BEN A. REID, JR., INDIVIDUALLY AND AND AS GENERAL PARTNER OF BEN A. REID, SR., FAMILY LIMITED PARTNERSHIP, AND AS EXECUTOR OF THE ESTATE OF BEN A. REID, SR. v. MICHAEL WAYNE REID
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RENDERED: MARCH 19, 2004; 10:00 a.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO.
2003-CA-000120-MR
BEN A. REID, JR., INDIVIDUALLY AND
AS FORMER ATTORNEY-IN-FACT OF BEN A. REID, SR.,
AND AS GENERAL PARTNER OF BEN A. REID, SR.,
FAMILY LIMITED PARTNERSHIP, AND AS EXECUTOR
OF THE ESTATE OF BEN A. REID, SR.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE ANN O'MALLEY SHAKE, JUDGE
ACTION NO. 99-CI-004206
v.
MICHAEL WAYNE REID
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
KNOPF, TACKETT, AND VANMETER, JUDGES.
TACKETT, JUDGE:
Ben Reid, Jr. (Ben) et al. appeal from a
judgment of the Jefferson Circuit Court ordering their family
limited partnership to re-convey a piece of property, situated
in Indiana, to Michael Reid (Michael).
Ben argues that the jury
instructions failed to require Michael to prove all of the
elements of his fraud claim, that the trial court had no subject
matter jurisdiction over the property, and that he was
erroneously prevented from introducing evidence of undue
influence.
After considering all of these arguments, we affirm
the judgment of the trial court.
Dr. Ben Reid, Sr. (Dr. Reid) was the original owner of
the property in question.
Dr. Reid and his wife, Dorothy, had
eight children, six of whom were still living at the time of
this action.
Dorothy died in the late 1970’s and Michael
continued to live with his father, Dr. Reid.
In 1996, Michael
began discussing a gift of 60 acres (the Arrowhead Lake
property) which he wished his father would convey to him.
This
parcel of land was part of a much larger dairy farm located in
Indiana.
On March 5, 1996, Dr. Reid deeded the Arrowhead Lake
property to Michael clandestinely and Michael’s siblings were
not informed that their father had given him the property until
after it was done.
Shortly thereafter, Michael asked his father
to convey the condo in which they lived to him, but Dr. Reid
refused.
That same year, Dr. Reid’s mental and physical well
being began to decline.
His ability to manage his financial
affairs suffered and he began to liquidate assets and to make
questionable investments.
From September through December 1996,
a springing power of attorney was in effect due to Dr. Reid’s
inability to handle his affairs.
After undergoing gallbladder
surgery, Dr. Reid’s health improved.
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During this time, plans
for a family limited partnership to benefit all of the Reid
children were being implemented.
On December 16, 1996, Dr. Reid
revoked his earlier power of attorney and signed a new one
appointing Ben as attorney-in-fact.
He subsequently signed a
new will and, as part of his estate planning strategy, executed
the family limited partnership naming himself and Ben as general
partners. Dr. Reid was the sole limited partner, owned most of
the shares, and had control of the partnership until his death.
From January through April of 1997, several properties were
transferred into the partnership.
It was during this time, that
Ben persuaded Michael to re-convey the Arrowhead Lake property
to his father for inclusion in the partnership where Michael
would share in it equally with his siblings.
The Indiana farm
is the largest asset contained within the partnership.
Dr. Reid died in April 1997, and the shares in the
partnership were evenly distributed among his children.
On July
21, 1999, Michael filed suit against Ben, individually and in
his former capacity as Dr. Reid’s attorney-in-fact, and against
one of their sisters, Deborah Menefee (Debbie) alleging that
they fraudulently induced him to re-convey the Arrowhead Lake
property to the family limited partnership.
The case was tried
in February 2002, and the jury found for Michael.
followed.
-3-
This appeal
Ben first argues that Michael failed to prove the
requisite elements of fraud.
In order to prove fraud, Michael
was required to demonstrate that there was (1) a material
representation, (2) which was false, (3) was known to be false
or made recklessly, (4) made with inducement to be acted upon,
(5) acted in reliance thereon, and (6) which caused injury.
Wahba v. Don Corlett Motors, Inc., Ky. App., 573 S.W.2d 357
(1978).
When Michael’s siblings found out that Dr. Reid had
conveyed the Arrowhead Lake property to him, Ben began his
attempts to persuade Michael to re-convey the property to Dr.
Reid for inclusion in the partnership.
Ben and Debbie argued
that it would be the only fair thing to do so that all of Dr.
Reid’s children could share equally in the land.
At this time,
Debbie was living in a $275,000.00 house which her father had
purchased in joint tenancy with her.
Debbie represented to
Michael that she intended to either re-convey the house to the
partnership or to offset its value against her share of the
inheritance.
However, it was revealed she in fact had no
intention of doing so and had informed another of their sisters
of this fact.
