedure.
3 Kentucky Revised Statutes.
instance. She asserts that to hold otherwise would afford those holding
property jointly with the same rights as those vested in married couples with
respect to considering contribution in the division of proceeds from the sale of
jointly-owned property, thereby destroying the joint tenancy presumption of
equality. Talley further asserts that even if Paisley could rebut the
presumption of equality by clear and convincing evidence, he waived any right
to contribution or intended his contributions to Talley to be a gift. She
maintains that since 2007, Paisley knew he had invested more than she had in
the residence, but nonetheless agreed to continue to hold the property jointly,
evidenced by the parties’ reaffirmation of their joint tenancy agreement in 2012
when they refinanced their home. Talley argues the Court of Appeals neglected
to consider defenses to contribution such as Waiver and gift.
Under Kentucky law, joint tenants are entitled to proportionate
reimbursement for the payment of liens and other encumbrances on the
property. The general rule is that “one joint tenant is entitled to contribution
from his cotenant for liens and encumbrances paid by him, including
mortgages, taxes, and ground rent.” Larmon v. Larmon, 173 Ky. 477 , 191 S.W.
110, 113 (1917) (footnotes omitted).
[O]ne who pays a joint debt is entitled to contribution
from his co-obligors and . . . a tenant who relieves
common property from a lien is subrogated to the lien
on his cotenant’s share for the excess he has paid over
his proportionate share. We think this rule applies
with equal force to a joint tenancy with survivorship. .
. . as between each other each Was liable for one-half
of the indebtedness, and if either paid the entire lien
indebtedness, he was entitled to contribution to the
extent of one-half of the indebtedness as against the
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other, and was subrogated to the original lien upon his
cotenant’s interest to that extent as in other cases of
cotenancy.
Petty v. Petty, 220 Ky. 569, 295 S.W.863, 864 (1927).
Furthermore, an agreement between the joint tenants for this type of
reimbursement is not required:
Equitable contribution between co-owners of
undivided interests in real estate _has often been
recognized and enforced, even without a contract
between the parties to that effect. If one such joint
owner at his own expense discharges a lien upon the
joint property, or is compelled, in order to protect his
own interest therein, to pay out his own money to
acquire outstanding title for the common benefit, he
may enforce contribution in equity from the other joint
owners in proportion to their interests
Bishop v. Wolford, 218 Ky. 657, 291 S.W. 1049, 1052 (1927) (citations omitted).
The record reflects that Paisley did not expressly or implicitly waive any
right to contribution, or intend his contributions to be a gift to Talley. While at
no point did the parties agree, expressly or otherwise, as to division of the
proceeds from the sale of the property, this oversight appears due to the fact _
that the parties did not anticipate or contemplate the demise of their
relationship or the division of the Lakewood property at all.
Contrary to Anne’s assertion, our holding in this case does not disrupt
longstanding legal principles with respect to the definition of joint tenancy with
right of survivorship. That definition remains intact. However, with respect to
the division of proceeds from the sale of jointly-held property when the
cotenants have no agreement regarding how sale proceeds would be split, we
hold that, to the extent one tenant contributed more than his or her half to the
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discharge of encumbrances, liens, taxes, that tenant is entitled to contribution
from the other,
CONCLUSION.
For the foregoing reasons, we affirm the Court of Appeals and remand
this case to the Fayette Circuit Court. On remand, the trial court is to make a
determination as to that amount which will equalize the respective
contributions of the parties to the property. Once the parties’ respective
contributions to the property have been equalized, the balance of the proceeds
from the sale of the property are to be split equally, 50% to each. 4
All sitting. Minton, C.J.; Cunningham, VanMeter, Venters and Wright,
JJ., concur. Keller, J., dissents by separate opinion in which Hughes, J., joins.
KELLER, J., DISSENTING: I respectfully dissent because I believe the
majority has erred in three ways: (1) the majority ignores the trial court’s
findings of fact; (2) the majority’s decision implicitly gives effect to common law
marriage in violation of our case law stating that such marriages are against
public policy; and (3) the trial court, the majority, and Daniel Paisley
improperly analyze this case as either a contract, family law, or partnership
case, when it is plainly and simply a property case. I address each of these in
, turn below.