Michael argued that both Debbie and he should
keep the land which their father had given them, but Ben and
Debbie eventually prevailed on Michael to agree to re-convey the
Arrowhead Lake property.
Nevertheless, before the end of 1996,
Michael changed his mind and refused to re-convey the property.
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In December, Debbie called Michael and once again
urged him to give the Arrowhead Lake property back to the
partnership and restated her intention to re-convey her house or
offset its value against her inheritance.
On January 2, 1997,
Ben called Michael with his attorney on the phone and told him
that the Arrowhead Lake property was necessary to fund the
family limited partnership.
In addition, Ben told Michael that
he was preparing a gift of some of Dr. Reid’s stock which was to
be divided among all of his children.
However, according to
Ben, Michael would not receive any of the stock unless he reconveyed his property to their father.
When Ben made this
representation to Michael, Ben had already signed a stock
transfer certificate which included Michael in the gift.
Nevertheless, relying on Ben’s representation that he would
otherwise get no stock, Michael re-conveyed the Arrowhead Lake
property to Dr. Reid.
Two weeks later, he found out that Debbie
had no plans to re-convey her house or offset its value.
Further, Michael never received any of the stock until after
this action was filed.
These facts, introduced to the jury, demonstrate that
Debbie and Ben made false representations to Michael to persuade
him to divest himself of the Arrowhead Lake property and that
he, in fact, did re-convey the property to Dr. Reid in reliance
on his siblings’ representations.
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However, Ben contends that
the trial court erred by failing to instruct the jury that it
had to find that Michael was injured by his action.
The trial
court refused to include an instruction to the jury that it must
find injury in order to determine fraud because it believed such
an instruction would be a source of confusion.
Moreover, the
trial court determined that, as a matter of law, Michael
suffered an injury because he gave up sole title to the
Arrowhead Lake property and now has only the same rights toward
it as each of his siblings.
We are unable to conclude that the
trial court acted incorrectly in making this determination.
The
trial court’s actions are also in accordance with Palmore’s
handbook on Kentucky jury instructions.
Ben next contends that the trial court lacked
jurisdiction to enter a judgment affecting title to the
Arrowhead Lake property because it is situated in Indiana.
Campbell v. W.M. Ritter Lumber Co., Ky., 131 S.W. 20 (1910).
We
note that Ben raises this issue for the first time on appeal.
The deeds conveying the property from Dr. Reid to Michael and
from Michael back to Dr. Reid were executed in Kentucky.
Likewise, the fraudulent representations made by Ben and Debbie
to Michael to induce him to re-convey the property to their
father also occurred in Kentucky.
The trial court entered a
judgment ordering Ben to re-convey the Arrowhead Lake property
to Michael.
In doing so, the trial court relied on its personal
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jurisdiction over the parties and the equitable powers to
indirectly affect title to real estate located in another state
as set forth in Fall v. Eastin, 25 U.S. 1, 30 S.Ct. 3, 54 L.Ed.
65 (1909).
The Supreme Court in Fall was faced with a dispute
involving real estate located in Nebraska which had been awarded
to one of the parties pursuant to her divorce in the state of
Washington.
The Court analyzed the issue of whether a court in
Washington could affect title to property located in Nebraska
and stated as follows:
“by means of its power over the person of a
party, a court of equity may, in a proper
case, compel him to act in relation to
property not within its jurisdiction; its
decree does not operate directly upon the
property nor affect the title, but is made
effectual through the coercion of the
defendant; as, for instance, by directing a
deed to be executed or canceled by or on
behalf of the party. . .”
Fall at 10 (citing Hart v. Sansom, 110 U. S. 151, 155, 28 L. ed.
101, 103, 3 Sup. Ct. Rep. 596).
The trial court correctly
realized that it could not annul or rescind the deed reconveying the Arrowhead Lake property; however, the trial court
acted properly under Fall v. Eastin by ordering Ben to re-convey
the property to Michael.
Finally, Ben argues that the trial court erred in
excluding evidence offered to prove its affirmative defense of
undue influence.
Ben asserted, as a defense against fraud, that
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Michael had used undue influence to pressure Dr. Reid into
deeding him the Arrowhead Lake property.
Michael presented
deposition testimony from their youngest sister, Mary Jo Reid,
in an attempt to bolster his credibility.
She testified that
Michael had given bone marrow to another sibling who was dying
of cancer.
The next day, Ben produced her as a witness to
testify that Michael had been paid $10,000.00 for his bone
marrow.
However, Michael objected, and the trial court excluded
the evidence.
This is a collateral issue having no real
relevance to Michael’s possible use of undue influence on Dr.
Reid and, as such, the trial court properly denied Ben’s attempt
to use it to impeach Michael.
For the forgoing reasons, the judgment of the
Jefferson Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Craig C. Dilger
Joseph A. Bickett
Ogden Newell & Welch PLLC
Louisville, Kentucky
Peter F. Ervin
Louisville, Kentucky
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