4 For example, using Paisley’s numbers for purpose of illustration, if the trial
court determines that Paisley contributed $263,92 1 more than Talley ($383,92 l -
$120,000 = $263,921), then an out-of-pocket payment from Talley to Paisley of one-
half of this amount, $131,960.50, equalizes the parties’ contribution. The net sale
proceeds would then be split equally. Absent an out-of-pocket payment to equalize,
Paisley would be entitled to the first $263,921 from the net sale proceeds, with the
balance then being split equally between the parties.
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I. Factual Findings
I believe the majority has ignored the trial judge’s findings of fact. As
noted in the majority opinion, the trial court’s findings of fact “shall not be set
aside unless clearly erroneous, and due regard shall be given to the
opportunity of the trial judge to judge the credibility of the witnesses.” CR
52.01. Furthermore, “[i]f the trial judge’s findings of fact in the underlying
action are not clearly erroneous, i.e., are supported by substantial evidence,
then the appellate court’s role is confined to determining whether those facts
support the trial judge’s legal conclusion.” Commonwealth v. Deloney, 20
S.W.3d 471, 473-74 (Ky. 2000). While appellate review of legal determinations
and conclusions is de novo, Sawyer v. Beller, 384 S.W.3d 107, 1 10 (Ky. 2012),
the factual determinations should remain undisturbed.
The trial court made the requisite findings of fact; the parties were in a
relationship and wanted to have a home together; the parties each contributed
differing amounts toward the home, at different times, throughout the
relationship; the parties initially deeded the property in Daniel’s name because
Anne’s divorce was not yet final; upon Anne’s divorce, Daniel transferred the
property into both parties’ names joint with right of survivorship; and both
parties testified that they trusted each other and never had any agreement
about what would happen if they separated. Based upon the above findings,
the trial court found that there was no agreement between the parties, written
or oral, relating to the property.
As the Court of Appeals held and the majority stated, the trial court’s
finding-that the couple had no agreement about what would happen to the
property if their relationship ended-is supported by substantial evidence in
the form of the parties’ own testimony, and, consequently, should not be
disturbed on appeal. I agree.
Further, the trial court Was presented with evidence showing that Daniel
and Anne had contributed differing amounts to the property throughout their
fifteen-year relationship. However, the majority fails to note that Anne offered
to sell her UPS stock to contribute to the home, but Daniel told her not to do
that, The majority further fails to recognize that Anne did not accept a salary
for her work in Daniel’s business. As noted above, this Court should not
decide which facts are credible and I believe the majority has overstepped its
bounds by doing so. l expound on these facts below.
II. Common Law Man'iage
The majority’s decision herein implicitly gives effect to common law
marriage Daniel and Anne had been in a relationship for fifteen years and
may have appeared like a married couple. However, the parties’ quasi-
marriage is not endorsed by this Commonwealth. It is well settled in Kentucky
that there must be a marriage in fact, and common-law marriages are not
recognized as valid. McDaniel v. McDaniel, 280 S.W. 145, 146 (Ky. 1926).
While Kentucky courts recognize rights and obligations attendant to a legally
valid civil marriage, they do not extend such marital rights and obligations to a
non-marital relationship no matter how closely it resembles a marriage.
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Our law providing for how the property of a married couple is to be
distributed following their separation is well-developed. Had Daniel and Anne
been married, division of property would be governed by``KRS 403.190, and the
court would identify marital and non-marital property, with Daniel and Anne
each receiving their non-marital property before dividing the marital property
in an equitable fashion. Because Daniel and Anne were not married, the
provisions of KRS 403 do not apply. Yet the majority is so focused on ensuring
Daniel receives a “fair” and “equitable” distribution that they nonetheless apply
the equitable rules inherent in KRS 403. With its opinion, the majority is
reinstituting “by judicial fiat common law marriage which by expressed public
policy is not recognized.” Murphy v. Bowen, 756 S.W.2d 149, 150 (Ky. App.
1988) (citing KRS 402.020(3)).
The United States Supreme Court has recognized a fundamental right to
marriage. Loving v. Virginia, 87 S. Ct. 1817, 1824 (1967) (citing Skinner v. State
of Oklahoma, 62 S. Ct. l 110, 1113 (1942)) (Marriage is one of the ‘basic civil
rights of man,’ fundamental to our very existence and survival.) There is a
sanctity in that right and, therefore, it is unsettling that the majority has
implicitly extended the equitable concepts of the Commonwealth’s marriage
' laws to this case. Individuals are free to marry or cohabitate as they wish, but
when parties choose the latter they cannot come to the courts asking for the
application of the equitable notions of family law to resolve their conflicts. If
the General Assembly wanted to recognize common law marriage, perhaps it
would have done so sometime in the past 200 years. In any event, common
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law marriage remains unrecognized and it is not up to this Court to de facto
recognize it in this case.
III. Improper Analysis
The trial court, Daniel, and the majority improperly analyze this case as
if it were either a contract, partnership, or a family law case, However, this
matter emanated as a civil action in the Fayette Circuit Court, general civil
division and is a property case.
A. Contract Case.
There was no contract between the parties. The only written documents
pertaining to the parties’ relationship are the mortgages and the deed, While
the majority would delve into the parties’ intent following the deterioration of
the relationship, that analysis is irrelevant to the parties’ conduct at the time
they became joint tenants. Absent any documentation or agreement to the
contrary, the deed is paramount; therefore, the trial court acted appropriately
by finding, based on the joint tenancy deed, that each tenant was entitled to
equal proceeds from the sale of the property.
That is not to say that Daniel and Anne were not free to contract as they
wished. For example, Daniel and Anne could have executed a cohabitation
agreement to govern distribution of their property while unmarried. Had they
chosen to contract, this Court could protect neither Daniel nor Anne from
making a bad bargain. Farmers’ Trust Co. of Harrordsburg v. Threlkeld’s
Adm’x., 77 S.W.2d 616, 620 (Ky. 1934) (citing O.H. Irvine v. Old Kentucky
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Distillery, etc., 271 S.W. 577 (Ky. 1924)). By the same token, this Court should
not protect Daniel from failing to make a bargain at all.
B. Partnership Case.
Daniel argued, and both parties briefed the issue, that this case should,
or should not be, decided under partnership law. While the majority opinion
does not specifically address this argument, I feel compelled to do so. KRS
362. 175 defines a partnership as “an association of two (2) or more persons to
carry on as co-owners a business for profit.” First, there was no express
partnership agreement between Daniel and Anne nor any evidence of an
implied partnership. Second, KRS 362.180(2) states that 4“joint tenancy. . .
does not of itself establish a partnership. . . .” “The law of partnerships does
not apply to a living arrangement, although it could apply to a business carried
on by persons Who lived together.” L. Graham & J. Keller, 15 Kentucky
Practice Series, Domestic Relations Law § 2: 13 (2016) (internal citations
`` omitted).
It behooves me to point out that the existence of a partnership must be
established before a court will look at distribution of partnership property.
Because there is no evidence of any kind of partnership between Daniel and
Anne, we cannot analyze division of the proceeds under a partnership theory to
arrive at a more equitable outcome for Daniel.
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C. Property Case.
As set forth above, this case is not a family law, contract, or partnership
case. In fact, this case is simply a property case and should be resolved based
solely on property law. Our jurisprudence has been couched .on the
presumption that joint tenancy creates “equal rights” in title among owners.
See Stambaugh v. Stambaugh, 156 S.W.2d 827, 831 (Ky. 1941). As we noted in
Ralthman v. Zusstone, “[I]t has long been the law in Kentucky that ‘[r]ecord title
or legal title is an indicia sufficient to raise a presumption of true ownership.”’
957 S.W.2d 241, 244 (Ky. 1997) '(quoting Tharp 1). Secun'ty Ins. Co. of New
Haven, Ky., 405 S.W.2d 7 60, 765 (1966)). It is undisputed that Daniel and
Anne ultimately took title to the property through a deed identifying the parties
as joint tenants with right of survivorship; thus, there was a presumption that
each tenant owned a yet undivided, but equal, interest in the property. See
City of Louisville v. Colebume, 56 S.W. 681, 682 (Ky. 1900) (“In order to
constitute an estate in joint tenancy, the tenants thereof must have one and
the same interest, arising by the same conveyance, commencing at the same
time, and held by one and the same undivided possession.”)
Although the shares of joint tenants are presumed to be equal, this
presumption is rebuttable 48A C.J.S. Joint Tenancy § 28. “Generally, the
mere fact of a greater contribution to the purchase price by one joint tenant
will not overcome the presumption of equality.” Id. (internal citations omitted).
“The beneficial interest of a joint tenant who furnishes nothing for the
purchase of the property, likewise, is generally precisely the same as that of his
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or her co-owner who furnishes all of the consideration for the purchase of the
jointly held property.” Id. (internal citations omitted).
In interpreting a deed, we look to the intention of the parties, “gathered
from the four corners of the instrument.” Smith v. Vest, 265 S.W.3d 246, 249
(Ky. App. 2007) (citing Phelps v. Sledd, 479 S.W.2d 894, 896 (Ky. 1972)
(citations omitted)). We will “not substitute what grantor may have intended to
say for what was said” in the deed itself. Id. (citing Phelps, 479 S.W.2d at 896).
We must begin, therefore, with the premise that the joint tenancy deed granted
Daniel and Anne equal ownership in the property.
The Court of Appeals and the majority cite two cases for the proposition
that one joint tenant who pays a lien or mortgage is entitled to contribution
from the other joint tenant. Petty v. Petty, 295 S.W.863, 864 (Ky. 1927);
Larmon v. Larmon, 191 S.W. 1 10, 1 13'(Ky. 1917). These cases are not
dispositive for Daniel and Anne. Petty involves collection of a loan against a
surviving joint tenant while Larmon dealt with contributions for repairs made
by a life tenant. I cannot agree with the majority that these cases demand
distribution of the proceeds according to Daniel’s and Anne’s contributions to
the property. “If the parties are actually making unequal contributions to the
property, they may still take a deed as joint tenants, but they must also have a
separate contract that memorializes their agreement to take account of actual
contribution if the relationship dissolves and one party wishes to buy out the
other.” L. Graham &, J. Keller, 15 Kentucky Practice Series, Domestic Relations
Law § 2: 13 (2016). This applies directly to Daniel and Anne,
15
As stated above, the trial court found that the parties had no agreement
as to how the property would be divided should their relationship end. The
trial court further found that the parties had contributed unequal amounts
toward the property throughout the fifteen-year relationship In fact, the
evidence shows that Daniel never asked Anne to contribute any more to the
property than her initial $120,000, and Anne worked for Daniel’s business
Without a salary for years. These facts were significant to the trial court’s -
finding that Daniel had not rebutted the presumption of an equal distribution.
I agree with the trial court’s decision and it should not be disturbed.
Had the parties’ relationship ended after Anne made her $120,000 down
payment, but prior to the deed being put in both parties’ joint names, Anne
would have had no recourse within the above-cited law, no matter how “unfair”
a result it may seem. Anne’s counsel-concedes this. The same must be said
for Daniel now. To hold otherwise would completely eviscerate the principles of
property law and give an effect to joint tenancy that was never intended.
For the foregoing reasons, I respectfully dissent.
Hughes, J., joins.
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COUNSEL FOR APPELLANT:
Amy Claire Johnson
Anita Mae Britton
Britton Johnson, PLLC
COUNSEL FOR APPELLEE:
Thomas W. Miller
Elizabeth C. Woodford
Anna Leisa Dominick
Miller, Griffin & Marks, P.S.C
17
Supreme Court of Benfuckg
2016-SC-000092-DG
ANNE M. TALLEY APPELLANT
ON REVIEW FROM COURT OF APPEALS
V. CASE NO. 2014-CA-00590
FAYETTE CIRCUIT COURT NO. 13-CI-01952
DANIEL J . PAISLEY APPELLEE
ORDER
On the Court’s own motion, this Court hereby modifies the Opinion of
the Court by Justice VanMeter rendered August 24, 2017 in the above styled
case``by the substitution of a new opinion as attached hereto in lieu of the
Opinion of the Court as originally entered. Said modification does not affect
the holding, and is made only to reflect the incorrect cite error on page 14, line t
8 changing “Tharp v. Secun'ty Ins. Co. of New Haven, Ky., 202 S.W.2d 999 (Ky.
1947)” to “Tharp v. Security Ins. Co. of New Haven, Ky., 405 S.W.2d 760, 765
(1966).”
Entered: August 31, 2017 .